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6. LUNG CENTER v. QUEZON CITY, G.R. No.

144104, June 29, 2004

FACTS: The petitioner Lung Center of the Philippines is a non-stock and non-profit entity
established by virtue of Presidential Decree No. 1823. It owns a piece of land located a t Quezon
City. Erected in the middle of the aforesaid lot is a hospital known as the Lung Center of
the Philippines. A big space at the ground floor is being leased to private parties for canteen and
small stores and to medical and to professional practitioners. A big portion of the lot is being
leased for commercial purposes to a private enterprise who use the same as their private clinics
for their patients whom they charge for their professional services. Almost one-half of the entire
area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion
on the right side, at the corner of Quezon Avenue and Elliptical Road, is being leased for
commercial purposes to a private enterprise known as the Elliptical Orchids and Garden Center.
In 1993, both land and the hospital building were assessed for real property taxes in the amount
of about Php 4.5 Million by the City Assessor of Quezon. The petitioner avers that it is a charitable
institution within the context of Section 28(3), Article VI of the 1987 Constitution. It asserts that
its character as a charitable institution is not altered by the fact that it admits paying patients and
renders medical services to them, leases portions of the land to private parties, and rents out
portions of the hospital to private medical practitioners from which it derives income to be used
for operational expenses.

ISSUES:

1. Whether the petitioner is a charitable institution within the context of Presidential


Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act
No. 7160;
2. Whether the real properties of the petitioner are exempt from real property taxes.

HELD:

1. YES. Petitioner is a charitable institution within the context of the 1973 and 1987
Constitutions. To determine whether an enterprise is a charitable institution/entity or
not, the elements which should be considered include the statute creating the enterprise,
its corporate purposes, its constitution and by-laws, the methods of administration, the
nature of the actual work performed, the character of the services rendered, the
indefiniteness of the beneficiaries, and the use and occupation of the properties. Under
P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to
the provisions of the decree, is to be administered by the Office of the President of the
Philippines with the Ministry of Health and the Ministry of Human Settlements. It was
organized for the welfare and benefit of the Filipino people principally to help combat the
high incidence of lung and pulmonary diseases in the Philippines. As a general principle,
a charitable institution does not lose its character as such and its exemption from taxes
simply because it derives income from paying patients, whether out-patient, or confined
in the hospital, or receives subsidies from the government, so long as the money received
is devoted or used altogether to the charitable object which it is intended to achieve; and
no money inures to the private benefit of the persons managing or operating the
institution. The money received by the petitioner becomes a part of the trust fund and
must be devoted to public trust purposes and cannot be diverted to private profit or
benefit. Under P.D. No. 1823, the petitioner is entitled to receive donations. The
petitioner does not lose its character as a charitable institution simply because the gift or
donation is in the form of subsidies granted by the government. In this case, the petitioner
adduced substantial evidence that it spent its income, including the subsidies from the
government for 1991 and 1992 for its patients and for the operation of the hospital. It
even incurred a net loss in 1991 and 1992 from its operations.

2. We hold that the portions of the land leased to private entities as well as those parts of
the hospital leased to private individuals are not exempt from such taxes. On the other
hand, the portions of the land occupied by the hospital and portions of the hospital used
for its patients, whether paying or non-paying, are exempt from real property taxes.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to
the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that
(a) it is a charitable institution; and (b) its real properties are ACTUALLY, DIRECTLY and
EXCLUSIVELY used for charitable purposes. Exclusive is defined as possessed and enjoyed
to the exclusion of others; debarred from participation or enjoyment; and exclusively is
defined, in a manner to exclude; as enjoying a privilege exclusively.[40] If real property is
used for one or more commercial purposes, it is not exclusively used for the exempted
purposes but is subject to taxation.The words dominant use or principal use cannot be
substituted for the words used exclusively without doing violence to the Constitutions
and the law. Solely is synonymous with exclusively.

What is meant by actual, direct and exclusive use of the property for charitable purposes
is the direct and immediate and actual application of the property itself to the purposes
for which the charitable institution is organized. It is not the use of the income from the
real property that is determinative of whether the property is used for tax-exempt
purposes. The petitioner failed to discharge its burden to prove that the entirety of its
real property is actually, directly and exclusively used for charitable purposes. While
portions of the hospital are used for the treatment of patients and the dispensation of
medical services to them, whether paying or non-paying, other portions thereof are being
leased to private individuals for their clinics and a canteen. Further, a portion of the land
is being leased to a private individual for her business enterprise under the business name
Elliptical Orchids and Garden Center. Indeed, the petitioners evidence shows that it
collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said
lessees.

7. OLIVARES vs MARQUEZ, G.R. No. 155591, September 22, 2004

FACTS: The Paranaque City Treasurer served final notices of real estate tax delinquency on
Olivares et al., who protested the assessments on 5 grounds (prescription under LGC 194, double
assessment, non-existence of properties taxed, tax exemption, and errors in assessment). The
City Treasurer did not act on the protest, so Olivares et al. filed a petition with the Paranaque
RTC questioning the assessment and levy made on their properties. The City Treasurer and other
LGU officials impleaded filed MTD, claiming that the RTC had no jurisdiction; that Olivares et al.
failed to exhaust administrative remedies; and that there was no cause of action. RTC dismissed
the case, hence this petition for review filed by Olivares et.al. with the SC.

ISSUE: Was the remedy of certiorari to the SC proper in this case?

RULING: NO. Certiorari, prohibition, and mandamus will not lie if administrative remedies have
not been exhausted. Olivares et al. failed to justify their non-exhaustion of administrative
remedies as their complaint did not really assail the power and authority of the City Officials to
assess and collect realty tax on their properties [as they assert, citing the ruling in Ty v. Trampe].
The allegations against the taxing authority of the officials were inserted simply to place the
petition within the Ty exception. A perusal of the petition filed shows that it was assailing the
correctness of the assessments. Such a case is properly resolved through the administrative
procedure provided for under the LGC. Moreover, the grounds raised involve factual questions
which are more properly resolved by the LBAA.

DOCTRINE: The extraordinary remedies of certiorari, prohibition and mandamus may be resorted
to only when there is no other plain, available, speedy and adequate remedy in the course of law.
Where administrative remedies are available, petitions for the issuance of these peremptory
writs do not lie in order to give the administrative body the opportunity to decide the matter by
itself correctly and to prevent unnecessary and premature resort to courts. Under the doctrine
of primacy of administrative remedies, an error in the assessment must be administratively
pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction.
But an appeal shall not suspend the collection of the tax assessed without prejudice to a later
adjustment pending the outcome of the appeal.

In Ty v. Trampe, jurisdiction was properly vested in the trial court because the petition was
questioning the very authority and power of the assessor - acting solely and independently - to
impose the assessment, and of the treasurer to collect; and not merely of amounts of the
increase in the tax.

Procedure/Remedies for assailing real property tax assessment under the LGC: Pay under
protest; if protest unacted upon within 60 days from filing or denied, appeal to LBAA; if denied,
appeal to CBAA; then appeal to CA under ROC 43.

8. Luz Yamane vs BA Lepanto Condominium Corporation

FACTS: BA-Lepanto Condominium Corporation is a condominium corporation constituted in


accordance with the Condominium Act, which owns and holds title to the common and limited
common areas of the BA-Lepanto Condominium situated in Makati City. The Corporation is
authorized, under its Amended By-Laws, to collect regular assessments from its members for
operating expenses, capital expenditures on the common areas, and other special assessments
as provided for in the Master Deed with Declaration of Restrictions of the Condominium. The
Corporation received a Notice of Assessment signed by the City Treasurer. The Notice of
Assessment stated that the Corporation is “liable to pay the correct city business taxes.” The
Notice of Assessment was silent as to the statutory basis of the business taxes assessed. The
Corporation responded with a written tax protest addressed to the City Treasurer. According to
respondent, under both the Makati Code and the Local Government Code, “business” is defined
as “trade or commercial activity regularly engaged in as a means of livelihood or with a view to
profit.” It was submitted that the Corporation, as a condominium corporation, was organized not
for profit, but to hold title over the common areas of the Condominium, to manage the
Condominium for the unit owners, and to hold title to the parcels of land on which the
Condominium was located. Neither was the Corporation authorized, under its articles of
incorporation or by-laws to engage in profit-making activities. The assessments it did collect from
the unit owners were for capital expenditures and operating expenses. The protest was rejected
by the City Treasurer and insisted that the collection of dues from the unit owners was effected
primarily “to sustain and maintain the expenses of the common areas, with the end in view of
getting full appreciative living values for the individual condominium occupants and to command
better marketable prices for those occupants” who would in the future sell their respective units.
In short, the petitioner avers that it is engaged in business for profit making. Because of the denial
of the protest, respondent filed an Appeal with the RTC of Makati. However, the latter dismissed
the case. As a recourse, respondent filed a Petition for Review under Rule 42 of the Rules of Civil
Procedure with the CA. It was dismissed outright because only decisions of the RTC brought on
appeal from a first level court could be elevated for review under Rule 42. However, it was
reinstated by the CA because of Sec. 195 of the LGC stating that the remedy of the taxpayer on
the denial of the protest filed with the local treasurer is to appeal the denial with the court of
competent jurisdiction. Afterwards, the CA reversed the ruling of the RTC.

ISSUE: Whether or not the City of Makati may collect business taxes on condominium
corporations.
RULING: No. Section 143 of the Code specifically enumerates several types of business on which
municipalities and cities may impose taxes. However, the Corporation does not fall under such
law. Moreover, nowhere in the Makati Revenue Code that would serve as the legal authority for
the collection of business taxes from condominiums in Makati. We can elicit from the
Condominium Act that a condominium corporation is precluded by statute from engaging in
corporate activities other than the holding of the common areas, the administration of the
condominium project, and other acts necessary, incidental or convenient to the accomplishment
of such purposes. Neither the maintenance of livelihood, nor the procurement of profit, fall
within the scope of permissible corporate purposes of a condominium corporation under the
Condominium Act. None of these stated corporate purposes are geared towards maintaining a
livelihood or the obtention of profit. Even though the Corporation is empowered to levy
assessments or dues from the unit owners, these amounts collected are not intended for the
incurrence of profit by the Corporation or its members, but to shoulder the multitude of
necessary expenses that arise from the maintenance of the Condominium Project.

9. GSIS vs. City Assessor of Iloilo City, G.R. No. 147192. June 27, 2006

FACTS: In the two cadastral cases, private respondent Rosalina Francisco petitioned for the
issuance of new transfer certificates of title (TCTs) in her name over two parcels of land. Private
respondent Francisco purchased the subject properties in the auction sales held for the
satisfaction of delinquent real property taxes. After the lapse of the one-year redemption period
and the failure of the registered owner or any interested person to redeem the properties, the
Iloilo City Treasurer issued the corresponding final bill of sale to private respondent. The sales
were later on duly annotated on the certificates of title on file with the Register of Deeds.
However, the final bill of sale could not be registered because the owner’s duplicate certificate
of title was unavailable at that time. To effect registration in her name, private respondent
instituted separate petitions for the entry of title in her name over the two lots with the RTCs of
Iloilo City. Both petitions were unopposed and the RTC issued separate orders directed the
issuance of new duplicate TCTs. No appeal was made from both orders of the courts a quo,
hence, they became final and executory.

In a petition to annul the judgment of the trial court, petitioner, claimed that the assessment of
real property taxes on it (GSIS) was void since, under its charter (RA 8291), it was exempt from
all forms of taxes (including real property taxes on the properties held by it) that were due to the
local governments where such properties were located. Furthermore, it claimed that the
proceedings in the assessment and levy of said taxes, as well as the sale of the properties at public
auction, were held without notice to it, hence, its right to due process was violated. In support
of its position, petitioner points to Section 39 of RA 8291. The CA gave no credence to the
arguments of petitioner and dismissed its petition.

ISSUE: Should GSIS be exempt from payment of real property tax?

RULING: No, even if the charter of the GSIS generally exempts it from tax liabilities, the
prescription is not so encompassing as to make the tax exemption applicable to the properties in
dispute here. In the early case of City of Baguio v. Busuego, we held that the tax-exempt status
of the GSIS could not prevent the accrual of the real estate tax liability on properties transferred
by it to a private buyer through a contract to sell. In the present case, GSIS had already conveyed
the properties to private persons thus making them subject to assessment and payment of real
property taxes. The alienation of the properties sold by GSIS was the proximate cause and
necessary consequence of the delinquent taxes due.

The doctrine laid down in City of Baguio is reflected in Section 234 (a) of the LGC, which states:
Section 234. Exemptions from Real Property Tax. — The following are exempted from payment
of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person.

ISSUE: Did RA 8291, which took effect in 1997, abrogated Section 234 (a) of the LGC of 1991?

RULING: No. The abrogation or repeal of a law cannot be assumed; the intention to revoke must
be clear and manifest. RA 8291 made no express repeal or abrogation of the provisions of RA
7160, particularly Section 234 (a) thereof. Repeal by implication in this case is not at all convincing
either. To bring about an implied repeal, the two laws must be absolutely incompatible. They
must be clearly repugnant in a way that the later law (RA 8291) cannot exist without nullifying
the prior law (RA 7160). Indeed, there is nothing in RA 8291 which abrogates, expressly or
impliedly, that particular provision of the LGC. The two statutes are not inconsistent on that
specific point, let alone so irreconcilable as to compel us to uphold one and strike down the other.
The rule is that every statute must be interpreted and brought into accord with other laws in a
way that will form a uniform system of jurisprudence. The legislature is presumed to have known
existing laws on the subject and not to have enacted conflicting laws. Thus, the legislature cannot
be presumed to have intended Section 234 (a) to run counter to Section 39 of RA 8291. Lastly,
even if we were to construe that RA 8291 abrogated Section 234(a) of the LGC, still it cannot be
made to apply retroactively without impairing the vested rights of private respondent.

10. GOVERNMENT SERVICE INSURANCE SYSTEM v. CITY TREASURER and CITY ASSESSOR of the
CITY OF MANILA, G.R. No. 186242 December 23, 2009

Facts: Petitioner GSIS owns or used to own two (2) parcels of land, Katigbak property and
Concepcion-Arroceros property. Concepcion-Arroceros property title was transferred to this
Court in 2005 pursuant to Proclamation No. 8353 dated April 27, 2005. Both the GSIS and the
Metropolitan Trial Court (MeTC) of Manila occupy the Concepcion-Arroceros property, while the
Katigbak property was under lease. The controversy started when the City Treasurer of Manila
addressed a letter dated September 13, 2002 to GSIS President and General Manager Winston F.
Garcia informing him of the unpaid real property taxes due for years 1992 to 2002, broken down
as follows: (a) PhP 54,826,599.37 for the Katigbak property; and (b) PhP 48,498,917.01 for the
Concepcion-Arroceros property. The letter warned of the inclusion of the subject properties in
the scheduled October 30, 2002 public auction of all delinquent properties in Manila should the
unpaid taxes remain unsettled before that date. On September 16, 2002, the City Treasurer of
Manila issued separate Notices of Realty Tax Delinquency for the subject properties, with the
usual warning of seizure and/or sale. On October 8, 2002, GSIS, through its legal counsel, wrote
back emphasizing the GSIS’ exemption from all kinds of taxes, including realty taxes, under
Republic Act No. (RA) 8291.

Two days after, GSIS filed a petition for certiorari and prohibition with prayer for a restraining
and injunctive relief before the Manila RTC. In it, GSIS prayed for the nullification of the
assessments thus made and that respondents City of Manila officials be permanently enjoined
from proceedings against GSIS’ property. GSIS would later amend its petition to include the fact
that: (a) the Katigbak property, covered by TCT Nos. 117685 and 119465 in the name of GSIS,
has, since November 1991, been leased to and occupied by the Manila Hotel Corporation (MHC),
which has contractually bound itself to pay any realty taxes that may be imposed on the subject
property; and (b) the Concepcion-Arroceros property is partly occupied by GSIS and partly
occupied by the MeTC of Manila.

RTC: dismissed GSIS’ petition

MR: denied

Hence, this petition.

Issue:

1. whether GSIS under its charter is exempt from real property taxation

2. assuming that it is so exempt, whether GSIS is liable for real property taxes for its properties
leased to a taxable entity

3. whether the properties of GSIS are exempt from levy.

Ruling:

1. Yes. GSIS Exempt from Real Property Tax

Full tax exemption granted through PD 1146

In 1936, Commonwealth Act No. (CA) 18611 was enacted abolishing the then pension systems
under Act No. 1638, as amended, and establishing the GSIS to manage the pension system, life
and retirement insurance, and other benefits of all government employees. Under what may be
considered as its first charter, the GSIS was set up as a non-stock corporation managed by a board
of trustees. Notably, Section 26 of CA 186 provided exemption from any legal process and liens
but only for insurance policies and their proceeds. In 1977, PD 1146,12 otherwise known as the
Revised Government Service Insurance Act of 1977, was issued, providing for an expanded
insurance system for government employees. Sec. 33 of PD 1146 provided for a new tax
treatment for GSIS.

RA 7160 lifted GSIS tax exemption


Then came the enactment in 1991 of the LGC or RA 7160, providing the exercise of local
government units (LGUs) of their power to tax, the scope and limitations thereof,14 and the
exemptions from taxations. Of particular pertinence is the general provision on withdrawal of tax
exemption privileges in Sec. 193 of the LGC, and the special provision on withdrawal of exemption
from payment of real property taxes in the last paragraph of the succeeding Sec. 234RA 7160
lifted GSIS tax exemption.

Significantly, the Court, in City of Davao, stated the observation that the GSIS’ tax-exempt status
withdrawn in 1992 by the LGC was restored in 1997 by RA 8291.

Full tax exemption reenacted through RA 8291

Indeed, almost 20 years to the day after the issuance of the GSIS charter, i.e., PD 1146, it was
further amended and expanded by RA 8291 which took effect on June 24, 1997.18 Under it, the
full tax exemption privilege of GSIS was restored, the operative provision being Sec. 39 thereof,
a virtual replication of the earlier quoted Sec. 33 of PD 1146. Given the foregoing perspectives,
the following may be assumed: (1) Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax exemption
from real estate taxes, among other tax burdens, until January 1, 1992 when the LGC took effect
and withdrew exemptions from payment of real estate taxes privileges granted under PD 1146;
(2) RA 8291 restored in 1997 the tax exempt status of GSIS by reenacting under its Sec. 39 what
was once Sec. 33 of P.D. 1146;19 and (3) If any real estate tax is due to the City of Manila, it is,
following City of Davao, only for the interim period, or from 1992 to 1996, to be precise.

Real property taxes assessed and due from GSIS considered paid

While recognizing the exempt status of GSIS owing to the reenactment of the full tax exemption
clause under Sec. 39 of RA 8291 in 1997, the ponencia in City of Davao appeared to have failed
to take stock of and fully appreciate the all-embracing condoning proviso in the very same Sec.
39 which, for all intents and purposes, considered as paid "any assessment against the GSIS as of
the approval of this Act."

GSIS an instrumentality of the National Government

First, Apart from the foregoing consideration, the Court’s fairly recent ruling in Manila
International Airport Authority v. Court of Appeals,20 a case likewise involving real estate tax
assessments by a Metro Manila city on the real properties administered by MIAA, argues for the
non-tax liability of GSIS for real estate taxes. There, the Court held that MIAA does not qualify as
a GOCC, not having been organized either as a stock corporation, its capital not being divided
into shares, or as a non-stock corporation because it has no members. MIAA is rather an
instrumentality of the National Government and, hence, outside the purview of local taxation by
force of Sec. 133 of the LGC providing in context that "unless otherwise provided," local
governments cannot tax national government instrumentalities.
Second, the subject properties under GSIS’s name are likewise owned by the Republic. The GSIS
is but a mere trustee of the subject properties which have either been ceded to it by the
Government or acquired for the enhancement of the system.

Third, GSIS manages the funds for the life insurance, retirement, survivorship, and disability
benefits of all government employees and their beneficiaries. This undertaking, to be sure,
constitutes an essential and vital function which the government, through one of its agencies or
instrumentalities, ought to perform if social security services to civil service employees are to be
delivered with reasonable dispatch.

2. Beneficial Use Doctrine Applicable

The provisions allow the Republic to grant the beneficial use of its property to an agency or
instrumentality of the national government. Such grant does not necessarily result in the loss of
the tax exemption. The tax exemption the property of the Republic or its instrumentality carries
ceases only if, as stated in Sec. 234(a) of the LGC of 1991, "beneficial use thereof has been
granted, for a consideration or otherwise, to a taxable person." GSIS, as a government
instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC. GSIS, however, lost
in a sense that status with respect to the Katigbak property when it contracted its beneficial use
to MHC, doubtless a taxable person. Thus, the real estate tax assessment of PhP 54,826,599.37
covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax delinquency
is concerned as assessed over said property.

The next query as to which between GSIS, as the owner of the Katigbak property, or MHC, as the
lessee thereof, is liable to pay the accrued real estate tax, need not detain us long. MHC ought to
pay. Being in possession and having actual use of the Katigbak property since November 1991,
MHC is liable for the realty taxes assessed over the Katigbak property from 1992 to 2002.

The foregoing is not all. As it were, MHC has obligated itself under the GSIS-MHC Contract of
Lease to shoulder such assessment. As a matter of law and contract, therefore, MHC stands liable
to pay the realty taxes due on the Katigbak property. Considering, however, that MHC has not
been impleaded in the instant case, the remedy of the City of Manila is to serve the realty tax
assessment covering the subject Katigbak property to MHC and to pursue other available
remedies in case of nonpayment, for said property cannot be levied upon as shall be explained
below.

3. GSIS Properties Exempt from Levy

In light of the foregoing disquisition, the issue of the propriety of the threatened levy of subject
properties by the City of Manila to answer for the demanded realty tax deficiency is now moot
and academic. A valid tax levy presupposes a corresponding tax liability. Nonetheless, it will not
be remiss to note that it is without doubt that the subject GSIS properties are exempt from any
attachment, garnishment, execution, levy, or other legal processes.
SUMMARY

In sum, the Court finds that GSIS enjoys under its charter full tax exemption. Moreover, as an
instrumentality of the national government, it is itself not liable to pay real estate taxes assessed
by the City of Manila against its Katigbak and Concepcion-Arroceros properties. Following the
"beneficial use" rule, however, accrued real property taxes are due from the Katigbak property,
leased as it is to a taxable entity. But the corresponding liability for the payment thereof devolves
on the taxable beneficial user. The Katigbak property cannot in any event be subject of a public
auction sale, notwithstanding its realty tax delinquency. This means that the City of Manila has
to satisfy its tax claim by serving the accrued realty tax assessment on MHC, as the taxable
beneficial user of the Katigbak property and, in case of nonpayment, through means other than
the sale at public auction of the leased property.

11. RCPI vs. PROVINCIAL ASSESOR OF SOUTH COTABATO, PROVINCIAL TREASURER OF SOUTH
COTABATO, MUNICIPAL ASSESSOR OF TUPI, SOUTH COTABATO, and MUNICIPAL TREASURER
OF TUPI, SOUTH COTABATO, G.R. No. 144486. April 13, 2005

Facts: R.A. No. 2036 of 1957, as amended by R.A. No. 4054, granted RCPI a 50-year franchise.
Thus, Sec. 14 of the amended law, in gist, provides that the grantee shall pay the same taxes as
may be required by law. Said tax shall be in lieu of any and all taxes of any kind, nature or
description levied, established or collected by any authority whatsoever, municipal, provincial or
national, from which taxes the grantee is hereby expressly exempted. On 10 June 1985, the
municipal treasurer of Tupi, South Cotabato assessed RCPI real property taxes from 1981 to 1985.
The municipal treasurer demanded that RCPI pay P166,810 as real property tax on its radio
station building in Barangay Kablon, as well as on its machinery shed, radio relay station tower
and its accessories, and generating sets, based on the following tax declarations. RCPI protested
the assessment before the Local Board of Assessment Appeals (LBAA') and claimed that all its
assessed properties are personal properties and thus exempt from the real property tax. It also
pointed out that its franchise exempts RCPI from 'paying any and all taxes of any kind, nature or
description in exchange for its payment of tax equal to one and one-half per cent on all gross
receipts from the business conducted under its franchise. It further claimed that any deviation
from its franchise would violate the non-impairment of contract clause of the Constitution.
Finally, RCPI stated that the value of the properties assessed has depreciated since their
acquisition in the 1960s. The Provincial Assessor of South Cotabato opposed RCPI's claims on all
points. The Local Board of Assessment Appeals ruled that appellant is ordered to pay the real
property taxes, inclusive of all penalties, surcharges and interest accruing as of the date of actual
payment, on the properties covered; in which the Central Board of Assessment Appeals affirmed.
The Appelate Court ruled that decision of the Central Board of Assessment Appeals is hereby
MODIFIED. Petitioner is declared exempt from paying the real property taxes assessed upon its
machinery and radio equipment mounted as accessories to its relay tower. The decision assessing
taxes upon petitioner's radio station building, machinery shed, and relay station tower is,
however, affirmed.

ISSUES:
1. Whether the appellate court erred when it excluded RCPI's tower, relay station building, and
machinery shed from tax exemption; and

2. Whether the appellate court erred when it did not resolve the issue of nullity of the tax
declarations and assessments due to non-inclusion of depreciation allowance.

RULING:

1. First, Congress passed the Local Government Code that withdrew all the tax exemptions
existing at the time of its passage including that of RCPI's. Second, Congress enacted the franchise
of telecommunications companies, such as Islacom, Bell, Island Country, IslaTel, TeleTech, Major
Telecoms, and Smart, with the 'in lieu of all taxes' proviso. Third, Congress passed RA 7925
entitled 'An Act to Promote and Govern the Development of Philippine Telecommunications and
the Delivery of Public Telecommunications Services' which, through Section 23, mandated the
equality of treatment of service providers in the telecommunications industry. The existing
legislative policy is clearly against the revival of the 'in lieu of all taxes' clause in franchises of
telecommunications companies. After the VAT on telecommunications companies took effect on
January 1, 1996, Congress never again included the 'in lieu of all taxes' clause in any
telecommunications franchise it subsequently approved. RCPI cannot also invoke the equality of
treatment clause under Section 23 of Republic Act No. 7925. The franchises of the petitioners all
expressly declare that the franchisee shall pay the real estate tax, using words similar to Section
14 of RA 2036, as amended. It is an elementary rule in taxation that exemptions are strictly
construed against the taxpayer and liberally in favor of the taxing authority. It is the taxpayer's
duty to justify the exemption by words too plain to be mistaken and too categorical to be
misinterpreted.

2.RCPI contends that the tax declarations and assessments covering its radio relay station tower,
radio station building, and machinery shed are void because the assessors did not consider
depreciation allowance in their assessments. The Court have examined the records of this case
and found that RCPI raised before the LBAA and the CBAA the nullity of the assessments due to
the non-inclusion of depreciation allowance. Therefore, RCPI did not raise this issue for the first
time. However, even if the court considers this issue, under the Real Property Tax Code
depreciation allowance applies only to machinery and not to real property.

12. City of Davao vs RTC 467 SCRA 280.

Facts: The GSIS Davao City branch office received a Notice of Public Auction for non-payment of
realty taxes for the years 1992 to 1994 totaling ₱295,721.61. However, the auction was enjoined
thru a TRO issued by the RTC. At the pre-trial, it was agreed that the sole issue for resolution was
purely a question of law, that is, whether Sections 234 and 534 of the Local Government Code,
which have withdrawn real property tax exemptions of government owned and controlled
corporations (GOCCs), have also withdrawn from the GSIS its right to be exempted from payment
of the realty taxes sought to be levied by Davao City. The RTC ruled that GSIS retained its
exemption, it cited Section 33 of Presidential Decree (P.D.) No. 1146, the Revised Government
Service Insurance Act of 1977, as amended by P. D. No. 1981, which mandated such exemption.
The RTC conceded that the tax exempting statute, P.D. No. 1146, was enacted prior to the Local
Government Code. However, it noted that the earlier law had prescribed two conditions in order
that the tax exemption provided therein could be withdrawn by future enactments, namely: (1)
that Section 33 be expressly and categorically repealed by law; and (2) that a provision be enacted
to substitute the declared policy of exemption from any and all taxes as an essential factor for
the solvency of the GSIS fund. Both conditions had not been satisfied by the LGU.

Issue: WON the exemption granted in Section 33 of P.D. No. 1146, as amended, was effectively
withdrawn upon the enactment of the Local Government Code, particularly Sections 193 and 294
thereof.

Ruling: Yes, exemption was withdrawn. The court ruled that The second paragraph of Section 33
of P.D. No. 1146, {“ "to substitute the declared policy of exemption from any and all taxes as an
essential factor for the solvency of the fund."} as amended, effectively imposes restrictions on
the competency of the Congress to enact future legislation on the taxability of the GSIS. This
places an undue restraint on the plenary power of the legislature to amend or repeal laws,
especially considering that it is a lawmaker’s act that imposes such burden. Only the Constitution
may operate to preclude or place restrictions on the amendment or repeal of laws. Constitutional
dicta is of higher order than legislative statutes, and the latter should always yield to the former
in cases of irreconcilable conflict. The court ruled that Section 33 of P.D. No. 1146 is contravenes
the constitution because it is an irrepealable law. It might be argued that Section 33 of P.D. No.
1146, as amended, does not preclude the repeal of the tax-exempt status of GSIS, but merely
imposes conditions for such to validly occur. Yet these conditions, if honored, have the precise
effect of limiting the powers of Congress. Thus, the same rationale for prohibiting irrepealable
laws applies in prohibiting restraints on future amendatory laws. Consistent with statutory
construction that, “This legislature cannot bind a future legislature to a particular mode of repeal.
It cannot declare in advance the intent of subsequent legislatures or the effect of subsequent
legislation upon existing statutes.” Thus, the two conditionalities of Section 33 cannot bear
relevance on whether the Local Government Code removed the tax-exempt status of the GSIS.
The express withdrawal of all tax exemptions accorded to all persons, natural or juridical, as
stated in Section 193 of the Local Government Code, applies without impediment to the present
case.

13. Republic vs Imperial Credit Corporation, G.R. No. 173088, June 25, 2008

FACTS: Respondent Imperial Credit Corporation is a corporation duly organized and existing
under the laws of the Philippines. On 07 March 1966, respondent purchased from a certain Jose
Tajon a parcel of land situated in Barrio Colaique (now Barangay San Roque), Antipolo City, Rizal
for the sum of P17, 986.00 as evidenced by a Deed of Sale with Mortgage. On 14 February 2000,
respondent filed before the RTC of Antipolo City an application for registration of a parcel of land.
The application alleged, among others, that respondent subrogated former owner Jose Tajon,
who has been in open, continuous, exclusive and notorious possession and occupation of the
parcel of land, being a part of the alienable and disposable lands of the public domain, under a
bona fide claim of ownership since 12 June 1945, by virtue of Deed of Sale with Mortgage
executed on 07 March 1966. At the hearing, Ricardo Santos, respondent’s legal researcher and
duly authorized attorney-in-fact, testified on the fact of respondent’s actual possession through
its caretaker, Teodisia Palapus, who had been overseeing said property since its acquisition from
Jose Tajon. Palapus also corroborated Santos testimony and added that except for some
trespassers, no one else had laid possessory claim on the property. Aside from the transfer
documents, the other documentary evidence submitted consisted of a 1993 tax declaration, the
tracing cloth plan, survey description, a certification from the Land Management Sector in lieu of
the geodetic engineers certificate and the report by the Community Environment and Natural
Resources Office that the property falls within the alienable and disposable zone. The RTC
rendered judgment granting respondents application for registration. Petitioner Republic of the
Philippines, through the Office of the Solicitor General (OSG), seasonably appealed from the RTCs
Decision to the Court of Appeals, contending that respondent failed to present incontrovertible
evidence that respondent and its predecessor-in-interest have been in open continuous,
exclusive and notorious possession and occupation of the property since 12 June 1945 or earlier.

ISSUE:

1. Whether or not respondent’s application for original registration of title under Paragraph 1,
Section 14 of P.D. 1529 should be granted?

2. If respondent does not qualify under Paragraph 1 of Section 14, may it still qualify under
Paragraphs 2 and 4 of Section 14 P.D. 1529?

RULING:

1. No. Respondent failed to comply with the requirements. Section 14, paragraph (1) of P.D. No.
1529 states:

SEC. 14. Who may apply. - The following persons may file in the proper Court of First Instance
[now Regional Trial Court] an application for registration of title to land, whether personally or
through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of alienable and disposable lands
of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.

It is doctrinally settled that a person who seeks confirmation of an imperfect or incomplete title
to a piece of land on the basis of possession by himself and his predecessors-in-interest shoulders
the burden of proving by clear and convincing evidence compliance with the requirements of
Section 48 (b) of Commonwealth Act No. 141, as amended. A perusal of the records leads the
Court to reverse the RTC's conclusion that respondent's predecessor-in-interest possessed and
occupied the property as early as 12 June 1945. Respondent was able to trace back its alleged
possession and occupation of the property only as far back as 1966 when it acquired the same
from Jose Tajon. Other than the bare allegation in the petition, respondent's evidence failed to
show that Jose Tajon, respondent's predecessor-in-interest, had occupied the property on 12
June 1945 or earlier.

The CENRO certification does not help respondent's cause. The Court held that all the CENRO
certification evidences is the alienability of the land involved, not the open, continuous, exclusive
and notorious possession and occupation thereof by the respondent or its predecessors-in-
interest for the period prescribed by law. The tax declaration submitted in evidence could have
clearly manifested respondent's adverse claim on the property. While a tax declaration by itself
is not sufficient to prove ownership, it may serve as sufficient basis for inferring possession.
However, respondent submitted only one tax declaration filed belatedly in the year 1993. If
respondent genuinely and consistently believed its claim of ownership, it should have regularly
complied with its real estate tax obligations from the start of its alleged occupation.

Paragraph (2) of Section 14, P.D. No. 1529 is inapplicable because the property sought to be
registered has not been clearly shown to be a private land. For a piece of land to be qualified for
registration under paragraph (2) of Section 14, P.D. No. 1529, the applicant must conclusively
prove that the land is private and not part of the public domain. Otherwise, if the land is part of
the disposable zone of the public domain, as in the instant case, the applicant must prove that
he has complied with the conditions under paragraph (1) of Section 14, P.D. No. 1529. This is
premised on the basic doctrine that all lands not otherwise appearing to be clearly within private
ownership are presumed to belong to the State. Respondent may neither apply for registration
under paragraph (4) of Section 14, P.D. No. 1529. Said provision contemplates registration of
lands acquired through modes other than those specifically enumerated under Section 14, P.D.
No. 1529. Respondent acquired an alienable and disposable land of the public domain, thus, its
application for registration must comply with the requisites under paragraph (1) and not
paragraph (4) of Section 14.

14. PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY vs. CA, GR NO. 150301 Oct. 2, 2007

FACTS: The controversy arose when respondent Municipality of Navotas assessed the real estate
taxes allegedly due from petitioner Philippine Fisheries Development Authority on properties
under its jurisdiction, management and operation located inside the Navotas Fishing Port
Complex (NFPC). The assessed taxes had remained unpaid despite the demands made by the
municipality which prompted it to give notice to petitioner that the NFP& will be sold at public
auction in order that the municipality will be able to collect on petitioners delinquent realty taxes
inclusive of penalties. Petitioner sought the deferment of the auction sale claiming that the NFP&
is owned by the Republic of the Philippines, and pursuant to P.D. No. 977, it is not a taxable entity.
In view of the refusal of PFDA to pay the assessed realty taxes, the matter was referred to the
Department of Finance. DOF stated that the use of the property should first be identified to
determine its tax liability. If used by a non-taxable person other than PFDA itself, it remains to be
non-taxable. Otherwise, if said properties are being used by taxable persons, same becomes
taxable properties. Notwithstanding the DOF’s instruction, respondent Municipality proceeded
to publish the notice of sale of NFPC in the issue of Balita, a local newspaper. Petitioner instituted
Civil Case against respondent Municipality, and its officers. Petitioner asked the RTC to enjoin the
auction of the NFPC on the ground that the properties comprising the NFPC are owned by the
Republic and thus, are exempt from taxation. According to petitioner, only a small portion of
NFPC which had been leased to private parties may be subjected to real property tax which
should be paid by the latter. RTC issued a writ of preliminary injunction enjoining respondent
Municipality from proceeding with the public auction. Subsequently, RTC dismissed the case and
dissolved the writ of preliminary injunction, ruling in favor of the Municipality’s right to collect
said tax. The CA affirmed the ruling of the RTC. Motion for reconsideration was filed but the same
was denied by the CA.

ISSUES:

1. Whether or not the NFPC property is a property owned by the state and is intended for public
use and public service. As such, it is, hence, exempt from real property tax.

2. Whether or not the NFPC can be sold at public auction to satisfy the tax delinquency
assessments made by the Municipality of Navotas on the entire complex.

RULING:

1. Local government units, pursuant to the fiscal autonomy granted by the provisions of Republic
Act No. 7160 or the 1991 Local Government Code, can impose realty taxes on juridical persons
subject to the limitations enumerated in Section 133 of the Code:

SEC. 133. Common Limitations on the Taxing Power of Local Government Units. Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:

(o) taxes, fees, charges of any kind on the national government, its agencies and instrumentalities,
and local government units.

Nonetheless, the above exemption does not apply when the beneficial use of the government
property has been granted to a taxable person. Section 234 (a) of the Code states that real
property owned by the Republic of the Philippines or any of its political subdivisions is exempted
from payment of the real property tax except when the beneficial use thereof has been granted,
for consideration or otherwise, to a taxable person. Thus, as a rule, petitioner PFDA, being an
instrumentality of the national government, is exempt from real property tax but the exemption
does not extend to the portions of the NFPC that were leased to taxable or private persons and
entities for their beneficial use.

2. NO. In consonance with the ruling in Philippine Fisheries Development Authority v. Court of
Appeals where this Court held that:

On the basis of the parameters set in the MIAA [Manila International Airport Authority v. Court
of Appeals case, the Authority should be classified as an instrumentality of the national
government. As such, it is generally exempt from payment of real property tax, except those
portions which have been leased to private entities. The real property tax assessments issued by
the City of Iloilo should be upheld only with respect to the portions leased to private persons. 4n
case the Authority fails to pay the real property taxes due thereon, said portions cannot be sold
at a public auction to satisfy the tax delinquency. The port built by the State in the Iloilo fishing
complex is a property of public dominion and cannot therefore be sold at public auction as
provided for under Article 420 of the Civil Code.
Similarly, for the same reason, the NFPC cannot be sold at public auction in satisfaction of the tax
delinquency assessments made by the Municipality of Navotas on the entire complex.
Additionally, the land on which the NFPC property sits is a reclaimed land, which belongs to the
State. In Chavez v. Public Estates Authority, the Court declared that reclaimed lands are lands of
the public domain and cannot, without Congressional fiat, be subject of a sale, public or private.

15. Philippines Ports Authority vs. City of Iloilo, G.R. no. 109791, July 14, 2003

Facts: PPA is created under PD 857 and under Section 25 of its charter, PPA is exempted from
paying real property tax. PPA is engaged in the business of arrastre and stevedoring and leasing
of real estate. Also, it owns a warehouse for itsoperation. On June 11, 1984, PD 1931 withdrew
all tax exemptions privileges granted to GOCC. Thus, the city of Iloilo seeks to collect from PPA
business tax and real property tax from the last quarter of 1984 up to the year 1986. However,
PPA claims the ff:

(1) The City of Iloilo cannot collect real property taxes from PPA because the warehouse is part
of the port. Under Sectio 420 of Civil Code, ports are part of public dominion.; (2) PPA is not
subject to business tax because they are not engage in business. Their leasing of its property was
not motivated by profit but duly to manage and control port operations.

Issue: Is PPA exempted from paying real property and business taxes?

Held: NO. PPA cannot claim such theory that their warehouse is a public dominion because such
theory is different from the theory they adopted and decided by the lower court. It is contrary
and inconsistent with its former pleading- PPA claimed it is a GOCC and therefore exempt from
paying the real property tax. Thus, PPA is bound by its admission of ownership of the warehouse.
It is therefore liable to pay real property tax. Also, under Sec 420 of the Civil Code, the ports
mentioned are those constructed by the state. Thus, PPA should prove that its port was
constructed by the state in order to conclude that such property is a public dominion. However,
PPA failed to prove such. Also, granting that its port is a public dominion, its warehouse which
they constructed is considered to be an improvement and improvements made by the occupants
is not exempted from payment of tax. On their second claim, PPA is liable for business tax for the
lease of their buildings to private corporations. During pre-trial,they did not refute the claims of
the city of Iloilo that they are engage in business nor did they present proof of exemption from
tax. PPA admitted that their act of leasing is not necessarily for government function of
administering ports but for convenience. Therefore, any income or profit generated by the entity,
even without any intention of realizing profit is still subject to business tax. What matters is that
PPA leased its properties to private entities and from which PPA earned substantial income.

16. ANGELES UNIVERSITY FOUNDATION, vs. CITY OF ANGELES, G.R. No. 189999 June 27, 2012

FACTS: Petitioner Angeles University Foundation (AUF) is an educational institution and was
converted into a non-stock, non-profit education foundation under the provisions of Republic Act
(R.A.) No. 6055. Petitioner filed with the Office of the City Building Official an application for a
building permit for the construction of an 11-storey building of the Angeles University Foundation
Medical Center in its main campus located at MacArthur Highway, Angeles City, Pampanga. Said
office issued a Building Permit Fee Assessment in the amount of P126,839.20. An Order of
Payment was also issued by the City Planning and Development Office, Zoning Administration
Unit requiring petitioner to pay the sum of P238,741.64 as Locational Clearance Fee. In separate
letters addressed to respondents City Treasurer Juliet G. Quinsaat and Acting City Building Official
Donato N. Dizon, petitioner claimed that it is exempt from the payment of the building permit
and locational clearance fees, citing legal opinions rendered by the Department of Justice.
Despite petitioners plea, however, respondents refused to issue the building permits for the
construction of the AUF Medical Center in the main campus and renovation of a school building
located at Marisol Village. Consequently, petitioner paid under protest the fees and real property
tax. Petitioner then filed a Complaint before the trial court seeking the refund. Respondents
asserted that the claim of petitioner cannot be granted because its structures are not among
those mentioned in Sec. 209 of the National Building Code as exempted from the building permit
fee. Respondents argued that R.A. No. 6055 should be considered repealed on the basis of Sec.
2104 of the National Building Code. Since the disputed assessments are regulatory in nature,
they are not taxes from which petitioner is exempt. As to the real property taxes imposed on
petitioners property located in Marisol Village, respondents pointed out that said premises will
be used as a school dormitory which cannot be considered as a use exclusively for educational
activities.

ISSUEs:

1.Is the petitioner exempt from the payment of building permit and related fees imposed
under the National Building Code?

2.Is the parcel of land owned by petitioner which has been assessed for real property tax
likewise exempt?

RULING:

1. No. Exempted from the payment of building permit fees are: (1) public buildings and
(2) traditional indigenous family dwellings. Not being expressly included in the enumeration of
structures to which the building permit fees do not apply, petitioners claim for exemption rests
solely on its interpretation of the term other charges imposed by the National Government in the
tax exemption clause of R.A. No. 6055. R.A. No. 6055 granted tax exemptions to educational
institutions like petitioner which converted to non-stock, non-profit educational foundations.
Section 8 of said law provides:

SECTION 8. The Foundation shall be exempt from the payment of all taxes, import duties,
assessments, and other charges imposed by the Government on all income derived from or
property, real or personal, used exclusively for the educational activities of the Foundation.

Note that the other charges mentioned in Sec. 8 of R.A. No. 6055 is qualified by the words
imposed by the Government on all property used exclusively for the educational activities of the
foundation. Building permit fees are not impositions on property but on the activity subject of
government regulation. Since building permit fees are not charges on property, they are not
impositions from which petitioner is exempt. As to petitioners argument that the building permit
fees collected by respondents are in reality taxes because the primary purpose is to raise
revenues for the local government unit, the same does not hold water. In distinguishing tax and
regulation as a form of police power, the determining factor is the purpose of the implemented
measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though
the measure results in some form of regulation. On the other hand, if the purpose is primarily to
regulate, then it is deemed a regulation and an exercise of the police power of the state, even
though incidentally, revenue is generated.

2. No. Petitioner failed to discharge its burden to prove that its real property is actually,
directly and exclusively used for educational purposes. While there is no allegation or proof that
petitioner leases the land to its present occupants, still there is no compliance with the
constitutional and statutory requirement that said real property is actually, directly and
exclusively used for educational purposes. The respondents correctly assessed the land for real
property taxes for the taxable period during which the land is not being devoted solely to
petitioners educational activities. Accordingly, the CA did not err in ruling that petitioner is
likewise not entitled to a refund of the real property tax it paid under protest.

17. NPC vs Quezon, GR 171586 25 Jan 2010

FACTS: The Province of Quezon assessed Mirant Pagbilao Corporation for unpaid real
property taxes in the amount of P1.5 Billion for the machineries located in its power plant in
Pagbilao, Quezon. Napocor, which entered into a Build-Operate-Transfer (BOT) Agreement
(entitled Energy Conversion Agreement) with Mirant, was furnished a copy of the tax
assessment. Napocor (not Mirant) protested the assessment before the Local Board of
Assessment Appeals (LBAA), claiming entitlement to the tax exemptions provided under Section
234 of the Local Government Code (LGC), which states:

Section 234.Exemptions from Real Property Tax. – The following are exempted from payment of
the real property tax: (c) All machineries and equipment that are actually, directly, and exclusively
used by local water districts and government-owned or –controlled corporations engaged
in the supply and distribution of water and/or generation and transmission of electric power; (e)
Machinery and equipment used for pollution control and environmental protection. Assuming
that it cannot claim the above tax exemptions, Napocor argued that it is entitled to certain tax
privileges,

1. The lower assessment level of 10% under Section 218(d) of the LGC for government-owned and
controlled corporations engaged in the generation and transmission of electric power,
instead of the 80% assessment level for commercial properties imposed in the
assessment letter; and

2. An allowance for depreciation of the subject machineries under Section 225 of the LGC.

ISSUE: Whether or not NAPOCOR has sufficient legal interest to protest the tax assessment and
is entitled to claimed tax exemptions and privileges.
RULING: No. Legal interest is defined as interest in property or a claim cognizable at law,
equivalent to that of a legal owner who has legal title to the property. Given this definition,
Napocor is clearly not vested with the requisite interest to protest the tax assessment, as it is not
an entity having the legal title over the machineries. It has absolutely no solid claim of ownership
or even of use and possession of the machineries. Napocor is not entitled to any of these claimed
tax exemptions and privileges on the basis primarily of the defective protest filed by the Napocor.
We found that Napocor did not file a valid protest against the realty tax assessment because it
did not possess the requisite legal standing. When a taxpayer fails to question the assessment
before the LBAA, the assessment becomes final, executory, and demandable, precluding the
taxpayer from questioning the correctness of the assessment or from invoking any defense that
would reopen the question of its liability on the merits. Under Section 226 of the LGC, any owner
or person having legal interest in the property may appeal an assessment for real property taxes
to the LBAA. Since Section 250 adopts the same language in enumerating who may pay the tax,
we equated those who are liable to pay the tax to the same entities who may protest the tax
assessment. A person legally burdened with the obligation to pay for the tax imposed on the
property has the legal interest in the property and the personality to protest the tax assessment.
At any rate, even if the Court were to brush aside the issue of legal interest to protest, Napocor
could still not successfully claim exemption under Section 234 (c) of the LGC because to be
entitled to the exemption under that provision, there must be actual, direct, and exclusive use of
machineries. Napocor failed to satisfy these requirements. Consistent with the BOT concept and
as implemented, BPPC, the owner-manager-operator of the project is the actual user of its
machineries and equipment. BPPC’s ownership and use of the machineries and equipment are
actual, direct, and immediate, while NAPOCOR’s is contingent and, at this stage of the BOT
Agreement, not sufficient to support its claim for tax exemption.

18. City of Pasig vs PCGG, G.R. No. 185023 August 24, 2011

FACTS: Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land, with a
total area of 18.4891 hectares, situated in Pasig City. Portions of the properties are leased to
different business establishments. In 1986, the registered owner of MPLDC, Jose Y. Campos
(Campos), voluntarily surrendered MPLDC to the Republic of the Philippines.On 30 September
2002, the Pasig City Assessor’s Office sent MPLDC two notices of tax delinquency for its failure to
pay real property tax on the properties for the period 1979 to 2001 totaling P256,858,555.86.
Independent Realty Corporation (IRC) President Ernesto R. Jalandoni (Jalandoni) and Treasurer
Rosario Razon informed the Pasig City Treasurer that the tax for the period 1979 to 1986 had
been paid, and that the properties were exempt from tax beginning 1987. The Pasig City
Treasurer then informed MPLDC and IRC that the properties were not exempt from tax. Then,
General Manager Antonio Merelos (Merelos) and Jalandoni again informed the asig City
Treasurer that the properties were exempt from tax. In turn, the Pasig City Treasurer again
informed Merelos that the properties were not exempt from tax. On 20 October 2005, the Pasig
City Assessor’s Office sent MPLDC a notice of final demand for payment of tax for the period 1987
to 2005 totaling P389,027,814.48. On the same day, MPLDC paid P2,000,000 partial payment
under protest. On 9 November 2005, MPLDC received two warrants of levy on the properties. On
1 December 2005, respondent Republic of the Philippines, through the PCGG, filed with the RTC
a petition for prohibition with prayer for issuance of a temporary restraining order or writ of
preliminary injunction to enjoin petitioner Pasig City from auctioning the properties and from
collecting real property tax. Subsequently, the Pasig City Treasurer offered the properties for sale
at public auction. Since there was no other bidder, Pasig City bought the properties and was
issued the corresponding certificates of sale.

On 19 December 2005, PCGG filed with the RTC an amended petition for certiorari, prohibition
and mandamus against Pasig City. PCGG prayed that: (1) the assessments for the payment of real
property tax and penalty be declared void; (2) the warrants of levy on the properties be declared
void; (3) the public auction be declared void; (4) the issuance of certificates of sale be declared
void; (5) Pasig City be prohibited from assessing MPLDC real property tax and penalty; (6) Pasig
City be prohibited from collecting real property tax and penalty from MPLDC; (7) Pasig City be
ordered to assess the actual occupants of the properties real property tax and penalty; and (8)
Pasig City be ordered to collect real property tax and penalty from the actual occupants of the
properties. The RTC granted the petition for certiorari, prohibition and mandamus. The CA set
aside the Decision. PCGG filed an MR. The CA reversed itself. Hence, the present petition.

ISSUE: WON the lower courts erred in granting PCGG’s petition for certiorari, prohibition and
mandamus and in ordering Pasig City to assess and collect real property tax from the lessees of
the properties.

HELD: The petition is partly meritorious. As correctly found by the RTC and the CA, the Republic
of the Philippines owns the properties. Campos voluntarily surrendered MPLDC, which owned
the properties, to the Republic of the Philippines. In Republic of the Philippines v. Sandiganbayan,
the Court stated: x x x Jose Y. Campos, “a confessed crony of former President Ferdinand E.
Marcos,” voluntarily surrendered or turned over to the PCGG the properties, assets and
corporations he held in trust for the deposed President. Among the corporations he surrendered
were the Independent Realty Corporation and the Mid-Pasig Land Development Corporation
Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the
Philippines are exempt from real property tax “except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.” Thus, the portions of the properties
not leased to taxable entities are exempt from real estate tax while the portions of the properties
leased to taxable entities are subject to real estate tax. The law imposes the liability to pay real
estate tax on the Republic of the Philippines for the portions of the properties leased to taxable
entities. It is, of course, assumed that the Republic of the Philippines passes on the real estate
tax as part of the rent to the lessees. Article 420 of the Civil Code classifies as properties of public
dominion those that are “intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads” and those that “are intended
for some public service or for the development of the national wealth.” Properties of public
dominion are not only exempt from real estate tax, they are exempt from sale at public auction.
In the present case, the parcels of land are not properties of public dominion because they are
not “intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads.” Neither are they “intended for some public service or
for the development of the national wealth.” MPLDC leases portions of the properties to different
business establishments. Thus, the portions of the properties leased to taxable entities are not
only subject to real estate tax, they can also be sold at public auction to satisfy the tax
delinquency. In sum, only those portions of the properties leased to taxable entities are subject
to real estate tax for the period of such leases. Pasig City must, therefore, issue to respondent
new real property tax assessments covering the portions of the properties leased to taxable
entities. If the Republic of the Philippines fails to pay the real property tax on the portions of the
properties leased to taxable entities, then such portions may be sold at public auction to satisfy
the tax delinquency.

19. DEMAALA vs COA, G.R. No. 199752, February 17, 2015

FACTS: The Sangguniang Panlalawigan of Palawan enacted Provincial Ordinance No. 332-A, Series
of 1995, entitled “An Ordinance Approving and Adopting the Code Governing the Revision of
Assessments, Classification and Valuation of Real Properties in the Province of Palawan”
(Ordinance).Chapter 5, Section 48 of the Ordinance provides for an additional levy on real
property tax for the special education fund at the rate of one-half percent or 0.5%. In conformity
with Section 48 of the Ordinance, the Municipality of Narra, Palawan, with Demaala as mayor,
collected from owners of real properties located within its territory an annual tax as special
education fund at the rate of 0.5% of the assessed value of the property subject to tax. This
collection was effected through the municipal treasurer. On post-audit, Audit Team Leader
Juanito A. Nostratis issued Audit Observation Memorandum (AOM) No. 03-005 dated August 7,
2003 in which he noted supposed deficiencies in the special education fund collected by the
Municipality of Narra. He questioned the levy of the special education fund at therate of only
0.5% rather than at 1%, the rate stated in Section 235 of the LGC. After evaluating AOM No. 03-
005, Regional Cluster Director Sy issued NC No. 2004-04-101 dated August 30, 2004 in the
amount of P1,125,416.56. He held Demaala, the municipal treasurer of Narra, and all special
education fund payors liable for the deficiency in special education fund collections. The
Municipality of Narra, through Demaala, filed the Motion for Reconsideration dated December
2, 2004. It stressed that the collection of the special education fund at the rate of 0.5% was
merely in accordance with the Ordinance. On March 9, 2005, Regional Cluster Director Sy issued
an Indorsement denying this Motion for Reconsideration. Following this, the Municipality of
Narra, through Demaala, filed an appeal with the Commission on Audit’s Legal and Adjudication
Office. It was denied. Then they filed a Petition for Review with the Commission on Audit. The
Commission on Audit ruled against Demaala with the modification that former Palawan Vice
Governor Joel T. Reyes and the other members of the Sangguniang Panlalawigan of Palawan who
enacted the Ordinance were held jointly and severally liable with Demaala, the municipal
treasurer of Narra, and the special education fund payors.

Thereafter, Demaala, who was no longer the mayor of the Municipality of Narra, filed a Motion
for Reconsideration. Former Vice Governor Joel T. Reyes and the other members of the
Sangguniang Panlalawigan of Palawan who were held liable filed a separate MR. The Commission
on Audit’s affirmed its decision. Demaala then filed with this court the present Petition for
Certiorari.

ISSUES:
1. Did respondent commit grave abuse of discretion amounting to lack or excess of jurisdiction
in holding that there was a deficiency in the Municipality of Narra’s collection of the additional
levy for the special education fund? Subsumed in this issue is the matter of whether a
municipality within the Metropolitan Manila Area, a city, or a province may have an additional
levy on real property for the special education fund at the rate of less than 1%?

2. Assuming that respondent correctly held that there was a deficiency, did respondent commit
grave abuse of discretion amounting to lack or excess or jurisdiction in holding petitioner
personally liable for the deficiency?

RULING: YES. Consistent with the 1987 Constitution’s declared preference, the taxing powers of
local government units must be resolved in favor of their local fiscal autonomy. The limits on the
level of additional levy for the special education fund under Section 235 of the Local Government
Code should be read as granting fiscal flexibility to local government units. Section 235 of the
Local Government Code allows provinces and cities, as well as municipalities in Metro Manila, to
collect, on top of the basic annual real property tax, an additional levy which shall exclusively
accrue to the special education fund. The operative phrase in Section 235’s grant to
municipalities in Metro Manila, cities, and provinces of the power to impose an additional levy
for the special education fund is prefixed with “may,” thus, “may levy and collect an annual tax
of one percent (1%).” In Buklod nang Magbubukid sa Lupaing Ramos, Inc. v. E.M. Ramos and Sons,
Inc. the meaning of “may” was discussed as follows: Where the provision reads “may,” this word
shows that it is not mandatory but discretionary. It is an auxiliary verb indicating liberty,
opportunity, permission and possibility. The use of the word “may” in a statute denotes that it is
directory in nature and generally permissive only.

Respondent concedes that Section 235’s grant to municipalities in Metro Manila, to cities, and to
provinces of the power to impose an additional levy for the special education fund makes its
collection optional. It is not mandatory that the levy be imposed and collected. The controversy
which the Commission on Audit created is not whether these local government units have
discretion to collect but whether they have discretion on the rate at which they are to collect. It
is respondent’s position that the option granted to a local government unit is limited to the
matter of whether it shall actually collect, and that the rate at which it shall collect (should it
choose to do so) is fixed by Section 235. In contrast, it is petitioner’s contention that the option
given to a local goverment unit extends not only to the matter of whether to collect but also to
the rate at which collection is to be made.

We sustain the position of petitioner. Section 235’s permissive language is unqualified.


Moreover, there is no limiting qualifier to the articulated rate of 1% which unequivocally indicates
that any and all special education fund collections must be at such rate.

2.YES. It was an error amounting to grave abuse of discretion for respondent to hold petitioner
personally liable for the supposed deficiency. Having established the propriety of imposing an
additional levy for the special education fund at the rate of 0.5%, it follows that there was nothing
erroneous in the Municipality of Narra’s having acted pursuant to Section 48 of the Ordinance
Likewise, it follows that it was an error for respondent to hold petitioner personally liable for the
supposed deficiency in collections. Even if a contrary ruling were to be had on the propriety of
collecting at a rate less than 1%, it would still not follow that petitioner is personally liable for
deficiencies.The actions of the officials of the Municipality of Narra are consistent with the rule
that ordinances are presumed valid. The mayor’s actions were done pursuant to an ordinance
which, at the time of the collection, was yet to be invalidated. It is basic that laws and local
ordinances are “presumed to be valid unless and until the courts declare the contrary in clear
and unequivocal terms.”Thus, the concerned officials of the Municipality of Narra, Palawan must
be deemed to have conducted themselves in good faith and with regularity when they acted
pursuant to Chapter 5, Section 48 of Provincial Ordinance No. 332-A, Series of 1995, and collected
the additional levy for the special education fund at the rate of 0.5%.

20. Meralco v. City Assessor GR No. 166102

FACTS: Before the Court is a Petition for Review on Certiorari seeking the reversal of the
Decision1 dated May 13, 2004 and Resolution dated November 18, 2004 of the Court of Appeals
in CA-G.R. SP No. 67027. The appellate court affirmed the Decision3 dated May 3, 2001 of the
Central Board of Assessment Appeals (CBAA) in CBAA Case No. L-20-98, which, in turn, affirmed
with modification the Decision dated June 17, 19985 of the Local Board of Assessment Appeals
(LBAA) of Lucena City, Quezon Province, as regards Tax Declaration Nos. 019-6500 and 019-7394,
ruling that MERALCO is liable for real property tax on its transformers, electric posts (or poles),
transmission lines, insulators, and electric meters, beginning 1992. MERALCO failed to persuade
the Court of Appeals that the transformers, transmission lines, insulators, and electric meters
mounted on the electric posts of MERALCO were not real properties. The appellate court invoked
the definition of "machinery" under Section 199(o) of the Local Government Code and then wrote
that:

We firmly believe and so hold that the wires, insulators, transformers and electric meters
mounted on the poles of [MERALCO] may nevertheless be considered as improvements on
the land, enhancing its utility and rendering it useful in distributing electricity. The said
properties are actually, directly and exclusively used to meet the needs of [MERALCO] in
the distribution of electricity.

In addition, "improvements on land are commonly taxed as realty even though for some
purposes they might be considered personalty. It is a familiar personalty phenomenon to see
things classed as real property for purposes of taxation which on general principle might be
considered personal property."

Issue: Whether or not the transformers, electric posts (or poles), transmission lines, insulators,
and electric meters are real properties.

Held: While the Local Government Code still does not provide for a specific definition of "real
property," Sections 199(o) and 232 of the said Code, respectively, gives an extensive definition
of what constitutes "machinery" and unequivocally subjects such machinery to real property tax.
The Court reiterates that the machinery subject to real property tax under the Local Government
Code "may or may not be attached, permanently or temporarily to the real property;" and the
physical facilities for production, installations, and appurtenant service facilities, those which are
mobile, self-powered or self-propelled, or are not permanently attached must (a) be actually,
directly, and exclusively used to meet the needs of the particular industry, business, or activity;
and (2) by their very nature and purpose, be designed for, or necessary for manufacturing,
mining, logging, commercial, industrial, or agricultural purposes.

Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and,
buildings, roads and constructions of all kinds adhered to the soil." The land, buildings, and roads
are immovables by nature "which cannot be moved from place to place," whereas the
constructions adhered to the soil are immovables by incorporation "which are essentially
movables, but are attached to an immovable in such manner as to be an integral part thereof."57
Article 415, paragraph (3) of the Civil Code, referring to "[ejverything attached to an immovable
in a fixed manner, in such a way that it cannot be separated therefrom without breaking the
material or deterioration of the object," are likewise immovables by incorporation. In contrast,
the Local Government Code considers as real property machinery which "may or may not be
attached, permanently or temporarily to the real property," and even those which are "mobile."

Article 415, paragraph (5) of the Civil Code considers as immovables or real properties
"[machinery, receptacles, instruments or implements intended by the owner of the tenement for
an industry or works which may be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works." The Civil Code, however, does not
define "machinery."

The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination,
or "those which are essentially movables, but by the purpose for which they have been placed in
an immovable, partake of the nature of the latter because of the added utility derived
therefrom."58 These properties, including machinery, become immobilized if the following
requisites concur: (a) they are placed in the tenement by the owner of such tenement; (b) they
are destined for use in the industry or work in the tenement; and (c) they tend to directly meet
the needs of said industry or works.59 The first two requisites are not found anywhere in the
Local Government Code. Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment
Appeals,62 the Court acknowledged that "[i]t is a familiar phenomenon to see things classed as
real property for purposes of taxation which on general principle might be considered personal
property[.]" Therefore, for determining whether machinery is real property subject to real
property tax, the definition and requirements under the Local Government Code are controlling.

21. City of Lapu-Lapu vs. Philippine Economic Zone Authority, G.R. No. 184203 November
26, 2014

FACTS: These are consolidated petitions for review on certiorari the City of Lapu-Lapu and the
Province of Bataan separately filed against the Philippine Economic Zone Authority (PEZA). In G.R.
No. 184203, the City of Lapu-Lapu assails the CA`s decision dismissing the City`s appeal appealing
the RTC`s decision finding the PEZA exempt from payment of real property taxes. In G.R. No.
187583, the Province of Bataan assails the Court of Appeals` decision ruling that the RTC gravely
abused its discretion in finding the PEZA liable for real property taxes to the Province of Bataan
President Ferdinand E. Marcos issued Presidential Decree No. 66 in 1972, declaring as
government policy the establishment of export processing zones. The Export Processing Zone
Authority (EPZA) was created to operate, administer, and manage the export processing zones
established in the Port of Mariveles, Bataan and such other export processing zones that may be
created by virtue of the decree. The decree declared the EPZA nonprofit in character with all its
revenues devoted to its development, improvement, and maintenance. To maintain this
nonprofit character, the EPZA was declared exempt from all taxes that may be due to the
Republic of the Philippines, its provinces, cities, municipalities, and other government agencies
and instrumentalities. Specifically, Section 21 of Presidential Decree No. 66 declared the EPZA
exempt from payment of real property taxes In 1995, the PEZA was created by virtue of Republic
Act No. 7916 or the Special Economic Zone Act of 1995 to operate, administer, manage, and
develop economic zones in the country. On October 30, 1995, President Fidel V. Ramos issued
Executive Order No. 282, directing the PEZA to assume and exercise all of the EPZA`s powers,
functions, and responsibilities as provided in Presidential Decree No. 66, as amended, insofar as
they are not inconsistent with the powers, functions, and responsibilities of the PEZA, as
mandated under the Special Economic Zone Act of 1995. All of EPZA`s properties, equipment,
and assets, among others, were ordered transferred to the PEZA.

ISSUE: Is the PEZA liable for real property tax?

RULING: NO. PEZA is a government instrumentality. An instrumentality is any agency of the


National Government, not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering
special funds, and enjoying operational autonomy, usually through a charter. As an
instrumentality of the national government, the PEZA is vested with special functions or
jurisdiction by law. Congress created the PEZA to operate, administer, manage and develop
special economic zones in the Philippines. Special economic zones are areas with highly
developed or which have the potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and financial centers. Being an
instrumentality of the national government, the PEZA cannot be taxed by local government units.
Although a body corporate vested with some corporate powers, the PEZA is not a government-
owned or -controlled corporation taxable for real property taxes.

Under the Special Economic Zone Act of 1995, the PEZA was established primarily to perform the
governmental function of operating, administering, managing, and developing special economic
zones to attract investments and provide opportunities for preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed with some corporate powers.
However, it was not organized as a stock or nonstock corporation. Nothing in the PEZA`s charter
provides that the PEZA`s capital is divided into shares. The PEZA also has no members who shall
share in the PEZA`s profits. We rule that the PEZA is exempt from real property taxes by virtue of
its charter. A provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA is
unnecessary. The PEZA assumed the real property exemption of the EPZA under Presidential
Decree No. 66. Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA to evolve
into the PEZA in accordance with the guidelines and regulations set forth in an executive order
issued for this purpose. President Ramos then issued Executive Order No. 282 in 1995, ordering
the PEZA to assume the EPZA`s powers, functions, and responsibilities under Presidential Decree
No. 66 not inconsistent with the Special Economic Zone Act of 1995.

22. CITY ASSESSOR OF CEBU CITY, petitioner vs. ASSOCIATION OF BENEVOLA DE CEBU, INC.,
G.R. No. 152904 June 8, 2007

Facts: Respondent Association of Benevola de Cebu, Inc. is a non-stock, non-profit organization


organized under the laws of the Republic of the Philippines and is the owner of Chong Hua
Hospital (CHH) in Cebu City. In the late 1990’s, respondent constructed the CHH Medical Arts
Center (CHHMAC). Thereafter, an April 17, 1998 Certificate of Occupancy7 was issued to the
center with a classification of "Commercial [Clinic]." Petitioner City Assessor of Cebu City assessed
the CHHMAC building under Tax Declaration (TD) No. ’97 GR-04-024-02529 as "commercial" with
a market value of PhP 28,060,520 and an assessed value of PhP 9,821,180 at the assessment level
of 35% for commercial buildings, and not at the 10% special assessment currently imposed for
CHH and its other separate buildings—the CHH’s Dietary and Records Departments. Thus,
respondent filed its September 15, 1998 letter-petition with the Cebu City LBAA for
reconsideration, asserting that CHHMAC is part of CHH and ought to be imposed the same special
assessment level of 10% with that of CHH. On September 25, 1998, respondent formally filed its
appeal with the LBAA.the LBAA directed petitioner to conduct an ocular inspection of the subject
property and to submit a report on the scheduled date of hearing. In the October 7, 1998 hearing,
the parties were required to submit their respective position papers.

In its position paper, petitioner argued that CHHMAC is a newly constructed five-storey building
situated about 100 meters away from CHH and, based on actual inspection, was ascertained that
it is not a part of the CHH building but a separate building which is actually used as commercial
clinic/room spaces for renting out to physicians and, thus, classified as "commercial." Petitioner
contended that in turn the medical specialists in CHHMAC charge consultation fees for patients
who consult for diagnosis and relief of bodily ailment together with the ancillary (or support)
services which include the areas of anesthesia, radiology, pathology, and more. Petitioner
concluded the foregoing set up to be ultimately geared for commercial purposes, and thus having
the proper classification as "commercial" under Building Permit No. B01-9750087 pursuant to
Section 10 of the Local Assessment Regulations No. 1-92 issued by the Department of Finance
(DOF). On the other hand, respondent contended in its position paper that CHHMAC building is
actually, directly, and exclusively part of CHH and should have a special assessment level of 10%
as provided under City Tax Ordinance LXX. Respondent asserted that the CHHMAC building is
similarly situated as the buildings of CHH, housing its Dietary and Records Departments, are
completely separate from the main CHH building and are imposed the 10% special assessment
level. In fine, respondent argued that the CHHMAC, though not actually indispensable, is
nonetheless incidental and reasonably necessary to CHH’s operations.

LBAA: issued declaring that the building is entitled to a ten (10) percent assessment level.

CBAA: affirming in toto the LBAA Decision and resolved the issue of whether the subject building
of CHHMAC is part and parcel of CHH.

CA: affirmed CBAA


Issue: WHETHER OR NOT THE NEW BUILDING IS LIABLE TO PAY THE 35% ASSESSMENT LEVEL

Ruling: No. Chong Hua Hospital Medical Arts Center is an integral part of Chong Hua Hospital. We
so hold that CHHMAC is an integral part of CHH. It is undisputed that the doctors and medical
specialists holding clinics in CHHMAC are those duly accredited by CHH, that is, they are
consultants of the hospital and the ones who can treat CHH’s patients confined in it. This fact
alone takes away CHHMAC from being categorized as "commercial" since a tertiary hospital like
CHH is required by law to have a pool of physicians who comprises the required medical
departments in various medical fields. As aptly pointed out by respondent:

Chong Hua Hospital is a duly licensed tertiary hospital and is covered by Dept. of Health (DOH)
Adm. Order No. 68-A and the "1989 Revised Rules and Regulations" governing the registration,
licensure and operation of hospitals in the Philippines. Under Sec. 6, sub-sec. 6.3, it is mandated
by law, that respondent appellee in order to retain its classification as a "TERTIARY HOSPITAL,"
must be fully departmentalized and equipped with the service capabilities needed to support
certified medical specialists and other licensed physicians rendering services in the field of
medicine, pediatrics, obstetrics and gynecology, surgery, and their sub-specialties, ICCU and
ancillary services which is precisely the function of the Chong Hua Hospital Medical Arts
Center.24

Sec. 6.3, Administrative Order No. (AO) 68-A, Series of 1989, Revised Rules and Regulations
Governing the Registration, Licensure and Operation of Hospitals in the Philippines pertinently
provides:

Tertiary Hospital –– is fully departmentalized and equipped with the service capabilities needed
to support certified medical specialists and other licensed physicians rendering services in the field
of Medicine, Pediatrics, Obstetrics and Gynecology, Surgery, their subspecialties and ancillary
services. (Emphasis supplied.)

Moreover, AO 68-A likewise provides what clinic service and medical ancillary service are, thus:

11.3.2 Clinical Service––The medical services to patients shall be performed by the medical staff
appointed by the governing body of the institution. x x x

11.3.3 Medical Ancillary Service––These are support services which include Anesthesia
Department, Pathology Department, Radiology Department, Out-Patient Department (OPD),
Emergency Service, Dental, Pharmacy, Medical Records and Medical Social Services.

Based on these provisions, these physicians holding offices or clinics in CHHMAC, duly appointed
or accredited by CHH, precisely fulfill and carry out their roles in the hospital’s services for its
patients through the CHHMAC. The fact that they are holding office in a separate building, like at
CHHMAC, does not take away the essence and nature of their services vis-à-vis the over-all
operation of the hospital and the benefits to the hospital’s patients. Given what the law requires,
it is clear that CHHMAC is an integral part of CHH. These accredited physicians normally hold
offices within the premises of the hospital; in which case there is no question as to the conduct
of their business in the ambit of diagnosis, treatment and/or confinement of patients. This was
the case before 1998 and before CHHMAC was built. Verily, their transfer to a more spacious and,
perhaps, convenient place and location for the benefit of the hospital’s patients does not remove
them from being an integral part of the overall operation of the hospital. Conversely, it would
have been different if CHHMAC was also open for non-accredited physicians, that is, any medical
practitioner, for then respondent would be running a commercial building for lease only to
doctors which would indeed subject the CHHMAC to the commercial level of 35% assessment.

Moreover, the CHHMAC, being hundred meters away from the CHH main building, does not
denigrate from its being an integral part of the latter. As aptly applied by the CBAA, the Herrera
ruling on what constitutes property exempt from taxation is indeed applicable in the instant case,
thus: Moreover, the exemption in favor of property used exclusively for charitable or educational
purposes is "not limited to property actually indispensable" therefore (Cooley on Taxation, Vol.
2, p. 1430), but extends to facilities which are "incidental to and reasonably necessary for" the
accomplishment of said purposes, such as, in the case of hospitals, "a school for training nurses,
a nurses’ home, property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational facilities for student
nurses, interns and residents" (84 C.J.S., 621), such as "athletic fields," including "a farm used for
the inmates of the institution" (Cooley on Taxation, Vol. 2, p. 1430).25

Verily, being an integral part of CHH, CHHMAC should be under the same special assessment level
of as that of the former. The CHHMAC facility is definitely incidental to and reasonably necessary
for the operations of Chong Hua Hospital. Given our discussion above, the CHHMAC facility, while
seemingly not indispensable to the operations of CHH, is definitely incidental to and reasonably
necessary for the operations of the hospital. Considering the legal requirements and the
ramifications of the medical and clinical operations that have been transferred to the CHHMAC
from the CHH main building in light of the accredited physicians’ transfer of offices in 1998 after
the CHHMAC building was finished, it cannot be gainsaid that the services done in CHHMAC are
indispensable and essential to the hospital’s operation. Thus, the importance of CHHMAC in the
operation of CHH cannot be over-emphasized nor disputed. Clearly, it plays a key role and
provides critical support to hospital operations.

Respondent’s explanation on this point is well taken. First, CHHMAC is only for its consultants or
accredited doctors and medical specialists. Second, the charging of rentals is a practical necessity:
(1) to recoup the investment cost of the building, (2) to cover the rentals for the lot CHHMAC is
built on, and (3) to maintain the CHHMAC building and its facilities. Third, as correctly pointed
out by respondent, it pays the proper taxes for its rental income. And, fourth, if there is indeed
any net income from the lease income of CHHMAC, such does not inure to any private or
individual person as it will be used for respondent’s other charitable projects.

We fail to see any reason why the CHHMAC building should be classified as "commercial" and be
imposed the commercial level of 35% as it is not operated primarily for profit but as an integral
part of CHH. The CHHMAC, with operations being devoted for the benefit of the CHH’s patients,
should be accorded the 10% special assessment. In this regard, we point with approbation the
appellate court’s application of Sec. 216 in relation with Sec. 215 of the Local Government Code
on the proper classification of the subject CHHMAC building as "special" and not "commercial."
Secs. 215 and 216 pertinently provide:

SEC. 215. Classes of Real Property for Assessment Purposes.—For purposes of assessment, real
property shall be classified as residential, agricultural, commercial, industrial, mineral, timberland
or special.

SEC. 216. Special Classes of Real Property.––All lands, buildings, and other improvements thereon
actually, directly and exclusively used for hospitals, cultural or scientific purposes, and those
owned and used by local water districts, and government-owned or controlled corporations
rendering essential public services in the supply and distribution of water and/or generation and
transmission of electric power shall be classified as special.

Thus, applying the above provisos in line with City Tax Ordinance LXX of Cebu City, the 10% special
assessment should be imposed for the CHHMAC building which should be classified as "special."