Ruling that the Philippine Heart Center (PHC) is a government instrumentality and therefore exempt from the payment of realty property taxes, the Supreme Court has nullified the sale at public auction of the hospital’s 11 pieces of real property in Quezon City to recoup P36.5 million in taxes in 2014.
In a decision written by Associate Justice Amy Lazaro C. Javier, the SC said that “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.”
With the ruling, the SC reversed a Court of Appeals (CA) decision which dismissed PHC’s petition on technicality.
It said that PHC conforms to two criteria for its classification as a government instrumentality. It noted that PHC performs governmental functions and enjoys operational autonomy.
It pointed out that the PHC is supervised by the Department of Health (DOH) and implements government policies.
“Certainly, the PHC’s functions are less commercial than governmental, and more for public use and public welfare than for profit-oriented services,” the SC said.
At the same time, the SC said that PHC’s pieces of real property are considered public dominion used for public welfare.
It cited PHC’s report that it had served 60,000 cardiology patients, performed around 94,000 radiology procedures, and provided free heart surgery for 82 mission beneficiaries.
While PHC reported revenues of P3.03 billion in 2018, it still suffered losses of P554.5 million that necessitated the government’s allocation of P888.7 million in financial assistance that year, the SC said.
“And to allow the Quezon City government to confiscate the PHC’s properties would be nothing short of ironic, if not self-destructive, as it would kill the very patient the government so desperately seeks to revive,” it stressed.
While the SC agreed with the Quezon City government that PHC’s 11 properties are subject to tax because they were being used by commercial establishments, “this does not automatically validate the acts of assessing, levying and selling the 11 properties of the PHC.”
It said that the “taxable person” with beneficial use of the properties being leased should be held responsible for payment of real property taxes due on government properties.
“Indeed, it would be the height of absurdity to levy the PHC’s properties to answer for taxes the PHC does not owe. This leaves the Quezon City government with only one recourse – judicial action for collection of real property taxes against private individuals with beneficial use of the PHC’s properties,” it said.