Davao Sawmill Vs BAA

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-40411
1935
August 7,
DAVAO SAW MILL CO., INC., plaintiffappellant,

vs.
APRONIANO G. CASTILLO and DAVAO
LIGHT & POWER CO., INC., defendantsappellees.
Arsenio Suazo and Jose L. Palma Gil and
Pablo Lorenzo and Delfin Joven for
appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the
opening sentence of the decision in the
trial court and as set forth by counsel for
the parties on appeal, involves the
determination of the nature of the
properties described in the complaint. The
trial judge found that those properties were
personal in nature, and as a consequence
absolved the defendants from the
complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder
of a lumber concession from the
Government of the Philippine Islands. It has
operated a sawmill in the sitio of Maa,
barrio of Tigatu, municipality of Davao,
Province of Davao. However, the land upon
which the business was conducted
belonged to another person. On the land
the sawmill company erected a building
which housed the machinery used by it.
Some of the implements thus used were
clearly personal property, the conflict
concerning machines which were placed
and mounted on foundations of cement. In
the contract of lease between the sawmill
company and the owner of the land there
appeared the following provision:
That on the expiration of the period
agreed upon, all the improvements
and buildings introduced and erected
PROPERTY CASES PUNSALAN TO BICERRA
1
by the party of the second part shall

pass to the exclusive ownership of
the party of the first part without any
obligation on its part to pay any
amount for said improvements and
buildings; also, in the event the party
of the second part should leave or
abandon the land leased before the
time herein stipulated, the
improvements and buildings shall
likewise pass to the ownership of the
party of the first part as though the
time agreed upon had expired:
Provided, however, That the
machineries and accessories are not
included in the improvements which
will pass to the party of the first part
on the expiration or abandonment of
the land leased.
In another action, wherein the Davao Light
& Power Co., Inc., was the plaintiff and the
Davao, Saw, Mill Co., Inc., was the
defendant, a judgment was rendered in
favor of the plaintiff in that action against
the defendant in that action; a writ of
execution issued thereon, and the
properties now in question were levied
upon as personalty by the sheriff. No third
party claim was filed for such properties at
the time of the sales thereof as is borne
out by the record made by the plaintiff
herein. Indeed the bidder, which was the
plaintiff in that action, and the defendant
herein having consummated the sale,
proceeded to take possession of the
machinery and other properties described
in the corresponding certificates of sale
executed in its favor by the sheriff of
Davao.
As connecting up with the facts, it should
further be explained that the Davao Saw
Mill Co., Inc., has on a number of occasions
treated the machinery as personal
property by executing chattel mortgages in
favor of third persons. One of such persons
is the appellee by assignment from the
original mortgages.
Article 334, paragraphs 1 and 5, of the Civil
Code, is in point. According to the Code,
real property consists of
1. Land, buildings, roads and

constructions of all kinds adhering to
the soil;
xxx
xxx
xxx
5. Machinery, liquid containers,

instruments or implements intended
by the owner of any building or land
for use in connection with any
industry or trade being carried on
therein and which are expressly
adapted to meet the requirements of
such trade of industry.
Appellant emphasizes the first paragraph,
and appellees the last mentioned
paragraph. We entertain no doubt that the
trial judge and appellees are right in their
appreciation of the legal doctrines flowing
from the facts.
In the first place, it must again be pointed
out that the appellant should have
registered its protest before or at the time
of the sale of this property. It must further
be pointed out that while not conclusive,
the characterization of the property as
chattels by the appellant is indicative of
intention and impresses upon the property
the character determined by the parties. In
this connection the decision of this court in
the case of Standard Oil Co. of New York
vs. Jaramillo ( [1923], 44 Phil., 630),
whether obiter dicta or not, furnishes the
key to such a situation.
It is, however not necessary to spend
overly must time in the resolution of this
appeal on side issues. It is machinery
which is involved; moreover, machinery
not intended by the owner of any building
or land for use in connection therewith, but
intended by a lessee for use in a building
erected on the land by the latter to be
returned to the lessee on the expiration or
abandonment of the lease.
A similar question arose in Puerto Rico, and
on appeal being taken to the United States
Supreme Court, it was held that machinery
which is movable in its nature only
becomes immobilized when placed in a
plant by the owner of the property or plant,
2
but not when so placed by a tenant, a

usufructuary, or any person having only a
temporary right, unless such person acted
as the agent of the owner. In the opinion
written by Chief Justice White, whose
knowledge of the Civil Law is well known, it
was in part said:
To determine this question involves
fixing the nature and character of the
property from the point of view of the
rights of Valdes and its nature and
character from the point of view of
Nevers & Callaghan as a judgment
creditor of the Altagracia Company
and the rights derived by them from
the execution levied on the
machinery placed by the corporation
in the plant. Following the Code
Napoleon, the Porto Rican Code
treats as immovable (real) property,
not only land and buildings, but also
attributes immovability in some
cases to property of a movable
nature, that is, personal property,
because of the destination to which it
is applied. "Things," says section 334
of the Porto Rican Code, "may be
immovable either by their own
nature or by their destination or the
object to which they are applicable."
Numerous illustrations are given in
the fifth subdivision of section 335,
which is as follows: "Machinery,
vessels, instruments or implements
intended by the owner of the
tenements for the industrial or works
that they may carry on in any
building or upon any land and which
tend directly to meet the needs of
the said industry or works." (See also
Code Nap., articles 516, 518 et seq.
to and inclusive of article 534,
recapitulating the things which,
though in themselves movable, may
be immobilized.) So far as the
subject-matter with which we are
dealing machinery placed in the
plant it is plain, both under the
provisions of the Porto Rican Law and
of the Code Napoleon, that
machinery which is movable in its
nature only becomes immobilized
when placed in a plant by the owner
of the property or plant. Such result

would not be accomplished,
therefore, by the placing of
machinery in a plant by a tenant or a
usufructuary or any person having
only a temporary right. (Demolombe,
Tit. 9, No. 203; Aubry et Rau, Tit. 2,
p. 12, Section 164; Laurent, Tit. 5,
No. 447; and decisions quoted in
Fuzier-Herman ed. Code Napoleon
under articles 522 et seq.) The
distinction rests, as pointed out by
Demolombe, upon the fact that one
only having a temporary right to the
possession or enjoyment of property
is not presumed by the law to have
applied movable property belonging
to him so as to deprive him of it by
causing it by an act of immobilization
to become the property of another. It
follows that abstractly speaking the
machinery put by the Altagracia
Company in the plant belonging to
Sanchez did not lose its character of
movable property and become
immovable by destination. But in the
concrete immobilization took place
because of the express provisions of
the lease under which the Altagracia
held, since the lease in substance
required the putting in of improved
machinery, deprived the tenant of
any right to charge against the lessor
the cost such machinery, and it was
expressly stipulated that the
machinery so put in should become a
part of the plant belonging to the
owner without compensation to the
lessee. Under such conditions the
tenant in putting in the machinery
was acting but as the agent of the
owner in compliance with the
obligations resting upon him, and the
immobilization of the machinery
which resulted arose in legal effect
from the act of the owner in giving
by contract a permanent destination
to the machinery.
xxx
xxx
xxx
The machinery levied upon by

Nevers & Callaghan, that is, that
which was placed in the plant by the
3
Altagracia Company, being, as

regards Nevers & Callaghan,
movable property, it follows that
they had the right to levy on it under
the execution upon the judgment in
their favor, and the exercise of that
right did not in a legal sense conflict
with the claim of Valdes, since as to
him the property was a part of the
realty which, as the result of his
obligations under the lease, he could
not, for the purpose of collecting his
debt, proceed separately against.
(Valdes vs. Central Altagracia [192],
225 U.S., 58.)
Finding no reversible error in the record,
the judgment appealed from will be
affirmed, the costs of this instance to be
paid by the appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ.,
concur.
G.R. No. L-17870
29, 1962
September
MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER
and the BOARD OF TAX APPEALS of
Cagayan de Oro City, respondents.
Binamira, Barria and Irabagon for
petitioner.
Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the
decision of the Court of Tax Appeals in
C.T.A. Case No. 710 holding that the
petitioner Mindanao Bus Company is liable
to the payment of the realty tax on its
maintenance and repair equipment
hereunder referred to.
Respondent City Assessor of Cagayan de
Oro City assessed at P4,400 petitioner's
above-mentioned equipment. Petitioner
appealed the assessment to the
respondent Board of Tax Appeals on the
ground that the same are not realty. The
Board of Tax Appeals of the City sustained
the city assessor, so petitioner herein filed
with the Court of Tax Appeals a petition for

the review of the assessment.
In the Court of Tax Appeals the parties
submitted the following stipulation of facts:
Petitioner and respondents, thru their
respective counsels agreed to the
following stipulation of facts:
1. That petitioner is a public utility
solely engaged in transporting
passengers and cargoes by motor
trucks, over its authorized lines in
the Island of Mindanao, collecting
rates approved by the Public Service
Commission;
2. That petitioner has its main office
and shop at Cagayan de Oro City. It
maintains Branch Offices and/or
stations at Iligan City, Lanao;
Pagadian, Zamboanga del Sur;
Davao City and Kibawe, Bukidnon
Province;
3. That the machineries sought to be
assessed by the respondent as real
properties are the following:
(a) Hobart Electric Welder
Machine, appearing in the
attached photograph, marked
Annex "A";
(b) Storm Boring Machine,
appearing in the attached
photograph, marked Annex
"B";
(c) Lathe machine with motor,
"C";
(d) Black and Decker Grinder,
"D";
(e) PEMCO Hydraulic Press,
"E";
(f) Battery charger (Tungar
charge machine) appearing in
the attached photograph,
marked Annex "F"; and

4
(g) D-Engine Waukesha-M-Fuel,

"G".
4. That these machineries are sitting
on cement or wooden platforms as
may be seen in the attached
photographs which form part of this
agreed stipulation of facts;
5. That petitioner is the owner of the
land where it maintains and operates
a garage for its TPU motor trucks; a
repair shop; blacksmith and
carpentry shops, and with these
machineries which are placed
therein, its TPU trucks are made;
body constructed; and same are
repaired in a condition to be
serviceable in the TPU land
transportation business it operates;
6. That these machineries have
never been or were never used as
industrial equipments to produce
finished products for sale, nor to
repair machineries, parts and the like
offered to the general public
indiscriminately for business or
commercial purposes for which
petitioner has never engaged in, to
date.1awphl.nt
The Court of Tax Appeals having sustained
the respondent city assessor's ruling, and
having denied a motion for
reconsideration, petitioner brought the
case to this Court assigning the following
errors:
1. The Honorable Court of Tax
Appeals erred in upholding
respondents' contention that the
questioned assessments are valid;
and that said tools, equipments or
machineries are immovable taxable
real properties.
2. The Tax Court erred in its
interpretation of paragraph 5 of
Article 415 of the New Civil Code,
and holding that pursuant thereto
the movable equipments are taxable
realties, by reason of their being
intended or destined for use in an
industry.
3. The Court of Tax Appeals erred in
denying petitioner's contention that
the respondent City Assessor's power
to assess and levy real estate taxes

on machineries is further restricted
by section 31, paragraph (c) of
Republic Act No. 521; and
4. The Tax Court erred in denying
petitioner's motion for
reconsideration.
Respondents contend that said
equipments, tho movable, are immobilized
by destination, in accordance with
paragraph 5 of Article 415 of the New Civil
Code which provides:
Art. 415. The following are
immovable properties:
xxx
xxx
xxx
(5) Machinery, receptacles,

by the owner of the tenement for an
industry or works which may be
carried on in a building or on a piece
of land, and which tend directly to
meet the needs of the said industry
or works. (Emphasis ours.)
Note that the stipulation expressly states
that the equipment are placed on wooden
or cement platforms. They can be moved
around and about in petitioner's repair
shop. In the case of B. H. Berkenkotter vs.
Cu Unjieng, 61 Phil. 663, the Supreme
Court said:
Article 344 (Now Art. 415), paragraph
(5) of the Civil Code, gives the
character of real property to
"machinery, liquid containers,
by the owner of any building or land
for use in connection with any
industry or trade being carried on
therein and which are expressly
adapted to meet the requirements of
such trade or industry."
If the installation of the machinery
and equipment in question in the
central of the Mabalacat Sugar Co.,
Inc., in lieu of the other of less
capacity existing therein, for its
sugar and industry, converted them
into real property by reason of their
purpose, it cannot be said that their
incorporation therewith was not
permanent in character because, as
essential and principle elements of a
sugar central, without them the
5
sugar central would be unable to

function or carry on the industrial
purpose for which it was established.
Inasmuch as the central is
permanent in character, the
necessary machinery and equipment
installed for carrying on the sugar
industry for which it has been
established must necessarily be
permanent. (Emphasis ours.)
So that movable equipments to be
immobilized in contemplation of the law
must first be "essential and principal
elements" of an industry or works without
which such industry or works would be
"unable to function or carry on the
industrial purpose for which it was
established." We may here distinguish,
therefore, those movable which become
immobilized by destination because they
are essential and principal elements in the
industry for those which may not be so
considered immobilized because they are
merely incidental, not essential and
principal. Thus, cash registers, typewriters,
etc., usually found and used in hotels,
restaurants, theaters, etc. are merely
incidentals and are not and should not be
considered immobilized by destination, for
these businesses can continue or carry on
their functions without these equity
comments. Airline companies use forklifts,
jeep-wagons, pressure pumps, IBM
machines, etc. which are incidentals, not
essentials, and thus retain their movable
nature. On the other hand, machineries of
breweries used in the manufacture of
liquor and soft drinks, though movable in
nature, are immobilized because they are
essential to said industries; but the
delivery trucks and adding machines which
they usually own and use and are found
within their industrial compounds are
merely incidental and retain their movable
nature.
Similarly, the tools and equipments in
question in this instant case are, by their
nature, not essential and principle
municipal elements of petitioner's business
of transporting passengers and cargoes by
motor trucks. They are merely incidentals
acquired as movables and used only for
expediency to facilitate and/or improve its
service. Even without such tools and
equipments, its business may be carried
on, as petitioner has carried on, without
such equipments, before the war. The
transportation business could be carried on
without the repair or service shop if its
rolling equipment is repaired or serviced in

another shop belonging to another.
The law that governs the determination of
the question at issue is as follows:
Art. 415. The following are
immovable property:
xxx
xxx
MAKATI LEASING and FINANCE

CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and
HONORABLE COURT OF APPEALS,
respondents.
Loreto C. Baduan for petitioner.
xxx

carried on in a building or on a piece
of land, and which tend directly to
or works; (Civil Code of the Phil.)
Aside from the element of essentiality the
above-quoted provision also requires that
the industry or works be carried on in a
building or on a piece of land. Thus in the
case of Berkenkotter vs. Cu Unjieng, supra,
the "machinery, liquid containers, and
instruments or implements" are found in a
building constructed on the land. A sawmill
would also be installed in a building on
land more or less permanently, and the
sawing is conducted in the land or building.
But in the case at bar the equipments in
question are destined only to repair or
service the transportation business, which
is not carried on in a building or
permanently on a piece of land, as
demanded by the law. Said equipments
may not, therefore, be deemed real
property.
Resuming what we have set forth above,
we hold that the equipments in question
are not absolutely essential to the
petitioner's transportation business, and
petitioner's business is not carried on in a
building, tenement or on a specified land,
so said equipment may not be considered
real estate within the meaning of Article
415 (c) of the Civil Code.
WHEREFORE, the decision subject of the
petition for review is hereby set aside and
the equipment in question declared not
subject to assessment as real estate for
the purposes of the real estate tax.
Without costs.
So ordered.
G.R. No. L-58469 May 16, 1983
6
Ramon D. Bagatsing & Assoc.

(collaborating counsel) for petitioner.
Jose V. Mancella for respondent.
DE CASTRO, J.:
Petition for review on certiorari of the
decision of the Court of Appeals (now
Intermediate Appellate Court) promulgated
on August 27, 1981 in CA-G.R. No. SP12731, setting aside certain Orders later
specified herein, of Judge Ricardo J.
Francisco, as Presiding Judge of the Court
of First instance of Rizal Branch VI, issued
in Civil Case No. 36040, as wen as the
resolution dated September 22, 1981 of
the said appellate court, denying
petitioner's motion for reconsideration.
It appears that in order to obtain financial
accommodations from herein petitioner
Makati Leasing and Finance Corporation,
the private respondent Wearever Textile
Mills, Inc., discounted and assigned several
receivables with the former under a
Receivable Purchase Agreement. To secure
the collection of the receivables assigned,
private respondent executed a Chattel
Mortgage over certain raw materials
inventory as well as a machinery described
as an Artos Aero Dryer Stentering Range.
Upon private respondent's default,
petitioner filed a petition for extrajudicial
foreclosure of the properties mortgage to
it. However, the Deputy Sheriff assigned to
implement the foreclosure failed to gain
entry into private respondent's premises
and was not able to effect the seizure of
the aforedescribed machinery. Petitioner
thereafter filed a complaint for judicial
foreclosure with the Court of First Instance
of Rizal, Branch VI, docketed as Civil Case

No. 36040, the case before the lower court.
Acting on petitioner's application for
replevin, the lower court issued a writ of
seizure, the enforcement of which was
however subsequently restrained upon
private respondent's filing of a motion for
reconsideration. After several incidents,
the lower court finally issued on February
11, 1981, an order lifting the restraining
order for the enforcement of the writ of
seizure and an order to break open the
premises of private respondent to enforce
said writ. The lower court reaffirmed its
stand upon private respondent's filing of a
further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the
seizure order, repaired to the premises of
private respondent and removed the main
drive motor of the subject machinery.
The Court of Appeals, in certiorari and
prohibition proceedings subsequently filed
by herein private respondent, set aside the
Orders of the lower court and ordered the
return of the drive motor seized by the
sheriff pursuant to said Orders, after ruling
that the machinery in suit cannot be the
subject of replevin, much less of a chattel
mortgage, because it is a real property
pursuant to Article 415 of the new Civil
Code, the same being attached to the
ground by means of bolts and the only way
to remove it from respondent's plant would
be to drill out or destroy the concrete floor,
the reason why all that the sheriff could do
to enfore the writ was to take the main
drive motor of said machinery. The
appellate court rejected petitioner's
argument that private respondent is
estopped from claiming that the machine
is real property by constituting a chattel
mortgage thereon.
A motion for reconsideration of this
decision of the Court of Appeals having
been denied, petitioner has brought the
case to this Court for review by writ of
certiorari. It is contended by private
respondent, however, that the instant
petition was rendered moot and academic
by petitioner's act of returning the subject
7
motor drive of respondent's machinery

after the Court of Appeals' decision was
promulgated.
The contention of private respondent is
without merit. When petitioner returned
the subject motor drive, it made itself
unequivocably clear that said action was
without prejudice to a motion for
reconsideration of the Court of Appeals
decision, as shown by the receipt duly
signed by respondent's representative. 1
Considering that petitioner has reserved its
right to question the propriety of the Court
of Appeals' decision, the contention of
private respondent that this petition has
been mooted by such return may not be
sustained.
The next and the more crucial question to
be resolved in this Petition is whether the
machinery in suit is real or personal
property from the point of view of the
parties, with petitioner arguing that it is a
personality, while the respondent claiming
the contrary, and was sustained by the
appellate court, which accordingly held
that the chattel mortgage constituted
thereon is null and void, as contended by
said respondent.
A similar, if not Identical issue was raised
in Tumalad v. Vicencio, 41 SCRA 143 where
this Court, speaking through Justice J.B.L.
Reyes, ruled:
Although there is no specific
statement referring to the
subject house as personal
property, yet by ceding, selling
or transferring a property by
way of chattel mortgage
defendants-appellants could
only have meant to convey the
house as chattel, or at least,
intended to treat the same as
such, so that they should not
now be allowed to make an
inconsistent stand by claiming
otherwise. Moreover, the
subject house stood on a
rented lot to which defendantsappellants merely had a
temporary right as lessee, and
although this can not in itself

alone determine the status of
the property, it does so when
combined with other factors to
sustain the interpretation that
the parties, particularly the
mortgagors, intended to treat
the house as personality.
Finally, unlike in the Iya cases,
Lopez vs. Orosa, Jr. & Plaza
Theatre, Inc. & Leung Yee vs.
F.L. Strong Machinery &
Williamson, wherein third
persons assailed the validity of
the chattel mortgage, it is the
defendants-appellants
themselves, as debtorsmortgagors, who are attacking
the validity of the chattel
mortgage in this case. The
doctrine of estoppel therefore
applies to the herein
defendants-appellants, having
treated the subject house as
personality.
Examining the records of the instant case,
We find no logical justification to exclude
the rule out, as the appellate court did, the
present case from the application of the
abovequoted pronouncement. If a house of
strong materials, like what was involved in
the above Tumalad case, may be
considered as personal property for
purposes of executing a chattel mortgage
thereon as long as the parties to the
contract so agree and no innocent third
party will be prejudiced thereby, there is
absolutely no reason why a machinery,
which is movable in its nature and
becomes immobilized only by destination
or purpose, may not be likewise treated as
such. This is really because one who has so
agreed is estopped from denying the
existence of the chattel mortgage.
In rejecting petitioner's assertion on the
applicability of the Tumalad doctrine, the
Court of Appeals lays stress on the fact
that the house involved therein was built
on a land that did not belong to the owner
of such house. But the law makes no
distinction with respect to the ownership of
the land on which the house is built and
8
We should not lay down distinctions not

contemplated by law.
It must be pointed out that the
characterization of the subject machinery
as chattel by the private respondent is
indicative of intention and impresses upon
the property the character determined by
the parties. As stated in Standard Oil Co. of
New York v. Jaramillo, 44 Phil. 630, it is
undeniable that the parties to a contract
may by agreement treat as personal
property that which by nature would be
real property, as long as no interest of third
parties would be prejudiced thereby.
Private respondent contends that estoppel
cannot apply against it because it had
never represented nor agreed that the
machinery in suit be considered as
personal property but was merely required
and dictated on by herein petitioner to sign
a printed form of chattel mortgage which
was in a blank form at the time of signing.
This contention lacks persuasiveness. As
aptly pointed out by petitioner and not
denied by the respondent, the status of the
subject machinery as movable or
immovable was never placed in issue
before the lower court and the Court of
Appeals except in a supplemental
memorandum in support of the petition
filed in the appellate court. Moreover, even
granting that the charge is true, such fact
alone does not render a contract void ab
initio, but can only be a ground for
rendering said contract voidable, or
annullable pursuant to Article 1390 of the
new Civil Code, by a proper action in court.
There is nothing on record to show that the
mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify
the same. On the other hand, as pointed
out by petitioner and again not refuted by
respondent, the latter has indubitably
benefited from said contract. Equity
dictates that one should not benefit at the
expense of another. Private respondent
could not now therefore, be allowed to
impugn the efficacy of the chattel
mortgage after it has benefited therefrom,
From what has been said above, the error
of the appellate court in ruling that the
questioned machinery is real, not personal

property, becomes very apparent.
Moreover, the case of Machinery and
Engineering Supplies, Inc. v. CA, 96 Phil.
70, heavily relied upon by said court is not
applicable to the case at bar, the nature of
the machinery and equipment involved
therein as real properties never having
been disputed nor in issue, and they were
not the subject of a Chattel Mortgage.
Undoubtedly, the Tumalad case bears more
nearly perfect parity with the instant case
to be the more controlling jurisprudential
authority.
WHEREFORE, the questioned decision and
resolution of the Court of Appeals are
hereby reversed and set aside, and the
Orders of the lower court are hereby
reinstated, with costs against the private
respondent.
reconsideration. The decretal portion of the

CA Decision reads as follows:
WHEREFORE, premises considered, the
assailed Order dated February 18, 1998
and Resolution dated March 31, 1998 in
Civil Case No. Q-98-33500 are hereby
AFFIRMED. The writ of preliminary
injunction issued on June 15, 1998 is
hereby LIFTED.4[4]
In its February 18, 1998 Order,5[5] the
Regional Trial Court (RTC) of Quezon City
(Branch 218)6[6] issued a Writ of Seizure.7
[7] The March 18, 1998 Resolution8[8]
denied petitioners Motion for Special
Protective Order, praying that the deputy
sheriff be enjoined from seizing
immobilized or other real properties in
(petitioners) factory in Cainta, Rizal and to
return to their original place whatever
immobilized machineries or equipments he
may have removed.9[9]
The Facts
THIRD DIVISION
[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T.
GOQUIOLAY, petitioners, vs. PCI
LEASING AND FINANCE, INC.,
respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that
a real or immovable property be
considered as personal or movable, a party
is estopped from subsequently claiming
otherwise. Hence, such property is a
proper subject of a writ of replevin
obtained by the other contracting party.
The Case
The undisputed facts are summarized by

the Court of Appeals as follows:10[10]
On February 13, 1998, respondent PCI
Leasing and Finance, Inc. (PCI Leasing for
short) filed with the RTC-QC a complaint for
[a] sum of money (Annex E), with an
application for a writ of replevin docketed
as Civil Case No. Q-98-33500.
On March 6, 1998, upon an ex-parte
application of PCI Leasing, respondent
judge issued a writ of replevin (Annex B)
directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing
after 5 days and upon the payment of the
necessary expenses.
Before us is a Petition for Review on

Certiorari assailing the January 6, 1999
Decision1[1] of the Court of Appeals (CA)2
[2] in CA-GR SP No. 47332 and its February
26, 1999 Resolution3[3] denying
10

9
6
7
On March 24, 1998, in implementation of

said writ, the sheriff proceeded to
petitioners factory, seized one machinery
with [the] word that he [would] return for
the other machineries.
On March 25, 1998, petitioners filed a
motion for special protective order (Annex
C), invoking the power of the court to
control the conduct of its officers and
amend and control its processes, praying
for a directive for the sheriff to defer
enforcement of the writ of replevin.
This motion was opposed by PCI Leasing
(Annex F), on the ground that the
properties [were] still personal and
therefore still subject to seizure and a writ
of replevin.
In their Reply, petitioners asserted that the
properties sought to be seized [were]
immovable as defined in Article 415 of the
Civil Code, the parties agreement to the
contrary notwithstanding. They argued
that to give effect to the agreement would
be prejudicial to innocent third parties.
They further stated that PCI Leasing [was]
estopped from treating these machineries
as personal because the contracts in which
the alleged agreement [were] embodied
[were] totally sham and farcical.
On April 6, 1998, the sheriff again sought
to enforce the writ of seizure and take
possession of the remaining properties. He
was able to take two more, but was
prevented by the workers from taking the
rest.
in ruling upon the case below, since the

merits of the whole matter are laid down
before us via a petition whose sole purpose
is to inquire upon the existence of a grave
abuse of discretion on the part of the [RTC]
in issuing the assailed Order and
Resolution. The issues raised herein are
proper subjects of a full-blown trial,
necessitating presentation of evidence by
both parties. The contract is being
enforced by one, and [its] validity is
attacked by the other a matter x x x which
respondent court is in the best position to
determine.
Hence, this Petition.11[11]
The Issues
In their Memorandum, petitioners submit
the following issues for our consideration:
A. Whether or not the machineries
purchased and imported by SERGS became
real property by virtue of immobilization.
B. Whether or not the contract between
the parties is a loan or a lease.12[12]
In the main, the Court will resolve whether
the said machines are personal, not
immovable, property which may be a
proper subject of a writ of replevin. As a
preliminary matter, the Court will also
address briefly the procedural points raised
by respondent.
The Courts Ruling
The Petition is not meritorious.
On April 7, 1998, they went to [the CA] via

an original action for certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the
appellate court held that the subject
machines were personal property, and that
they had only been leased, not owned, by
petitioners. It also ruled that the words of
the contract are clear and leave no doubt
upon the true intention of the contracting
parties. Observing that Petitioner
Goquiolay was an experienced
businessman who was not unfamiliar with
the ways of the trade, it ruled that he
should have realized the import of the
document he signed. The CA further held:
Furthermore, to accord merit to this
petition would be to preempt the trial court
10
Preliminary Matter:Procedural Questions

Respondent contends that the Petition
failed to indicate expressly whether it was
being filed under Rule 45 or Rule 65 of the
Rules of Court. It further alleges that the
Petition erroneously impleaded Judge
Hilario Laqui as respondent.
There is no question that the present
recourse is under Rule 45. This conclusion
finds support in the very title of the
Petition, which is Petition for Review on
Certiorari.13[13]
11
12
While Judge Laqui should not have been

impleaded as a respondent,14[14]
substantial justice requires that such lapse
by itself should not warrant the dismissal
of the present Petition. In this light, the
Court deems it proper to remove, motu
proprio, the name of Judge Laqui from the
caption of the present case.
Main Issue: Nature of the Subject
Machinery
Petitioners contend that the subject
machines used in their factory were not
proper subjects of the Writ issued by the
RTC, because they were in fact real
property. Serious policy considerations,
they argue, militate against a contrary
characterization.
Rule 60 of the Rules of Court provides that
writs of replevin are issued for the recovery
of personal property only.15[15] Section 3
thereof reads:
SEC. 3. Order. -- Upon the filing of such
affidavit and approval of the bond, the
court shall issue an order and the
corresponding writ of replevin describing
the personal property alleged to be
wrongfully detained and requiring the
sheriff forthwith to take such property into
his custody.
On the other hand, Article 415 of the Civil
Code enumerates immovable or real
property as follows:
ART. 415. The following are immovable
property:
x x x....................................x x
x....................................x x x
(5) Machinery, receptacles, instruments or
implements intended by the owner of the
tenement for an industry or works which
may be carried on in a building or on a
piece of land, and which tend directly to
meet the needs of the said industry or
works;
In the present case, the machines that

were the subjects of the Writ of Seizure
were placed by petitioners in the factory
built on their own land. Indisputably, they
were essential and principal elements of
their chocolate-making industry. Hence,
although each of them was movable or
personal property on its own, all of them
have become immobilized by destination
because they are essential and principal
elements in the industry.16[16] In that
sense, petitioners are correct in arguing
that the said machines are real, not
personal, property pursuant to Article 415
(5) of the Civil Code.17[17]
Be that as it may, we disagree with the
submission of the petitioners that the said
machines are not proper subjects of the
Writ of Seizure.
The Court has held that contracting parties
may validly stipulate that a real property
be considered as personal.18[18] After
agreeing to such stipulation, they are
consequently estopped from claiming
otherwise. Under the principle of estoppel,
a party to a contract is ordinarily precluded
from denying the truth of any material fact
found therein.
Hence, in Tumalad v. Vicencio,19[19] the
Court upheld the intention of the parties to
treat a house as a personal property
because it had been made the subject of a
chattel mortgage. The Court ruled:
x x x. Although there is no specific
statement referring to the subject house as
personal property, yet by ceding, selling or
transferring a property by way of chattel
mortgage defendants-appellants could only
have meant to convey the house as
chattel, or at least, intended to treat the
same as such, so that they should not now
be allowed to make an inconsistent stand
by claiming otherwise.
Applying Tumalad, the Court in Makati
Leasing and Finance Corp. v. Wearever
Textile Mills20[20] also held that the
machinery used in a factory and essential
x x x....................................x x
x....................................x x x
16
13
17
14
18
15
19

11
to the industry, as in the present case, was

a proper subject of a writ of replevin
because it was treated as personal
property in a contract. Pertinent portions of
the Courts ruling are reproduced
hereunder:
x x x. If a house of strong materials, like
what was involved in the above Tumalad
case, may be considered as personal
property for purposes of executing a
chattel mortgage thereon as long as the
parties to the contract so agree and no
innocent third party will be prejudiced
thereby, there is absolutely no reason why
a machinery, which is movable in its nature
and becomes immobilized only by
destination or purpose, may not be
likewise treated as such. This is really
because one who has so agreed is
estopped from denying the existence of
the chattel mortgage.
In the present case, the Lease Agreement
clearly provides that the machines in
question are to be considered as personal
property. Specifically, Section 12.1 of the
Agreement reads as follows:21[21]
12.1 The PROPERTY is, and shall at all
times be and remain, personal property
notwithstanding that the PROPERTY or any
part thereof may now be, or hereafter
become, in any manner affixed or attached
to or embedded in, or permanently resting
upon, real property or any building
thereon, or attached in any manner to
what is permanent.
Clearly then, petitioners are estopped from
denying the characterization of the subject
machines as personal property. Under the
circumstances, they are proper subjects of
the Writ of Seizure.
It should be stressed, however, that our
holding -- that the machines should be
deemed personal property pursuant to the
Lease Agreement is good only insofar as
the contracting parties are concerned.22
[22] Hence, while the parties are bound by
the Agreement, third persons acting in
good faith are not affected by its
stipulation characterizing the subject
machinery as personal.23[23] In any event,

there is no showing that any specific third
party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend
that the Agreement is a loan and not a
lease.24[24] Submitting documents
supposedly showing that they own the
subject machines, petitioners also argue in
their Petition that the Agreement suffers
from intrinsic ambiguity which places in
serious doubt the intention of the parties
and the validity of the lease agreement
itself.25[25] In their Reply to respondents
Comment, they further allege that the
Agreement is invalid.26[26]
These arguments are unconvincing. The
validity and the nature of the contract are
the lis mota of the civil action pending
before the RTC. A resolution of these
questions, therefore, is effectively a
resolution of the merits of the case. Hence,
they should be threshed out in the trial, not
in the proceedings involving the issuance
of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,27[27]
the Court explained that the policy under
Rule 60 was that questions involving title
to the subject property questions which
petitioners are now raising -- should be
determined in the trial. In that case, the
Court noted that the remedy of defendants
under Rule 60 was either to post a counterbond or to question the sufficiency of the
plaintiffs bond. They were not allowed,
however, to invoke the title to the subject
property. The Court ruled:
In other words, the law does not allow the
defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery)
on ground of insufficiency of the complaint
or of the grounds relied upon therefor, as
in proceedings on preliminary attachment
or injunction, and thereby put at issue the
matter of the title or right of possession
23
24
20
25
21
26
22
27

12
over the specific chattel being replevied,

the policy apparently being that said
matter should be ventilated and
determined only at the trial on the merits.28
[28]
Besides, these questions require a
determination of facts and a presentation
of evidence, both of which have no place in
a petition for certiorari in the CA under
Rule 65 or in a petition for review in this
Court under Rule 45.29[29]
Reliance on the Lease Agreement
It should be pointed out that the Court in
this case may rely on the Lease
Agreement, for nothing on record shows
that it has been nullified or annulled. In
fact, petitioners assailed it first only in the
RTC proceedings, which had ironically been
instituted by respondent. Accordingly, it
must be presumed valid and binding as the
law between the parties.
Makati Leasing and Finance
Corporation30[30] is also instructive on this
point. In that case, the Deed of Chattel
Mortgage, which characterized the subject
machinery as personal property, was also
assailed because respondent had allegedly
been required to sign a printed form of
chattel mortgage which was in a blank
form at the time of signing. The Court
rejected the argument and relied on the
Deed, ruling as follows:
x x x. Moreover, even granting that the
charge is true, such fact alone does not
render a contract void ab initio, but can
only be a ground for rendering said
contract voidable, or annullable pursuant
to Article 1390 of the new Civil Code, by a
proper action in court. There is nothing on
record to show that the mortgage has been
annulled. Neither is it disclosed that steps
were taken to nullify the same. x x x
Alleged Injustice Committed on the Part of
Petitioners
Petitioners contend that if the Court allows
these machineries to be seized, then its
workers would be out of work and thrown
28
into the streets.31[31] They also allege that

the seizure would nullify all efforts to
rehabilitate the corporation.
Petitioners arguments do not preclude the
implementation of the Writ. As earlier
discussed, law and jurisprudence support
its propriety. Verily, the above-mentioned
consequences, if they come true, should
not be blamed on this Court, but on the
petitioners for failing to avail themselves of
the remedy under Section 5 of Rule 60,
which allows the filing of a counter-bond.
The provision states:
SEC. 5. Return of property. -- If the adverse
party objects to the sufficiency of the
applicants bond, or of the surety or
sureties thereon, he cannot immediately
require the return of the property, but if he
does not so object, he may, at any time
before the delivery of the property to the
applicant, require the return thereof, by
filing with the court where the action is
pending a bond executed to the applicant,
in double the value of the property as
stated in the applicants affidavit for the
delivery thereof to the applicant, if such
delivery be adjudged, and for the payment
of such sum to him as may be recovered
against the adverse party, and by serving
a copy bond on the applicant.
WHEREFORE, the Petition is DENIED and
the assailed Decision of the Court of
Appeals AFFIRMED. Costs against
petitioners.
SO ORDERED.
G.R. No. L-19650
29, 1966
CALTEX (PHILIPPINES), INC., petitionerappellee,

vs.
ENRICO PALOMAR, in his capacity as
THE POSTMASTER GENERAL,
respondent-appellant.
Office of the Solicitor General for
respondent and appellant.
Ross, Selph and Carrascoso for petitioner
and appellee.
29
30
13
September
31
CASTRO, J.:
In the year 1960 the Caltex (Philippines)
Inc. (hereinafter referred to as Caltex)
conceived and laid the groundwork for a
promotional scheme calculated to drum up
patronage for its oil products.
Denominated "Caltex Hooded Pump
Contest", it calls for participants therein to
estimate the actual number of liters a
hooded gas pump at each Caltex station
will dispense during a specified period.
Employees of the Caltex (Philippines) Inc.,
its dealers and its advertising agency, and
their immediate families excepted,
participation is to be open indiscriminately
to all "motor vehicle owners and/or
licensed drivers". For the privilege to
participate, no fee or consideration is
required to be paid, no purchase of Caltex
products required to be made. Entry forms
are to be made available upon request at
each Caltex station where a sealed can will
be provided for the deposit of
accomplished entry stubs.
A three-staged winner selection system is
envisioned. At the station level, called
"Dealer Contest", the contestant whose
estimate is closest to the actual number of
liters dispensed by the hooded pump
thereat is to be awarded the first prize; the
next closest, the second; and the next, the
third. Prizes at this level consist of a 3burner kerosene stove for first; a thermos
bottle and a Ray-O-Vac hunter lantern for
second; and an Everready Magnet-lite
flashlight with batteries and a screwdriver
set for third. The first-prize winner in each
station will then be qualified to join in the
"Regional Contest" in seven different
regions. The winning stubs of the qualified
contestants in each region will be
deposited in a sealed can from which the
first-prize, second-prize and third-prize
winners of that region will be drawn. The
regional first-prize winners will be entitled
to make a three-day all-expenses-paid
round trip to Manila, accompanied by their
respective Caltex dealers, in order to take
part in the "National Contest". The regional
second-prize and third-prize winners will
receive cash prizes of P500 and P300,
respectively. At the national level, the
14
stubs of the seven regional first-prize

winners will be placed inside a sealed can
from which the drawing for the final firstprize, second-prize and third-prize winners
will be made. Cash prizes in store for
winners at this final stage are: P3,000 for
first; P2,000 for second; Pl,500 for third;
and P650 as consolation prize for each of
the remaining four participants.
Foreseeing the extensive use of the mails
not only as amongst the media for
publicizing the contest but also for the
transmission of communications relative
thereto, representations were made by
Caltex with the postal authorities for the
contest to be cleared in advance for
mailing, having in view sections 1954(a),
1982 and 1983 of the Revised
Administrative Code, the pertinent
provisions of which read as follows:
SECTION 1954. Absolutely nonmailable matter. No matter
belonging to any of the following
classes, whether sealed as first-class
matter or not, shall be imported into
the Philippines through the mails, or
to be deposited in or carried by the
mails of the Philippines, or be
delivered to its addressee by any
officer or employee of the Bureau of
Posts:
Written or printed matter in any form
advertising, describing, or in any
manner pertaining to, or conveying
or purporting to convey any
information concerning any lottery,
gift enterprise, or similar scheme
depending in whole or in part upon
lot or chance, or any scheme, device,
or enterprise for obtaining any
money or property of any kind by
means of false or fraudulent
pretenses, representations, or
promises.
"SECTION 1982. Fraud orders.Upon
satisfactory evidence that any
person or company is engaged in
conducting any lottery, gift
enterprise, or scheme for the
distribution of money, or of any real
or personal property by lot, chance,

or drawing of any kind, or that any
person or company is conducting any
scheme, device, or enterprise for
obtaining money or property of any
kind through the mails by means of
false or fraudulent pretenses,
representations, or promises, the
Director of Posts may instruct any
postmaster or other officer or
employee of the Bureau to return to
the person, depositing the same in
the mails, with the word "fraudulent"
plainly written or stamped upon the
outside cover thereof, any mail
matter of whatever class mailed by
or addressed to such person or
company or the representative or
agent of such person or company.
SECTION 1983. Deprivation of use of
money order system and telegraphic
transfer service.The Director of
Posts may, upon evidence
satisfactory to him that any person
or company is engaged in conducting
any lottery, gift enterprise or scheme
for the distribution of money, or of
any real or personal property by lot,
chance, or drawing of any kind, or
that any person or company is
conducting any scheme, device, or
enterprise for obtaining money or
property of any kind through the
mails by means of false or fraudulent
pretenses, representations, or
promise, forbid the issue or payment
by any postmaster of any postal
money order or telegraphic transfer
to said person or company or to the
agent of any such person or
company, whether such agent is
acting as an individual or as a firm,
bank, corporation, or association of
any kind, and may provide by
regulation for the return to the
remitters of the sums named in
money orders or telegraphic
transfers drawn in favor of such
person or company or its agent.
The overtures were later formalized in a
letter to the Postmaster General, dated
October 31, 1960, in which the Caltex, thru
15
counsel, enclosed a copy of the contest

rules and endeavored to justify its position
that the contest does not violate the antilottery provisions of the Postal Law.
Unimpressed, the then Acting Postmaster
General opined that the scheme falls
within the purview of the provisions
aforesaid and declined to grant the
requested clearance. In its counsel's letter
of December 7, 1960, Caltex sought a
reconsideration of the foregoing stand,
stressing that there being involved no
consideration in the part of any contestant,
the contest was not, under controlling
authorities, condemnable as a lottery.
Relying, however, on an opinion rendered
by the Secretary of Justice on an unrelated
case seven years before (Opinion 217,
Series of 1953), the Postmaster General
maintained his view that the contest
involves consideration, or that, if it does
not, it is nevertheless a "gift enterprise"
which is equally banned by the Postal Law,
and in his letter of December 10, 1960 not
only denied the use of the mails for
purposes of the proposed contest but as
well threatened that if the contest was
conducted, "a fraud order will have to be
issued against it (Caltex) and all its
representatives".
Caltex thereupon invoked judicial
intervention by filing the present petition
for declaratory relief against Postmaster
General Enrico Palomar, praying "that
judgment be rendered declaring its 'Caltex
Hooded Pump Contest' not to be violative
of the Postal Law, and ordering respondent
to allow petitioner the use of the mails to
bring the contest to the attention of the
public". After issues were joined and upon
the respective memoranda of the parties,
the trial court rendered judgment as
follows:
In view of the foregoing
considerations, the Court holds that
the proposed 'Caltex Hooded Pump
Contest' announced to be conducted
by the petitioner under the rules
marked as Annex B of the petitioner
does not violate the Postal Law and
the respondent has no right to bar
the public distribution of said rules

by the mails.
The respondent appealed.
The parties are now before us, arrayed
against each other upon two basic issues:
first, whether the petition states a
sufficient cause of action for declaratory
relief; and second, whether the proposed
"Caltex Hooded Pump Contest" violates the
Postal Law. We shall take these up in
seriatim.
1. By express mandate of section 1 of Rule
66 of the old Rules of Court, which was the
applicable legal basis for the remedy at the
time it was invoked, declaratory relief is
available to any person "whose rights are
affected by a statute . . . to determine any
question of construction or validity arising
under the . . . statute and for a declaration
of his rights thereunder" (now section 1,
Rule 64, Revised Rules of Court). In
amplification, this Court, conformably to
established jurisprudence on the matter,
laid down certain conditions sine qua non
therefor, to wit: (1) there must be a
justiciable controversy; (2) the controversy
must be between persons whose interests
are adverse; (3) the party seeking
declaratory relief must have a legal
interest in the controversy; and (4) the
issue involved must be ripe for judicial
determination (Tolentino vs. The Board of
Accountancy, et al., G.R. No. L-3062,
September 28, 1951; Delumen, et al. vs.
Republic of the Philippines, 50 O.G., No. 2,
pp. 576, 578-579; Edades vs. Edades, et
al., G.R. No. L-8964, July 31, 1956). The
gravamen of the appellant's stand being
that the petition herein states no sufficient
cause of action for declaratory relief, our
duty is to assay the factual bases thereof
upon the foregoing crucible.
As we look in retrospect at the incidents
that generated the present controversy, a
number of significant points stand out in
bold relief. The appellee (Caltex), as a
business enterprise of some consequence,
concededly has the unquestioned right to
exploit every legitimate means, and to
avail of all appropriate media to advertise
16
and stimulate increased patronage for its

products. In contrast, the appellant, as the
authority charged with the enforcement of
the Postal Law, admittedly has the power
and the duty to suppress transgressions
thereof particularly thru the issuance of
fraud orders, under Sections 1982 and
1983 of the Revised Administrative Code,
against legally non-mailable schemes.
Obviously pursuing its right aforesaid, the
appellee laid out plans for the sales
promotion scheme hereinbefore detailed.
To forestall possible difficulties in the
dissemination of information thereon thru
the mails, amongst other media, it was
found expedient to request the appellant
for an advance clearance therefor.
However, likewise by virtue of his
jurisdiction in the premises and construing
the pertinent provisions of the Postal Law,
the appellant saw a violation thereof in the
proposed scheme and accordingly declined
the request. A point of difference as to the
correct construction to be given to the
applicable statute was thus reached.
Communications in which the parties
expounded on their respective theories
were exchanged. The confidence with
which the appellee insisted upon its
position was matched only by the
obstinacy with which the appellant stood
his ground. And this impasse was climaxed
by the appellant's open warning to the
appellee that if the proposed contest was
"conducted, a fraud order will have to be
issued against it and all its
representatives."
Against this backdrop, the stage was
indeed set for the remedy prayed for. The
appellee's insistent assertion of its claim to
the use of the mails for its proposed
contest, and the challenge thereto and
consequent denial by the appellant of the
privilege demanded, undoubtedly spawned
a live controversy. The justiciability of the
dispute cannot be gainsaid. There is an
active antagonistic assertion of a legal
right on one side and a denial thereof on
the other, concerning a real not a mere
theoretical question or issue. The
contenders are as real as their interests
are substantial. To the appellee, the
uncertainty occasioned by the divergence
of views on the issue of construction

hampers or disturbs its freedom to
enhance its business. To the appellant, the
suppression of the appellee's proposed
contest believed to transgress a law he has
sworn to uphold and enforce is an
unavoidable duty. With the appellee's bent
to hold the contest and the appellant's
threat to issue a fraud order therefor if
carried out, the contenders are confronted
by the ominous shadow of an imminent
and inevitable litigation unless their
differences are settled and stabilized by a
tranquilizing declaration (Pablo y Sen, et al.
vs. Republic of the Philippines, G.R. No. L6868, April 30, 1955). And, contrary to the
insinuation of the appellant, the time is
long past when it can rightly be said that
merely the appellee's "desires are
thwarted by its own doubts, or by the fears
of others" which admittedly does not
confer a cause of action. Doubt, if any
there was, has ripened into a justiciable
controversy when, as in the case at bar, it
was translated into a positive claim of right
which is actually contested (III Moran,
Comments on the Rules of Court, 1963 ed.,
pp. 132-133, citing: Woodward vs. Fox
West Coast Theaters, 36 Ariz., 251, 284
Pac. 350).
We cannot hospitably entertain the
appellant's pretense that there is here no
question of construction because the said
appellant "simply applied the clear
provisions of the law to a given set of facts
as embodied in the rules of the contest",
hence, there is no room for declaratory
relief. The infirmity of this pose lies in the
fact that it proceeds from the assumption
that, if the circumstances here presented,
the construction of the legal provisions can
be divorced from the matter of their
application to the appellee's contest. This
is not feasible. Construction, verily, is the
art or process of discovering and
expounding the meaning and intention of
the authors of the law with respect to its
application to a given case, where that
intention is rendered doubtful, amongst
others, by reason of the fact that the given
case is not explicitly provided for in the
law (Black, Interpretation of Laws, p. 1).
This is precisely the case here. Whether or
17
not the scheme proposed by the appellee

is within the coverage of the prohibitive
provisions of the Postal Law inescapably
requires an inquiry into the intended
meaning of the words used therein. To our
mind, this is as much a question of
construction or interpretation as any other.
Nor is it accurate to say, as the appellant
intimates, that a pronouncement on the
matter at hand can amount to nothing
more than an advisory opinion the handing
down of which is anathema to a
declaratory relief action. Of course, no
breach of the Postal Law has as yet been
committed. Yet, the disagreement over the
construction thereof is no longer nebulous
or contingent. It has taken a fixed and final
shape, presenting clearly defined legal
issues susceptible of immediate resolution.
With the battle lines drawn, in a manner of
speaking, the propriety nay, the
necessity of setting the dispute at rest
before it accumulates the asperity
distemper, animosity, passion and violence
of a full-blown battle which looms ahead
(III Moran, Comments on the Rules of
Court, 1963 ed., p. 132 and cases cited),
cannot but be conceded. Paraphrasing the
language in Zeitlin vs. Arnebergh 59 Cal.,
2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152,
cited in 22 Am. Jur., 2d., p. 869, to deny
declaratory relief to the appellee in the
situation into which it has been cast, would
be to force it to choose between
undesirable alternatives. If it cannot obtain
a final and definitive pronouncement as to
whether the anti-lottery provisions of the
Postal Law apply to its proposed contest, it
would be faced with these choices: If it
launches the contest and uses the mails
for purposes thereof, it not only incurs the
risk, but is also actually threatened with
the certain imposition, of a fraud order
with its concomitant stigma which may
attach even if the appellee will eventually
be vindicated; if it abandons the contest, it
becomes a self-appointed censor, or
permits the appellant to put into effect a
virtual fiat of previous censorship which is
constitutionally unwarranted. As we weigh
these considerations in one equation and
in the spirit of liberality with which the
Rules of Court are to be interpreted in
order to promote their object (section 1,

Rule 1, Revised Rules of Court) which, in
the instant case, is to settle, and afford
relief from uncertainty and insecurity with
respect to, rights and duties under a law
we can see in the present case any
imposition upon our jurisdiction or any
futility or prematurity in our intervention.
The appellant, we apprehend, underrates
the force and binding effect of the ruling
we hand down in this case if he believes
that it will not have the final and pacifying
function that a declaratory judgment is
calculated to subserve. At the very least,
the appellant will be bound. But more than
this, he obviously overlooks that in this
jurisdiction, "Judicial decisions applying or
interpreting the law shall form a part of the
legal system" (Article 8, Civil Code of the
Philippines). In effect, judicial decisions
assume the same authority as the statute
itself and, until authoritatively abandoned,
necessarily become, to the extent that
they are applicable, the criteria which must
control the actuations not only of those
called upon to abide thereby but also of
those in duty bound to enforce obedience
thereto. Accordingly, we entertain no
misgivings that our resolution of this case
will terminate the controversy at hand.
It is not amiss to point out at this juncture
that the conclusion we have herein just
reached is not without precedent. In
Liberty Calendar Co. vs. Cohen, 19 N.J.,
399, 117 A. 2d., 487, where a corporation
engaged in promotional advertising was
advised by the county prosecutor that its
proposed sales promotion plan had the
characteristics of a lottery, and that if such
sales promotion were conducted, the
corporation would be subject to criminal
prosecution, it was held that the
corporation was entitled to maintain a
declaratory relief action against the county
prosecutor to determine the legality of its
sales promotion plan. In pari materia, see
also: Bunis vs. Conway, 17 App. Div. 2d.,
207, 234 N.Y.S. 2d., 435; Zeitlin vs.
Arnebergh, supra; Thrillo, Inc. vs. Scott, 15
N.J. Super. 124, 82 A. 2d., 903.

18
In fine, we hold that the appellee has made

out a case for declaratory relief.
2. The Postal Law, chapter 52 of the
Revised Administrative Code, using almost
identical terminology in sections 1954(a),
1982 and 1983 thereof, supra, condemns
as absolutely non-mailable, and empowers
the Postmaster General to issue fraud
orders against, or otherwise deny the use
of the facilities of the postal service to, any
information concerning "any lottery, gift
enterprise, or scheme for the distribution
of money, or of any real or personal
property by lot, chance, or drawing of any
kind". Upon these words hinges the
resolution of the second issue posed in this
appeal.
Happily, this is not an altogether untrodden
judicial path. As early as in 1922, in "El
Debate", Inc. vs. Topacio, 44 Phil., 278,
283-284, which significantly dwelt on the
power of the postal authorities under the
abovementioned provisions of the Postal
Law, this Court declared that
While countless definitions of lottery
have been attempted, the
authoritative one for this jurisdiction
is that of the United States Supreme
Court, in analogous cases having to
do with the power of the United
States Postmaster General, viz.: The
term "lottery" extends to all schemes
for the distribution of prizes by
chance, such as policy playing, gift
exhibitions, prize concerts, raffles at
fairs, etc., and various forms of
gambling. The three essential
elements of a lottery are: First,
consideration; second, prize; and
third, chance. (Horner vs. States
[1892], 147 U.S. 449; Public Clearing
House vs. Coyne [1903], 194 U.S.,
497; U.S. vs. Filart and Singson
[1915], 30 Phil., 80; U.S. vs. Olsen
and Marker [1917], 36 Phil., 395; U.S.
vs. Baguio [1919], 39 Phil., 962;
Valhalla Hotel Construction Company
vs. Carmona, p. 233, ante.)
Unanimity there is in all quarters, and we
agree, that the elements of prize and
chance are too obvious in the disputed

scheme to be the subject of contention.
Consequently as the appellant himself
concedes, the field of inquiry is narrowed
down to the existence of the element of
consideration therein. Respecting this
matter, our task is considerably lightened
inasmuch as in the same case just cited,
this Court has laid down a definitive yardstick in the following terms
In respect to the last element of
consideration, the law does not
condemn the gratuitous distribution
of property by chance, if no
consideration is derived directly or
indirectly from the party receiving
the chance, but does condemn as
criminal schemes in which a valuable
consideration of some kind is paid
directly or indirectly for the chance
to draw a prize.
Reverting to the rules of the proposed
contest, we are struck by the clarity of the
language in which the invitation to
participate therein is couched. Thus
No puzzles, no rhymes? You don't
need wrappers, labels or boxtops?
You don't have to buy anything?
Simply estimate the actual number
of liter the Caltex gas pump with the
hood at your favorite Caltex dealer
will dispense from to , and win
valuable prizes . . . ." .
Nowhere in the said rules is any
requirement that any fee be paid, any
merchandise be bought, any service be
rendered, or any value whatsoever be
given for the privilege to participate. A
prospective contestant has but to go to a
Caltex station, request for the entry form
which is available on demand, and
accomplish and submit the same for the
drawing of the winner. Viewed from all
angles or turned inside out, the contest
fails to exhibit any discernible
consideration which would brand it as a
lottery. Indeed, even as we head the stern
injunction, "look beyond the fair exterior,
to the substance, in order to unmask the
real element and pernicious tendencies
19
which the law is seeking to prevent" ("El

Debate", Inc. vs. Topacio, supra, p. 291),
we find none. In our appraisal, the scheme
does not only appear to be, but actually is,
a gratuitous distribution of property by
chance.
There is no point to the appellant's
insistence that non-Caltex customers who
may buy Caltex products simply to win a
prize would actually be indirectly paying a
consideration for the privilege to join the
contest. Perhaps this would be tenable if
the purchase of any Caltex product or the
use of any Caltex service were a prerequisite to participation. But it is not. A
contestant, it hardly needs reiterating,
does not have to buy anything or to give
anything of value.1awphl.nt
Off-tangent, too, is the suggestion that the
scheme, being admittedly for sales
promotion, would naturally benefit the
sponsor in the way of increased patronage
by those who will be encouraged to prefer
Caltex products "if only to get the chance
to draw a prize by securing entry blanks".
The required element of consideration does
not consist of the benefit derived by the
proponent of the contest. The true test, as
laid down in People vs. Cardas, 28 P. 2d.,
99, 137 Cal. App. (Supp.) 788, is whether
the participant pays a valuable
consideration for the chance, and not
whether those conducting the enterprise
receive something of value in return for the
distribution of the prize. Perspective
properly oriented, the standpoint of the
contestant is all that matters, not that of
the sponsor. The following, culled from
Corpus Juris Secundum, should set the
matter at rest:
The fact that the holder of the
drawing expects thereby to receive,
or in fact does receive, some benefit
in the way of patronage or otherwise,
as a result of the drawing; does not
supply the element of consideration.
Griffith Amusement Co. vs. Morgan,
Tex. Civ. App., 98 S.W., 2d., 844" (54
C.J.S., p. 849).
Thus enlightened, we join the trial court in

declaring that the "Caltex Hooded Pump
Contest" proposed by the appellee is not a
lottery that may be administratively and
adversely dealt with under the Postal Law.
But it may be asked: Is it not at least a "gift
enterprise, or scheme for the distribution
of money, or of any real or personal
property by lot, chance, or drawing of any
kind", which is equally prescribed?
Incidentally, while the appellant's brief
appears to have concentrated on the issue
of consideration, this aspect of the case
cannot be avoided if the remedy here
invoked is to achieve its tranquilizing effect
as an instrument of both curative and
preventive justice. Recalling that the
appellant's action was predicated, amongst
other bases, upon Opinion 217, Series
1953, of the Secretary of Justice, which
opined in effect that a scheme, though not
a lottery for want of consideration, may
nevertheless be a gift enterprise in which
that element is not essential, the
determination of whether or not the
proposed contest wanting in
consideration as we have found it to be
is a prohibited gift enterprise, cannot be
passed over sub silencio.
While an all-embracing concept of the term
"gift enterprise" is yet to be spelled out in
explicit words, there appears to be a
consensus among lexicographers and
standard authorities that the term is
commonly applied to a sporting artifice of
under which goods are sold for their
market value but by way of inducement
each purchaser is given a chance to win a
prize (54 C.J.S., 850; 34 Am. Jur., 654;
Black, Law Dictionary, 4th ed., p. 817;
Ballantine, Law Dictionary with
Pronunciations, 2nd ed., p. 55; Retail
Section of Chamber of Commerce of
Plattsmouth vs. Kieck, 257 N.W., 493, 128
Neb. 13; Barker vs. State, 193 S.E., 605, 56
Ga. App., 705; Bell vs. State, 37 Tenn. 507,
509, 5 Sneed, 507, 509). As thus
conceived, the term clearly cannot
embrace the scheme at bar. As already
noted, there is no sale of anything to which
the chance offered is attached as an
inducement to the purchaser. The contest
20
is open to all qualified contestants

irrespective of whether or not they buy the
appellee's products.
Going a step farther, however, and
assuming that the appellee's contest can
be encompassed within the broadest
sweep that the term "gift enterprise" is
capable of being extended, we think that
the appellant's pose will gain no added
comfort. As stated in the opinion relied
upon, rulings there are indeed holding that
a gift enterprise involving an award by
chance, even in default of the element of
consideration necessary to constitute a
lottery, is prohibited (E.g.: Crimes vs.
States, 235 Ala 192, 178 So. 73; Russell vs.
Equitable Loan & Sec. Co., 129 Ga. 154, 58
S.E., 88; State ex rel. Stafford vs. Fox-Great
Falls Theater Corporation, 132 P. 2d., 689,
694, 698, 114 Mont. 52). But this is only
one side of the coin. Equally impressive
authorities declare that, like a lottery, a gift
enterprise comes within the prohibitive
statutes only if it exhibits the tripartite
elements of prize, chance and
consideration (E.g.: Bills vs. People, 157 P.
2d., 139, 142, 113 Colo., 326; D'Orio vs.
Jacobs, 275 P. 563, 565, 151 Wash., 297;
People vs. Psallis, 12 N.Y.S., 2d., 796; City
and County of Denver vs. Frueauff, 88 P.,
389, 394, 39 Colo., 20, 7 L.R.A., N.S., 1131,
12 Ann. Cas., 521; 54 C.J.S., 851, citing:
Barker vs. State, 193 S.E., 605, 607, 56 Ga.
App., 705; 18 Words and Phrases, perm.
ed., pp. 590-594). The apparent conflict of
opinions is explained by the fact that the
specific statutory provisions relied upon
are not identical. In some cases, as pointed
out in 54 C.J.S., 851, the terms "lottery"
and "gift enterprise" are used
interchangeably (Bills vs. People, supra); in
others, the necessity for the element of
consideration or chance has been
specifically eliminated by statute. (54
C.J.S., 351-352, citing Barker vs. State,
supra; State ex rel. Stafford vs. Fox-Great
Falls Theater Corporation, supra). The
lesson that we derive from this state of the
pertinent jurisprudence is, therefore, that
every case must be resolved upon the
particular phraseology of the applicable
statutory provision.
Taking this cue, we note that in the Postal

Law, the term in question is used in
association with the word "lottery". With
the meaning of lottery settled, and
consonant to the well-known principle of
legal hermeneutics noscitur a sociis
which Opinion 217 aforesaid also relied
upon although only insofar as the element
of chance is concerned it is only logical
that the term under a construction should
be accorded no other meaning than that
which is consistent with the nature of the
word associated therewith. Hence, if lottery
is prohibited only if it involves a
consideration, so also must the term "gift
enterprise" be so construed. Significantly,
there is not in the law the slightest
indicium of any intent to eliminate that
element of consideration from the "gift
enterprise" therein included.
This conclusion firms up in the light of the
mischief sought to be remedied by the law,
resort to the determination thereof being
an accepted extrinsic aid in statutory
construction. Mail fraud orders, it is
axiomatic, are designed to prevent the use
of the mails as a medium for disseminating
printed matters which on grounds of public
policy are declared non-mailable. As
applied to lotteries, gift enterprises and
similar schemes, justification lies in the
recognized necessity to suppress their
tendency to inflame the gambling spirit
and to corrupt public morals (Com. vs.
Lund, 15 A. 2d., 839, 143 Pa. Super. 208).
Since in gambling it is inherent that
something of value be hazarded for a
chance to gain a larger amount, it follows
ineluctably that where no consideration is
paid by the contestant to participate, the
reason behind the law can hardly be said
to obtain. If, as it has been held
Gratuitous distribution of property by
lot or chance does not constitute
"lottery", if it is not resorted to as a
device to evade the law and no
consideration is derived, directly or
indirectly, from the party receiving
the chance, gambling spirit not being
cultivated or stimulated thereby. City
of Roswell vs. Jones, 67 P. 2d., 286,
41 N.M., 258." (25 Words and
21
Phrases, perm. ed., p. 695, emphasis

supplied).
we find no obstacle in saying the same
respecting a gift enterprise. In the end, we
are persuaded to hold that, under the
prohibitive provisions of the Postal Law
which we have heretofore examined, gift
enterprises and similar schemes therein
contemplated are condemnable only if, like
lotteries, they involve the element of
consideration. Finding none in the contest
here in question, we rule that the appellee
may not be denied the use of the mails for
purposes thereof.
Recapitulating, we hold that the petition
herein states a sufficient cause of action
for declaratory relief, and that the "Caltex
Hooded Pump Contest" as described in the
rules submitted by the appellee does not
transgress the provisions of the Postal Law.
ACCORDINGLY, the judgment appealed
from is affirmed. No costs.
G.R. No. 168557
2007
February 16,
FELS ENERGY, INC., Petitioner,

vs.
THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS, Respondents.
x----------------------------------------------------x
G.R. No. 170628
2007
February 16,
NATIONAL POWER CORPORATION,

Petitioner,
vs.
LOCAL BOARD OF ASSESSMENT
APPEALS OF BATANGAS, LAURO C.
ANDAYA, in his capacity as the
Assessor of the Province of Batangas,
and the PROVINCE OF BATANGAS
represented by its Provincial
Assessor, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases

docketed as G.R. No. 168557 and G.R. No.
170628, which were filed by petitioners
FELS Energy, Inc. (FELS) and National
Power Corporation (NPC), respectively. The
first is a petition for review on certiorari
assailing the August 25, 2004 Decision1 of
the Court of Appeals (CA) in CA-G.R. SP No.
67490 and its Resolution2 dated June 20,
2005; the second, also a petition for review
on certiorari, challenges the February 9,
2005 Decision3 and November 23, 2005
Resolution4 of the CA in CA-G.R. SP No.
67491. Both petitions were dismissed on
the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a
lease contract with Polar Energy, Inc. over
3x30 MW diesel engine power barges
moored at Balayan Bay in Calaca,
Batangas. The contract, denominated as
an Energy Conversion Agreement5
(Agreement), was for a period of five years.
Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be
responsible for the payment of (a) all
taxes, import duties, fees, charges and
other levies imposed by the National
Government of the Republic of the
Philippines or any agency or
instrumentality thereof to which POLAR
may be or become subject to or in relation
to the performance of their obligations
under this agreement (other than (i) taxes
imposed or calculated on the basis of the
net income of POLAR and Personal Income
Taxes of its employees and (ii) construction
permit fees, environmental permit fees and
other similar fees and charges) and (b) all
real estate taxes and assessments, rates
and other charges in respect of the Power
Barges.6
Subsequently, Polar Energy, Inc. assigned
its rights under the Agreement to FELS.
The NPC initially opposed the assignment
of rights, citing paragraph 17.2 of Article
17 of the Agreement.
On August 7, 1995, FELS received an
assessment of real property taxes on the
22
power barges from Provincial Assessor

Lauro C. Andaya of Batangas City. The
assessed tax, which likewise covered those
due for 1994, amounted to P56,184,088.40
per annum. FELS referred the matter to
NPC, reminding it of its obligation under
the Agreement to pay all real estate taxes.
It then gave NPC the full power and
authority to represent it in any conference
regarding the real property assessment of
the Provincial Assessor.
In a letter7 dated September 7, 1995, NPC
sought reconsideration of the Provincial
Assessors decision to assess real property
taxes on the power barges. However, the
motion was denied on September 22,
1995, and the Provincial Assessor advised
NPC to pay the assessment.8 This
prompted NPC to file a petition with the
Local Board of Assessment Appeals (LBAA)
for the setting aside of the assessment and
the declaration of the barges as nontaxable items; it also prayed that should
LBAA find the barges to be taxable, the
Provincial Assessor be directed to make the
necessary corrections.9
In its Answer to the petition, the Provincial
Assessor averred that the barges were real
property for purposes of taxation under
Section 199(c) of Republic Act (R.A.) No.
7160.
Before the case was decided by the LBAA,
NPC filed a Manifestation, informing the
LBAA that the Department of Finance
(DOF) had rendered an opinion10 dated May
20, 1996, where it is clearly stated that
power barges are not real property subject
to real property assessment.
On August 26, 1996, the LBAA rendered a
Resolution11 denying the petition. The fallo
reads:
WHEREFORE, the Petition is DENIED. FELS
is hereby ordered to pay the real estate tax
in the amount of P56,184,088.40, for the
year 1994.
SO ORDERED.12
The LBAA ruled that the power plant

facilities, while they may be classified as
movable or personal property, are
nevertheless considered real property for
taxation purposes because they are
installed at a specific location with a
character of permanency. The LBAA also
pointed out that the owner of the barges
FELS, a private corporationis the one
being taxed, not NPC. A mere agreement
making NPC responsible for the payment of
all real estate taxes and assessments will
not justify the exemption of FELS; such a
privilege can only be granted to NPC and
cannot be extended to FELS. Finally, the
LBAA also ruled that the petition was filed
out of time.
Aggrieved, FELS appealed the LBAAs
ruling to the Central Board of Assessment
Appeals (CBAA).
On August 28, 1996, the Provincial
Treasurer of Batangas City issued a Notice
of Levy and Warrant by Distraint13 over the
power barges, seeking to collect real
property taxes amounting to
P232,602,125.91 as of July 31, 1996. The
notice and warrant was officially served to
FELS on November 8, 1996. It then filed a
Motion to Lift Levy dated November 14,
1996, praying that the Provincial Assessor
be further restrained by the CBAA from
enforcing the disputed assessment during
the pendency of the appeal.
On November 15, 1996, the CBAA issued
an Order14 lifting the levy and distraint on
the properties of FELS in order not to
preempt and render ineffectual, nugatory
and illusory any resolution or judgment
which the Board would issue.
Meantime, the NPC filed a Motion for
Intervention15 dated August 7, 1998 in the
proceedings before the CBAA. This was
approved by the CBAA in an Order16 dated
September 22, 1998.
During the pendency of the case, both
FELS and NPC filed several motions to
admit bond to guarantee the payment of
real property taxes assessed by the
Provincial Assessor (in the event that the
23
judgment be unfavorable to them). The

bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a
Decision17 finding the power barges
exempt from real property tax. The
dispositive portion reads:
WHEREFORE, the Resolution of the Local
Board of Assessment Appeals of the
Province of Batangas is hereby reversed.
Respondent-appellee Provincial Assessor of
the Province of Batangas is hereby ordered
to drop subject property under ARP/Tax
Declaration No. 018-00958 from the List of
Taxable Properties in the Assessment Roll.
The Provincial Treasurer of Batangas is
hereby directed to act accordingly.
SO ORDERED.18
Ruling in favor of FELS and NPC, the CBAA
reasoned that the power barges belong to
NPC; since they are actually, directly and
exclusively used by it, the power barges
are covered by the exemptions under
Section 234(c) of R.A. No. 7160.19 As to the
other jurisdictional issue, the CBAA ruled
that prescription did not preclude the NPC
from pursuing its claim for tax exemption
in accordance with Section 206 of R.A. No.
7160. The Provincial Assessor filed a
motion for reconsideration, which was
opposed by FELS and NPC.
In a complete volte face, the CBAA issued
a Resolution20 on July 31, 2001 reversing its
earlier decision. The fallo of the resolution
reads:
WHEREFORE, premises considered, it is the
resolution of this Board that:
(a) The decision of the Board dated 6
April 2000 is hereby reversed.
(b) The petition of FELS, as well as
the intervention of NPC, is dismissed.
(c) The resolution of the Local Board
of Assessment Appeals of Batangas
is hereby affirmed,
(d) The real property tax assessment

on FELS by the Provincial Assessor of
Batangas is likewise hereby affirmed.
SO ORDERED.21
FELS and NPC filed separate motions for
reconsideration, which were timely
opposed by the Provincial Assessor. The
CBAA denied the said motions in a
Resolution22 dated October 19, 2001.
Dissatisfied, FELS filed a petition for review
before the CA docketed as CA-G.R. SP No.
67490. Meanwhile, NPC filed a separate
petition, docketed as CA-G.R. SP No.
67491.
On January 17, 2002, NPC filed a
Manifestation/Motion for Consolidation in
CA-G.R. SP No. 67490 praying for the
consolidation of its petition with CA-G.R. SP
No. 67491. In a Resolution23 dated February
12, 2002, the appellate court directed NPC
to re-file its motion for consolidation with
CA-G.R. SP No. 67491, since it is the
ponente of the latter petition who should
resolve the request for reconsideration.
NPC failed to comply with the aforesaid
resolution. On August 25, 2004, the Twelfth
Division of the appellate court rendered
judgment in CA-G.R. SP No. 67490 denying
the petition on the ground of prescription.
The decretal portion of the decision reads:
2004, for NPCs failure to sufficiently show

that the CA committed any reversible error
in the challenged decision. NPC filed a
motion for reconsideration, which the Court
denied with finality in a Resolution26 dated
January 19, 2005.
Meantime, the appellate court dismissed
the petition in CA-G.R. SP No. 67491. It
held that the right to question the
assessment of the Provincial Assessor had
already prescribed upon the failure of FELS
to appeal the disputed assessment to the
LBAA within the period prescribed by law.
Since FELS had lost the right to question
the assessment, the right of the Provincial
Government to collect the tax was already
absolute.
NPC filed a motion for reconsideration
dated March 8, 2005, seeking
reconsideration of the February 5, 2005
ruling of the CA in CA-G.R. SP No. 67491.
The motion was denied in a Resolution27
dated November 23, 2005.
The motion for reconsideration filed by
FELS in CA-G.R. SP No. 67490 had been
earlier denied for lack of merit in a
Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition
docketed as G.R. No. 168557 before this
Court, raising the following issues:
A.
WHEREFORE, the petition for review is

DENIED for lack of merit and the assailed
Resolutions dated July 31, 2001 and
October 19, 2001 of the Central Board of
Assessment Appeals are AFFIRMED.
Whether power barges, which are floating

and movable, are personal properties and
therefore, not subject to real property tax.
B.
SO ORDERED.
24
On September 20, 2004, FELS timely filed

a motion for reconsideration seeking the
reversal of the appellate courts decision in
CA-G.R. SP No. 67490.
Assuming that the subject power barges

are real properties, whether they are
exempt from real estate tax under Section
234 of the Local Government Code ("LGC").
C.
Thereafter, NPC filed a petition for review

dated October 19, 2004 before this Court,
docketed as G.R. No. 165113, assailing the
appellate courts decision in CA-G.R. SP No.
67490. The petition was, however, denied
in this Courts Resolution25 of November 8,
24
Assuming arguendo that the subject power

barges are subject to real estate tax,
whether or not it should be NPC which
should be made to pay the same under the
law.
D.
Assuming arguendo that the subject power
barges are real properties, whether or not
the same is subject to depreciation just like
any other personal properties.
E.
Whether the right of the petitioner to
question the patently null and void real
property tax assessment on the
petitioners personal properties is
imprescriptible.29
On January 13, 2006, NPC filed its own
petition for review before this Court (G.R.
No. 170628), indicating the following errors
committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED
IN HOLDING THAT THE APPEAL TO THE
LBAA WAS FILED OUT OF TIME.
II
IN NOT HOLDING THAT THE POWER
BARGES ARE NOT SUBJECT TO REAL
PROPERTY TAXES.
III
IN NOT HOLDING THAT THE ASSESSMENT
ON THE POWER BARGES WAS NOT MADE
IN ACCORDANCE WITH LAW.30
Considering that the factual antecedents of
both cases are similar, the Court ordered
the consolidation of the two cases in a
Resolution31 dated March 8,
2006.1awphi1.net
In an earlier Resolution dated February 1,
2006, the Court had required the parties to
submit their respective Memoranda within
30 days from notice. Almost a year passed
but the parties had not submitted their
respective memoranda. Considering that
taxesthe lifeblood of our economyare
involved in the present controversy, the
Court was prompted to dispense with the
25
said pleadings, with the end view of

advancing the interests of justice and
avoiding further delay.
In both petitions, FELS and NPC maintain
that the appeal before the LBAA was not
time-barred. FELS argues that when NPC
moved to have the assessment
reconsidered on September 7, 1995, the
running of the period to file an appeal with
the LBAA was tolled. For its part, NPC
posits that the 60-day period for appealing
to the LBAA should be reckoned from its
receipt of the denial of its motion for
reconsideration.
Petitioners contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise
known as the Local Government Code of
1991, provides:
SECTION 226. Local Board of Assessment
Appeals. Any owner or person having
legal interest in the property who is not
satisfied with the action of the provincial,
city or municipal assessor in the
assessment of his property may, within
sixty (60) days from the date of receipt of
the written notice of assessment, appeal to
the Board of Assessment Appeals of the
province or city by filing a petition under
oath in the form prescribed for the
purpose, together with copies of the tax
declarations and such affidavits or
documents submitted in support of the
appeal.
We note that the notice of assessment
which the Provincial Assessor sent to FELS
on August 7, 1995, contained the following
statement:
If you are not satisfied with this
assessment, you may, within sixty (60)
days from the date of receipt hereof,
appeal to the Board of Assessment Appeals
of the province by filing a petition under
oath on the form prescribed for the
purpose, together with copies of ARP/Tax
Declaration and such affidavits or
documents submitted in support of the
appeal.32
Instead of appealing to the Board of

Assessment Appeals (as stated in the
notice), NPC opted to file a motion for
reconsideration of the Provincial Assessors
decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is
available from an adverse ruling or action
of the provincial, city or municipal assessor
in the assessment of the property. It
follows then that the determination made
by the respondent Provincial Assessor with
regard to the taxability of the subject real
properties falls within its power to assess
properties for taxation purposes subject to
appeal before the LBAA.33
We fully agree with the rationalization of
the CA in both CA-G.R. SP No. 67490 and
CA-G.R. SP No. 67491. The two divisions of
the appellate court cited the case of
Callanta v. Office of the Ombudsman,34
where we ruled that under Section 226 of
R.A. No 7160,35 the last action of the local
assessor on a particular assessment shall
be the notice of assessment; it is this last
action which gives the owner of the
property the right to appeal to the LBAA.
The procedure likewise does not permit the
property owner the remedy of filing a
motion for reconsideration before the local
assessor. The pertinent holding of the
Court in Callanta is as follows:
x x x [T]he same Code is equally clear that

the aggrieved owners should have brought
their appeals before the LBAA.
Unfortunately, despite the advice to this
effect contained in their respective notices
of assessment, the owners chose to bring
their requests for a review/readjustment
before the city assessor, a remedy not
sanctioned by the law. To allow this
procedure would indeed invite corruption
in the system of appraisal and assessment.
It conveniently courts a graft-prone
situation where values of real property
may be initially set unreasonably high, and
then subsequently reduced upon the
request of a property owner. In the latter
instance, allusions of a possible covert,
illicit trade-off cannot be avoided, and in
fact can conveniently take place. Such
occasion for mischief must be prevented
and excised from our system.36
For its part, the appellate court declared in
CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth,
whenever the local assessor sends a notice
to the owner or lawful possessor of real
property of its revised assessed value, the
former shall no longer have any jurisdiction
to entertain any request for a review or
readjustment. The appropriate forum
where the aggrieved party may bring his
appeal is the LBAA as provided by law. It
follows ineluctably that the 60-day period
for making the appeal to the LBAA runs
without interruption. This is what We held
in SP 67490 and reaffirm today in SP
67491.37
To reiterate, if the taxpayer fails to appeal
in due course, the right of the local
government to collect the taxes due with
respect to the taxpayers property
becomes absolute upon the expiration of
the period to appeal.38 It also bears
stressing that the taxpayers failure to
question the assessment in the LBAA
renders the assessment of the local
assessor final, executory and demandable,
thus, precluding the taxpayer from
questioning the correctness of the
assessment, or from invoking any defense

26
that would reopen the question of its

liability on the merits.39
In fine, the LBAA acted correctly when it
dismissed the petitioners appeal for
having been filed out of time; the CBAA
and the appellate court were likewise
correct in affirming the dismissal.
Elementary is the rule that the perfection
of an appeal within the period therefor is
both mandatory and jurisdictional, and
failure in this regard renders the decision
final and executory.40
In the Comment filed by the Provincial
Assessor, it is asserted that the instant
petition is barred by res judicata; that the
final and executory judgment in G.R. No.
165113 (where there was a final
determination on the issue of prescription),
effectively precludes the claims herein;
and that the filing of the instant petition
after an adverse judgment in G.R. No.
165113 constitutes forum shopping.
FELS maintains that the argument of the
Provincial Assessor is completely
misplaced since it was not a party to the
erroneous petition which the NPC filed in
G.R. No. 165113. It avers that it did not
participate in the aforesaid proceeding,
and the Supreme Court never acquired
jurisdiction over it. As to the issue of forum
shopping, petitioner claims that no forum
shopping could have been committed since
the elements of litis pendentia or res
judicata are not present.
We do not agree.
Res judicata pervades every organized
system of jurisprudence and is founded
upon two grounds embodied in various
maxims of common law, namely: (1) public
policy and necessity, which makes it to the
interest of the
State that there should be an end to
litigation republicae ut sit litium; and (2)
the hardship on the individual of being
vexed twice for the same cause nemo
debet bis vexari et eadem causa. A
conflicting doctrine would subject the
public peace and quiet to the will and
27
dereliction of individuals and prefer the

regalement of the litigious disposition on
the part of suitors to the preservation of
the public tranquility and happiness.41 As
we ruled in Heirs of Trinidad De Leon Vda.
de Roxas v. Court of Appeals:42
x x x An existing final judgment or decree
rendered upon the merits, without fraud or
collusion, by a court of competent
jurisdiction acting upon a matter within its
authority is conclusive on the rights of
the parties and their privies. This ruling
holds in all other actions or suits, in the
same or any other judicial tribunal of
concurrent jurisdiction, touching on the
points or matters in issue in the first suit.
xxx
Courts will simply refuse to reopen what
has been decided. They will not allow the
same parties or their privies to litigate
anew a question once it has been
considered and decided with finality.
Litigations must end and terminate
sometime and somewhere. The effective
and efficient administration of justice
requires that once a judgment has become
final, the prevailing party should not be
deprived of the fruits of the verdict by
subsequent suits on the same issues filed
by the same parties.
This is in accordance with the doctrine of
res judicata which has the following
elements: (1) the former judgment must be
final; (2) the court which rendered it had
jurisdiction over the subject matter and the
parties; (3) the judgment must be on the
merits; and (4) there must be between the
first and the second actions, identity of
parties, subject matter and causes of
action. The application of the doctrine of
res judicata does not require absolute
identity of parties but merely substantial
identity of parties. There is substantial
identity of parties when there is
community of interest or privity of interest
between a party in the first and a party in
the second case even if the first case did
not implead the latter.43
To recall, FELS gave NPC the full power and

authority to represent it in any proceeding
regarding real property assessment.
Therefore, when petitioner NPC filed its
petition for review docketed as G.R. No.
165113, it did so not only on its behalf but
also on behalf of FELS. Moreover, the
assailed decision in the earlier petition for
review filed in this Court was the decision
of the appellate court in CA-G.R. SP No.
67490, in which FELS was the petitioner.
Thus, the decision in G.R. No. 165116 is
binding on petitioner FELS under the
principle of privity of interest. In fine, FELS
and NPC are substantially "identical
parties" as to warrant the application of res
judicata. FELSs argument that it is not
bound by the erroneous petition filed by
NPC is thus unavailing.
On the issue of forum shopping, we rule for
the Provincial Assessor. Forum shopping
exists when, as a result of an adverse
judgment in one forum, a party seeks
another and possibly favorable judgment in
another forum other than by appeal or
special civil action or certiorari. There is
also forum shopping when a party
institutes two or more actions or
proceedings grounded on the same cause,
on the gamble that one or the other court
would make a favorable disposition.44
Petitioner FELS alleges that there is no
forum shopping since the elements of res
judicata are not present in the cases at
bar; however, as already discussed, res
judicata may be properly applied herein.
Petitioners engaged in forum shopping
when they filed G.R. Nos. 168557 and
170628 after the petition for review in G.R.
No. 165116. Indeed, petitioners went from
one court to another trying to get a
favorable decision from one of the
tribunals which allowed them to pursue
their cases.
It must be stressed that an important
factor in determining the existence of
forum shopping is the vexation caused to
the courts and the parties-litigants by the
filing of similar cases to claim substantially
the same reliefs.45 The rationale against
forum shopping is that a party should not
28
be allowed to pursue simultaneous

remedies in two different fora. Filing
multiple petitions or complaints constitutes
abuse of court processes, which tends to
degrade the administration of justice,
wreaks havoc upon orderly judicial
procedure, and adds to the congestion of
the heavily burdened dockets of the
courts.46
Thus, there is forum shopping when there
exist: (a) identity of parties, or at least
such parties as represent the same
interests in both actions, (b) identity of
rights asserted and relief prayed for, the
relief being founded on the same facts,
and (c) the identity of the two preceding
particulars is such that any judgment
rendered in the pending case, regardless of
which party is successful, would amount to
res judicata in the other.47
Having found that the elements of res
judicata and forum shopping are present in
the consolidated cases, a discussion of the
other issues is no longer necessary.
Nevertheless, for the peace and
contentment of petitioners, we shall shed
light on the merits of the case.
As found by the appellate court, the CBAA
and LBAA power barges are real property
and are thus subject to real property tax.
This is also the inevitable conclusion,
considering that G.R. No. 165113 was
dismissed for failure to sufficiently show
any reversible error. Tax assessments by
tax examiners are presumed correct and
made in good faith, with the taxpayer
having the burden of proving otherwise.48
Besides, factual findings of administrative
bodies, which have acquired expertise in
their field, are generally binding and
conclusive upon the Court; we will not
assume to interfere with the sensible
exercise of the judgment of men especially
trained in appraising property. Where the
judicial mind is left in doubt, it is a sound
policy to leave the assessment
undisturbed.49 We find no reason to depart
from this rule in this case.
In Consolidated Edison Company of New
York, Inc., et al. v. The City of New York, et
al.,50 a power company brought an action

to review property tax assessment. On the
citys motion to dismiss, the Supreme
Court of New York held that the barges on
which were mounted gas turbine power
plants designated to generate electrical
power, the fuel oil barges which supplied
fuel oil to the power plant barges, and the
accessory equipment mounted on the
barges were subject to real property
taxation.
Moreover, Article 415 (9) of the New Civil
Code provides that "[d]ocks and structures
which, though floating, are intended by
their nature and object to remain at a fixed
place on a river, lake, or coast" are
considered immovable property. Thus,
power barges are categorized as
immovable property by destination, being
in the nature of machinery and other
implements intended by the owner for an
industry or work which may be carried on
in a building or on a piece of land and
which tend directly to meet the needs of
said industry or work.51
Petitioners maintain nevertheless that the
power barges are exempt from real estate
tax under Section 234 (c) of R.A. No. 7160
because they are actually, directly and
exclusively used by petitioner NPC, a
governmentowned and controlled
corporation engaged in the supply,
generation, and transmission of electric
power.
We affirm the findings of the LBAA and
CBAA that the owner of the taxable
properties is petitioner FELS, which in fine,
is the entity being taxed by the local
government. As stipulated under Section
2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR
shall own the Power Barges and all the
fixtures, fittings, machinery and equipment
on the Site used in connection with the
Power Barges which have been supplied by
it at its own cost. POLAR shall operate,
manage and maintain the Power Barges for
the purpose of converting Fuel of
NAPOCOR into electricity.52
29
It follows then that FELS cannot escape

liability from the payment of realty taxes
by invoking its exemption in Section 234
(c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real
Property Tax. The following are exempted
from payment of the real property tax:
xxx
(c) All machineries and equipment that are
actually, directly and exclusively used by
local water districts and governmentowned or controlled corporations engaged
in the supply and distribution of water
and/or generation and transmission of
electric power; x x x
Indeed, the law states that the machinery
must be actually, directly and exclusively
used by the government owned or
controlled corporation; nevertheless,
petitioner FELS still cannot find solace in
this provision because Section 5.5, Article
5 of the Agreement provides:
OPERATION. POLAR undertakes that until
the end of the Lease Period, subject to the
supply of the necessary Fuel pursuant to
Article 6 and to the other provisions hereof,
it will operate the Power Barges to convert
such Fuel into electricity in accordance
with Part A of Article 7.53
It is a basic rule that obligations arising
from a contract have the force of law
between the parties. Not being contrary to
law, morals, good customs, public order or
public policy, the parties to the contract
are bound by its terms and conditions.54
Time and again, the Supreme Court has
stated that taxation is the rule and
exemption is the exception.55 The law does
not look with favor on tax exemptions and
the entity that would seek to be thus
privileged must justify it by words too plain
to be mistaken and too categorical to be
misinterpreted.56 Thus, applying the rule of
strict construction of laws granting tax
exemptions, and the rule that doubts
should be resolved in favor of provincial
corporations, we hold that FELS is

considered a taxable entity.
G.R. No. L-15334

1964
The mere undertaking of petitioner NPC

under Section 10.1 of the Agreement, that
it shall be responsible for the payment of
all real estate taxes and assessments, does
not justify the exemption. The privilege
granted to petitioner NPC cannot be
extended to FELS. The covenant is
between FELS and NPC and does not bind a
third person not privy thereto, in this case,
the Province of Batangas.
BOARD OF ASSESSMENT APPEALS,

CITY ASSESSOR and CITY TREASURER
OF QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY,
respondent.
It must be pointed out that the protracted

and circuitous litigation has seriously
resulted in the local governments
deprivation of revenues. The power to tax
is an incident of sovereignty and is
unlimited in its magnitude, acknowledging
in its very nature no perimeter so that
security against its abuse is to be found
only in the responsibility of the legislature
which imposes the tax on the constituency
who are to pay for it.57 The right of local
government units to collect taxes due must
always be upheld to avoid severe tax
erosion. This consideration is consistent
with the State policy to guarantee the
autonomy of local governments58 and the
objective of the Local Government Code
that they enjoy genuine and meaningful
local autonomy to empower them to
achieve their fullest development as selfreliant communities and make them
effective partners in the attainment of
national goals.59
In conclusion, we reiterate that the power
to tax is the most potent instrument to
raise the needed revenues to finance and
support myriad activities of the local
government units for the delivery of basic
services essential to the promotion of the
general welfare and the enhancement of
peace, progress, and prosperity of the
people.60
WHEREFORE, the Petitions are DENIED and
the assailed Decisions and Resolutions
AFFIRMED.
SO ORDERED.
30
January 31,
Assistant City Attorney Jaime R. Agloro for

petitioners.
Ross, Selph and Carrascoso for
respondent.
PAREDES, J.:
From the stipulation of facts and evidence
adduced during the hearing, the following
appear:
On October 20, 1902, the Philippine
Commission enacted Act No. 484 which
authorized the Municipal Board of Manila to
grant a franchise to construct, maintain
and operate an electric street railway and
electric light, heat and power system in the
City of Manila and its suburbs to the person
or persons making the most favorable bid.
Charles M. Swift was awarded the said
franchise on March 1903, the terms and
conditions of which were embodied in
Ordinance No. 44 approved on March 24,
1903. Respondent Manila Electric Co.
(Meralco for short), became the transferee
and owner of the franchise.
Meralco's electric power is generated by its
hydro-electric plant located at Botocan
Falls, Laguna and is transmitted to the City
of Manila by means of electric transmission
wires, running from the province of Laguna
to the said City. These electric transmission
wires which carry high voltage current, are
fastened to insulators attached on steel
towers constructed by respondent at
intervals, from its hydro-electric plant in
the province of Laguna to the City of
Manila. The respondent Meralco has
constructed 40 of these steel towers within
Quezon City, on land belonging to it. A
photograph of one of these steel towers is
attached to the petition for review, marked
Annex A. Three steel towers were
inspected by the lower court and parties

and the following were the descriptions
given there of by said court:
The first steel tower is located in
South Tatalon, Espaa Extension,
Quezon City. The findings were as
follows: the ground around one of the
four posts was excavated to a depth
of about eight (8) feet, with an
opening of about one (1) meter in
diameter, decreased to about a
quarter of a meter as it we deeper
until it reached the bottom of the
post; at the bottom of the post were
two parallel steel bars attached to
the leg means of bolts; the tower
proper was attached to the leg three
bolts; with two cross metals to
prevent mobility; there was no
concrete foundation but there was
adobe stone underneath; as the
bottom of the excavation was
covered with water about three
inches high, it could not be
determined with certainty to whether
said adobe stone was placed
purposely or not, as the place
abounds with this kind of stone; and
the tower carried five high voltage
wires without cover or any insulating
materials.
The second tower inspected was
located in Kamuning Road, K-F,
Quezon City, on land owned by the
petitioner approximate more than
one kilometer from the first tower. As
in the first tower, the ground around
one of the four legs was excavate
from seven to eight (8) feet deep and
one and a half (1-) meters wide.
There being very little water at the
bottom, it was seen that there was
no concrete foundation, but there
soft adobe beneath. The leg was
likewise provided with two parallel
steel bars bolted to a square metal
frame also bolted to each corner.
Like the first one, the second tower is
made up of metal rods joined
together by means of bolts, so that
by unscrewing the bolts, the tower
31
could be dismantled and

reassembled.
The third tower examined is located
along Kamias Road, Quezon City. As
in the first two towers given above,
the ground around the two legs of
the third tower was excavated to a
depth about two or three inches
beyond the outside level of the steel
bar foundation. It was found that
there was no concrete foundation.
Like the two previous ones, the
bottom arrangement of the legs
thereof were found to be resting on
soft adobe, which, probably due to
high humidity, looks like mud or clay.
It was also found that the square
metal frame supporting the legs
were not attached to any material or
foundation.
On November 15, 1955, petitioner City
Assessor of Quezon City declared the
aforesaid steel towers for real property tax
under Tax declaration Nos. 31992 and
15549. After denying respondent's petition
to cancel these declarations, an appeal
was taken by respondent to the Board of
Assessment Appeals of Quezon City, which
required respondent to pay the amount of
P11,651.86 as real property tax on the said
steel towers for the years 1952 to 1956.
Respondent paid the amount under
protest, and filed a petition for review in
the Court of Tax Appeals (CTA for short)
which rendered a decision on December
29, 1958, ordering the cancellation of the
said tax declarations and the petitioner
City Treasurer of Quezon City to refund to
the respondent the sum of P11,651.86. The
motion for reconsideration having been
denied, on April 22, 1959, the instant
petition for review was filed.
In upholding the cause of respondents, the
CTA held that: (1) the steel towers come
within the term "poles" which are declared
exempt from taxes under part II paragraph
9 of respondent's franchise; (2) the steel
towers are personal properties and are not
subject to real property tax; and (3) the
City Treasurer of Quezon City is held
responsible for the refund of the amount
paid. These are assigned as errors by the

petitioner in the brief.
The tax exemption privilege of the
petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to
pay the same taxes upon its real
estate, buildings, plant (not including
poles, wires, transformers, and
insulators), machinery and personal
property as other persons are or may
be hereafter required by law to
pay ... Said percentage shall be due
and payable at the time stated in
paragraph nineteen of Part One
hereof, ... and shall be in lieu of all
taxes and assessments of
whatsoever nature and by
whatsoever authority upon the
privileges, earnings, income,
franchise, and poles, wires,
transformers, and insulators of the
grantee from which taxes and
assessments the grantee is hereby
expressly exempted. (Par. 9, Part
Two, Act No. 484 Respondent's
Franchise; emphasis supplied.)
The word "pole" means "a long,
comparatively slender usually cylindrical
piece of wood or timber, as typically the
stem of a small tree stripped of its
branches; also by extension, a similar
typically cylindrical piece or object of metal
or the like". The term also refers to "an
upright standard to the top of which
something is affixed or by which
something is supported; as a dovecote set
on a pole; telegraph poles; a tent pole;
sometimes, specifically a vessel's master
(Webster's New International Dictionary
2nd Ed., p. 1907.) Along the streets, in the
City of Manila, may be seen cylindrical
metal poles, cubical concrete poles, and
poles of the PLDT Co. which are made of
two steel bars joined together by an
interlacing metal rod. They are called
"poles" notwithstanding the fact that they
are no made of wood. It must be noted
from paragraph 9, above quoted, that the
concept of the "poles" for which exemption
is granted, is not determined by their place
or location, nor by the character of the
32
electric current it carries, nor the material

or form of which it is made, but the use to
which they are dedicated. In accordance
with the definitions, pole is not restricted
to a long cylindrical piece of wood or
metal, but includes "upright standards to
the top of which something is affixed or by
which something is supported. As
heretofore described, respondent's steel
supports consists of a framework of four
steel bars or strips which are bound by
steel cross-arms atop of which are crossarms supporting five high voltage
transmission wires (See Annex A) and their
sole function is to support or carry such
wires.
The conclusion of the CTA that the steel
supports in question are embraced in the
term "poles" is not a novelty. Several
courts of last resort in the United States
have called these steel supports "steel
towers", and they denominated these
supports or towers, as electric poles. In
their decisions the words "towers" and
"poles" were used interchangeably, and it
is well understood in that jurisdiction that a
transmission tower or pole means the
same thing.
In a proceeding to condemn land for the
use of electric power wires, in which the
law provided that wires shall be
constructed upon suitable poles, this term
was construed to mean either wood or
metal poles and in view of the land being
subject to overflow, and the necessary
carrying of numerous wires and the
distance between poles, the statute was
interpreted to include towers or poles.
(Stemmons and Dallas Light Co. (Tex) 212
S.W. 222, 224; 32-A Words and Phrases, p.
365.)
The term "poles" was also used to
denominate the steel supports or towers
used by an association used to convey its
electric power furnished to subscribers and
members, constructed for the purpose of
fastening high voltage and dangerous
electric wires alongside public highways.
The steel supports or towers were made of
iron or other metals consisting of two
pieces running from the ground up some
thirty feet high, being wider at the bottom

than at the top, the said two metal pieces
being connected with criss-cross iron
running from the bottom to the top,
constructed like ladders and loaded with
high voltage electricity. In form and
structure, they are like the steel towers in
question. (Salt River Valley Users' Ass'n v.
Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the
steel towers of an electric company
engaged in the generation of hydro-electric
power generated from its plant to the
Tower of Oxford and City of Waterbury.
These steel towers are about 15 feet
square at the base and extended to a
height of about 35 feet to a point, and are
embedded in the cement foundations sunk
in the earth, the top of which extends
above the surface of the soil in the tower
of Oxford, and to the towers are attached
insulators, arms, and other equipment
capable of carrying wires for the
transmission of electric power (Connecticut
Light and Power Co. v. Oxford, 101 Conn.
383, 126 Atl. p. 1).
In a case, the defendant admitted that the
structure on which a certain person met his
death was built for the purpose of
supporting a transmission wire used for
carrying high-tension electric power, but
claimed that the steel towers on which it is
carried were so large that their wire took
their structure out of the definition of a
pole line. It was held that in defining the
word pole, one should not be governed by
the wire or material of the support used,
but was considering the danger from any
elevated wire carrying electric current, and
that regardless of the size or material wire
of its individual members, any continuous
series of structures intended and used
solely or primarily for the purpose of
supporting wires carrying electric currents
is a pole line (Inspiration Consolidation
Cooper Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word
"poles", as used in Act No. 484 and
incorporated in the petitioner's franchise,
should not be given a restrictive and
narrow interpretation, as to defeat the very
33
object for which the franchise was granted.

The poles as contemplated thereon, should
be understood and taken as a part of the
electric power system of the respondent
Meralco, for the conveyance of electric
current from the source thereof to its
consumers. If the respondent would be
required to employ "wooden poles", or
"rounded poles" as it used to do fifty years
back, then one should admit that the
Philippines is one century behind the age
of space. It should also be conceded by
now that steel towers, like the ones in
question, for obvious reasons, can better
effectuate the purpose for which the
respondent's franchise was granted.
Granting for the purpose of argument that
the steel supports or towers in question are
not embraced within the term poles, the
logical question posited is whether they
constitute real properties, so that they can
be subject to a real property tax. The tax
law does not provide for a definition of real
property; but Article 415 of the Civil Code
does, by stating the following are
immovable property:
(1) Land, buildings, roads, and
constructions of all kinds adhered to
the soil;
xxx
xxx
xxx
(3) Everything attached to an

immovable in a fixed manner, in
such a way that it cannot be
separated therefrom without
breaking the material or
deterioration of the object;
xxx
xxx
xxx

carried in a building or on a piece of
land, and which tends directly to
or works;
xxx
xxx
xxx
The steel towers or supports in question,

do not come within the objects mentioned
in paragraph 1, because they do not
constitute buildings or constructions
adhered to the soil. They are not
construction analogous to buildings nor
adhering to the soil. As per description,
given by the lower court, they are
removable and merely attached to a
square metal frame by means of bolts,
which when unscrewed could easily be
dismantled and moved from place to place.
They can not be included under paragraph
3, as they are not attached to an
immovable in a fixed manner, and they can
be separated without breaking the material
or causing deterioration upon the object to
which they are attached. Each of these
steel towers or supports consists of steel
bars or metal strips, joined together by
means of bolts, which can be disassembled
by unscrewing the bolts and reassembled
by screwing the same. These steel towers
or supports do not also fall under
paragraph 5, for they are not machineries,
receptacles, instruments or implements,
and even if they were, they are not
intended for industry or works on the land.
Petitioner is not engaged in an industry or

34
works in the land in which the steel

supports or towers are constructed.
It is finally contended that the CTA erred in
ordering the City Treasurer of Quezon City
to refund the sum of P11,651.86, despite
the fact that Quezon City is not a party to
the case. It is argued that as the City
Treasurer is not the real party in interest,
but Quezon City, which was not a party to
the suit, notwithstanding its capacity to
sue and be sued, he should not be ordered
to effect the refund. This question has not
been raised in the court below, and,
therefore, it cannot be properly raised for
the first time on appeal. The herein
petitioner is indulging in legal technicalities
and niceties which do not help him any; for
factually, it was he (City Treasurer) whom
had insisted that respondent herein pay
the real estate taxes, which respondent
paid under protest. Having acted in his
official capacity as City Treasurer of
Quezon City, he would surely know what to
do, under the circumstances.
IN VIEW HEREOF, the decision appealed
from is hereby affirmed, with costs against
the petitioners.

Davao Sawmill Vs BAA

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Davao Sawmill Vs BAA

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Republic of the Philippines

DAVAO SAW MILL CO., INC., plaintiffappellant,

by the party of the second part shall

1. Land, buildings, roads and

5. Machinery, liquid containers,

but not when so placed by a tenant, a

of the property or plant. Such result

The machinery levied upon by

Altagracia Company, being, as

MINDANAO BUS COMPANY, petitioner,

with the Court of Tax Appeals a petition for

PROPERTY CASES PUNSALAN TO BICERRA

(g) D-Engine Waukesha-M-Fuel,

to assess and levy real estate taxes

(5) Machinery, receptacles,

sugar central would be unable to

rolling equipment is repaired or serviced in

MAKATI LEASING and FINANCE

(5) Machinery, receptacles,

Ramon D. Bagatsing & Assoc.

of Rizal, Branch VI, docketed as Civil Case

motor drive of respondent's machinery

although this can not in itself

We should not lay down distinctions not

questioned machinery is real, not personal

reconsideration. The decretal portion of the

The undisputed facts are summarized by

Before us is a Petition for Review on

PROPERTY CASES PUNSALAN TO BICERRA

On March 24, 1998, in implementation of

in ruling upon the case below, since the

On April 7, 1998, they went to [the CA] via

Preliminary Matter:Procedural Questions

While Judge Laqui should not have been

In the present case, the machines that

PROPERTY CASES PUNSALAN TO BICERRA

to the industry, as in the present case, was

machinery as personal.23[23] In any event,

PROPERTY CASES PUNSALAN TO BICERRA

over the specific chattel being replevied,

into the streets.31[31] They also allege that

CALTEX (PHILIPPINES), INC., petitionerappellee,

stubs of the seven regional first-prize

or personal property by lot, chance,

counsel, enclosed a copy of the contest

the public distribution of said rules

and stimulate increased patronage for its

of views on the issue of construction

not the scheme proposed by the appellee

order to promote their object (section 1,

PROPERTY CASES PUNSALAN TO BICERRA

In fine, we hold that the appellee has made

chance are too obvious in the disputed

which the law is seeking to prevent" ("El

Thus enlightened, we join the trial court in

is open to all qualified contestants

Taking this cue, we note that in the Postal

Phrases, perm. ed., p. 695, emphasis

FELS ENERGY, INC., Petitioner,

NATIONAL POWER CORPORATION,

Before us are two consolidated cases

power barges from Provincial Assessor

The LBAA ruled that the power plant