19. MERALCO V.

CBAA
L-47943
May 31, 1982
FACTS:
In 1969, a realty tax was imposed on two oil storage tanks installed by Manila Electric
Company (Meralco) on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.),
Inc. With a total capacity of 566,000 barrels, the tanks are used for storing fuel oil for Meralco's
power plants.
According to Meralco, the storage tanks are not attached to its foundation. It is not
anchored or welded to the concrete circular wall; its bottom plate is not attached to any part of the
foundation by bolts, screws or similar devices. In fact, each empty tank can be floated by flooding
its location with water 4ft deep.
On the other hand, according to the Central Board of Assessment Appeals, while the
tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps, which are
integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks.
In 1970, the municipal treasurer of Bauan, Batangas required Meralco to pay realty taxes
on the two tanks based on an assessment made by the provincial assessor, amounting to
P431,703.96 from 1970 to 1974.
The Central Board of Assessment Appeals ruled that the tanks together with the
foundation, walls, dikes, steps, pipelines and other appurtenances constitute taxable
improvements. Meralco filed a motion for reconsideration, which the Board denied. So, Meralco
filed a special civil action of certiorari to annul the Board's decision, contending that its storage
tanks are not taxable real property since: a) the tanks are not attached to the land; b) these were
placed on leased land, not on the land owned by Meralco; c) these tanks do not fall under the
kinds of real property in Art. 415 of the Civil Code, so they cannot be categorized as realty by
nature, by incorporation, by destination nor by analogy.
ISSUE: Whether or not the storage tanks of Meralco are real properties, thus taxable.
HELD: YES. Sec. 2 of the Assessment Law provides that the realty tax is due "on real property,
including land, buildings, machinery, and other improvements" not exempted in Sec. 3.
Sec. 28 of Real Property Tax Code similarly provides that real property tax shall be
levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem
tax on real property, such as land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted.
And, the Real Property Tax Code defines improvements as a valuable addition made
to property or an amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility
or to adapt it for new or further purposes.
From the aforesaid provisions of law, the Court ruled that although the two storage
tanks were not embedded in the land, they may, nevertheless, be considered as
improvements on the land, enhancing its utility and rendering it useful to the oil industry.
The two tanks had been installed with permanence as receptacles for oil needed by Meralco for its
operations. The tanks are considered as real properties, thus they are subject to realty taxes.
This case is different from Board of Assessment Appeals vs. Manila Electric Company,
where Meralco's steel towers were not subject to realty tax, since its steel towers were regarded as
poles and under its franchise, Meralco's poles are exempt from taxation. Also, the steel towers
were not attached to any land or building, but rather they were removable.
Therefore, the Court dismissed Meralcos petition.