ABRA VALLEY COLLEGE vs. AQUINO 1988 June 15; G.R. No. L-3908 PARAS, J.

This is a petition for review on certiorari of the decision of the defunct Court of First Instance of Abra, Branch I, dated June 14, 1974, rendered in Civil Case o! "#", entitled $Abra %alle& Junior Colle'e, Inc!, represented b& (edro %! Bor'onia, plaintiff vs! Ar)in *! Caria'a as (rovincial Treasurer of Abra, +aspar %! Bos,ue as *unicipal Treasurer of Ban'ued, Abra and (aterno *illare, defendants,$ the decretal portion of which reads$I %I./ 0F A11 T2. F03.+0I +, the Court hereb& declares$That the distraint sei4ure and sale b& the *unicipal Treasurer of Ban'ued, Abra, the (rovincial Treasurer of said province a'ainst the lot and buildin' of the Abra %alle& Junior Colle'e, Inc!, represented b& 5irector (edro Bor'onia located at Ban'ued, Abra, is valid6 $That since the school is not e7e)pt fro) pa&in' ta7es, it should therefore pa& all bac8 ta7es in the a)ount of (#,149!:1 and bac8 ta7es and penalties fro) the pro)ul'ation of this decision6 $That the a)ount deposited b& the plaintiff in the su) of ("9,999!99 before the trial, be confiscated to appl& for the pa&)ent of the bac8 ta7es and for the rede)ption of the propert& in ,uestion, if the a)ount is less than (",999!99, the re)ainder )ust be returned to the 5irector of (edro Bor'onia, who represents the plaintiff herein6 $That the deposit of the *unicipal Treasurer in the a)ount of (",999!99 also before the trial )ust be returned to said *unicipal Treasurer of Ban'ued, Abra6 $And finall& the case is hereb& ordered dis)issed with costs a'ainst the plaintiff! $;0 035.3.5!$ <3ollo, pp! ==>=:? (etitioner, an educational corporation and institution of hi'her learnin' dul& incorporated with the ;ecurities and .7chan'e Co))ission in 194@, filed a co)plaint <Anne7 $1$ of Answer b& the respondents 2eirs of (aterno *illare6 3ollo, pp! 9#>97? on Jul& 19, 197= in the court a ,uo to annul and declare void the $ otice of ;ei4ure$ and the $ otice of ;ale$ of its lot and buildin' located at Ban'ued, Abra, for non>pa&)ent of real estate ta7es and penalties a)ountin' to (#,149!:1! ;aid $ otice of ;ei4ure$ of the colle'e lot and buildin' covered b& 0ri'inal Certificate of Title o! A>@: dul& re'istered in the na)e of petitioner, plaintiff below, on Jul& ", 197=, b& respondents *unicipal Treasurer and (rovincial Treasurer, defendants below, was issued for the satisfaction of the said ta7es thereon! The $ otice of ;ale$ was caused to be served upon the petitioner b& the respondent treasurers on Jul& @, 197= for the sale at public auction of said colle'e lot and buildin', which sale was held on the sa)e date! 5r! (aterno *illare, then *unicipal *a&or of Ban'ued, Abra, offered the hi'hest bid of (",999!99 which was dul& accepted! The certificate of sale was correspondin'l& issued to hi)! 0n Au'ust 19, 197=, the respondent (aterno *illare <now deceased? filed throu'h counsel a )otion to dis)iss the co)plaint! 0n Au'ust =:, 197=, the respondent (rovincial Treasurer and *unicipal Treasurer, throu'h then (rovincial Fiscal 1oreto C! 3oldan, filed their answer <Anne7 $=$ of Answer b& the respondents 2eirs of (aterno *illare6 3ollo, pp! 9@>199? to the co)plaint this was followed b& an a)ended answer <Anne7 $:,$ ibid6 3ollo, pp! 191>19:? on Au'ust :1, 197=!

0n ;epte)ber 1, 197=, the respondent (aterno *illare filed his answer <Anne7 $#,$ ibid6 3ollo, pp! 19">19@?! 0n 0ctober 1=, 197=, with the aforesaid sale of the school pre)ises at public auction, the respondent Jud'e, 2on! Juan (! A,uino of the Court of First Instance of Abra, Branch I, ordered <Anne7 $",$ ibid6 3ollo, pp! 199>119? the respondents provincial and )unicipal treasurers to deliver to the Cler8 of Court the proceeds of the auction sale! 2ence, on 5ece)ber 14, 197=, petitioner, throu'h 5irector Bor'onia, deposited with the trial court the su) of (",999!99 evidenced b& ( B Chec8 o! 994:"9! 0n April 1=, 197:, the parties entered into a stipulation of facts adopted and e)bodied b& the trial court in its ,uestioned decision! ;aid ;tipulations reads$;TI(B1ATI0 0F FACT;

$C0*. 0/ the parties, assisted b& counsels, and to this 2onorable Court respectfull& enter into the followin' a'reed stipulation of facts$1! That the personal circu)stances of the parties as stated in para'raph 1 of the co)plaint is ad)itted6 but the particular person of *r! Ar)in *! Caria'a is to be substituted, however, b& an&one who is actuall& holdin' the position of (rovincial Treasurer of the (rovince of Abra6 $=! That the plaintiff Abra %alle& Junior Colle'e, Inc! is the owner of the lot and buildin's thereon located in Ban'ued, Abra under 0ri'inal Certificate of Title o! 9>@:6 $:! That the defendant +aspar %! Bos,ue, as *unicipal Treasurer of Ban'ued, Abra caused to be served upon the Abra %alle& Junior Colle'e, Inc! a otice of ;ei4ure on the propert& of said school under 0ri'inal Certificate of title o! 9>@: for the satisfaction of real propert& ta7es thereon, a)ountin' to (#,149!:16 the otice of ;ei4ure bein' the one attached to the co)plaint as .7hibit A6 $4! That on June @, 197= the above properties of the Abra %alle& Junior Colle'e, Inc! was sold at public auction for the satisfaction of the unpaid real propert& ta7es thereon and the sa)e was sold to defendant (aterno *illare who offered the hi'hest bid of (",999!99 and a Certificate of ;ale in his favor was issued b& the defendant *unicipal Treasurer! $#! That all other )atters not particularl& and speciall& covered b& this stipulation of facts will be the subCect of evidence b& the parties! /2.3.F03., it is respectfull& pra&ed of the 2onorable Court to consider and ad)it this stipulation of facts on the point a'reed upon b& the parties! Ban'ued, Abra, April 1=, 197:! ;'d! A'ripino Brillantes T&p! A+3I(I 0 B3I11A T.; Attorne& for (laintiff ;'d! 1oreto 3oldan T&p! 103.T0 3015A (rovincial Fiscal Counsel for 5efendants (rovincial Treasurer of Abra and the *unicipal

Treasurer of Ban'ued, Abra ;'d! 5e)etrio %! (re T&p! 5.*.T3I0 %! (3. Attorne& for 5efendant (aterno *illare$ <3ollo, pp! 17>1@? Aside fro) the ;tipulation of Facts, the trial court a)on' others, found the followin'- <a? that the school is reco'ni4ed b& the 'overn)ent and is offerin' (ri)ar&, 2i'h ;chool and Colle'e Courses, and has a school population of )ore than one thousand students all in all6 <b? that it is located ri'ht in the heart of the town of Ban'ued, a few )eters fro) the pla4a and about 1=9 )eters fro) the Court of First Instance buildin'6 <c? that the ele)entar& pupils are housed in a two>store& buildin' across the street6 <d? that the hi'h school and colle'e students are housed in the )ain buildin'6 <e? that the 5irector with his fa)il& is in the second floor of the )ain buildin'6 and <f? that the annual 'ross inco)e of the school reaches )ore than one hundred thousand pesos! Fro) all the fore'oin', the onl& issue left for the Court to deter)ine and as a'reed b& the parties, is whether or not the lot and buildin' in ,uestion are used e7clusivel& for educational purposes! <3ollo, p! =9? The succeedin' (rovincial Fiscal, 2on! Jose A! ;olo)on and his Assistant, 2on! .usta,uio D! *ontero, filed a *e)orandu) for the +overn)ent on *arch =#, 1974, and a ;upple)ental *e)orandu) on *a& 7, 1974, wherein the& opined $that based on the evidence, the laws applicable, court decisions and Curisprudence, the school buildin' and school lot used for educational purposes of the Abra %alle& Colle'e, Inc!, are e7e)pted fro) the pa&)ent of ta7es!$ <Anne7es $B,$ $B>1$ of (etition6 3ollo, pp! =4>496 44 and 49?! onetheless, the trial court disa'reed because of the use of the second floor b& the 5irector of petitioner school for residential purposes! 2e thus ruled for the 'overn)ent and rendered the assailed decision! After havin' been 'ranted b& the trial court ten <19? da&s fro) Au'ust ", 1974 within which to perfect its appeal <(er 0rder dated Au'ust ", 19746 Anne7 $+$ of (etition6 3ollo, p! #7? petitioner instead availed of the instant petition for review on certiorari with pra&er for preli)inar& inCunction before this Court, which petition was filed on Au'ust 17, 1974 <3ollo, p! =?! In the resolution dated Au'ust 1", 1974, this Court resolved to 'ive 5B. C0B3;. to the petition <3ollo, p! #@?! 3espondents were re,uired to answer said petition <3ollo, p! 74?! (etitioner raised the followin' assi'n)ents of errorI T2. C0B3T A AB0 .33.5 I ;B;TAI I + A; %A1I5 T2. ;.IDB3. A 5 ;A1. 0F T2. C011.+. 10T A 5 BBI15I + B;.5 F03 .5BCATI0 A1 (B3(0;.; 0F T2. (.TITI0 .3! II T2. C0B3T A AB0 .33.5 I 5.C1A3I + T2AT T2. C011.+. 10T A 5 BBI15I + 0F T2. (.TITI0 .3 A3. 0T B;.5 .EC1B;I%.1F F03 .5BCATI0 A1 (B3(0;.; *.3.1F B.CAB;. T2. C011.+. (3.;I5. T 3.;I5.; I 0 . 300* 0F T2. C011.+. BBI15I +!

III T2. C0B3T A AB0 .33.5 I 5.C1A3I + T2AT T2. C011.+. 10T A 5 BBI15I + 0F T2. (.TITI0 .3 A3. 0T .E.*(T F30* (30(.3TF TAE.; A 5 I 035.3I + (.TITI0 .3 T0 (AF (#,149!:1 A; 3.A1TF TAE.;! I% T2. C0B3T A AB0 .33.5 I 035.3I + T2. C0 FI;CATI0 0F T2. (",999!99 5.(0;IT *A5. I T2. C0B3T BF (.TITI0 .3 A; (AF*. T 0F T2. (#,149!:1 3.A1TF TAE.;! <;ee Brief for the (etitioner, pp! 1>=? The )ain issue in this case is the proper interpretation of the phrase $used e7clusivel& for educational purposes!$ (etitioner contends that the pri)ar& use of the lot and buildin' for educational purposes, and not the incidental use thereof, deter)ines and e7e)ption fro) propert& ta7es under ;ection == <:?, Article %I of the 19:# Constitution! 2ence, the sei4ure and sale of subCect colle'e lot and buildin', which are contrar& thereto as well as to the provision of Co))onwealth Act o! 479, otherwise 8nown as the Assess)ent 1aw, are without le'al basis and therefore void! 0n the other hand, private respondents )aintain that the colle'e lot and buildin' in ,uestion which were subCected to sei4ure and sale to answer for the unpaid ta7 are used- <1? for the educational purposes of the colle'e6 <=? as the per)anent residence of the (resident and 5irector thereof, *r! (edro %! Bor'onia, and his fa)il& includin' the in>laws and 'randchildren6 and <:? for co))ercial purposes because the 'round floor of the colle'e buildin' is bein' used and rented b& a co))ercial establish)ent, the orthern *ar8etin' Corporation <;ee photo'raph attached as Anne7 $@$ GCo))ent6 3ollo, p! 99H?! 5ue to its ti)e fra)e, the constitutional provision which finds application in the case at bar is ;ection ==, para'raph :, Article %I, of the then 19:# (hilippine Constitution, which e7pressl& 'rants e7e)ption fro) realt& ta7es for $Ce)eteries, churches and parsona'es or convents appurtenant thereto, and all lands, buildin's, and i)prove)ents used e7clusivel& for reli'ious, charitable or educational purposes ! ! ! !$ 3elative thereto, ;ection #4, para'raph c, Co))onwealth Act o! 479 as a)ended b& 3epublic Act o! 499, otherwise 8nown as the Assess)ent 1aw, provides$The followin' are e7e)pted fro) real propert& ta7 under the Assess)ent 1aw777 777 777

< c? churches and parsona'es or convents appurtenant thereto, and all lands, buildin's, and i)prove)ents used e7clusivel& for reli'ious, charitable, scientific or educational purposes! 777 777 777

In this re'ard petitioner ar'ues that the pri)ar& use of the school lot and buildin' is the basic and controllin' 'uide, nor) and standard to deter)ine ta7 e7e)ption, and not the )ere incidental use thereof! As earl& as 191" in F*CA of *anila vs! Collector of Internal 3evenue, :: (hil! =17 G191"H, this Court ruled that while it )a& be true that the F*CA 8eeps a lod'in' and a boardin' house and )aintains a restaurant for its )e)bers, still these do not constitute business in the ordinar& acceptance of the word, but an institution used e7clusivel& for

reli'ious, charitable and educational purposes, and as such, it is entitled to be e7e)pted fro) ta7ation! In the case of Bishop of ueva ;e'ovia v! (rovincial Board of Ilocos orte, #1 (hil! :#= G197=H, this Court included in the e7e)ption a ve'etable 'arden in an adCacent lot and another lot for)erl& used as a ce)eter&! It was clarified that the ter) $used e7clusivel&$ considers incidental use also! Thus, the e7e)ption fro) pa&)ent of land ta7 in favor of the convent includes, not onl& the land actuall& occupied b& the buildin' but also the adCacent 'arden devoted to the incidental use of the parish priest! The lot which is not used for co))ercial purposes but serves solel& as a sort of lod'in' place, also ,ualifies for e7e)ption because this constitutes incidental use in reli'ious functions! The phrase $e7clusivel& used for educational purposes$ was further clarified b& this Court in the cases of 2errera vs! Aue4on Cit& Board of Assess)ent Appeals, : ;C3A 1@" G19"1H and Co))issioner of Internal 3evenue vs! Bishop of the *issionar& 5istrict, 14 ;C3A 991 G19"#H, thus $*oreover, the e7e)ption in favor of propert& used e7clusivel& for charitable or educational purposes is Inot li)ited to propert& actuall& indispensableI therefor <Coole& on Ta7ation, %ol! =, p! 14:9?, but e7tends to facilities which are incidental to and reasonabl& necessar& for the acco)plish)ent of said purposes, such as in the case of hospitals, Ia school for trainin' nurses, a nursesI ho)e, propert& use to provide housin' facilities for interns, resident doctors, superintendents, and other )e)bers of the hospital staff, and recreational facilities for student nurses, interns, and residentsI <@4 CJ; ""=1?, such as IAthletic fieldsI includin' Ia fir) used for the in)ates of the institution!I$ <Coole& on Ta7ation, %ol! =, p! 14:9?! The test of e7e)ption fro) ta7ation is the use of the propert& for purposes )entioned in the Constitution <Apostolic (refect v! Cit& Treasurer of Ba'uio, 71 (hil! #47 G1941H?! It )ust be stressed however, that while this Court allows a )ore liberal and non> restrictive interpretation of the phrase $e7clusivel& used for educational purposes$ as provided for in Article %I, ;ection ==, para'raph : of the 19:# (hilippine Constitution, reasonable e)phasis has alwa&s been )ade that e7e)ption e7tends to facilities which are incidental to and reasonabl& necessar& for the acco)plish)ent of the )ain purposes! 0therwise stated, the use of the school buildin' or lot for co))ercial purposes is neither conte)plated b& law, nor b& Curisprudence! Thus, while the use of the second floor of the )ain buildin' in the case at bar for residential purposes of the 5irector and his fa)il&, )a& find Custification under the concept of incidental use, which is co)pli)entar& to the )ain or pri)ar& purpose educational, the lease of the first floor thereof to the orthern *ar8etin' Corporation cannot b& an& stretch of the i)a'ination be considered incidental to the purpose of education! It will be noted however that the afore)entioned lease appears to have been raised for the first ti)e in this Court! That the )atter was not ta8en up in the trial court is reall& apparent in the decision of respondent Jud'e! o )ention thereof was )ade in the stipulation of facts, not even in the description of the school buildin' b& the trial Cud'e, both e)bodied in the decision nor as one of the issues to resolve in order to deter)ine whether or not said propert& )a& be e7e)pted fro) pa&)ent of real estate ta7es <3ollo, pp! 17>=:?! 0n the other hand, it is noteworth& that such fact was not disputed even after it was raised in this Court! Indeed it is a7io)atic that facts not raised in the lower court cannot be ta8en up for the first ti)e on appeal! onetheless, as an e7ception to the rule, this Court has held that althou'h a factual issue is not s,uarel& raised below, still in the interest of substantial Custice, this Court is not prevented fro) considerin' a pivotal factual )atter! $The ;upre)e Court is clothed with a)ple authorit& to review palpable errors not assi'ned as

such if it finds that their consideration is necessar& in arrivin' at a Cust decision!$ <(ere4 vs! Court of Appeals, 1=7 ;C3A "4# G19@4H?! Bnder the 19:# Constitution, the trial court correctl& arrived at the conclusion that the school buildin' as well as the lot where it is built, should be ta7ed, not because the second floor of the sa)e is bein' used b& the 5irector and his fa)il& for residential purposes, but because the first floor thereof is bein' used for co))ercial purposes! 2owever, since onl& a portion is used for purposes of co))erce, it is onl& fair that half of the assessed ta7 be returned to the school involved! (3.*I;.; C0 ;I5.3.5, the decision of the Court of First Instance of Abra, Branch I, is hereb& AFFI3*.5 subCect to the )odification that half of the assessed ta7 be returned to the petitioner! ;0 035.3.5!