PHILIPPINE HEART CENTER vs. LGU OF QUEZON CITY, G.R. No. 225409, March 11, 2020

 

PHILIPPINE HEART CENTER vs. LGU OF QUEZON CITY

G.R. No. 225409, March 11, 2020

 

Subject: Taxation Law

Principle: Real properties owned by the Republic, whether titled in the name of the Republic itself or in the name of agencies or instrumentalities of the national government, are exempt from real property tax

 

Facts: In 1975, the PHC established under PD 173 as a specialty hospital mandated to provide exert comprehensive cardiovascular care to the general public, especially the poor and less fortunate in life.

 

Respondent Quezon City Government issued 3 final Notices of Delinquency for unpaid real property taxes pertaining to the 11 properties of the PHC. The Quezon City Treasurer issued a Warrant of Levy for the PHC's failure to pay real property taxes despite due notice. On July 7, 2011, after due publication, all the properties were sold to the Quezon City Government, the lone bidder during the public auction.

 

PHC asserted that it was exempt from taxes, fees and charges imposed by a local government unit.

 

 

Issue: WON the PHC exempt from paying real property taxes on its eleven (11) properties in Quezon City.

 

Ruling: Yes. 11 properties were not anymore exempt since its beneficial use were transfer to private taxable persons. The beneficial owner is the person liable to pay the RPT to the LGU of Quezon, not the PHC since it is government instrumentality.

 

SC ruled that PHC is exempted from the real property taxes of the Quezon City Government and the public auction was considered void. The PHC is a government instrumentality with corporate powers exempt from local taxes. An agency will be classified as a government instrumentality vested with corporate powers when the following elements concur: a) it performs governmental functions, and b) it enjoys operational autonomy which PHC passes these twin criteria. The high court said the properties of the PHC are considered public dominion devoted to public use and welfare, thus exempt from real property taxes and levies.

 

The properties of the PHC are properties of public dominion devoted to public use and welfare provided in Article 420 of the Civil Code and, therefore, exempt from real property taxes and levy, without prejudice to the liability of taxable persons to whom the beneficial use of any of these properties has been granted.

 

 However, Supreme Court agreed with the position of the Quezon City government that the 11 properties of the PHC in the city are subject to real property tax since the PHC granted the beneficial use of these properties to commercial establishments such as Globe Telecom Inc., Jollibee Corporation and several others. PHC's properties which are leased to private individuals are no longer covered by the tax exemption, the private individuals are liable to pay the RPT tax.

 

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