CTA Case No. 665 (Decision)

/ REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEAlS MANIJ;A LEONARDA: K. LEYBA., C.T .A. CASE I Petitioner, NO. 665 - versus - BOARD CF ASSESSMENT APPEALS OF RIZAL PROVINCE, Respondent. X- - ~ - - - - - - - - - X DECISION This is an appeal taken by Leonarda K. Leyba from the decision of the Board of Assessment Ap- peals of Rizal Province, denying her request for exemption from real estate tax of her property lo- cated at Baclaran, Parafiaque, Rizalo Petitioner is a doctor of medicine and is the owner of Leyba Clinic and Maternity Hospital located at No. 7, Taft Avenue Extension, Baclaran, Parafiaque, Rizal. Assessment for real estate tax having been made on the lot, buildings and other improvements comprising the clinic and hospital, she requested for exemption from the payment thereof pursuant to Section 3, Par. (c), CommomeaLth Act No. 470,which request was deni@d by the Provincial Assessor of Ri~al (See Exhibits "Bu and ncn, PP� 138 & 139, CTA rec.). When petitioner opened a school of mid- wifery, she informed the latter of such fact and reiterated her request for exemption (See Exhibits 11M'� and 11N'1 , pp. 168 & 169, CTA rec. ) � Hence, this appeal,.

DECISION, CTA Case No. 665 Upon motion of petitioner, respondent was de- clared in default because it failed to file its answer to the petition for review for more than one (1) year . Respondent's motion to set aside this Court's order of default was denied for lack of merit, resulting in the .presentation of petitioner's evidence without the presence of respondent and/or his coun- sel. During the hearing, evidence was adduced to the effect that out of the 30 beds of the hospital, 18 are for charity patients and 12 for pay patients (See t.s.n. P� 26; Exhibit "An, pp. 83-137, CTA rec.); that the charity patients are given free me- dical service and medicine; that all the income real- ized from the hospital is utilized in the maintenance of the charity wards and in its operational expenses and no part of it inures to the benefit of any in- dividual (See t.s.n. pp. 7, 26, 27, 30 & 32; Ex- hibit .Jt, pp. 161-165, CTA rec.); that petitioner and her husband, as co-administrators of the hospi- tal, do not receive salaries, although the resident physicians are given monthly salaries (See t.s.n. PP� 26, 30-34); that their personal expenses are paid from rentals of their real estate and from income derived from the medical practice of the husband (See t.s.n. p. 31); and that they likewise operate a school of midwifery 1r.ecognized by the Government, the income of which is also used for I

DECISION, CTA Case No. 665 - 3- the maintenance of the charity wards of the hospi- tal (See Exhibit nv�, P� 167, CTA rec.; t.s.n. PP� 26-27). This appeal narrows down to the question whe- ther or not the lot, buildings and other improve- ments of the Leyba Clinic and Maternity Hospital and the Leyba School of Midwifery are exempt from realty tax pursuant to the provisions of the Consti- tution and Section 3, par. (c) of Commonwealth Act No . 470. This case is on all fours with the Herrera case, wherein the Supreme Court ruled: "X X X X It is well settled,in this connection, that the admission of pay-patients does not detract from the charitable character of a hos- pitaL, if all of its funds are devoted �exclusively to the maintenance of the institution' as a 'public charity� (84 C.J.s., 617; see, also, 51 Am. Jur. 607; Cooley on Taxation, Vol. 2, P� 1562; 144 A.L.R., 1489- 1492). In other words, 'where rendering charity is its primary object, and the funds derived from pay- ments made by patients able to pay are devoted to the benevolent purpooes of the institution, the mere fact that a profit has been made will not deprive the hos- pital of its benevolent character� (Prairie Du Chien Sanitarium Co. v. Cit~ af Prairie Du Chien, 242 Wis. 262 7 7 NW (2d) 832, 144 A.L.R. 1480). X X X X X X ttMoreover, the exemption in favor of property used exclusively for charitable or educational pur- poses is 1not limited to property actually indispen- sable' therefor (Cooley on Taxation, Vol. 2, p. 1430), but extends to facilities which are 'incidental to and reasonably necessary for� the accomplishment of said purposes, such as, in the case of hospitals, �a school ftoor~ training nurses, a nurses' home pro- perty use provide housing facilities for Interns, resident doctors, superintendents, and other members of the hospital starr, and recreational facilities

DECISION, CTA Case No . 665 - 4- for student nurses, inter ns and residents' (84 c. J . S., 621 ) such as �athletic f ields, � including 1a farm used for the inmates of the institution� (Cooley on Taxation, Vol . 2, p. 1430) . '~ithin the purview of the Constitutional exemp- tion from taxation, the St. Catherine's Hospital is, therefore, a charitable institution, and the fact that it admits pay-patients does not bar it from claiming that it is devoted exclusively to benevolent purposes, it being admitted that the income derived from pay-patients is devoted to the improvement of the charity wards, which represent almost two-thirds (2/3) of the bed capacity of the hospit~ aside from 'out-charity patients ' who come only for cons ultation. nAgain, the existence of �st . catherine's School of l11dwifery 1 , with an enrollment of about 200 students, who practice partly in St . Catherine ' s Hospit~and partly in St. Mary ' s Hospital, which, likewise, belongs to petitioner s herein, does not, and cannot! affect the exemption to which St . Catherine's Hosp tal is entitled under our fundamental law. On the contrary, it furnishes another ground for exepption. Seeming- ly, the Court of Tax Appeals was impressed by the fact that the size of said enrollment and the matri- . culation fee charged from the students of midwifery, aside from the amount they paid for board and lodging, including transportation to St. Mary's Hospital, war- rants the belief that petitioners derive a substantial profit from the operation of the school aforementioned . Such factor is, however, immaterial to the issue in the case at bar, for 1all lands, buildings and improve- ments used exclusively for religious, charitable or educational purposes shall be exempt from taxation,� pursuant to the Constitution regardless of whether or not material profits are Jerived from the operation of the institutions in question. In other words, Congress may, if it deems fit to do so, impose taxes upon such ' profits�, but said 'lands, buildings and improvements ' are beyond its taxing power. (Jose V. Herrera, et al vs . the Que20n City Board of Assess- ment Appeals, G. R. No . L-15270, Sept . 30, 196l�i See also Coll . of Int . Rev . vs . St . Paul's Hospita of Iloilo, 12127, May 27, 1959; U. S.T. Hospital Emplo- yees Association vs . Sto. Tomas University Hospital L-6988 , May 24, 1954) We find no compelling reason to deviate from the above ruling . I

DECISION , CTA Case No . 665' - 5' - ~~ORE, the decision of the Board of Assess- ment ppeals of Rizal Province is hereby reversed and set aside , and another one shall be entered de- claring the lot , buildings and improvements consti- tuting the Leyba Clinic and Maternity Hospital and the Leyba School of Midwifery exempt from taxation under the provisions of the Constitution and Sec . 3, Par . (c) of Commrnweath Act No . 470, without pro- nouncement as to c ts . SO ORDERED. Manila, January 24, 1963. We concurs ROMAN M. UMALI Associate Judge