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Abra Valley College v.

Aquino [GR L-39086, 15 June 1988]

Second Division, Paras (p): 4 concur
Facts: Petitioner Abra Valley College is an educational corporation and institut
ion of higher learning duly
incorporated with the SEC in 1948. On 6 July 1972, the Municipal and Provincial
treasurers (Gaspar Bosque
and Armin Cariaga, respectively) and issued a Notice of Seizure upon the petitio
ner for the college lot and
building (OCT Q-83) for the satisfaction of said taxes thereon. The treasurers s
erved upon the petitioner a
Notice of Sale on 8 July 1972, the sale being held on the same day. Dr. Paterno
Millare, then municipal mayor
of Bangued, Abra, offered the highest bid of P 6,000 on public auction involving
the sale of the college lot
and building. The certificate of sale was correspondingly issued to him.
The petitioner filed a complaint on 10 July 1972 in the court a quo to annul and
declare void the Notice of
Seizure and the Notice of Sale of its lot and building located at Bangued, Abra, fo
r non-payment of real
estate taxes and penalties amounting to P5,140.31. On 12 April 1973, the parties
entered into a stipulation of
facts adopted and embodied by the trial court in its questioned decision. The tr
ial court ruled for the
government, holding that the second floor of the building is being used by the d
irector for residential purposes
and that the ground floor used and rented by Northern Marketing Corporation, a c
ommercial establishment,
and thus the property is not being used exclusively for educational purposes. Inst
ead of perfecting an
appeal, petitioner availed of the instant petition for review on certiorari with
prayer for preliminary injunction
before the Supreme Court, by filing said petition on 17 August 1974.
The Supreme Court affirmed the decision of the CFI Abra (Branch I) subject to th
e modification that half of
the assessed tax be returned to the petitioner. The modification is derived from
the fact that the ground floor is
being used for commercial purposes (leased) and the second floor being used as i
ncidental to education
(residence of the director).
1. Interpretation of the phrase used exclusively for educational purposes
Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, e
xpressly grants
exemption from realty taxes for Cemeteries, churches and parsonages or convents a
ppurtenant thereto, and
all lands, buildings, and improvements used exclusively for religious, charitabl
e or educational purposes.
This constitution is relative to Section 54, paragraph c, Commonwealth Act 470 a
s amended by RA 409
(Assessment Law). An institution used exclusively for religious, charitable and
educational purposes, and as
such, it is entitled to be exempted from taxation; notwithstanding that it keeps
a lodging and a boarding house
and maintains a restaurant for its members (YMCA case). A lot which is not used
for commercial purposes
but serves solely as a sort of lodging place, also qualifies for exemption becau
se this constitutes incidental use
in religious functions (Bishop of Nueva Segovia case). Exemption in favor of pro
perty used exclusively for
charitable or educational purposes is not limited to property actually indispensa
ble therefor but extends to

facilities which are incidental to and reasonably necessary for the accomplishme
nt of said purposes (Herrera
v. Quezon City Board of Assessment Appeals). While the Court allows a more liber
al and non-restrictive
interpretation of the phrase exclusively used for educational purposes, reasonable
emphasis has always been
made that exemption extends to facilities which are incidental to and reasonably
necessary for the
accomplishment of the main purposes. The use of the school building or lot for c
ommercial purposes is
neither contemplated by law, nor by jurisprudence. In the case at bar, the lease
of the first floor of the building
to the Northern Marketing Corporation cannot by any stretch of the imagination b
e considered incidental to
Taxation Law I, 2003 ( 2 )
Haystacks (Berne Guerrero)
the purpose of education.
2. Test of tax exemption
The test of exemption from taxation is the use of the property for purposes ment
ioned in the
Constitution (Apostolic Prefect v. City Treasurer of Baguio).
3. Issues not raised in the lower court cannot be taken on appeal; rule relaxed
in the interest of
It is axiomatic that facts not raised in the lower court cannot be taken up for
the first time on appeal.
Nonetheless, as an exception to the rule, the Court has held that although a fac
tual issue is not squarely raised
below, still in the interest of substantial justice, the Court is not prevented
from considering a pivotal factual
matter. The Supreme Court is clothed with ample authority to review palpable err
ors not assigned as such if it
finds that their consideration is necessary in arriving at a just decision (Pere
z vs. CA).