CTA Case No. 295 (Decision)

a.JTHWESTE~ COLLE<;CS, It-e ., c.;. T. A. C .E O. 295 Pe t1t1oner, � v raua .. CITY " fAX Tf-1: CITY es pondents . X� ~ � - � � � ~ � - � - � � X DEC I ON This is an appeal from a decision o re6pondent oard of Assess eut App! als of Cebu City declaring itself without auth r1tv to declare certain prop r- tles of petitioner axe pt ! ro the pa ent of realty taxes and to or er the Ctt" Assessor oft Cebu to cance l the tax ������ ent thereon. Petitioner 1& a corporation dul ortanized 1n 1946 under Philippine l aws a an ducat1onal institu- tion with offic s at Ce u C lty. S om tim 1n the earlv part of 1946, petitioner requested respond nt Citv As- sessor of Cebu t hat th f ollo !ng real properties e exempt fro realtv taxe s rax Decl. o. Lot o. A ss~ssed Value 285 Road lock 2, 820. 486� an!led Est te 124, 420. 30950 2 lock 6 38455 4 lock 6 1 , 530. 3 1 ck 6 9~09 5 lock 6 4 , 320.00 1 Block 6 2, 20. 39510 485 lock 5 , 6 o. 39~11 2, 670. 39512 39513 (Lot 4) -495-su 8~1 , su b� Lot 49 B) (Lot lock 5 ) 5}-486� 1 4, 7 o. 373

OECL>IOO - C. T. A. E � � 2~ .... - 2- etitlone requested that th tax d c laratl ns of t h a ove proper ie e tr n~ierred in its ( outh� western ~olleges , Il c.) n " � he e propertie ere then, and still ar r gist red in t e names of th spouses .ati s H. A~n~r �~ _ nunci .cion arcen1lla9 This reque ~t as ni d v the Citr sses or of w bu on ebruar 10, 1956. he~eupo , et1t1o on e:oruarv 25, 19~6 .eppeale to t e o rcl "f s ss tnt ppeal of Cebu itv. v 1, 1956, 'tde c.foresa;Ld oard rendered a dec1sior. d cl ar~nu that it �as: �wit out an uthoritv to oraer the appellee , Citv AsG Gsor of Cebu to concel tle ax d - nt clarations & ove-~entioneo and have new one~ issue ~1 ivvor ot h app ~1 and al o, this oard is wit ut autnorltv� to �declare the aid prop rtl. s ex ltpt rom the pa ent of taxes ince the vear 1946." Consequentlv, p~titionor filed tne instant appe 1 with this Court , pra�r.1ng that th properties in estion e declared e~e pt iro.:a realt, t x s fro th t �, o th " \ere exclusive!,, sed for uucatio1.a1 purpOSE* !n 19 6 1 and that the Cit Assessor of Ce u ordorcd to incluGe s~ld properties ~ t e 1 st of pr<>p rt!.os exo pt from rAalt,, taxes . After filing its answer to t et ti . , but b - fore the c ase was heard, respond nts fil d ~ motion to dismiss the pet1t1or. on April 22, 1957 for lac'' of juris- diction over t e suo~ ct m tter of t e petition. fhe Court however den...cd the afOl'es id ...1ot!on to dismiss on pr11 231 1957 and set the c a At the trial, petitioner adduced evidence to support its claim that the properties herein involved sl.ould oe I ,� 3 7 tl

1 DECISIOO - C. . A. t,;~E NO. 295 exempt from he pavm nt of r ltr taxes. During the hearing, the 3 dge presiding over the case, conducted an ocu l r ln pec tlon of the buildings ana pr ls of the land in 5tion 1n the presence of both counsels . Fro t .e mas of vi enco intro uced the follo 1ng facts have b n establ1s.e s Th properties In question (lots) covere bv the above- ent�oned Tax Dccla at ns re ~djac nt ~ each other and for on cont1 uou propert end referre to as the Banilad E&tate . Th ertif.1c t s f tle to th said lots w r no atill are Ul ~he na es of t e spou es, t a H. znar and unciacl. n � arc n� a� These 1 nd are wit .in th school c mpu o titioner. th s lan s and school site there h~v en Qrect several U4ldings, 11 l4Ste t en 0 tit a � to w1ta Tax ouses } of znars h aforesaid ev n (7) rean house cov ed v ax Deelar tion N � 4071 e eillg us as r sidence of t e professors , instruct r1:1 �nd oth r e~plor cs of the outh� we tern C.oll e5 ho do not h v anv house of their o n. 11 in cov red bv Tax D claration {o. 612 iS ed as re idence " t c air n of potit1oner' s o d o Trustees, � l t1 Ia. Aznar. Th ground floor of tie Coop uilding embraced 1n rax D claration o. 61243 1s 375 3

DEC IGI - C.T . A. CASE ~0. 29 uaed as a mess hall of the 6 udents , with c~rt in portion occupied bv the c ool Hoti p tal kerv, while the upper floor th reo 1s us d as claa roo s . This ba)ferv 1 mall oa erv pro uc;ln u t nough to up- ply the ne ds of the hospital patien s n tuaent nurses. The War houses ( os . 1 26 un r iax eclar t on& os. 61244 and 61245 re not u ed on � or t tor e of goods, ater1ala , e ~n nt or uppli devo~ or ucation 1 pose , but ~ el u or orin n other surplus ateri 1~ neeaed nd usea o� H. znar 1n his other varieo enterprises . l.ng covered bv r x Declaration o. 124/ hou not on v t accounting off1c o petitioner but al o 1 t of t e v ous enterprises of t H. zn � ~p Of the uil 1ng r erred 0 DO � 0 1� 11 tng (Tax cl. .. o. 12 an CCQ 1ng (Tax D!cl. o. partJ. 1 X pt 0 fro realtv t x s , but.onl to xt nt iv 1 nt 0 the portion xclu tv 1 u cz uc t1 n 1 purpo es. s, In d d of conv n r o, 52, h efore otar Pu lie on ~ at1as H. zntr nd tr to titloner t re-. nt n atanding ther on on o r� f stock orth 1� ued to the for c ildren (Ex ~it � pp. - 6, ec:.). has apparentlv ... ... re 1 te.red & th e not en t tle re a1ne 1n na �� of &al spouse � 376

DEClSI I - C . T. A. C E .~o. 29~ - 5- 23, 19~3 . � and ~s . znar .ortgaged the e 1 nds in favor of the Philippine � ational ~n for the sum of / P3 ,occ.oo for co rcial purpos \ xhibit ' ~~*} . However , accordin to the mcrt a ors , th 1 nds w'ere mort ed ac tuallv " to h lp f i nancin outh estern Col� leges� of p t!tioner h rein . Under the foregc!n s et of f ct � t e o lv 1ssu is whether or not the r al )ro rertic~ in qu t ion (land and buildings) are xe pt from realtr taxes . espond nt conte ds t~at the propertie est ion are not exe.. pted from re lt" taxe on the t heorv that the real n rs thereof are th ipou . s .dati s H. znar an Anunc 1ac1on arcenilla ~ 10 sn G to pe- or over, r spond nt argue~ th t not 11 properties ar used for ducational purposes. P tit oner, on the other hcmd, maintains that the . r nl properties herein involved are exe pt from re lt�r taxes. uot d hereunder are . the constitutional and statutorr provisions rel1e upon b" p tit1on r: ~~em ter!es, church s , an parsonav s or conve ts appurten nt ther to , nd all lands, buildings , improv m nts us d exclus v 1 for rel1g oue , ch ritable or educational purpos s shall e exe pt from taxation. � {Art. I . S c. 22, Par . 3 , Constitution of the Phillpp!ncs . ) - - ---� ec. 3 . P.rop ,ty oxenpt f Fom t x.� h exe pt1on shall as follows: f~l : ~ ~ (c Churc a and par onag s or convents appurtenant thereto , end all 1 nd � uildings and improv ents us d xc lus!ve1 for reli- gious, charitable , sci nt!ffc or educational purposes.� ( rt. 1, ec . 3, ar. (c) f the Assessment Law, Co:n."'lonwealth ct 470.) 377

� o. 295 51. JXI .... (aec) . L aEa�n99'1!1I 1ngps towfrnoel. tt�l~v t� ntted tates o riCa, the vea nt of PhUipplne Islands, the ltv of Ce , an v1ng gro nds, ch rc �! and t 1r d� jacent parsonage , and c nvento lands or u1ld1ngs used excluslvelv for rel1g1oua, cbarita le, sc1ent1fie , or cat n r � poses, and not for profltl but uc ex P� tion shall not exten t o and and u1 din held for 1nve& nt � t ough the inco th re� fr be voted to roligiou , ch rit le, scientif c or eduea~lon 1 purposes . - {Co � alt ct o. 5 , � ~1 , rter of Cit � ) th afor ecited const tutional prov sion, th exe pt1on fr t axes ext ds to .'.all 1 nda, buildings , or improve ents u ed exclu lvelv for x x x educ t1onal pole X X X X. 11 th oth r hand, S ct!on 51 of c nwealth ct o. a cit ov p ov1 e th t � exe p~ton cont plate& �lands o ilding used exclu� stvel for . x x x � ucatlonal pur ses, and ot for p o t X X x.� , a co ar1� of t ese t o provisions , not that th statut r p vi ion .po e an d lt1 n 1 condi� tion that 1 n a or ild!n e ot use for profit 1n order to e entl le to x Ion fro t x tion whic condlt n o � n t p r 1n con tltut!?n 1 1 � e tion !>1 of Co n � th c o. 5 s not 1t J.n t � co - t plat.ton of t con tltutlon 1 ov1 ton and c nnot owr�ride t � It iS gu d b, 1r nt found in th fund nt l la~) I pon nt h v r, t tl � f the u �r n t . 0 r do not concur n one person or entlt � it 1 n cess r, to - ter ~� w eth th r n� letting t e u�er ke u e of 1 propert lets h s pr � pert r tl or con lderat n. In c 37

DECJSIOO - � f . A. CASE O. 295 th ownor d riv benefit or co pe sation fro tho user , �ho by nature of his usi� ness or ctiv t , is ex pt u der the .... o.1 - st1tution or the statute , t exempt on exten � to the u. r je ..nu � . t:> t. owner ' � nef1t . � (p. 9, Resp.�s Memo.) (~ the Constitution is quit clear and precis that "�11 lands, bu ildings , and ~prove ents us for religiou , charitable , ci nti ic or ..........-.-......................................, poses sh 11 e ex pt fro tax t1on� . ro th cont xt of the provl !on, note that ~he sole d ter !native factor for exe pt ! on fro realtv taxes is the .. u � to which the propertr is devote~J "It th Con itutlon � � � provld s that propertv �u ed' for c rt in p rp s s s 11 ex� pted , it !& th use nd not th nership whtct cl r in s tl ri t � t � x . tion , and the owner of the prop rt a; .cla t h ex cp.t n, a lt ,o ~ to u s ot r. J. c v ( 61 40 1 1t 1ng: An nis t o n Ltlnci ~o . it'-' vs . � te 8 .;;Jo. 6:.> , 16 la . 25 � cott v � ociet of Russi n sr lites , Bl �� 624, 59 eb. 571.) his Vi appear to have v o\lr i;l pr Court in the ca s of postol c f ct o ,ount in o- vtnce vs. Cit, rea ur r o a u!o ( 71 hil. r. 7) and ishop of ueva egov. ;,s � ... ovin 1 1 oco t , th orte, ( :>1 hil. 52) . J nd er "u p.ropertv 1 ownership i~ terial. 1 ._ ct t t t not owned b v the education al in titution d s ot r mov it f~om the influence of.th x lpti n as lon as th pro- pertv 1& us d xclu ivf.'l or ecuc~t onal purpos ~ ~under a const1tutiona provision for ex- � ption of real propertv uaed excl sivelv for schools , an statutory provlilon for x m t1on of real and personal propertv owned and used bv ,f 37 9

D I(�14 � C.T.A. ASE NO. 295 - 8- the person to whom ~~aossad exclusively for schools, use for acnools is sufficient to exempt r al propertv 1rrespectiv of owner- ship, sine~ use, not ownership is t deter- mining factor. Accordinglv the exe ption � has b�cn allowed as to lar � sed exclu ivelv for school purposes even though it 11 leased district at a profit le ront to th school b t he owner. (84 c.J.~. p. 575.) ~ If the ax mption depends on the use cia 9f t he propert ''� rather thi:n th� ~.nor ship, the title to the ropertv i s ater1al, 1. e., t he title need ot e 1n tl u x cl�!m- 1ng exe pt1on. In such caee, it 1a the use , an not the ownership hich deter Lt1es the right to . t he exemption. It fo lallotwho� t hat the cla im th exemption u h th e OWJ'l~r ma'~ use 11 bv another." (l oolev, 1ha ~aw of / Taxation. 19?.4 ed., � 14?. . ) \_And "' e xclusivol�' used. accor in to t he et cer cons!- de.r d dec lsio s, , ean the pr � ar' and ~n e ant use an does not preclude such incid ntal use� &$ aro ctrectlv connec ~ed 1th, e&sen~ial, and tn f urt. anc of. the pr arv usa." (Cool " ' Tho Law of TaKati on ( th d.) ec . 685, p. 1433; se also Bishop of Nueva � o� ovla vs. ov!nc ~1 oard of Ilocos <>rte , pr . )) . ' re a1�ds tno A;) S�Si ... Law E fir. . the provi- sion o the sa~ne not a;p licabl to th it of C u ( "ect!on ~ . Co~~onw~alth ct o. 47~) . n the light of the f o e o1n o se�vatl-on , w shall no deteJ:ain! Jheth r tt. lal}ds at r r en- titl ed t o the enjo" tent fr o r lt ta;�es. 1th respe t t o th seov� 2t'IHHl h uG covered o, Tax Decl ar t on o. 4071 , w bel �ev t h s a e should e declared exe.pt.fro l r <ilt�r t xeo. Le , have benn and are being u ed b he tchool s roslcl nces for the pro- feasors , instructors and othe ploveca of th outh- 380

DEC IS I � C . T. A. CASE NO. 29!> -9- western Colleges ~ho do not.hav hou&e of th 1r own. That the dwellers do not av r ~t for tt cupatlon of the uies not disput d. �uch non- pa ment of th rent would 1 nd support to the ropos1t1 n that the use of t hese occ pied hous s 1 but inc~dental to t � du- c ational purpos s of petit io r . Con!1d ring further the progressiv an holeso e tend ncv of odern duca- tiona! inst1tutions to esta i ucational co un1t1 s .b'' the selve!i. e eli ve that uch r sidence or occupanc" of the buildings i an app op.r ate and con- venient use of the properties a fected to carr , out the purposes of etitioner (see Ro an qatholic C rch v. ast- !ng, 5 Phil. 01) or 1 e neces arv in ~o nt ~f pet t!oner's pursuit o diffusing the b n fit5 of education. � s a en r 1 rul � residence � o teac- hers e1� cted upon or n .r th colleg orcunds are held to b exe pt , 1snnost imila rlv, th ex- emption of the school lost oc us th principal and his fam1lv re&ides ~l the schoo ~ building." ( 51 lm. Jr. S c. 622 , p . 9 .) _, . .... 'Tb~ ._.ellin... 9s of n ducetional sti� tutlon reason blv necessarv for 1nst tut onal use r ord1 r11� exe pt vhen us d s resi- ences b t chers, oxficers, or other e - . plo, G � (41 C.J . 477.) ons1 't'ing further 1: t . r � . zn r is the Pres d .a and h d of petition r as n due tlona~ !nst tut on , the :.s: s1denc used b'� in d c vor , Tzx eclrration o. 61240 u~t b lik \is~ considGred �x~~ t. uc a d l- lin mu t b C�)it t er d Rs re sonabl" nec ossar , for th institutional use to cr.rrv out petition �r' s cduca ional urpos s . If tho uso of the bui dings !san . nc d nt of t~tioner ' s purpose. it follo that he usc of th lands 381

DEClS IOO - C . T� � CASE NO. 295 - 10 - on which said bu1ld1ngG are construct d is of th aa.e n tur � L~!(evdse . 1th respect to the Coop ild!ng co- vere b, Tax Declaration No . 612 3, locat d "ithin th school compound� we belicv~ that ~n& sa should be ex� erapt fro realtu taxes. The upp r floor of thi& build- ing is used for classroo s. fhe major p rt of the ground f~oor l&_used am ss h ll forth studen~s . with onl., a v rv smal~ portion wh ch !S occupie v the ~chool Hospital aker�r which rr!.maril'� pro uces bread for th hospital staff , nurses and patients ~l petitioner's hospital , which is an adj unct of its m d~cal school. as- ponderyts wish to c apitalize on !ts theor, that t h s.;.i b ker, bakes br d which is so�d to stud nts nd thus argue that this f8ct takes S\'f ,, th 1lding fro the pr1� vilege of tl t ax exemption. e find how �er th t the evidence sho s that the ba...erH uses about one or one- half s ck of flour ever" evening 1n the qaa ing of read wh1ch shows th limited s1z of the baker" and its output as to indicate that the sal of }?read to th tu e�1ts is negligible if not nil. t an'r r8te, this fact alone, we believe, does not affect the use to which the building is devoted, as for educational purposes. The weight o( authorit~es old that -dorm!tor1e& and dining halls fur� nished bv a college for the uee of itt students are clear! exempt� {51 Am. Jur. ec._622, p. 598) and this would necessarilv include a bakerv which bakes bread for the students. ,. 382

ECLS IC � C. T. A. C/SE NO. 295 - 11 - �The dor~1tor1cs ~nd dinin hells and other: equtpmant of a colla ar n t taxable 1erel' because th~ students re charged rent for t e roo s n the dormitories and fee for the se of tt other e ipm.nt . ~ (~h c o v. Univers1t ~f Ch cago 228 llr 5, 1 1138, 1 Ann C 669. !y It nee ar1lv follo s th t t lnnd on ~h c the Coop ilding st nd 1 1 x mpt. !lative, ho s os . 1 and 2, co- v re . ' r X Dec 1 r t ions os. 61244 nd 61245�� sp c - t!velv, and the Accounting ullding covered b I x Decla� r t1on o. 61247 h ch er 11 l!k foun it in the �chool co pound, � b ltev th & a" not b d clared tax exe t. !� not1c . d t t th ouses in qu stion re pri! &rilv used v t1 ' H. mar a 9 for SU"- plu ood ( ed!cal end other 1st) -.;h!ch h ha5 purchased 383

D 'C :&3 I\.4 � � T., .� ~ E ~0. 2')5 - 12 - in co ection it. � iS oth r , terpr1ses� but c rtainlv no for educat onnl pu poses . � hile it .:.s trJe that said b:Jde a!:i \'.~re also in used t~ store school equip- nt and supplv, aid ~ ~G m rolv incidental to its pri::lary use a bodega r the perso al profit of latias H. ~ zn ar . .e are c 1n to give. e 9ht to he e&t1� mon of the ~ ld ."an ro .. the Citv ;hsses sor �s Offic e that 1d 0 a us d u storin bales of tobacco us iJ h to cooC t~ade , one of the sinesses ngag d in bv t. nterprise � & or th ccountin ulldin In question, w not ced that t.u�~ Sal hous d n ccoun 1ng office h1ch w a mor or less a accountl.n office for th wh e Aznar ent rpri~cs and net for the ~out e&ter. olleg s alone . ts use tt}er for as an accounting office o petitioner 1as r lv incident l tu it b 1ng used as accounting office !or t. varied enterprises of 'l.r. an~ !.t'G . datias H. Aznar , henc e it can not b satlsf~ctor!lv stated that the said ouiloin � s in pr1mar1lv and xclus1velv used fo: aucatlon 1 purposes. ~ the final anal -�sis , the exe.-.Pt1on clepends Jion the pn ti~ la.4' st.atu~o.Lv OJ: canst tutional provistol involved and h facts and C il:CU uSt I.CeS tv vL , pp.&.i- ca ion s invo,�d. � oreov r . th occu ancv of �. o 1 Prv}; -"t" u�r a. e..:! cat.t.OC.d.&. :uu;~i tuti n or its offic rs or th pu~poses foz .;au s ta . liiho � v,4.�o.~.&. \,<.~ xempt .:c the prop rtv fro taxation , ust tava , r u po~ d to h~v � a direct c uHftC ~o.lou w.i. t h such purposes, nd d !ling hous s elong to a colle e an ... ontG ~.~v 4i u r� f r heir own conv n1ence and not for the benefit of the c olle ...e � rc nc't c (51 !'\ � Ju-4. s c. 622, p. 5~0 . ) 384

, cD.EtC.JAS.IGI � � 29~ - 13 ..- " byl ualv, th occupanc v of pro rtv as a re 1dence bv the preaid nt of a sc hool and hla f ilv oea not 1n and of it lf constitute ita use for educ ational purposes. t neither 1S it iRe O&iatent 1th its exelu11Ve use in that wav. here such occupancv 11 f or the be- � nefit of t school rather than of the occu- pant- is intended to serve t he enda h1ch the &chool ls 1nt 1ned, is dapte th reto and ac tuallv ace pl1shea that object--i be- co s in itself an eicl uaivelv cat1onal use . �- ( ansas ��1� an Un1vera1t v. aline ounty, 120 n 496, 243 P 1055. } or has it been held, ex pt , where the proprietors or teachers live in th iloing f r c nve� n1ence of personal advanta e.� ( at v. Cowles, 611 tb ~161 se � � 3~ . ) ... � re rds t e lan 1 1n que t~on , it av e f alrl said tba�t h entire de p o con t1t utea part of t � scho~l site of petitio��~ ana hould therefore .. � consider d ex t fr re v xe 1 lt entiretv. e av h ret fore int at that the a ditional c; nd1t1on oaed bv Section 1 01 'o onwealth ct o.. 5 � thit t � land or 1ld s i ul e used for ~oflt 1n or r t l.�it exe ption fro taxation 1s not within t Gonte lat on of e const tutlonal .. provision nci, herefore , eannot overr � e that pos d bv t e 1 tter provl ion. o ever, even as&umin do that sal lands or u11 1ngs should not als o �.Jsed f or profit, e are still cons train� to ru � 1n fav~r of petltloner. here 1s no evidene e that pet! 1 ner profited f~ the use of the la ds tn question. 1h re 1� equall n..o sho - 1ng that the Aznar spouses gained from such use bv pet1� tloner. The fact that hares of stock worth 1~,000.00 were rec eived 1s not indteat ve that the Aznar spouse profited from the u � � It st e r ered that the 35

f cD.ErC.JAS.I c - o. 295 E � - 14 - ahare5 of stock were the cons1derat!Qn for tho convev� ~nee of the lands and the ild!ngs 1n question, not a rental/or co pen tlon for the uee . Th rece1pt of the shares of stock is not profit within th scope of ec- t!on ~1 of Com o.weelth ct No. ~8 . IN !E Tf cru!GOD :,.) C �m TI � the dec � a!on of the Cebu Boord of Tax ~~ ess ent Appeals appo led fro should be, as 1~ !s hare v odified. ihe lo d d properties covered bv Tax D clarat:?n4 os. 28� � 09 � S8455 , 39509, 39510, 39e11, 3~512 and 39~1 as \ ll a& the buildings and irJprov errts cover d b , ;ax Dtclara- t ns ..o ! 407le 61240 nd 61243, of the Citv of C u ra he .d cl red exempt !ro .realtv t x s sine 1 46 a~ p~o rtv used exclusivel' for educ ion 1 purpose � ' p t!tioner 'outhwestern Col!eges . Inc. and the Cltv ssessor of 'ebu is according! ordered, to inclu these properties in t~ list of real prop rtl a which ar ex� ffipt from realt � t xe � !h following uild1ngs or prov ~ nts f petition r o wit .. ar hou o. 1, eo- v red b, T x Declar ti n o. 61245; ar o. 2, CO� v red bv ax Dec lar!tion o. 61243; and the ccoun'ting u1ld!ng , covered v T~x eel ation o. 61247, r .. he1.�eb declar d ubj ct to al"'.;v t xes nd th corr &- por~a1ng reaJ.tv tax asc osm nt th rcon h re declared valid. ithout pr no nee ent ai t o coats. D. ~ c 386