G.R. No. 144104 ● Under P.D.
1823, LCP was organized for the welfare and benefit of the
Lung Center v. Quezon City
Callejo, Sr.
All credit goes to Faye Banogon (with permission haha)
The Lung Center of the Philippines was assessed for real property taxes by the
City Assessor of Quezon City. The petitioner claimed that under Sec 28 (3), Art 6 of the
Constitution it is a charitable institution and thus, exempted from paying real property
taxes. The Court partially granted the petition and ruled that only the portions of the
land/building used exclusively, directly and actually for charitable purposes are exempt
from taxes.
DOCTRINE
For a property to be exempt from tax, it should be actually, directly and
exclusively used for a tax-exempt purpose.
FACTS
1. Lung Center of the Philippines (LCP) was created under PD No. 1823 on
Jan. 16, 1981. The institution own a land located at Quezon City. In the
middle of the land is the LCP (the hospital itself). The ground floor of the
building is leased to private parties, canteen/stores and for private
practitioners for their clinics. The left side of the building is vacant while the
right side is leased to Elliptical Orchids and Garden Center.
2. The City Assessor of QC assessed LCP for real property taxes amounting to
P4.6M. LCP filed a Claim for Exemption claiming that it is a charitable
institution and under Sec 28(3), Art 6 of the Constitution it is exempted from
real property taxes.
3. The City Assessor denied LCP’s claim. LCP filed a petition before the Local
Board of Assessment Appeals of QC (QC-LBAA), it was denied. QC-LBAA’s
decision was affirmed by Central Board of Assessment Appeals of QC
(CBAA) saying that it was not a charitable institution. The Court of Appeals
then affirmed CBAA’s decision.
ISSUE with HOLDING
1. Whether or not Lung Center of the Philippines is a charitable institution.
Yes. The Lung Center of the Philippines is a charitable institution.
● Petitioner – It is a charitable institution within Sec 28 (3), Art 6 of the
Constitution and its character as such is not altered because it admits
paying patients (60% of bed capacity for charity patients).
● Respondent - LCP is not a charitable entity. It failed to prove that its
property is actually, directly and exclusively used for charitable
purposes.
Filipino people to help combat the high incidence of lung and
pulmonary
diseases (45% of annual deaths in the country). Under its Articles of
Incorporation, LCP is to render medical services to the public in
general.
● A charitable institution does not lose exemption from taxes just because
it derives income from paying patients. The money received becomes a
part of the trust fund and must be devoted to public trust purposes and
cannot be diverted to private profit or benefit.
● A charitable institution does not lose its character because of
government subsidies as such are to be considered as gifts or
donation. LCP spent its income, including subsidies form gov’t for its
patients and hospital operations.
2. Whether or not Lung Center of the Philippines is exempted from real
property taxes.
Only the portion of LCP that is actually, directly and exclusively for
charitable purposes is exempted from real property tax.
● Petitioner - Even if a portion of its property is leased, charitable
character stays and remains exempted from real property taxes.
● Respondent - LCP is not a charitable entity. It failed to prove that
its property is actually, directly and exclusively used for charitable
purposes.
● Laws granting tax exemptions are to be construed strictissimi juris
against the taxpayer. Taxation is the rule and exemption is the
exception.
o Section 2 of PD1823 – all donations, contributions,
endowments, equipment and supplies shall be exempt
from income and gift taxes.
o LCP does not enjoy property tax exemption under the
above decree
o Expressio unius est exclusio alterius applies – express
mention of a thing implies exclusion of all others
● LCP may avail of tax exemption under Sec 28 (3), Art 6 of the
1987 Constitution “all lands, building, and improvements, actually,
directly and exclusively used for charitable purposes shall be
exempt from taxation” (The provision is also implemented by Sec
234 (b) of RA No. 7160 or Local Government Code of 1991)
● Exemption – LCP must prove that it is a charitable institution and
that its real properties are actually, directly and exclusively used
for charitable purposes.
o Exclusive – possessed and enjoyed to the exclusion of
others
1
 o If a real property is used for one or more commercial
purposes it is not exclusively used for the exempted
charitable purpose
● Actual, direct and exclusive use of property for charitable purpose
means the direct and immediate and actual application of the
property for the charitable purpose and not the use of the income
of the property for such tax-exempt purpose
● Portions of the hospital are leased to private individuals. Such
portions are not exempt from taxes. Only portions of land occupied
by the hospital and portions of it used for patients are exempted.

DISPOSITIVE PORTION
Petition partially granted. The QC Assessor is directed to determine the portions
of the land which are leased to private persons and compute real property taxes
due thereon.