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G.R. No. L-39086

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RepublicofthePhilippines
SUPREMECOURT
Manila
SECONDDIVISION
G.R.No.L39086June15,1988
ABRAVALLEYCOLLEGE,INC.,representedbyPEDROV.BORGONIA,petitioner,
vs.
HON.JUANP.AQUINO,Judge,CourtofFirstInstance,AbraARMINM.CARIAGA,ProvincialTreasurer,
AbraGASPARV.BOSQUE,MunicipalTreasurer,Bangued,AbraHEIRSOFPATERNOMILLARE,
respondents.

PARAS,J.:
Thisisapetitionforreviewoncertiorariofthedecision * of the defunct Court of First Instance of Abra, Branch I, dated June 14, 1974,

renderedinCivilCaseNo.656,entitled"AbraValleyJuniorCollege,Inc.,representedbyPedroV.Borgonia,plaintiffvs.ArminM.CariagaasProvincialTreasurer
ofAbra,GasparV.BosqueasMunicipalTreasurerofBangued,AbraandPaternoMillare,defendants,"thedecretalportionofwhichreads:

INVIEWOFALLTHEFOREGOING,theCourtherebydeclares:
That the distraint seizure and sale by the Municipal Treasurer of Bangued, Abra, the Provincial
Treasurer of said province against the lot and building of the Abra Valley Junior College, Inc.,
representedbyDirectorPedroBorgonialocatedatBangued,Abra,isvalid
That since the school is not exempt from paying taxes, it should therefore pay all back taxes in the
amountofP5,140.31andbacktaxesandpenaltiesfromthepromulgationofthisdecision
ThattheamountdepositedbytheplaintaffhimthesumofP60,000.00beforethetrial,beconfiscatedto
apply for the payment of the back taxes and for the redemption of the property in question, if the
amountislessthanP6,000.00,theremaindermustbereturnedtotheDirectorofPedroBorgonia,who
representstheplaintiffherein
That the deposit of the Municipal Treasurer in the amount of P6,000.00 also before the trial must be
returnedtosaidMunicipalTreasurerofBangued,Abra
Andfinallythecaseisherebyordereddismissedwithcostsagainsttheplaintiff.
SOORDERED.(Rollo,pp.2223)
Petitioner, an educational corporation and institution of higher learning duly incorporated with the Securities and
ExchangeCommissionin1948,filedacomplaint(Annex"1"ofAnswerbytherespondentsHeirsofPaternoMillare
Rollo, pp. 9597) on July 10, 1972 in the court a quo to annul and declare void the "Notice of Seizure' and the
"NoticeofSale"ofitslotandbuildinglocatedatBangued,Abra,fornonpaymentofrealestatetaxesandpenalties
amountingtoP5,140.31.Said"NoticeofSeizure"ofthecollegelotandbuildingcoveredbyOriginalCertificateof
TitleNo.Q83dulyregisteredinthenameofpetitioner,plaintiffbelow,onJuly6,1972,byrespondentsMunicipal
TreasurerandProvincialTreasurer,defendantsbelow,wasissuedforthesatisfactionofthesaidtaxesthereon.The
"NoticeofSale"wascausedtobeserveduponthepetitionerbytherespondenttreasurersonJuly8,1972forthe
saleatpublicauctionofsaidcollegelotandbuilding,whichsalewasheldonthesamedate.Dr.PaternoMillare,
then Municipal Mayor of Bangued, Abra, offered the highest bid of P6,000.00 which was duly accepted. The
certificateofsalewascorrespondinglyissuedtohim.
OnAugust10,1972,therespondentPaternoMillare(nowdeceased)filedthroughcounstelamotiontodismissthe
complaint.
OnAugust23,1972,therespondentProvincialTreasurerandMunicipalTreasurer,throughthenProvincialFiscal
LoretoC.Roldan,filedtheiranswer(Annex"2"ofAnswerbytherespondentsHeirsofPatemoMillareRollo,pp.98
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100)tothecomplaint.Thiswasfollowedbyanamendedanswer(Annex"3,"ibid,Rollo,pp.101103)onAugust31,
1972.
OnSeptember1,1972therespondentPaternoMillarefiledhisanswer(Annex"5,"ibidRollo,pp.106108).
OnOctober12,1972,withtheaforesaidsaleoftheschoolpremisesatpublicauction,therespondentJudge,Hon.
Juan P. Aquino of the Court of First Instance of Abra, Branch I, ordered (Annex "6," ibid Rollo, pp. 109110) the
respondents provincial and municipal treasurers to deliver to the Clerk of Court the proceeds of the auction sale.
Hence, on December 14, 1972, petitioner, through Director Borgonia, deposited with the trial court the sum of
P6,000.00evidencedbyPNBCheckNo.904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted and embodied by the trial court in its
questioneddecision.SaidStipulationsreads:
STIPULATIONOFFACTS
COMENOWtheparties,assistedbycounsels,andtothisHonorableCourtrespectfullyenterintothe
followingagreedstipulationoffacts:
1.Thatthepersonalcircumstancesofthepartiesasstatedinparagraph1ofthecomplaintisadmitted
but the particular person of Mr. Armin M. Cariaga is to be substituted, however, by anyone who is
actuallyholdingthepositionofProvincialTreasureroftheProvinceofAbra
2.ThattheplaintiffAbraValleyJuniorCollege,Inc.istheownerofthelotandbuildingsthereonlocated
inBangued,AbraunderOriginalCertificateofTitleNo.083
3.ThatthedefendantGasparV.Bosque,asMunicipaltreasurerofBangued,Abracausedtobeserved
upon the Abra Valley Junior College, Inc. a Notice of Seizure on the property of said school under
Original Certificate of Title No. 083 for the satisfaction of real property taxes thereon, amounting to
P5,140.31theNoticeofSeizurebeingtheoneattachedtothecomplaintasExhibitA
4.ThatonJune8,1972theabovepropertiesoftheAbraValleyJuniorCollege,Inc.wassoldatpublic
auction for the satisfaction of the unpaid real property taxes thereon and the same was sold to
defendant Paterno Millare who offered the highest bid of P6,000.00 and a Certificate of Sale in his
favorwasissuedbythedefendantMunicipalTreasurer.
5. That all other matters not particularly and specially covered by this stipulation of facts will be the
subjectofevidencebytheparties.
WHEREFORE,itisrespectfullyprayedoftheHonorableCourttoconsiderandadmitthisstipulationof
factsonthepointagreeduponbytheparties.
Bangued,Abra,April12,1973.
Sgd.AgripinoBrillantes
TypAGRIPINOBRILLANTES
AttorneyforPlaintiff
Sgd.LoretoRoldan
TypLORETOROLDAN
ProvincialFiscal
CounselforDefendants
ProvincialTreasurerof
AbraandtheMunicipal
TreasurerofBangued,Abra
Sgd.DemetrioV.Pre
Typ.DEMETRIOV.PRE
AttorneyforDefendant
PaternoMillare(Rollo,pp.1718)
Aside from the Stipulation of Facts, the trial court among others, found the following: (a) that the school is
recognized by the government and is offering Primary, High School and College Courses, and has a school
population of more than one thousand students all in all (b) that it is located right in the heart of the town of
Bangued,afewmetersfromtheplazaandabout120metersfromtheCourtofFirstInstancebuilding(c)thatthe
elementary pupils are housed in a twostorey building across the street (d) that the high school and college
students are housed in the main building (e) that the Director with his family is in the second floor of the main
buildingand(f)thattheannualgrossincomeoftheschoolreachesmorethanonehundredthousandpesos.
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Fromalltheforegoing,theonlyissueleftfortheCourttodetermineandasagreedbytheparties,iswhetherornot
thelotandbuildinginquestionareusedexclusivelyforeducationalpurposes.(Rollo,p.20)
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon. Eustaquio Z. Montero, filed a
MemorandumfortheGovernmentonMarch25,1974,andaSupplementalMemorandumonMay7,1974,wherein
theyopined"thatbasedontheevidence,thelawsapplicable,courtdecisionsandjurisprudence,theschoolbuilding
andschoollotusedforeducationalpurposesoftheAbraValleyCollege,Inc.,areexemptedfromthepaymentof
taxes."(Annexes"B,""B1"ofPetitionRollo,pp.244944and49).
Nonetheless,thetrialcourtdisagreedbecauseoftheuseofthesecondfloorbytheDirectorofpetitionerschoolfor
residentialpurposes.Hethusruledforthegovernmentandrenderedtheassaileddecision.
Afterhavingbeengrantedbythetrialcourtten(10)daysfromAugust6,1974withinwhichtoperfectitsappeal(Per
OrderdatedAugust6,1974Annex"G"ofPetitionRollo,p.57)petitionerinsteadavailedoftheinstantpetitionfor
reviewon certiorari with prayer for preliminary injunction before this Court, which petition was filed on August 17,
1974(Rollo,p.2).
In the resolution dated August 16, 1974, this Court resolved to give DUE COURSE to the petition (Rollo, p. 58).
Respondentswererequiredtoanswersaidpetition(Rollo,p.74).
Petitionerraisedthefollowingassignmentsoferror:
I
THECOURTAQUOERREDINSUSTAININGASVALIDTHESEIZUREANDSALEOFTHECOLLEGELOTAND
BUILDINGUSEDFOREDUCATIONALPURPOSESOFTHEPETITIONER.
II
THECOURTAQUOERREDINDECLARINGTHATTHECOLLEGELOTANDBUILDINGOFTHEPETITIONER
ARE NOT USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES MERELY BECAUSE THE COLLEGE
PRESIDENTRESIDESINONEROOMOFTHECOLLEGEBUILDING.
III
THECOURTAQUOERREDINDECLARINGTHATTHECOLLEGELOTANDBUILDINGOFTHEPETITIONER
ARE NOT EXEMPT FROM PROPERTY TAXES AND IN ORDERING PETITIONER TO PAY P5,140.31 AS
REALTYTAXES.
IV
THECOURTAQUOERREDINORDERINGTHECONFISCATIONOFTHEP6,000.00DEPOSITMADEINTHE
COURTBYPETITIONERASPAYMENTOFTHEP5,140.31REALTYTAXES.(SeeBriefforthePetitioner,pp.12)
Themainissueinthiscaseistheproperinterpretationofthephrase"usedexclusivelyforeducationalpurposes."
Petitionercontendsthattheprimaryuseofthelotandbuildingforeducationalpurposes,andnottheincidentaluse
thereof, determines and exemption from property taxes under Section 22 (3), Article VI of the 1935 Constitution.
Hence,theseizureandsaleofsubjectcollegelotandbuilding,whicharecontrarytheretoaswellastotheprovision
of Commonwealth Act No. 470, otherwise known as the Assessment Law, are without legal basis and therefore
void.
Ontheotherhand,privaterespondentsmaintainthatthecollegelotandbuildinginquestionwhichweresubjected
toseizureandsaletoanswerfortheunpaidtaxareused:(1)fortheeducationalpurposesofthecollege(2)asthe
permanentresidenceofthePresidentandDirectorthereof,Mr.PedroV.Borgonia,andhisfamilyincludingthein
lawsandgrandchildrenand(3)forcommercialpurposesbecausethegroundfloorofthecollegebuildingisbeing
usedandrentedbyacommercialestablishment,theNorthernMarketingCorporation(Seephotographattachedas
Annex"8"(CommentRollo,p.90]).
Duetoitstimeframe,theconstitutionalprovisionwhichfindsapplicationinthecaseatbarisSection22,paragraph
3, Article VI, of the then 1935 Philippine Constitution, which expressly grants exemption from realty taxes for
"Cemeteries, churches and parsonages or convents appurtenant thereto, and all lands, buildings, and
improvementsusedexclusivelyforreligious,charitableoreducationalpurposes...
Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as amended by Republic Act No. 409,
otherwiseknownastheAssessmentLaw,provides:
ThefollowingareexemptedfromrealpropertytaxundertheAssessmentLaw:
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(c) churches and parsonages or convents appurtenant thereto, and all lands, buildings, and
improvementsusedexclusivelyforreligious,charitable,scientificoreducationalpurposes.
xxxxxxxxx
Inthisregardpetitionerarguesthattheprimaryuseoftheschoollotandbuildingisthebasicandcontrollingguide,
normandstandardtodeterminetaxexemption,andnotthemereincidentalusethereof.
As early as 1916 in YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil. 217 [1916], this Court ruled that
while it may be true that the YMCA keeps a lodging and a boarding house and maintains a restaurant for its
members, still these do not constitute business in the ordinary acceptance of the word, but an institution used
exclusively for religious, charitable and educational purposes, and as such, it is entitled to be exempted from
taxation.
InthecaseofBishopofNuevaSegoviav.ProvincialBoardofIlocosNorte,51Phil.352[1972],thisCourtincluded
intheexemptionavegetablegardeninanadjacentlotandanotherlotformerlyusedasacemetery.Itwasclarified
thattheterm"usedexclusively"considersincidentalusealso.Thus,theexemptionfrompaymentoflandtaxinfavor
oftheconventincludes,notonlythelandactuallyoccupiedbythebuildingbutalsotheadjacentgardendevotedto
theincidentaluseoftheparishpriest.Thelotwhichisnotusedforcommercialpurposesbutservessolelyasasort
oflodgingplace,alsoqualifiesforexemptionbecausethisconstitutesincidentaluseinreligiousfunctions.
Thephrase"exclusivelyusedforeducationalpurposes"wasfurtherclarifiedbythisCourtinthecasesofHerreravs.
QuezonCityBoardofassessmentAppeals,3SCRA186[1961]andCommissionerofInternalRevenuevs.Bishop
oftheMissionaryDistrict,14SCRA991[1965],thus
Moreover,theexemptioninfavorofpropertyusedexclusivelyforcharitableoreducationalpurposesis
'not limited to property actually indispensable' therefor (Cooley on Taxation, Vol. 2, p. 1430), but
extendstofacilitieswhichareincidentaltoandreasonablynecessaryfortheaccomplishmentofsaid
purposes,suchasinthecaseofhospitals,"aschoolfortrainingnurses,anurses'home,propertyuse
to provide housing facilities for interns, resident doctors, superintendents, and other members of the
hospitalstaff,andrecreationalfacilitiesforstudentnurses,interns,andresidents'(84CJS6621),such
as"Athleticfields"including"afirmusedfortheinmatesoftheinstitution.(CooleyonTaxation,Vol.2,
p.1430).
ThetestofexemptionfromtaxationistheuseofthepropertyforpurposesmentionedintheConstitution(Apostolic
Prefectv.CityTreasurerofBaguio,71Phil,547[1941]).
It must be stressed however, that while this Court allows a more liberal and nonrestrictive interpretation of the
phrase"exclusivelyusedforeducationalpurposes"asprovidedforinArticleVI,Section22,paragraph3ofthe1935
PhilippineConstitution,reasonableemphasishasalwaysbeenmadethatexemptionextendstofacilitieswhichare
incidentaltoandreasonablynecessaryfortheaccomplishmentofthemainpurposes.Otherwisestated,theuseof
theschoolbuildingorlotforcommercialpurposesisneithercontemplatedbylaw,norbyjurisprudence.Thus,while
theuseofthesecondfloorofthemainbuildinginthecaseatbarforresidentialpurposesoftheDirectorandhis
family, may find justification under the concept of incidental use, which is complimentary to the main or primary
purposeeducational, the lease of the first floor thereof to the Northern Marketing Corporation cannot by any
stretchoftheimaginationbeconsideredincidentaltothepurposeofeducation.
ItwillbenotedhoweverthattheaforementionedleaseappearstohavebeenraisedforthefirsttimeinthisCourt.
ThatthematterwasnottakenupinthetocourtisreallyapparentinthedecisionofrespondentJudge.Nomention
thereofwasmadeinthestipulationoffacts,noteveninthedescriptionoftheschoolbuildingbythetrialjudge,both
embodiedinthedecisionnorasoneoftheissuestoresolveinordertodeterminewhetherornotsaidproperlymay
beexemptedfrompaymentofrealestatetaxes(Rollo,pp.1723).Ontheotherhand,itisnoteworthythatsuchfact
wasnotdisputedevenafteritwasraisedinthisCourt.
Indeed, 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, this Court has held that although a factual issue is not squarely raised
below,stillintheinterestofsubstantialjustice,thisCourtisnotpreventedfromconsideringapivotalfactualmatter.
"TheSupremeCourtisclothedwithampleauthoritytoreviewpalpableerrorsnotassignedassuchifitfindsthat
theirconsiderationisnecessaryinarrivingatajustdecision."(Perezvs.CourtofAppeals,127SCRA645[1984]).
Underthe1935Constitution,thetrialcourtcorrectlyarrivedattheconclusionthattheschoolbuildingaswellasthe
lotwhereitisbuilt,shouldbetaxed,notbecausethesecondfloorofthesameisbeingusedbytheDirectorandhis
familyforresidentialpurposes,butbecausethefirstfloorthereofisbeingusedforcommercialpurposes.However,
sinceonlyaportionisusedforpurposesofcommerce,itisonlyfairthathalfoftheassessedtaxbereturnedtothe
schoolinvolved.
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PREMISES CONSIDERED, the decision of the Court of First Instance of Abra, Branch I, is hereby AFFIRMED
subjecttothemodificationthathalfoftheassessedtaxbereturnedtothepetitioner.
SOORDERED.
Yap,C.J.,MelencioHerrera,PadillaandSarmiento,JJ.,concur.

Footnotes
*PennedbytherespondentJudge,Hon.JudgeP.Aquino.
TheLawphilProjectArellanoLawFoundation

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