TITLE: Philippine Heart Center v.
Local Government of Quezon City
GR NO. 225409
DATE: March 11, 2020
SUBJECT Certiorari; Exemption of government intrumentality from Real Property
MATTER: tax imposed by LGU
DOCTRINES: 1. An individual cannot exercise any corporate power pertaining to
a corporation without authority from its board of directors.
Physical acts of the corporation, like the signing of documents,
can be performed only by natural persons duly authorized for the
purpose. Consequently, verifications and certifications against
forum shopping purportedly signed in behalf of the corporation
but without the requisite board resolution authorizing the same
are defective.
2. Such defect, however, merely affects the form of the pleading
and does not necessarily warrant the outright dismissal of the
case. In fact, courts may order the correction of the unverified
pleading or even act on it despite the infirmity to ensure that the
ends of justice are served.
3. Article VIII, Section 1 of the 1987 Constitution empowers the
Court to determine whether there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the Government. This is the
Court's expanded power of judicial review which may be invoked
through special civil actions for certiorari or prohibition under
Rule 65 of the Rules of Court.
The remedies of certiorari and prohibition may issue to correct
errors of jurisdiction committed not only by a tribunal,
corporation, board or officer exercising judicial, quasi-judicial or
ministerial functions but also to set right, undo and restrain any
act of grave abuse of discretion amounting to lack or excess of
jurisdiction by any branch or instrumentality of the government,
even if the latter does not exercise judicial, quasi-judicial or
ministerial functions.
4. MIAA elucidated on the rationale behind the exemption from
local taxes of the national government and its agencies and
instrumentalities, thus:
Section 133(o) recognizes the basic principle that local
governments cannot tax the national government, which
historically merely delegated to local governments the power to
tax. While the 1987 Constitution now includes taxation as one of
the powers of local governments, local governments may only
exercise such power "subject to such guidelines and limitations
as the Congress may provide."
When local governments invoke the power to tax on national
government instrumentalities, such power is construed strictly
against local governments. The rule is that a tax is never
presumed and there must be clear language in the law imposing
the tax. Any doubt whether a person, article or activity is taxable
is resolved against taxation. This rule applies with greater force
when local governments seek to tax national government
instrumentalities.
5. Another rule is that a tax exemption is strictly construed against
the taxpayer claiming the exemption. However, when Congress
grants an exemption to a national government instrumentality
from local taxation, such exemption is construed liberally in favor
of the national government instrumentality.
6. There is, moreover, no point in national and local governments
taxing each other, unless a sound and compelling policy requires
such transfer of public funds from one government pocket to
another.
7. There is also no reason for local governments to tax national
government instrumentalities for rendering essential public
services to inhabitants of local governments. The only exception
is when the legislature clearly intended to tax government
instrumentalities for the delivery of essential public services for
sound and compelling policy considerations. There must be
express language in the law empowering local governments to
tax national government instrumentalities. Any doubt whether
such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that
"unless otherwise provided" in the Code, local governments
cannot tax national government instrumentalities. xxx
Section 234(a) of RA 7160 further exempts real property owned
by the Republic from real property taxes, viz:
8. SEC. 234. Exemptions from Real Property Tax. -The following
are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
9. Under Article 420 of the Civil Code, the following things are property
of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads,
and others of similar character; and
(2) Those which belong to the State, without being for public use, and
are intended for some public service or for the development of the
national wealth.
10. Properties of public dominion, being for public use, are not subject to
levy, encumbrance or disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of any property of public
dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale.
11. To reiterate, Section 234(a) of RA 7160 exempts real property
owned by the Republic from real property taxes except when the
beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person. Thus, the Court has invariably held
that a government instrumentality, though vested with corporate powers,
are exempt from real property tax but the exemption shall not extend to
taxable private entities to whom the beneficial use of the government
instrumentality's properties has been vested.
12. The provision must be read in connection with Section 133(o) of RA
7160 exempting the Republic from local taxes, and Section 234 of the
same law allowing the imposition of tax on real property owned by the
Republic when the beneficial use thereof has been granted to a "taxable
person."
Notably, it is the "taxable person" with beneficial use who shall be
responsible for payment of real property taxes due on government
properties. Any remedy for the collection of taxes should then be
directed against the "taxable person," the same being an action in
personam.
13. Local government units must exercise restraint in levying on
government properties. The "power to destroy" ought not be used
against the very entity that wields it.[79] Despite its corporate status, the
PHC remains an instrumentality of the government from which the
power to tax of local units originates. Thus, it, too, must be spared from
a local unit's power of confiscation.
14. As in MIAA, we see no compelling reason or sound policy for
allowing the Quezon City Government to tax the PHC, a national
government instrumentality which renders essential public health care
services. More so, given that the PHC's services are more readily
accessible to residents of Quezon City itself than of any other local
government unit. Besides, there is simply no point in forcing the transfer
of public funds from one government pocket to another.
FACTS: In 1975, the PHC established under PD 173 as a specialty hospital
mandated to provide exertcomprehensive cardiovascular care to the
general public, especially the poor and less fortunate inlife. PD 673 also
authorized the PHC to acquire properties; to enter into contracts; and to
mortgage,encumber, lease, sell, convey or dispose of its properties and
exempting them from "the payment ofall taxes, charges, fees imposed
by the Government or any political subdivision or instrumentalitythereof"
for a period of ten (10) years. President Ferdinand E. Marcos issued
Letter of Instruction
(LOI) 1455 extending the tax exemption "without interruption.”
Respondent Quezon City Government issued 3 final Notices of
Delinquency for unpaid real propertytaxes pertaining to the 11 properties
of the PHC. The latter wrote a letter to President Gloria M.Macapagal-
Arroyo for condonation or reduction of the taxes assessed on its
properties and since itwas not acted it resulted in PHC to enter into a
MOA providing that they will provide free medicalservices to qualified
residents of Quezon City. The respondent issued two Final Notices of
TaxDelinquency to the PHC and the Quezon City Treasurer issued a
Warrant of Levy for the PHC's failureto pay real property taxes despite
due notice. On July 7, 2011, after due publication, all the propertieswere
sold to the Quezon City Government, the lone bidder during the public
auction.PHC filed a petition for certiorari before the Court of Appeals,
claiming respondents Quezon CityGovernment, Mayor, Treasurer and
Assessor gravely abused their discretion when they assessed,levied and
sold its properties. They asserted that it was exempt from taxes, fees
and charges imposedby a local government unit. Respondents moved to
dismiss the petition for the PHC's failure toexhaust administrative
remedies which CA dismissed By Resolution dated March 18, 2013, the
Courtof Appeals reinstated the petition. It held that the remedies under
Section 252 of RA 7160 are nolonger plain, speedy, nor adequate since
the properties in issue had already been auctioned off andsold to the
Quezon City Government. By its assailed Decision dated March 15,
2016, however, theCourt of Appeals dismissed anew the PHC's petition
for certiorari.
ISSUE/S: 1. Did the PHC comply with the required verification and
certification against forum shopping
2. Is a petition for certiorari the proper remedy to challenge
respondents’ assessment, levy and sale of its properties for
failure to pay real property taxes theron?
3. Is the PHC exempt from paying real property taxes on its eleven
(11) properties in Quezon City?
RULING: 1. The petition substantially complied with the rules on
verification and certification against forum shopping.
Although PHC did not expressly authorize Dr. Manzo to sign the
petition’s verification and certificate against forum shopping in its behalf,
as Officer-inCharge Executive Director of the PHC pursuant toDOH
Order No. 2016- 2359- A, he is indubitably in a position to verify the
truthfulness of theallegations in the petition. An individual cannot
exercise any corporate power pertaining to acorporation without
authority from its board of directors. Verifications and certifications
againstforum shopping purportedly signed on behalf of the corporation
but without the requisite boardresolution authorizing the same are
defective. Such defect, however, merely affects the form of thepleading
and does not necessarily warrant the outright dismissal of the case.
2. The PHC properly availed of the extraordinary remedy of
certiorari before the Court of Appeals.
Here, the PHC correctly availed of the remedy of certiorari before the
Court of Appeals when it assailed the validity of respondents'
assessment, levy and sale of its eleven (11) properties in Quezon City.
Although respondents' acts were neither judicial nor quasi-judicial in
nature, the same may still be the proper subject of certiorari when
tainted with grave abuse of discretion amounting to lack or excess of
jurisdiction.
In its petition for certiorari before the Court of Appeals, the PHC charged
respondents with grave abuse of discretion when they imposed and
assessed taxes on its properties despite the PHC's claimed exemption
pursuant to PD 673, LOI 1455, Article III, Section 28(3) of the 1987
Constitution, Section 234(b) of RA 7160, and the MIAA and MCIAA
cases. Should their argument merit the grant of affirmative relief,
certiorari may properly issue to nullify respondents' acts.
3. The PHC is a government instrumentality with corporate
powers exempt from local taxes
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.
On the contention that 11 properties of the PHC in Quezon City are
subject to real property tax since the PHC granted the beneficial use of
these properties to commercial establishments.
Section 234 (a) of RA 7160 exempts real property owned by the
Republic from real property taxes except when the beneficial use thereof
has been granted, for consideration or otherwise,to a taxable person.
Thus, the Court has invariably held that a government
instrumentality,though vested with corporate powers, are exempt from
real property tax but the exemption shall not extend to taxable private
entities to whom the beneficial use of the government instrumentality's
properties has been vested. Respondents, therefore, correctly posit that
thePHC's properties which are leased to private individuals are no
longer covered by the tax exemption. Respondents failed to specify
which of the eleven (11) properties or portions thereof were being leased
out, to whom they were being leased, and the lease periods for which
the private individuals are to be taxed.
