Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-39086 June 15, 1988
ABRA VALLE COLLEGE, !NC., "e#"e$en%e& '( PE)RO V. BORGON!A, petitioner,
vs.
*ON. JUAN P. A+U!NO, Ju&,e, Cou"% o- ./"$% !n$%0n1e, A'"02 ARM!N M. CAR!AGA, P"o3/n1/04
T"e0$u"e", A'"02 GASPAR V. BOS+UE, Mun/1/#04 T"e0$u"e", B0n,ue&, A'"02 *E!RS O.
PATERNO M!LLARE,respondents.

PARAS, J.:
his is a petition for revie! on certiorari of the decision 5 of the defunct Court of "irst Instance of
#bra, $ranch I, dated %une &', &()', rendered in Civil Case No. *+*, entitled ,#bra Valle- %unior
Colle.e, Inc., represented b- Pedro V. $or.onia, plaintiff vs. #r/in M. Caria.a as Provincial
reasurer of #bra, 0aspar V. $os1ue as Municipal reasurer of $an.ued, #bra and Paterno Millare,
defendants,, the decretal portion of !hich reads2
IN VIE3 O" #44 5E "ORE0OIN0, the Court hereb- declares2
hat the distraint sei6ure and sale b- the Municipal reasurer of $an.ued, #bra, the
Provincial reasurer of said province a.ainst the lot and buildin. of the #bra Valle-
%unior Colle.e, Inc., represented b- Director Pedro $or.onia located at $an.ued,
#bra, is valid7
hat since the school is not e8e/pt fro/ pa-in. ta8es, it should therefore pa- all
bac9 ta8es in the a/ount of P+,&':.;& and bac9 ta8es and penalties fro/ the
pro/ul.ation of this decision7
hat the a/ount deposited b- the plaintaff hi/ the su/ of P*:,:::.:: before the
trial, be confiscated to appl- for the pa-/ent of the bac9 ta8es and for the
rede/ption of the propert- in 1uestion, if the a/ount is less than P*,:::.::, the
re/ainder /ust be returned to the Director of Pedro $or.onia, !ho represents the
plaintiff herein7
hat the deposit of the Municipal reasurer in the a/ount of P*,:::.:: also before
the trial /ust be returned to said Municipal reasurer of $an.ued, #bra7
#nd finall- the case is hereb- ordered dis/issed !ith costs a.ainst the plaintiff.
SO ORDERED. <Rollo, pp. ==>=;?
Petitioner, an educational corporation and institution of hi.her learnin. dul- incorporated !ith the
Securities and E8chan.e Co//ission in &('@, filed a co/plaint <#nne8 ,&, of #ns!er b- the
respondents 5eirs of Paterno Millare7 Rollo, pp. (+>()? on %ul- &:, &()= in the court a quo to annul
and declare void the ,Notice of Sei6ureA and the ,Notice of Sale, of its lot and buildin. located at
$an.ued, #bra, for non>pa-/ent of real estate ta8es and penalties a/ountin. to P+,&':.;&. Said
,Notice of Sei6ure, of the colle.e lot and buildin. covered b- Ori.inal Certificate of itle No. B>@;
dul- re.istered in the na/e of petitioner, plaintiff belo!, on %ul- *, &()=, b- respondents Municipal
reasurer and Provincial reasurer, defendants belo!, !as issued for the satisfaction of the said
ta8es thereon. he ,Notice of Sale, !as caused to be served upon the petitioner b- the respondent
treasurers on %ul- @, &()= for the sale at public auction of said colle.e lot and buildin., !hich sale
!as held on the sa/e date. Dr. Paterno Millare, then Municipal Ma-or of $an.ued, #bra, offered the
hi.hest bid of P*,:::.:: !hich !as dul- accepted. he certificate of sale !as correspondin.l-
issued to hi/.
On #u.ust &:, &()=, the respondent Paterno Millare <no! deceased? filed throu.h counstel a /otion
to dis/iss the co/plaint.
On #u.ust =;, &()=, the respondent Provincial reasurer and Municipal reasurer, throu.h then
Provincial "iscal 4oreto C. Roldan, filed their ans!er <#nne8 ,=, of #ns!er b- the respondents 5eirs
of Pate/o Millare7 Rollo, pp. (@>&::? to the co/plaint. his !as follo!ed b- an a/ended ans!er
<#nne8 ,;,, ibid, Rollo, pp. &:&>&:;? on #u.ust ;&, &()=.
On Septe/ber &, &()= the respondent Paterno Millare filed his ans!er <#nne8 ,+,, ibid7 Rollo, pp.
&:*>&:@?.
On October &=, &()=, !ith the aforesaid sale of the school pre/ises at public auction, the
respondent %ud.e, 5on. %uan P. #1uino of the Court of "irst Instance of #bra, $ranch I, ordered
<#nne8 ,*,, ibid7 Rollo, pp. &:(>&&:? the respondents provincial and /unicipal treasurers to deliver to
the Cler9 of Court the proceeds of the auction sale. 5ence, on Dece/ber &', &()=, petitioner,
throu.h Director $or.onia, deposited !ith the trial court the su/ of P*,:::.:: evidenced b- PN$
Chec9 No. (:';*(.
On #pril &=, &();, the parties entered into a stipulation of facts adopted and e/bodied b- the trial
court in its 1uestioned decision. Said Stipulations reads2
SIPC4#ION O" "#CS
COME NO3 the parties, assisted b- counsels, and to this 5onorable Court
respectfull- enter into the follo!in. a.reed stipulation of facts2
&. hat the personal circu/stances of the parties as stated in para.raph & of the
co/plaint is ad/itted7 but the particular person of Mr. #r/in M. Caria.a is to be
substituted, ho!ever, b- an-one !ho is actuall- holdin. the position of Provincial
reasurer of the Province of #bra7
=. hat the plaintiff #bra Valle- %unior Colle.e, Inc. is the o!ner of the lot and
buildin.s thereon located in $an.ued, #bra under Ori.inal Certificate of itle No. :>
@;7
;. hat the defendant 0aspar V. $os1ue, as Municipal treasurer of $an.ued, #bra
caused to be served upon the #bra Valle- %unior Colle.e, Inc. a Notice of Sei6ure on
the propert- of said school under Ori.inal Certificate of itle No. :>@; for the
satisfaction of real propert- ta8es thereon, a/ountin. to P+,&':.;&7 the Notice of
Sei6ure bein. the one attached to the co/plaint as E8hibit #7
'. hat on %une @, &()= the above properties of the #bra Valle- %unior Colle.e, Inc.
!as sold at public auction for the satisfaction of the unpaid real propert- ta8es
thereon and the sa/e !as sold to defendant Paterno Millare !ho offered the hi.hest
bid of P*,:::.:: and a Certificate of Sale in his favor !as issued b- the defendant
Municipal reasurer.
+. hat all other /atters not particularl- and speciall- covered b- this stipulation of
facts !ill be the subDect of evidence b- the parties.
35ERE"ORE, it is respectfull- pra-ed of the 5onorable Court to consider and ad/it
this stipulation of facts on the point a.reed upon b- the parties.
$an.ued, #bra, #pril &=, &();.
S.d.
#.ripin
o
$rillant
es
-p
#0RIPI
NO
$RI44
#NES
#ttorne
- for
Plaintiff
S.d.
4oreto
Roldan
-p
4ORE
O
RO4D
#N
Provinc
ial
"iscal
Couns
el for
Defend
ants
Provinc
ial
reasur
er of
#bra
and the
Munici
pal
reasur
er of
$an.u
ed,
#bra
S.d.
De/etr
io V.
Pre
-p.
DEME
RIO
V.
PRE
#ttorne
- for
Defend
ant
Patern
o
Millare
<Rollo,
pp. &)>
&@?
#side fro/ the Stipulation of "acts, the trial court a/on. others, found the follo!in.2 <a? that the
school is reco.ni6ed b- the .overn/ent and is offerin. Pri/ar-, 5i.h School and Colle.e Courses,
and has a school population of /ore than one thousand students all in all7 <b? that it is located ri.ht
in the heart of the to!n of $an.ued, a fe! /eters fro/ the pla6a and about &=: /eters fro/ the
Court of "irst Instance buildin.7 <c? that the ele/entar- pupils are housed in a t!o>store- buildin.
across the street7 <d? that the hi.h school and colle.e students are housed in the /ain buildin.7 <e?
that the Director !ith his fa/il- is in the second floor of the /ain buildin.7 and <f? that the annual
.ross inco/e of the school reaches /ore than one hundred thousand pesos.
"ro/ all the fore.oin., the onl- issue left for the Court to deter/ine and as a.reed b- the parties, is
!hether or not the lot and buildin. in 1uestion are used exclusively for educational purposes. <Rollo,
p. =:?
he succeedin. Provincial "iscal, 5on. %ose #. Solo/on and his #ssistant, 5on. Eusta1uio E.
Montero, filed a Me/orandu/ for the 0overn/ent on March =+, &()', and a Supple/ental
Me/orandu/ on Ma- ), &()', !herein the- opined ,that based on the evidence, the la!s
applicable, court decisions and Durisprudence, the school buildin. and school lot used for educational
purposes of the #bra Valle- Colle.e, Inc., are e8e/pted fro/ the pa-/ent of ta8es., <#nne8es ,$,,
,$>&, of Petition7 Rollo, pp. ='>'(7 '' and '(?.
Nonetheless, the trial court disa.reed because of the use of the second floor b- the Director of
petitioner school for residential purposes. 5e thus ruled for the .overn/ent and rendered the
assailed decision.
#fter havin. been .ranted b- the trial court ten <&:? da-s fro/ #u.ust *, &()' !ithin !hich to perfect
its appeal <Per Order dated #u.ust *, &()'7 #nne8 ,0, of Petition7 Rollo, p. +)? petitioner instead
availed of the instant petition for revie! on certiorari !ith pra-er for preli/inar- inDunction before this
Court, !hich petition !as filed on #u.ust &), &()' <Rollo, p.=?.
In the resolution dated #u.ust &*, &()', this Court resolved to .ive DCE COCRSE to the petition
<Rollo, p. +@?. Respondents !ere re1uired to ans!er said petition <Rollo, p. )'?.
Petitioner raised the follo!in. assi.n/ents of error2
I
5E COCR A QUO ERRED IN SCS#ININ0 #S V#4ID 5E SEIECRE #ND S#4E O" 5E
CO44E0E 4O #ND $CI4DIN0 CSED "OR EDCC#ION#4 PCRPOSES O" 5E PEIIONER.
II
5E COCR A QUO ERRED IN DEC4#RIN0 5# 5E CO44E0E 4O #ND $CI4DIN0 O" 5E
PEIIONER #RE NO CSED EFC4CSIVE4G "OR EDCC#ION#4 PCRPOSES MERE4G
$EC#CSE 5E CO44E0E PRESIDEN RESIDES IN ONE ROOM O" 5E CO44E0E $CI4DIN0.
III
5E COCR A QUO ERRED IN DEC4#RIN0 5# 5E CO44E0E 4O #ND $CI4DIN0 O" 5E
PEIIONER #RE NO EFEMP "ROM PROPERG #FES #ND IN ORDERIN0 PEIIONER
O P#G P+,&':.;& #S RE#4G #FES.
IV
5E COCR A QUO ERRED IN ORDERIN0 5E CON"ISC#ION O" 5E P*,:::.:: DEPOSI
M#DE IN 5E COCR $G PEIIONER #S P#GMEN O" 5E P+,&':.;& RE#4G #FES. <See
$rief for the Petitioner, pp. &>=?
he /ain issue in this case is the proper interpretation of the phrase ,used e8clusivel- for
educational purposes.,
Petitioner contends that the pri/ar- use of the lot and buildin. for educational purposes, and not the
incidental use thereof, deter/ines and e8e/ption fro/ propert- ta8es under Section == <;?, #rticle
VI of the &(;+ Constitution. 5ence, the sei6ure and sale of subDect colle.e lot and buildin., !hich
are contrar- thereto as !ell as to the provision of Co//on!ealth #ct No. '):, other!ise 9no!n as
the #ssess/ent 4a!, are !ithout le.al basis and therefore void.
On the other hand, private respondents /aintain that the colle.e lot and buildin. in 1uestion !hich
!ere subDected to sei6ure and sale to ans!er for the unpaid ta8 are used2 <&? for the educational
purposes of the colle.e7 <=? as the per/anent residence of the President and Director thereof, Mr.
Pedro V. $or.onia, and his fa/il- includin. the in>la!s and .randchildren7 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 Northern Mar9etin. Corporation <See photo.raph attached as #nne8 ,@,
<Co//ent7 Rollo, p. (:H?.
Due to its ti/e fra/e, the constitutional provision !hich finds application in the case at bar is Section
==, para.raph ;, #rticle VI, of the then &(;+ Philippine Constitution, !hich e8pressl- .rants
e8e/ption fro/ realt- ta8es for ,Ce/eteries, churches and parsona.es or convents appurtenant
thereto, and all lands, buildin.s, and i/prove/ents used exclusively for reli.ious, charitable or
educational purposes ...
Relative thereto, Section +', para.raph c, Co//on!ealth #ct No. '): as a/ended b- Republic #ct
No. ':(, other!ise 9no!n as the #ssess/ent 4a!, provides2
he follo!in. are e8e/pted fro/ real propert- ta8 under the #ssess/ent 4a!2
888 888 888
<c? churches and parsona.es or convents appurtenant thereto, and all lands,
buildin.s, and i/prove/ents used exclusively for reli.ious, charitable, scientific or
educational purposes.
888 888 888
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 ta8 e8e/ption, and not the /ere incidental use
thereof.
#s earl- as &(&* in YMCA of Manila vs. Collector of lnternal Revenue, ;; Phil. =&) I&(&*H, this Court
ruled that !hile it /a- be true that the GMC# 9eeps 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
!ord, but an institution used e8clusivel- for reli.ious, charitable and educational purposes, and as
such, it is entitled to be e8e/pted fro/ ta8ation.
In the case of $ishop of Nueva Seovia v. !rovincial "oard of #locos Norte, +& Phil. ;+= I&()=H, this
Court included in the e8e/ption a ve.etable .arden in an adDacent lot and another lot for/erl- used
as a ce/eter-. It !as clarified that the ter/ ,used e8clusivel-, considers incidental use also. hus,
the e8e/ption fro/ pa-/ent of land ta8 in favor of the convent includes, not onl- the land actuall-
occupied b- the buildin. but also the adDacent .arden devoted to the incidental use of the parish
priest. he lot !hich is not used for co//ercial purposes but serves solel- as a sort of lod.in.
place, also 1ualifies for e8e/ption because this constitutes incidental use in reli.ious functions.
he phrase ,e8clusivel- used for educational purposes, !as further clarified b- this Court in the
cases of $errera vs. Que%on City "oard of assess&ent Appeals, ; SCR# &@* I&(*&H
and Co&&issioner of #nternal Revenue vs. "is'op of t'e Missionary (istrict, &' SCR# ((& I&(*+H,
thus J
Moreover, the e8e/ption in favor of propert- used e8clusivel- for charitable or
educational purposes is Anot li/ited to propert- actuall- indispensableA therefor
<Coole- on a8ation, Vol. =, p. &';:?, but e8tends to facilities !hich are incidental to
and reasonabl- necessar- for the acco/plish/ent of said purposes, such as in the
case of hospitals, ,a school for trainin. nurses, a nursesA 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 residentsA <@' C%S **=&?, such as ,#thletic fields, includin. ,a fir/ used for the
in/ates of the institution. <Coole- on a8ation, Vol. =, p. &';:?.
he test of e8e/ption fro/ ta8ation is the use of the propert- for purposes /entioned in the
Constitution <#postolic Prefect v. Cit- reasurer of $a.uio, )& Phil, +') I&('&H?.
It /ust be stressed ho!ever, that !hile this Court allo!s a /ore liberal and non>restrictive
interpretation of the phrase ,e8clusivel- used for educational purposes, as provided for in #rticle VI,
Section ==, para.raph ; of the &(;+ Philippine Constitution, reasonable e/phasis has al!a-s been
/ade that e8e/ption e8tends to facilities !hich are incidental to and reasonabl- necessar- for the
acco/plish/ent of the /ain purposes. Other!ise stated, the use of the school buildin. or lot for
co//ercial purposes is neither conte/plated b- la!, nor b- Durisprudence. hus, !hile the use of
the second floor of the /ain buildin. in the case at bar for residential purposes of the Director and
his fa/il-, /a- find Dustification under the concept of incidental use, !hich is co/pli/entar- to the
/ain or pri/ar- purposeJeducational, the lease of the first floor thereof to the Northern Mar9etin.
Corporation cannot b- an- stretch of the i/a.ination be considered incidental to the purpose of
education.
It !ill be noted ho!ever that the afore/entioned lease appears to have been raised for the first ti/e
in this Court. hat the /atter !as not ta9en up in the to court is reall- apparent in the decision of
respondent %ud.e. No /ention thereof !as /ade in the stipulation of facts, not even in the
description of the school buildin. b- the trial Dud.e, both e/bodied in the decision nor as one of the
issues to resolve in order to deter/ine !hether or not said properl- /a- be e8e/pted fro/ pa-/ent
of real estate ta8es <Rollo, pp. &)>=;?. On the other hand, it is note!orth- that such fact !as not
disputed even after it !as raised in this Court.
Indeed, it is a8io/atic that facts not raised in the lo!er court cannot be ta9en up for the first ti/e on
appeal. Nonetheless, as an e8ception to the rule, this Court has held that althou.h a factual issue is
not s1uarel- raised belo!, still in the interest of substantial Dustice, this Court is not prevented fro/
considerin. a pivotal factual /atter. ,he Supre/e Court is clothed !ith a/ple authorit- to revie!
palpable errors not assi.ned as such if it finds that their consideration is necessar- in arrivin. at a
Dust decision., <Pere6 vs. Court of #ppeals, &=) SCR# *'+ I&(@'H?.
Cnder the &(;+ Constitution, the trial court correctl- arrived at the conclusion that the school buildin.
as !ell as the lot !here it is built, should be ta8ed, not because the second floor of the sa/e is bein.
used b- the Director and his fa/il- for residential purposes, but because the first floor thereof is
bein. used for co//ercial purposes. 5o!ever, since onl- a portion is used for purposes of
co//erce, it is onl- fair that half of the assessed ta8 be returned to the school involved.
PREMISES CONSIDERED, the decision of the Court of "irst Instance of #bra, $ranch I, is hereb-
#""IRMED subDect to the /odification that half of the assessed ta8 be returned to the petitioner.
SO ORDERED.
Yap) C.*.) Melencio+$errera) !adilla and Sar&iento) **.) concur.

.oo%no%e$
K Penned b- the respondent %ud.e, 5on. %ud.e P. #1uino.
he 4a!phil ProDect > #rellano 4a! "oundation