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Republic oI the Philippines

G.R. No. L-39086 June 15, 1988
ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner,
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA,
ProvinciaI Treasurer, Abra; GASPAR V. BOSQUE, MunicipaI Treasurer, Bangued, Abra;

%is is a petition for review on certiorari of te decision of te defunct Court of First nstance
of Abra, Branc , dated June 14, 1974, rendered in Civil Case No. 656, entitled "Abra Valley
Junior College, nc., represented by Pedro V. Borgonia, plaintiff vs. Armin M. Cariaga as
Provincial %reasurer of Abra, Gaspar V. Bosque as Municipal %reasurer of Bangued, Abra
and Paterno Millare, defendants," te decretal portion of wic reads:
N VEW OF ALL %E FOREGONG, te Court ereby declares:
%at te distraint seizure and sale by te Municipal %reasurer of Bangued,
Abra, te Provincial %reasurer of said province against te lot and building of
te Abra Valley Junior College, nc., represented by Director Pedro Borgonia
located at Bangued, Abra, is valid;
%at since te scool is not exempt from paying taxes, it sould terefore pay
all back taxes in te amount of P5,140.31 and back taxes and penalties from
te promulgation of tis decision;
%at te amount deposited by te plaintaff im te sum of P60,000.00 before
te trial, be confiscated to apply for te payment of te back taxes and for te
redemption of te property in question, if te amount is less tan P6,000.00,
te remainder must be returned to te Director of Pedro Borgonia, wo
represents te plaintiff erein;
%at te deposit of te Municipal %reasurer in te amount of P6,000.00 also
before te trial must be returned to said Municipal %reasurer of Bangued,
And finally te case is ereby ordered dismissed wit costs against te
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of iger learning duly incorporated wit
te Securities and Excange Commission in 1948, filed a complaint (Annex "1" of Answer by
te respondents eirs of Paterno Millare; Rollo, pp. 95-97) on July 10, 1972 in te court a quo
to annul and declare void te "Notice of Seizure' and te "Notice of Sale" of its lot and
building located at Bangued, Abra, for non-payment of real estate taxes and penalties
amounting to P5,140.31. Said "Notice of Seizure" of te college lot and building covered by
Original Certificate of %itle No. Q-83 duly registered in te name of petitioner, plaintiff below,
on July 6, 1972, by respondents Municipal %reasurer and Provincial %reasurer, defendants
below, was issued for te satisfaction of te said taxes tereon. %e "Notice of Sale" was
caused to be served upon te petitioner by te respondent treasurers on July 8, 1972 for te
sale at public auction of said college lot and building, wic sale was eld on te same date.
Dr. Paterno Millare, ten Municipal Mayor of Bangued, Abra, offered te igest bid of
P6,000.00 wic was duly accepted. %e certificate of sale was correspondingly issued to
On August 10, 1972, te respondent Paterno Millare (now deceased) filed troug counstel a
motion to dismiss te complaint.
On August 23, 1972, te respondent Provincial %reasurer and Municipal %reasurer, troug
ten Provincial Fiscal Loreto C. Roldan, filed teir answer (Annex "2" of Answer by te
respondents eirs of Patemo Millare; Rollo, pp. 98-100) to te complaint. %is was followed
by an amended answer (Annex "3," ibid, Rollo, pp. 101-103) on August 31, 1972.
On September 1, 1972 te respondent Paterno Millare filed is answer (Annex "5," ibid; Rollo,
pp. 106-108).
On October 12, 1972, wit te aforesaid sale of te scool premises at public auction, te
respondent Judge, on. Juan P. Aquino of te Court of First nstance of Abra, Branc ,
ordered (Annex "6," ibid; Rollo, pp. 109-110) te respondents provincial and municipal
treasurers to deliver to te Clerk of Court te proceeds of te auction sale. ence, on
December 14, 1972, petitioner, troug Director Borgonia, deposited wit te trial court te
sum of P6,000.00 evidenced by PNB Ceck No. 904369.
On April 12, 1973, te parties entered into a stipulation of facts adopted and embodied by te
trial court in its questioned decision. Said Stipulations reads:
COME NOW te parties, assisted by counsels, and to tis onorable Court
respectfully enter into te following agreed stipulation of facts:
1. %at te personal circumstances of te parties as stated in paragrap 1 of
te complaint is admitted; but te particular person of Mr. Armin M. Cariaga is
to be substituted, owever, by anyone wo is actually olding te position of
Provincial %reasurer of te Province of Abra;
2. %at te plaintiff Abra Valley Junior College, nc. is te owner of te lot and
buildings tereon located in Bangued, Abra under Original Certificate of %itle
No. 0-83;
3. %at te defendant Gaspar V. Bosque, as Municipal treasurer of Bangued,
Abra caused to be served upon te Abra Valley Junior College, nc. a Notice
of Seizure on te property of said scool under Original Certificate of %itle
No. 0-83 for te satisfaction of real property taxes tereon, amounting to
P5,140.31; te Notice of Seizure being te one attaced to te complaint as
Exibit A;
4. %at on June 8, 1972 te above properties of te Abra Valley Junior
College, nc. was sold at public auction for te satisfaction of te unpaid real
property taxes tereon and te same was sold to defendant Paterno Millare
wo offered te igest bid of P6,000.00 and a Certificate of Sale in is favor
was issued by te defendant Municipal %reasurer.
5. %at all oter matters not particularly and specially covered by tis
stipulation of facts will be te subject of evidence by te parties.
WEREFORE, it is respectfully prayed of te onorable Court to consider
and admit tis stipulation of facts on te point agreed upon by te parties.
Bangued, Abra, April 12, 1973.

Aside from te Stipulation of Facts, te trial court among oters, found te
following: (a) tat te scool is recognized by te government and is offering
Primary, ig Scool and College Courses, and as a scool population of
more tan one tousand students all in all; (b) tat it is located rigt in te
eart of te town of Bangued, a few meters from te plaza and about 120
meters from te Court of First nstance building; (c) tat te elementary pupils
are oused in a two-storey building across te street; (d) tat te ig scool
and college students are oused in te main building; (e) tat te Director
wit is family is in te second floor of te main building; and (f) tat te
annual gross income of te scool reaces more tan one undred tousand
From all te foregoing, te only issue left for te Court to determine and as agreed by te
parties, is weter or not te lot and building in question are used exclusively for educational
purposes. (Rollo, p. 20)
%e succeeding Provincial Fiscal, on. Jose A. Solomon and is Assistant, on. Eustaquio Z.
Montero, filed a Memorandum for te Government on Marc 25, 1974, and a Supplemental
Memorandum on May 7, 1974, werein tey opined "tat based on te evidence, te laws
applicable, court decisions and jurisprudence, te scool building and scool lot used for
educational purposes of te Abra Valley College, nc., are exempted from te payment of
taxes." (Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and 49).
Noneteless, te trial court disagreed because of te use of te second floor by te Director
of petitioner scool for residential purposes. e tus ruled for te government and rendered
te assailed decision.
After aving been granted by te trial court ten (10) days from August 6, 1974 witin wic to
perfect its appeal (Per Order dated August 6, 1974; Annex "G" of Petition; Rollo, p. 57)
petitioner instead availed of te instant petition for review on certiorari wit prayer for
preliminary injunction before tis Court, wic petition was filed on August 17, 1974 (Rollo,
n te resolution dated August 16, 1974, tis Court resolved to give DUE COURSE to te
petition (Rollo, p. 58). Respondents were required to answer said petition (Rollo, p. 74).
Petitioner raised te following assignments of error:



REAL%Y %AXES. (See Brief for te Petitioner, pp. 1-2)
%e main issue in tis case is te proper interpretation of te prase "used exclusively for
educational purposes."
Petitioner contends tat te primary use of te lot and building for educational purposes, and
not te incidental use tereof, determines and exemption from property taxes under Section
22 (3), Article V of te 1935 Constitution. ence, te seizure and sale of subject college lot
and building, wic are contrary tereto as well as to te provision of Commonwealt Act No.
470, oterwise known as te Assessment Law, are witout legal basis and terefore void.
On te oter and, private respondents maintain tat te college lot and building in question
wic were subjected to seizure and sale to answer for te unpaid tax are used: (1) for te
educational purposes of te college; (2) as te permanent residence of te President and
Director tereof, Mr. Pedro V. Borgonia, and is family including te in-laws and
grandcildren; and (3) for commercial purposes because te ground floor of te college
building is being used and rented by a commercial establisment, te Nortern Marketing
Corporation (See potograp attaced as Annex "8" (Comment; Rollo, p. 90]).
Due to its time frame, te constitutional provision wic finds application in te case at bar is
Section 22, paragrap 3, Article V, of te ten 1935 Pilippine Constitution, wic expressly
grants exemption from realty taxes for "Cemeteries, curces and parsonages or convents
appurtenant tereto, and all lands, buildings, and improvements used exclusively for religious,
caritable or educational purposes ...
Relative tereto, Section 54, paragrap c, Commonwealt Act No. 470 as amended by
Republic Act No. 409, oterwise known as te Assessment Law, provides:
%e following are exempted from real property tax under te Assessment
xxx xxx xxx
(c) curces and parsonages or convents appurtenant tereto, and all lands,
buildings, and improvements used exclusively for religious, caritable,
scientific or educational purposes.
xxx xxx xxx
n tis regard petitioner argues tat te primary use of te scool lot and building is te basic
and controlling guide, norm and standard to determine tax exemption, and not te mere
incidental use tereof.
As early as 1916 in YMC of Manila vs. Collector of lnternal Revenue, 33 Pil. 217 [1916],
tis Court ruled tat wile it may be true tat te YMCA keeps a lodging and a boarding
ouse and maintains a restaurant for its members, still tese do not constitute business in te
ordinary acceptance of te word, but an institution used exclusively for religious, caritable
and educational purposes, and as suc, it is entitled to be exempted from taxation.
n te case of Bisop of Nueva Segovia v. Provincial Board of Ilocos Norte, 51 Pil. 352
[1972], tis Court included in te exemption a vegetable garden in an adjacent lot and
anoter lot formerly used as a cemetery. t was clarified tat te term "used exclusively"
considers incidental use also. %us, te exemption from payment of land tax in favor of te
convent includes, not only te land actually occupied by te building but also te adjacent
garden devoted to te incidental use of te paris priest. %e lot wic is not used for
commercial purposes but serves solely as a sort of lodging place, also qualifies for exemption
because tis constitutes incidental use in religious functions.
%e prase "exclusively used for educational purposes" was furter clarified by tis Court in
te cases of errera vs. Quezon City Board of assessment ppeals, 3 SCRA 186 [1961] and
Commissioner of Internal Revenue vs. Bishop of the Missionary District, 14 SCRA 991 [1965],
Moreover, te exemption in favor of property used exclusively for caritable
or educational purposes is 'not limited to property actually indispensable'
terefor (Cooley on %axation, Vol. 2, p. 1430), but extends to facilities wic
are incidental to and reasonably necessary for te accomplisment of said
purposes, suc as in te case of ospitals, "a scool for training nurses, a
nurses' ome, property use to provide ousing facilities for interns, resident
doctors, superintendents, and oter members of te ospital staff, and
recreational facilities for student nurses, interns, and residents' (84 CJS
6621), suc as "Atletic fields" including "a firm used for te inmates of te
institution. (Cooley on %axation, Vol. 2, p. 1430).
%e test of exemption from taxation is te use of te property for purposes mentioned in te
Constitution (Apostolic Prefect v. City %reasurer of Baguio, 71 Pil, 547 [1941]).
t must be stressed owever, tat wile tis Court allows a more liberal and non-restrictive
interpretation of te prase "exclusively used for educational purposes" as provided for in
Article V, Section 22, paragrap 3 of te 1935 Pilippine Constitution, reasonable empasis
as always been made tat exemption extends to facilities wic are incidental to and
reasonably necessary for te accomplisment of te main purposes. Oterwise stated, te
use of te scool building or lot for commercial purposes is neiter contemplated by law, nor
by jurisprudence. %us, wile te use of te second floor of te main building in te case at
bar for residential purposes of te Director and is family, may find justification under te
concept of incidental use, wic is complimentary to te main or primary purpose
educational, te lease of te first floor tereof to te Nortern Marketing Corporation cannot
by any stretc of te imagination be considered incidental to te purpose of education.
t will be noted owever tat te aforementioned lease appears to ave been raised for te
first time in tis Court. %at te matter was not taken up in te to court is really apparent in
te decision of respondent Judge. No mention tereof was made in te stipulation of facts,
not even in te description of te scool building by te trial judge, bot embodied in te
decision nor as one of te issues to resolve in order to determine weter or not said properly
may be exempted from payment of real estate taxes (Rollo, pp. 17-23). On te oter and, it
is noteworty tat suc fact was not disputed even after it was raised in tis Court.
ndeed, it is axiomatic tat facts not raised in te lower court cannot be taken up for te first
time on appeal. Noneteless, as an exception to te rule, tis Court as eld tat altoug a
factual issue is not squarely raised below, still in te interest of substantial justice, tis Court
is not prevented from considering a pivotal factual matter. "%e Supreme Court is cloted wit
ample autority to review palpable errors not assigned as suc if it finds tat teir
consideration is necessary in arriving at a just decision." (Perez vs. Court of Appeals, 127
SCRA 645 [1984]).
Under te 1935 Constitution, te trial court correctly arrived at te conclusion tat te scool
building as well as te lot were it is built, sould be taxed, not because te second floor of
te same is being used by te Director and is family for residential purposes, but because
te first floor tereof is being used for commercial purposes. owever, since only a portion is
used for purposes of commerce, it is only fair tat alf of te assessed tax be returned to te
scool involved.
PREMSES CONSDERED, te decision of te Court of First nstance of Abra, Branc , is
ereby AFFRMED subject to te modification tat alf of te assessed tax be returned to te