Case Title Abra Valley College v.

Aquino
G.R. no. L-39086
Main Topic Power of Taxation
Other Related Topic Statutory Construction
Date: June. 15, 1988

DOCTRINES
 Power of Taxation; Statutory Construction: Tax provisions should be strictly
construed against the government, and, if any ambiguity be found to exist, it must be
construed liberally and resolved in favor of the citizen.

FACTS:
 ABRA VALLEY COLLEGE, INC, an educational corporation and institution of higher
learning duly incorporated with the Securities and Exchange Commission, filed a
complaint in the court a quo to annul and declare void the “Notice of Seizure” and the
“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.

 The “Notice of Sale” was caused to be served upon the ABRA VALLEY by the
respondent treasurers for the sale at public auction of said college lot and building, which
sale was held on the same date. Dr. Paterno Millare, then Municipal Mayor of Bangued,
Abra, offered the highest bid of P6,000.00 which was duly accepted. The certificate of
sale was correspondingly issued to him. Hence, this complaint by the petitioner.

 So a certain Paterno Mellare who probably was with Public Respondent AQUINO
(chismis) is the municipal and provincial treasurers filed through counsel a motion to
dismiss the complaint.

 So what the Provincial Fiscal did was they filed a memorandum for the government
where they opined that based on the evidence, the laws applicable, and previous court
decisions and jurisprudence, the school building an the school lot used for educational
purpose of Abra Valley College are exempted from payment of taxes.

 The trial court disagreed. Let’s try to look at the evidence and what they found out.

 You see what actually happened was that Abra Valley College (AVC) was renting out the
ground floor of its college building to Nothern Marketing Corporation (NMC) while the
second floor thereof is used by the Director of the College for residential purposes. So
this is precisely the reason why the municipal and provincial treasurers served upon the
College a “notice of seizure” and later a “notice of sale” due to the alleged failure of the
College to pay real estate taxes and penalties thereon.

 So this falls under a case of a claim for tax exemption.

ADDED THOUGHTS:
 This is an old taxation case which had been covered by the 1935 Constitution.
o Questions #1: Is tax exemption which is embraced in the words “Exclusively
Used for Educational Purposes” liberally construed?
o Answer: YES.
o Therefore: A reasonable emphasis can be made that the tax exemption may extend
to facilities which are INCIDENTAL TO and REASONABLY NECESSARY for
the accomplishment of the main purpose (which is to educate)
o Further Question #2: Can a ground floor of an educational institution (which is
tax exempted), being used for commercial purpose and its second floor being used
for residential purpose fall under said extension?
o Further Answer: The residential issue may be qualified depending on who is
residing. The commercial issue? NO.

ISSUE:

 The main issue in this case is the proper interpretation of the phrase “used exclusively for
educational purpose.”

 The question is, whether or not the lot and building in question are used exclusively for
educational purpose? E pinaparenta yung ground floor eh, ginawa naming residential
yung second floor. Kaya siguro sinabe ng municipal and provincial treasurers,
“Pinaglololoko nyo kami, ok tataxan naming kayo, and pag di na kayo makabayad, we
will seize that property, then we will sell it.” Problema ang nakabili naman yung Mayor.
hahahaha

HELD:

 While the Court allows a more liberal and non-restrictive interpretation of the
phrase “exclusively used for educational purpose,” as per the provision in the
constitution, reasonable emphasis has always been made that exemption extends to
facilities which are incidental to and reasonably necessary for the accomplishment of the
main purposes.

 While the second floor’s use, as residence of the director, is incidental to education; the
lease of the first floor cannot by any stretch of imagination be considered incidental to the
purposes of education.

 The test of exemption from taxation is the use of the property for purposes mentioned in
the constitution.

 So there we go. Let’s reiterate: While the use of the second floor of the main building in
the case at bar for residential purposes of the Director of the school and his family may
find justification under the concept of INCIDENTAL USE, which is complimentary to
 the main or primary purpose which is educational, the lease of the first floor thereof to
the Northern Marketing Corporation cannot by any stretch of imagination be considered
incidental to the purpose of education.
 So the Supreme Court affirmed the lower court ruling stating it correctly arrived at the
conclusion that the school building as well as the lot where it is built should be taxed. Not
because of the second issue but of the first floor.

 However, since it is only a portion of its premises is used for purpose of commerce, the
high court directed that it is only fair that half of the assessed tax be returned to the
school.