PASCUAL vs.
SECRETARY OF PUBLIC WORKS
110 PHIL 331
GR No. L-10405, December 29, 1960
"A law appropriating the public revenue is invalid if the public advantage or
benefit, derived from such expenditure, is merely incidental in the promotion of a
particular enterprise."
FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory
relief, with injunction, upon the ground that RA No. 920, which apropriates funds
for public works particularly for the construction and improvement of Pasig
feeder road terminals. Some of the feeder roads, however, as alleged and as
contained in the tracings attached to the petition, were nothing but projected
and planned subdivision roads, not yet constructed within the Antonio
Subdivision, belonging to private respondent Zulueta, situated at Pasig, Rizal;
and which projected feeder roads do not connect any government property or
any important premises to the main highway. The respondents' contention is that
there is public purpose because people living in the subdivision will directly be
benefitted from the construction of the roads, and the government also gains
from the donation of the land supposed to be occupied by the streets, made by
its owner to the government.
ISSUE: Should incidental gains by the public be considered "public purpose" for
the purpose of justifying an expenditure of the government?
HELD: No. It is a general rule that the legislature is without power to appropriate
public revenue for anything but a public purpose. It is the essential character of
the direct object of the expenditure which must determine its validity as
justifying a tax, and not the magnitude of the interest to be affected nor the
degree to which the general advantage of the community, and thus the public
welfare, may be ultimately benefited by their promotion. Incidental to the public
or to the state, which results from the promotion of private interest and the
prosperity of private enterprises or business, does not justify their aid by the use
public money.
The test of the constitutionality of a statute requiring the use of public funds is
whether the statute is designed to promote the public interest, as opposed to the
furtherance of the advantage of individuals, although each advantage to
individuals might incidentally serve the public.
SILVESTRE M. PUNSALAN v. MUNICIPAL BOARD OF CITY OF MANILA, GR No. L-
4817, 1954-05-26
Facts:
annulment of Ordinance No. 3398 of the City of Manila together with the
provision of the Manila charter authorizing it and the refund of taxes collected
under the ordinance but paid under protest.
imposes a municipal occupation tax on persons exercising various
professions in the city and penalizes non-payment of the tax "by a fine of not
more than two hundred... pesos or by imprisonment of not more than six
months,... plaintiffs, upon being required to pay the additional tax prescribed
in the ordinance, paid the same under protest and then brought the present
suit... lower court upheld the validity of the provision of law authorizing the
enactment of the ordinance but declared the ordinance itself illegal and void
on the ground that the penalty therein provided for non-payment of the tax
was not legally authorized. From this... decision both parties appealed to this
Court,... whether this ruling is correct or not, for though the decision is silent
on the refund of taxes paid plaintiffs make no assignment of error on this
point.
Issues:
whether this ruling is correct or not, for though the decision is silent on the
refund of taxes paid plaintiffs make no assignment of error on this point.
Ruling:
we find that the lower court was in error in saying that the imposition of the
penalty provided for in the ordinance was without the authority of law.
empowers the Municipal Board "to fix penalties for the violation of ordinances
which shall not exceed to (sic) two hundred pesos fine or six months'
imprisonment, or both such fine and imprisonment, for a... single offense"
Hence, the pronouncement below that the ordinance in question is illegal and
void because it imposes a penalty not authorized by law is clearly without
basis.
The ordinance imposes the tax upon every person "exercising" or "pursuing"
in the City of Manila naturally any one of the occupations named, but does
not say that such person must have his... office in Manila. Wha
The argument against double taxation may not be invoked where one tax is
imposed by the state and the other is imposed by the city (1 Cooley on
Taxation, 4th ed., p. 492), it being widely recognized that there is nothing
inherently obnoxious in the requirement that license... fees or taxes be
exacted with respect to the same occupation, calling or activity by both the
state and the political subdivisions thereof. (51 Am. Jur., 341.)... the judgment
appealed from is reversed in so far as it declares Ordinance No. 3398 of the
City of Manila illegal and void and affirmed in so far as it holds the validity of
the provision of the Manila charter authorizing it
Lladoc vs commissioner on Internal Revenue
Fact: Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in
cash to Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and
predecessor of herein petitioner, for the construction of a new Catholic Church in the
locality. The total amount was actually spent for the purpose intended. On March 3,
1958, the donor M.B. Estate, Inc., filed the donor’s gift tax return. Under date of April 29,
1960, the respondent Commissioner of Internal Revenue issued an assessment for
donee’s gift tax against the Catholic Parish of Victorias, Negros Occidental, of which
petitioner was the priest. The tax amounted to P1,370.00 including surcharges, interests
of 1% monthly from May 15, 1958 to June 15, 1960, and the compromise for the late filing
of the return. Petitioner lodged a protest to the assessment and requested the withdrawal
thereof. The protest and the motion for reconsideration presented to the Commissioner
of Internal Revenue were denied. The petitioner appealed to the Court of Tax Appeals on
November 2, 1960. In the petition for review, the Rev. Fr. Casimiro Lladoc claimed,
among others, that at the time of the donation, he was not the parish priest in Victorias;
that there is no legal entity or juridical person known as the “Catholic Parish Priest of
Victorias,” and, therefore, he should not be liable for the donee’s gift tax. It was also
asserted that the assessment of the gift tax, even against the Roman Catholic Church,
would not be valid, for such would be a clear violation of the provisions of the
Constitution.
Issue: Whether the petitioner is liable for the assessed donee’s gift tax on the donated for
the construction of the Victorias Parish Church.
Held: Yes, exempts from taxation cemeteries, churches and parsonages or convents,
appurtenant thereto, and all lands, buildings, and improvements used exclusively for
religious purposes. The exemption is only from the payment of taxes assessed on such
properties enumerated, as property taxes, as contra distinguished from excise taxes. In
the present case, what the Collector assessed was a donee’s gift tax; the assessment was
not on the properties themselves. It did not rest upon general ownership; it was an excise
upon the use made of the properties, upon the exercise of the privilege of receiving the
properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A gift tax is not a property tax, but
an excise tax imposed on the transfer of property by way of gift inter vivos, the
imposition of which on property used exclusively for religious purposes, does not
constitute an impairment of the Constitution. As well observed by the learned
respondent Court, the phrase “exempt from taxation,” as employed in the Constitution
(supra) should not be interpreted to mean exemption from all kinds of taxes. And there
being no clear, positive or express grant of such privilege by law, in favor of petitioner,
the exemption herein must be denied
ABRA VALLEY COLLEGE, INC vs Aquino Case Digest
ABRA VALLEY COLLEGE, INC. represented by PEDRO V. BORGONIA, petitioner, vs. 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, respondents.
FACTS: On June 8, 1972 the properties of the Abra Valley Junior College, Inc. was sold at public
auction for the satisfaction of the unpaid real property taxes thereon and the same was sold to
Paterno Millare who offered the highest bid of P6,000.00 and a Certificate of Sale in his favor was
issued by the defendant Municipal Treasurer.
(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, a few meters from the plaza and about
120 meters from the Court of First Instance building; (c) that the elementary pupils are housed in
a two-storey 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 building;
and (f) that the annual gross income of the school reaches more than one hundred thousand
pesos.
The only issue left for the Court to determine and as agreed by the parties, is whether or not the
lot and building in question are used exclusively for educational purposes.
ISSUE: Whether or not the properties are exclusively for education purposes?
HELD: Petitioner contends that the primary use of the lot and building for educational purposes,
and not the incidental use thereof, determines and exemption from property taxes under Section
22 (3), Article VI of the 1935 Constitution. Hence, the seizure and sale of subject college lot and
building, which are contrary thereto as well as to the provision of Commonwealth Act No. 470,
otherwise known as the Assessment Law, are without legal basis and therefore void.
On the other hand, private respondents maintain that the college lot and building in question
which were subjected to seizure and sale to answer for the unpaid tax are used: (1) for the
educational purposes of the college; (2) as the permanent residence of the President and Director
thereof, Mr. Pedro V. Borgonia, and his family including the in-laws and grandchildren; and (3) for
commercial purposes because the ground floor of the college building is being used and rented
by a commercial establishment, the Northern Marketing Corporation
The phrase “exclusively used for educational purposes” was further clarified by this Court,
thus““Moreover, 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, such as in
the case of hospitals, ‘a school for training nurses, a nurses’ home, property use to provide
housing facilities for interns, resident doctors, superintendents, and other members of the hospital
staff, and recreational facilities for student nurses, interns, and residents’ (84 CJS 6621), such as
‘athletic fields’ including ‘a firm used for the inmates of the institution.’ ”
The exemption extends to facilities which are incidental to and reasonably necessary for the
accomplishment of the main purpose the lease of the first floor to the Northern Marketing
Corporation cannot by any stretch of the imagination be considered incidental to the purposes of
education; Case at bar.—It must be stressed however, that while this Court allows a more liberal
and non-restrictive interpretation of the phrase “exclusively used for educational purposes” as
provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine 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. Otherwise stated, the use of
the school building or lot for commercial purposes is neither contemplated by law, nor by
jurisprudence. 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 pur-pose—educational, the lease of
the first floor thereof to the Northern Marketing Corporation cannot by any stretch of the
imagination be considered incidental to the purposes of education.
Trial Court correct in imposing the tax not because the second floor is being used by the Director
and his family for residential purposes but because the first floor is being used for commercial
purposes.—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.
