Power of Taxation

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Abra Valley College v. Aquino
G.R. No. L-39086 | June 15, 1988 | PARAS, J.

Petitioner: ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA

Respondents: HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M. CARIAGA,
Provincial Treasurer, Abra; GASPAR V. BOSQUE, Municipal Treasurer, Bangued, Abra; HEIRS OF
PATERNO MILLARE
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DOCTRINE

The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. It
was clarified that the term "used exclusively" considers incidental use also.
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FACTS

● Petitioner Abra Valley College, an educational corporation duly incorporated with the SEC, filed a
complaint to annul and declare void the "Notice of Seizure" and the "Notice of Sale" of its lot and
building located in Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31.
● The lot and building were seized and sold by the Municipal Treasurer of Bangued and the Provincial
Treasurer of Abra to satisfy the unpaid taxes.
● The lot and building were sold to Paterno Millare, the highest bidder, for P6,000.00.
● Petitioner argued that the seizure and sale were without legal basis and void because the lot and
building were used exclusively for educational purposes.

CASE TRAIL
CFI Abra: ruled in favor of the government, stating that the lot and building were not used exclusively for
educational purposes because the Director of the college used the second floor of the building for
residential purposes and the ground floor was rented to a commercial establishment.
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ISSUES & HELD

W/N the lot and building of Abra Valley College, Inc. are exempt from property taxes because they
are used exclusively for educational purposes. NO (partially)
● Petitioner:
○ contends that the primary use of the lot and building for educational purposes, and not the
incidental use thereof, determines the exemption from property taxes under the Constitution.
■ Hence, the seizure of the lot and building are without legal basis and therefore, void.

● SC: The phrase "used exclusively for educational purposes" includes facilities that are incidental to
and reasonably necessary for the accomplishment of educational purposes.
○ The test of exemption from taxation is the use of the property for purposes mentioned in the
Constitution. (In this case, education purposes). In Bishop of Nueva Segovia v. Prov. Board
of Ilocos Norte, the SC clarified that that the term "used exclusively" considers incidental use
also.
■ CIR v. Bishop of the Missionary District – The exemption in favor of property used
exclusively for charitable or educational purposes is 'not limited to property actually
indispensable' therefor but extends to facilities which are incidental to and reasonably
necessary for the accomplishment of said purposes
○ Thus, while the use of the second floor of the main building in the case at bar for
residential purposes of the Director and his family, may find justification under the
concept of incidental use, which is complimentary to the main or primary purpose—
educational, the lease of the first floor thereof to the Northern Marketing Corporation

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cannot by any stretch of the imagination be considered incidental to the purpose of

education.
● Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school
building as well as the lot where it is built, should be taxed, not because the second floor of the
same is being used by the Director and his family for residential purposes, but because the first floor
thereof is being used for commercial purposes. However, since only a portion is used for purposes
of commerce, it is only fair that half of the assessed tax be returned to the school involved.

On the facts being raised for the first time

SC: It will be noted however that the lease (the ground floor lease for commercial purposes) appears to
have been raised for the first time in this Court. No mention thereof was made in the stipulation of facts, not
even in the description of the school building by the trial judge, both embodied in the decision nor as one of
the issues to resolve.
 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, still in the interest of substantial justice, this Court is not prevented from
considering a pivotal factual matter.

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Decision of CFI Abra: affirmed subject to the modification that half of the assessed tax be returned to the
petitioner.
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NOTES