Herrera v. Q.C. Board of Assessment Appeals Concepcion, J (September 30, 1961) Petitioner: JOSE V.

HERRERA and ESTER OCHANGCO HERRERA owners of subject establishments sought to be exempted from tax under ArtVII 28(3) 1987 Consti Respondent: THE QUEZON CITY BOARD OF ASSESSMENT APPEALS from exempt to taxable Facts: 1.

July 1952 Dir Bureau of Hospitals authorized petitioners to establish and operate St. Catherines Hospital at Sta. Mesa QC. a. Jan 1953 Request for exemption from Real Estate Tax because: it was established for charitable and humanitarian purposs and not for commercial gain. Exemption: GRANTED for 1953, 54, 55. 2. The Building Surgical and Orthopedic Hospital, emphasis on obstetrical cases (90%) - 20 Charity patients + 12 Pay patients = 32beds total. 3. The Patients a. Out-Charity Patients free consult, prescription, not costly medicines b. Charity Lying In Patients free medical service, medicine, food c. Pay-Patients Hospital service fee of P5-P40/day. 4. The income realized from pay-patients is spent for the improvement of charity wards. 5. The Personnel 3Nurses, 2graduate midwives, resident physician with P170.mo salary, and petitioner as Directress (no salary). 6. Petitioners also operate within the premises of the hospital the "St. Catherine's School of Midwifery" of about 200 students The students are charged matriculation fee. The students practice at both St. Catherines Hosp and St. Marys Hospital (also owned by petitioners). 7. QC ASSESSOR - Aug 1955 notified petitioners that the properties Exemption: REMOVED QC BOARD OF ASSESMENT APPEALS Affirmed, taxable. CTA: Affirmed. Not used exclusively for charitable purposes, hence it is not exempt. It is used as a hospital, part as residence of the petitioners, part as garage, part as dormitory and part as school"; and that "the portion dedicated to educational and charitable purposes can not be identified from those destined to other uses; and the building is itself an indivisible unit of property." Issue: w/n St. Catherines Hospital is a charitable institution and hence exempt from tax. Held: YES, St. Catherines is a charitable institution, Charity is the primary object, income devoted to benevolent purposes, the fact that it may still earn income is immaterial. 1. The admission of pay-patients does not detract from the charitable character of a hospital, if all its funds are devoted "exclusively to the maintenance of the institution" as a "public charity" (84 C.J.S., 617) 2. charity is its primary object, and the funds derived from payments made by patients able to pay are devoted to the benevolent purposes of the institution, the mere fact that a profit has been made will not deprive the hospital of its benevolent character" (Prairie Du Chien Sanitarium Co. vs. City of Prairie Du Chien, 242 Wis. 262, 7 NW [2d] 832, 144 A.L.R. 1480). 3. THUS PHIL CASES 1 a. U.S.T. Hospital Employees Association vs. Sto. Tomas University Hospital - Hospital was not established for profit-making purposes, although it had 140 paying beds maintained only to partly finance the expenses of the free wards 2 b. CIRvs. St. Paul's Hospital of Iloilo - corporation organized for "charitable educational and religious purposes" can not be considered as engaged in business merely because its pharmacy department charges paying patients the cost of their medicine, plus 10% thereof, to partly offset the cost of medicines supplied free of charge to charity patients 3 c. CIRvs. University of Visayas - a gain of P200,000.00 in property, besides good-will, which was not carried out, does not justify the inference that the corporation has become one for business and profit, none of its profits having inured to the benefit of any stockholder or individual 4. Exemption for Property used exclusively for charitable purposes also include facilities which are incidental to and reasonably necessary for" the accomplishment of said purposes. (Cooley on Taxation, Vol.2, p.1430) a. The garage is essential for the operation of the school and as such it is exempt.
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L-6988, May 24, 1954 L-12127, May 25, 1959 3 L-13554, February 28, 1961

5. The existence of St. Catherines School of Midwifery does not affect the exemption of the hospital being separate from it, further the school is another ground for exemption. Consti provides: all lands, building and improvements used exclusively for religious, charitable or educational purposes shall be exempt from taxation. WHEREFORE REVERSED. St. Catherines Hospital is exempted from Real Estate Tax.