Pascual v.

Secretary of Public Works and Communications FACTS: Pascual, in his official capacity as the Provincial Governor of Rizal, petitioned for a writ of certiorari against the dismissal of the case and dissolving of the preliminary injunction held by the Court of the First Instance. Petitioner prayed for that RA #920 be declared null and void, that the alleged Deed of Donation made by Zulueta be declared unconstitutional. Petitioner also prayed for an injunction enjoining Secretary of Public Works and Communications, Director of Public Works and Highways and the disbursing officers of the latter department from making and securing any further release of funds for the said road project. RA# 920 contained an item appropriating P85,000.00 which the petitioner alleged that it was for the construction of roads improving the private property of Jose Zuleta, a member of the Senate. ISSUES: 1. Whether or not RA # 920 is unconstitutional. 2. Whether or not Pascual has the legal capacity or to sue. HELD: 1. RA #920 is unconstitutional because the Congress is without power to appropriate public revenue for anything but public purpose. 2. Pascual has the personality to sue as a taxpayer recognizing the right of the taxpayer to assail the constitutionality of a legislation appropriating public funds.

THE PROVINCE OF ABRA, represented by LADISLAO ANCHETA, Provincial Assessor,

petitioner,vs.

HONORABLE HAROLD M. HERNANDO, in his capacity as Presiding Judge of Branch I, Court of First Instance Abra;THE ROMAN CATHOLIC BISHOP OF BANGUED, INC., represented by Bishop Odilo etspueler and Reverend FelipeFlores,

respondents.

FERNANDO,C.J.:

Facts:The provincial assessor of Abra made a tax assessment on the properties of the Roman Catholic Bishop of Bangued.The bishop claims tax exemption from real estate tax, through an action for declaratory relief. Judge Hernando of the CFI Abra presided over the case. The petitioner province filed a motion to dismiss, based on lack of jurisdiction, which was denied. It was followed by a summary judgment granting the exemption without hearing the side of the petitioner. The Acting Provincial Fiscal, as counsel for petitioner, alleged that respondent Judge "virtually ignored the pertinent provisions of the Rules of Court; ... wantonly violated the rights of petitioner to due process, by giving due course to the petition of private respondent for declaratory relief, and thereafter without allowing petitioner to answer and without any hearing, adjudged the case; all in total disregard of basic laws of procedure and basic provisions of due process in the constitution, thereby indicating a failure to grasp and understand the law.

Issue:

WON Judge Hernando erred in denying the motion to dismiss of petitioner and in granting the tax exemption through summary judgment. Held:

YES. The petition must be granted. Respondent Judge would not have erred so grievously had he merely compared the provisions of the present Constitution with that appearing in the 1935 Charter on the tax exemption of "lands, buildings, and improvements."There is a marked difference. Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be exempt from taxation."10The present Constitution added "charitable institutions, mosques, and non-profit cemeteries" and required that for the exemption of ": lands, buildings, and improvements," they should not only be "exclusively" but also "actually and "directly" used for religious or charitable purposes.11The Constitution is worded differently. The change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have sufficed were the words "actually" as well as "directly" not added. There must be proof therefore of the actual and direct use of the lands, buildings, and improvements for religious or charitable purposes to be exempt from taxation. It has been the constant and uniform holding that exemption from taxation is not favoured and is never presumed, so that if granted it must be strictly construed against the taxpayer. Affirmatively put, the law frowns on exemption from taxation, hence, an exempting provision should be construed strictissimi juris. Petitioner Province of Abra is therefore fully justified in invoking the protection of procedural due process. If there is any case where proof is necessary to demonstrate that there is compliance with the constitutional provision that allows an exemption, this is it. Instead, respondent Judge accepted at its face the allegation of private respondent. All that was alleged in the petition for declaratory relief filed by private respondents, after mentioning certain parcels of land owned by it, are that they are used "actually, directly and exclusively" as sources of support of the parish priest and his helpers and also of private respondent Bishop. It clearly appears, therefore, that in failing to accord a hearing to petitioner Province of Abra and deciding the case immediately in favor of private respondent, respondent Judge failed to abide by the constitutional command of procedural due process

Ormoc Sugar Company Inc. vs Ormoc City et al 15 11 2010 Rate This

Equal Protection In 1964, Ormoc City passed a bill which read: There shall be paid to the City Treasurer on any and all productions of centrifugal sugar milled at the Ormoc Sugar Company Incorporated, in Ormoc City a municipal tax equivalent to one per centum (1%) per export sale to the United States of America and other foreign countries. Though referred to as a production tax, the imposition actually amounts to a tax on the export of centrifugal sugar produced at Ormoc Sugar Company, Inc. For production of sugar alone is not taxable; the only time the tax applies is when the sugar produced is exported. Ormoc Sugar paid the tax (P7,087.50) in protest averring that the same is violative of Sec 2287 of the Revised Administrative Code which provides: It shall not be in the power of the municipal council to impose a tax in any form whatever, upon goods and merchandise carried into the municipality, or out of the same, and any attempt to impose an import or export tax upon such goods in the guise of an unreasonable charge for wharfage, use of bridges or otherwise, shall be void. And that the ordinance is violative to equal protection as it singled out Ormoc Sugar As being liable for such tax impost for no other sugar mill is found in the city. ISSUE: Whether or not there has been a violation of equal protection.

HELD: The SC held in favor of Ormoc Sugar. The SC noted that even if Sec 2287 of the RAC had already been repealed by a latter statute (Sec 2 RA 2264) which effectively authorized LGUs to tax goods and merchandise carried in and out of their turf, the act of Ormoc City is still violative of equal protection. The ordinance is discriminatory for it taxes only centrifugal sugar produced and exported by the Ormoc Sugar Company, Inc. and none other. At the time of the taxing ordinances enactment, Ormoc Sugar Company, Inc., it is true, was the only sugar central in the city of Ormoc. Still, the classification, to be reasonable, should be in terms applicable to future conditions as well. The taxing ordinance should not be singular and exclusive as to exclude any subsequently established sugar central, of the same class as plaintiff, from the coverage of the tax. As it is now, even if later a similar company is set up, it cannot be subject to the tax because the ordinance expressly points only to Ormoc Sugar Company, Inc. as the entity to be levied upon.

Summary: Lung Center vs. Quezon City (GR 144104, 29 June 2004) Lung Center vs. Quezon City [GR 144104, 29 June 2004] En Banc, Callejo Sr. (J): 13 concur Facts: The Lung Center of the Philippines is a non-stock and non-profit entity established on 16 January 1981 by virtue of Presidential Decree 1823. It is the registered owner of a parcel of land, particularly described as Lot RP-3B-3A-1-B-1, SWO-04-000495, located at Quezon Avenue corner Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters and is covered by Transfer Certificate of Title (TCT) 261320 of the Registry of Deeds of 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 store spaces, and to medical or professional practitioners 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. The Lung Center accepts paying and non-paying patients. It also renders medical services to outpatients, both paying and non-paying. Aside from its income from paying patients, the Lung Center receives annual subsidies from the government. On 7 June 1993, both the land and the hospital building of the Lung Center were assessed for real property taxes in the amount of P4,554,860 by the City Assessor of Quezon City. Accordingly, Tax Declarations C-021-01226 (16-2518) and C-021-01231 (15-2518-A) were issued for the land and the hospital building, respectively. On 25 August 1993, the Lung Center filed a Claim for Exemption5 from real property taxes with the City Assessor, predicated on its claim that it is a charitable institution. The Lung Centers request was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City (QCLBAA) for the reversal of the resolution of the City Assessor. The Lung Cwenter alleged that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital operation is to serve charity patients. The Lung Center contends that it is a charitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the Lung Center liable for real property taxes. The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of Quezon City (CBAA) which ruled that the Lung Center was not a charitable institution and that its real properties were not actually, directly and exclusively used for charitable purposes; hence, it was not entitled to real property tax exemption under the constitution and the law. The Lung Center sought relief from the Court of Appeals, which, on 17 July 2000 (CA-GR SP 57014), rendered judgment affirming the decision of the CBAA. Undaunted, the Lung Center filed its petition for review on certiorari under Rule 45 of the Rules of Court, as amended, in the Supreme Court. Issue [1]: Whether the Lung Center is a charitable institution within the context of Presidential Decree 1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act 7160. Held [1]: YES. The Lung Center 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 PD 1823, the Lung Center 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. The raison detre for the creation of the Lung Center is stated in the decree. Further, the purposes for which the Lung Center was created are spelled out in its Articles of Incorporation, where the medical services of the Lung Center are to be rendered to the public in general in any and all walks of life including those who are poor and the needy without discrimination. After all, any person, the rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity. Furthermore, 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 Lung Center 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 PD 1823, the Lung Center is entitled to receive donations. The Lung Center 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. Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government rather than private charitable contributions does not dictate the denial of a charitable exemption if the facts otherwise support such an exemption. Issue [2]: Whether the real properties of the Lung Center are exempt from real property taxes. Held [2]: PARTLY NO. Those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Under PD 1823, the Lung Center does not enjoy any property tax exemption privileges for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same should have been among the enumeration of tax exempt privileges under Section 2 thereof. The exemption must not be so enlarged by construction since the reasonable presumption is that the State has granted in express terms all it intended to grant at all, and that unless the privilege is limited to the very terms of the statute the favor would be intended beyond what was meant. The tax exemption under Section 28(3), Article VI of the 1987 Philippine Constitution covers property taxes only. Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act 7160 (Local Government Code of 1991). Under the 1973 and 1987 Constitutions and RA 7160 in order to be entitled to the exemption, the Lung Center 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." 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 Lung Center 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 Lung Centers evidence shows that it collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said lessees. Accordingly, 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. REPUBLIC vs. MAMBULAO LUMBER COMPANY, ET AL. G.R. No. L-17725, February 28, 1962 FACTS: Defendants have a liability for forest charges to the Republic of the Philippines. Defendants contended that since the Republic of the Philippines has not made use of those reforestation charges (RA 115) collected from it for reforesting the denuded area of the land covered by its license, the Republic of the Philippines should refund said amount, or, if it cannot be refunded, at least it should be compensated with what Mambulao Lumber Company owed the Republic of the Philippines for reforestation charges. ISSUE: May reforestation charges be set-off to forest charges owed by defendants to the government? Ruling: No. Appellant and appellee are not mutually creditors and debtors of each other. Consequently, the law on compensation is inapplicable. The forest charges which the defendant Mambulao Lumber Company has paid to the government, are in the coffers of the government as taxes collected, and the government does not owe anything, crystal clear that the Republic of the Philippines and the Mambulao Lumber Company are not creditors and debtors of each other, because compensation refers to mutual debts. MELECIO R. DOMINGO vs. LORENZO C. GARLITOS, ET AL. G.R. No. L-18994, June 29, 1963 Facts: The government has a claim against the estate of the Walter Scott Price of estate and inheritance taxes, charges and penalties amounting to P40,058.55. The government is at the same time indebted to the estate under administration in the amount of P262,200. Issue: May the claim by the government against the estate be deducted from its debt to the estate? May compensation take place? Ruling: Yes. The claim of the estate against the Government has been recognized and an amount of P262,200 has already been appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code, and both debts are extinguished to the concurrent amount. compensation takes effect by operation of law, and extinguished both debts to the concurrent amount. ENGRACIO FRANCIA vs. INTERMEDIATE APPELLATE COURT, ET AL. G.R. No. L-67649, June 28, 1988 Facts: On October 15, 1977, a 125 square meter portion of Francias property was expropriated by the Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent to the assessed value of the aforesaid portion. Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5, 1977, his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section 73 of Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax delinquency of P2,400.00. Issue: May compensation take place? Ruling: There can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.

A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or municipality for taxes. Government and taxpayer are not mutually creditors and debtors of each other under Article 1278 of the Civil Code and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.