DAVAO SAW MILL vs. APRONIANO G.
CASTILLO and DAVAO LIGHT & POWER Orosa, a resident of the same province as Lopez, invited the latter to make an investment in the
CO., INC. G.R. No. L-40411 August 7, 1935
Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the
Philippine Islands. 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 by the party of the second part shall pass
to the exclusive ownership of the lessor without any obligation on its part to pay any amount
for said improvements and buildings; which do not include the machineries and accessories in
the improvements.
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; 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
It must be noted also that on number of occasion, Davao Sawmill treated the machinery as
personal property by executing chattel mortgages in favor of third persons. One of such is the
appellee by assignment from the original mortgages.
The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.
Issue:
whether or not the machineries and equipments were personal in nature.
Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.
Machinery which is movable in its nature only becomes immobilized when placed in a plant
by the owner of the property or plant, 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.
Lopez v. Orosa
LOPEZ V. OROSA AND PLAZA THEATREG.R. Nos. L-10817-18 February 28, 1958
FACTS:
-Petitioner Lopez was engaged in doing business under the trade name Lopez-Castelo
Sawmill.
theatre business. Lopez declined to invest but agreed to supply the lumber necessary for the
construction of the proposed theatre. They had an oral agreement that Orosa would be
personally liable for any account that the said construction might incur and that payment
would be on demand and not cash on delivery basis.
Lopez delivered the which was used for construction amounting to P62,255.85. He was paid
only P20,848.50, leaving a balance of P41,771.35.
The land on which the building was erected previously owned by Orosa, was later on acquired
by the corporation.
. As Lopez was pressing Orosa for payment, the latter and president of the corporation
promised to obtain a bank loan by mortgaging the properties of the Plaza Theatre., out of
which the unpaid balance would be satisfied. But unknown to Lopez, the corporation already
obtained a loan with Luzon Surety Company as surety, and the corporation in turn executed a
mortgage on the land and building in favor of the said company as counter-security.
Due to the persistent demands of Lopez, Orosa executed a “deed of assignment” over his
shares of stock in the corporation.
As it remained unsettled, Lopez filed a case against Orosa and Plaza theatre praying that they
be sentenced to pay him jointly and severally of the unpaid balance; and in case defendants
fail to pay, the land and building owned by the corporation be sold in public auction with the
proceeds be applied to the balance; or the shares of stock be sold in public auction.
The lower court held that defendants were jointly liable for the unpaid balance and Lopez thus
acquired the material man’s lien over the construction. The lien was merely confined to the
building and did not extend to the on which the construction was made.
Lopez tried to secure a modification of the decision, but was denied.
ISSUES:
Whether the material man’s lien for the value of the materials used in the construction of the
building attaches to said structure alone and doesn’t extend to the land on which the building
is adhered to.
Whether the lower court and CA erred in not providing that the material mans liens is superior
to the mortgage executed in favor of surety company not only on the building but also on the
land.
HELD:
-The material man’s lien could be charged only to the building for which the credit was made
or which received the benefit of refection, the lower court was right in, holding at the interest
of the mortgagee over the land is superior and cannot be made subject to the material man's
lien.
-Generally, real estate connotes the land and the building constructed thereon, it is obvious
that the inclusion of the building in the enumeration of what may constitute real properties
could only mean one thing—that a building is by itself an immovable property.
-In the absence of any specific provision to the contrary, a building is an immovable property
irrespective of whether or not said structure and the land on which it is adhered to belong to
the same owner.
-The law gives preference to unregistered refectionary credits only with respect to the real
estate upon which the refectionary or work was made.
- The lien so created attaches merely to the immovable property for the construction or repair
of which the obligation was incurred. Therefore, the lien in favor of appellant for the unpaid
value of the lumber used in the construction of the building attaches only to said structure and
to no other property of the obligors.
G.R. Nos. L-10837-38 May 30, 1958
ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff,
vs.
ISABEL IYA, ADRIANO VALINO and LUCIA VALINO, defendants.
Facts:
Valino & Valino were the owners and possessors of a house of strong materials in Rizal,
which they purchased on installment basis. To enable her to purchase on credit rice from
NARIC, Valino filed a bond (P11,000) subscribed by Associated Insurance and Surety Co Inc,
and as a counter-guaranty, Valino executed an alleged chattel mortgage on the aforementioned
house in favour of the surety company. At the same time, the parcel of land which the house
was erected was registered in the name of Philippine Realty Corporation.
Valino, to secure payment of an indebtedness (P12,000) executed a real estate mortgage over
the lot and the house in favour of Iya.
Valino failed to satisfy her obligation to NARIC, so the surety company was compelled to pay
the same pursuant to the undertaking of the bond. In turn, surety company demanded
reimbursement from Valino, and as they failed to do so, the company foreclosed the chattel
mortgage over the house. As a result, public sale was conducted and the property was awarded
to the surety company.
The surety company then learned of the existence of the real estate mortgage over the lot and
the improvements thereon; thus, they prayed for the exclusion of the residential house from the
real estate mortgage and the declaration of its ownership in virtue of the award given during
bidding.
Iya alleged that she acquired a real right over the lot and the house constructed thereon, and
that the auction sale resulting from the foreclosure of chattel mortgage was null and void.
Surety company argued that as the lot on which the house was constructed did not belong to
the spouses at the time the chattel mortgage was executed, the house might be considered as
personal property, and they prayed that the said building be excluded from the real estate
mortgage.
Issue:
There is no question over Iya’s right over the land by real estate mortgage; however, as the
building instructed thereon has been the subject of two mortgages, controversy arise as to
which of these encumbrances should receive preference over the other.
Held:
The building is subject to the real estate mortgage, in favour of Iya. Iya’s right to foreclose not
only the land but also the building erected thereon is recognised.
While it is true that real estate connotes the land and the building constructed thereon, it is
obvious that the inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties (Article 415), could only mean that a
building is by itself an immovable property. Moreover, in view of the absence of any specific
provision to the contrary, a building is an immovable property irrespective of whether or not
said structure and the land on which it is adhered to belong to the same owner.
A building certainly cannot be divested of its character of a realty by the fact that the land on
which it is constructed belongs to another.
In the case at bar, as personal properties could only be the subject of a chattel mortgage and as
obviously the structure in question is not one, the execution of the chattel mortgage covering
said building is clearly invalid and a nullity. While it is true that said document was
correspondingly registered in Chattel Mortgage Registry of Rizal, this act produced no effect
whatsoever, for where the interest conveyed is in the nature of real property, the registration of
the document in the registry of chattels is merely a futile act. Thus, the registration of the
chattel mortgage of a building of strong materials produced no effect as far as the building is
concerned.
TUMALAD VS. VICENCIO (G.R. NO. L-30173, SEPTEMBER 30, 1971)
APRIL 23, 2015 | YUMMY
FACTS:
1. Some time in 1955, Alberta Vicencio and Emiliano Simeon loaned 4,800 pesos from
Gavino and Generosa Tumalad. As guarantee, they executed a chattel mortgage over
their house in Quiapo which, at that time, was being rented from Madrigal and
Company, Inc.
2. The mortgage was registered in the Registry of Deeds of Manila. It was also agreed that
default in the payment of any of the amortizations will make the unpaid balance
immediately due and demandable.
3. The defendants-appellants thus defaulted in paying and the mortgage was extrajudicially
foreclosed. The house was auctioned and bought by the Tumalad’s as the highest bidder.
4. They then commenced an ejectment case in the MTC which ruled in favor of Tumalad.
The defendants-appellants then appealed to the RTC questioning the legality of the
chattel mortgage.
5. While pending, the MTC issued a writ of execution but cannot be carried because the
house has already been demolished 10 days before pursuant to an order in another
ejectment case against the defendants.
6. The RTC ruled then in favor of Tumalad and ordered the defendants to pay the rent. This
was appealed to the CA which, in turn, certified the case to the SC as only questions of
law are involved.
7. Defendants-appellants contend that the chattel mortgage was void because the subject
matter is a house of strong materials and being an immovable, it can only be the subject
of a real estate mortgage and not a chattel mortgage.
ISSUE: Can defendants claim that the house is an immovable property?
RULING: No.
1. The parties to a contract may, by agreement, treat as personal property that which by
nature would be a real property if it was so expressly and specifically designated. This is
based on the principle of estoppel.
2. A mortgaged house on a rented land was held to be a personal property not only because
the deed of mortgage considered it as such but also because it did not form part of the
land.
3. It is now settled that an object placed on land by one who had only a temporary right to
the same does not become immobilized by attachment.
4. In the contract, the house was expressly designated as chattel mortgage which provides
that: “the mortgagor voluntarily cedes, sells and transfers by way of chattel mortgage…”
5. Although there is no specific statement referring to the house as personal property, the
defendants-appellants could only have meant to convey the house as chattek or intended
to treat the same as such sk that they should not now be allowed to make an inconsistent
stand by claiming otherwise.
6. Moreover, the subject house stood on a rented lot to which defendants-appellants merely
had a temporary right as lessee, and although this cannot in itself alone determine the
status of the property, it does so when combined with other factors to sustain the
interpretation of the parties.
7. The SC, however, reversed the decision appealed from on the ground that the purchaser
of the house is not yet entitled, as a matter of right, to its possession as there is a 1-year
period within which the mortgagor may redeem the property.
8. The period of redemption had not yet expired when action was instituted in the court of
origin. The original complaint stated no cause of action and was prematurely filed.
G.R. No. L-46245 May 31, 1982
MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT
APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA, respondents.
Facts:
Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No.
387, Meralco Securities installed from Batangas to Manila a pipeline system consisting of
cylindrical steel pipes joined together and buried not less than one meter below the surface
along the shoulder of the public highway. The pipes are embedded in the soil and are firmly
and solidly welded together so as to preclude breakage or damage thereto and prevent leakage
or seepage of the oil. The valves are welded to the pipes so as to make the pipeline system one
single piece of property from end to end.
In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be
cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of
the ground where they are buried. In points where the pipeline traversed rivers or creeks, the
pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the land.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of
Laguna treated the pipeline as real property and issued tax declarations, containing the
assessed values of portions of the pipeline.
Meralco appealed the assessments to the defendants, but the latter ruled that pipeline is subject
to realty tax. The defendants argued that the pipeline is subject to realty tax because they are
contemplated in Assessment Law and Real Property Tax Code; that they do not fall within the
category of property exempt from realty tax under those laws; that Articles 415 & 416 of the
Civil Code, defining real and personal property have no applications to this case because these
pipes are constructions adhered to soil and things attached to the land in a fixed manner, and
that Meralco Securities is not exempt from realty tax under petroleum law.
Meralco insists that its pipeline is not subject to realty tax because it is not real property within
the meaning of Art. 415.
Issue:
Whether the aforementioned pipelines are subject to realty tax.
Held:
Yes, the pipelines are subject to realty tax.
Section 2 of the Assessment Law provides that the realty tax is due “on real property,
including land, buildings, machinery, and other improvements.” This provision is reproduced
with some modification in Section 38, Real Property Tax Code, which provides that “there
shall be levied, assessed, and collected xxx annual ad valorem tax on real property such as
land, buildings, machinery, and other improvements affixed or attached to real property xxx.”
It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes
of exempt real property enumerated in section 3 of the Assessment Law and section 40 of the
Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying
liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying
with it the right to the use of the soil in which it is placed.
Article 415[l] and [3] provides that real property may consist of constructions of all kinds
adhered to the soil and 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.
The pipeline system in question is indubitably a construction adhering to the soil. It is attached
to the land in such a way that it cannot be separated therefrom without dismantling the steel
pipes which were welded to form the pipeline.
WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed.
No costs.
Makati Leasing and Finance Corp. vs Wearever Textile Mills Inc.,
G.R. No. 58469
May 16, 1983
Facts:
Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of Makati Leasing
and Finance Corporation covering certain raw materials and machinery. Upon default, Makati
Leasing filed a petition for judicial foreclosure of the properties mortgaged. Acting on Makati
Leasing’s application for replevin, the lower court issued a writ of seizure. Pursuant thereto, the
sheriff enforcing the seizure order and removed the main motor of the subject machinery. In a
petition for certiorari and prohibition, the Court of Appeals ordered the return of the machinery
on the ground that the same cannot be the subject of replevin 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 Wearever textile’s plant would be to drill out or
destroy the concrete floor. When the motion for reconsideration of Makati Leasing was denied
by the Court of Appeals, Makati Leasing elevated the matter to the Supreme Court.
Issue:
Whether or not the machinery in suit is real or personal property from the point of view of the
parties.
Held:
The said machinery is a personal property. Like what was involved in the Tumalad case, if
a house of strong materials, 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 the
denying the existence of the chattel mortgage. The decision of the Court of Appeals was set
aside and the order of the lower court was reinstated.
G.R. No. L-41643 July 31, 1935
FACTS: This is an appeal taken by the plaintiff, B. H. Berkenkotter, from the judgment of the
Court of First Instance of Manila, dismissing said plaintiff’s complaint against Cu Unjieng e
Hijos et al
Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga,
obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage
constituted on two parcels and land “with all its buildings, improvements, sugar-cane mill,
steel railway, telephone line, apparatus, utensils and whatever forms part or is necessary
complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in
the future exist is said lots.”
Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to
increase the capacity of its sugar central by buying additional machinery and equipment, so
that instead of milling 150 tons daily, it could produce 250. The estimated cost of said
additional machinery and equipment was approximately P100,000. B.A. Green, president of
said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary
amount for the purchase of said machinery and equipment, promising to reimburse him as
soon as he could obtain an additional loan from the mortgagees, the herein defendants Cu
Unjieng e Hijos. Berkenkotter agreed to the said proposition and delivered to him a total sum
of P25,750. Berkenkotter had a credit of P22,000 against said corporation for unpaid salary.
With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased
the additional machinery and equipment now in litigation.
B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos for an
additional loan of P75,000 offering as security the additional machinery and equipment
acquired by said B.A. Green and installed in the sugar central after the execution of the
original mortgage deed, together with whatever additional equipment acquired with said loan.
B.A. Green failed to obtain said loan.
Appellants contention: the installation of the machinery and equipment claimed by him in the
sugar central of the Mabalacat Sugar Company, Inc., was not permanent in character inasmuch
as B. A. Green, in proposing to him to advance the money for the purchase thereof, that in
case B. A. Green should fail to obtain an additional loan from the defendants Cu Unjieng e
Hijos, said machinery and equipment would become security therefor.
ISSUE: Whether or not the lower court erred in declaring that the additional machinery and
equipment, as improvement incorporated with the central are subject to the mortgage deed
executed in favor of the defendants Cu Unjieng e Hijos.
HELD: No error was committed by trial court. The additional machinery and equipment are
included in the first mortgage.
Article 334, paragraph 5, of the Civil Code gives the character of real property to “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 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 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 principal elements of a sugar central, without them the 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 necessary be permanent.
Furthermore, the fact that B. A. Green bound himself to the plaintiff B. H. Berkenkotter to
hold said machinery and equipment as security, as nothing could prevent B. A. Green from
giving them as security at least under a second mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they
had been permanently incorporated with the sugar central of the Mabalacat Sugar Co., Inc.,
and while the mortgage constituted on said sugar central to Cu Unjieng e Hijos remained in
force, only the right of redemption of the vendor Mabalacat Sugar Co., Inc., in he sugar central
with which said machinery and equipment had been incorporated, was transferred thereby,
subject to the right of the defendants Cu Unjieng e Hijos under the first mortgage.
For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of
a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity,
for the purpose of carrying out the industrial functions of the latter and increasing production,
constitutes a permanent improvement on said sugar central and subjects said machinery and
equipment to the mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that
the purchaser of the new machinery and equipment has bound himself to the person supplying
him the purchase money to hold them as security for the payment of the latter’s credit, and to
refrain from mortgaging or otherwise encumbering them does not alter the permanent
character of the incorporation of said machinery and equipment with the central; and (3) that
the sale of the machinery and equipment in question by the purchaser who was supplied the
money, after the incorporation thereof with the mortgaged sugar central, does not vest the
creditor with ownership of said machinery and equipment but simply with the right of
redemption.
[G.R. No. L-16005. April 28, 1962.]
MANILA ELECTRIC COMPANY, Petitioner, v. PUBLIC SERVICE
COMMISSION, Respondent.
Ross, Selph & Carrascoso for Petitioner.
Solicitor General for Respondent.
SYLLABUS
1. LEGISLATIVE FRANCHISE; PAYMENT OF PERMIT FEES; EXEMPTION. — If the
intention of the lawmakers was to exempt the appellant from the payment, not only of taxes
and assessments, but also of permit fees, it could have easily done so. It is presumed that the
lawmakers are familiar with the distinction between taxes and fees (Manila Electric Co. v. El
Auditor General y la Comision de Servicios Publicos, 73 Phil., 128-142).
2. ID.; ID.; DOUBTS RESOLVED IN FAVOR OF THE STATE. — Doubts regarding the
exemption of the applicant for a legislative franchise from the payment of fees should be
resolved in favor of the grantor of the privilege, the State, and strictly against the party
claiming exemption. Whoever claims exemption must be able to justify his claim by the
clearest grant of organic or statute law. An exemption cannot be permitted to exist upon vague
implication (C. Borja v. Coll. of Int. Rev., G.R. No. L-12134, Nov. 30, 1961; See also Coll. v.
Manila Jockey Club, Inc., G.R. No. L-8755, March 24, 1956, 53 Off. Gaz. 3762; Song Kiat
Chocolate Factory v. Central Bank, G.R. No. L-8888, Nov. 29, 1957, 54 Off. Gaz. 615).
DECISION
PAREDES, J.:
On November 24, 1958, the Manila Electric Company was, upon its application, authorized to
place a firm order and to install and operate at its Rockwell Steam Plant in San Pedro, Makati,
Rizal, an additional electric generating unit with a 60,000 KW capacity, complete with boiler
and other accessories, by the Public Service Commission. On December 18, 1958, the PSC
handed down an order requiring the MERALCO "to pay to the Commission within thirty (30)
days from the date of its receipt of this order the sum of P27,346.80 as permit fee authorizing
the increase of capacity of its electric plant based on the additional investment of
P27,346,800.00 at the rate of P0.10 for each one hundred pesos (P100.00) or fraction of said
additional investment."cralaw virtua1aw library
Under date of December 29, 1958, the MERALCO presented a motion for reconsideration of
the above order, contending that the requirement to pay the permit fee is contrary to law,
particularly Section 40 of the Public Service Act (CA 146), as amended by Com. Act No. 454.
The motion was denied on September 11, 1959; hence this appeal.
There is no question of fact involved. The only issue presented to Us is "the legality of the
imposed permit fee of P27,346.80 by the PSC."cralaw virtua1aw library
Petitioner’s argument in objecting to the imposition of the fee is centered on Section 40 of the
Public Service Act, as amended by Comm. Act No. 454, which provides —
"SEC. 40. — The Commission is authorized and ordered to charge and collect from any public
service the following fees:chanrob1es virtual 1aw library
x x x of organic or statute law. An exemption cannot be permitted to exist upon vague implication
"(g) For each permit authorizing the increase of equipment, the installation of new units or
authorizing the increase of capacity, or the extension of means or general extensions in the
services, ten centavos for each one hundred pesos or fraction of the additional capital
necessary to carry out the permit.
x x x
"All collections of fees provided in this section shall be covered into the Philippine Treasury.
This article shall not be applicable to the Commonwealth of the Philippines nor to its
instrumentalities, nor to enterprises that have legislative franchises for the exercise of which
the law specifies the payment of a certain per centum of their earnings in lieu of any other
taxes, fees, or license fees."cralaw virtua1aw library
Upon the other hand, the State contends that while the franchise of petitioner exempts it from
the payment of taxes and assessments, it does not exempt it from the payment of fees; and that
there is a great difference between taxes and assessments on one hand and fees on the other
(Manila Electric Company, contra El Auditor General y la Comision, 73 Phil. 128-142).
The petitioner argues that it is not claiming exemption from paying the permit fee under its
franchise; that the exemption is claimed under the law (CA No. 146, as amended by CA No.
454), the pertinent provision of which states: "This article shall not be applicable to . . .
enterprises that have legislative franchises for the exercise of which the law specifies the
payment of certain per centum of their earnings in lieu of any other taxes, fees, or license fees"
; and that the distinction between ‘taxes’ and ‘fees’ in the case cited by the State, is irrelevant
to the resolution of the instant appeal, so that an extended disquisition thereon is deemed
superfluous. Under the above arguments, petitioner submits that as it already pays 5% of its
earnings for the exercise of its legislative franchise, it is exempted to pay the permit fee,
because paragraph 9 of its franchise (as amended), provides that the 5% 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."
It is true that petitioner seeks exemption under section 40 of the Public Service Act, as
amended by CA No. 454, but it is no less true that said Act makes reference "to enterprises
that have legislative franchises for the exercise of which the law specifies the payment of a
certain per centum of their earnings in lieu of any other taxes, fees or license fees", like the
herein petitioner. In the interpretation or construction of the real meaning and intent of the said
act, we should, therefore, take into consideration the provisions of petitioner’s franchise.
Petitioner’s legislative franchise, as amended, specifies the payment of 5% of its earnings and
expressly exempts applicant from the payment of taxes and assessments. The franchise limits
the exemption to the payment of taxes and assessments. It does not exempt the petitioner from
the payment of fees. If the intention of the lawmakers was to include permit fees, it could have
easily done so. It is presumed that the lawmakers are familiar with the distinction between
taxes (assessments or ‘impuestos’) and fees (derechos) (Manila Electric Co. v. El Auditor
General y la Comision de Servicios Publicos, 73 Phil., 128-142). The exemption from the
payment of fees not having been expressly granted in the petitioner’s legislative franchise,
which is a special law governing its operation, the doubt should be, as it is hereby resolved in
favor of the grantor of the privilege, here the State, and strictly against the party claiming
exemption. Whoever claims exemption must be able to justify his claim by the clearest grant
(C. Borja v. Coll. of Int. Rev., G.R. No. L-12134, Nov. 30, 1961; see also Coll. v. Manila
Jockey Slub, Inc., G.R. No. L-8755, March 24, 1956, 53 O.G.; 3762; Song Kiat Chocolate
Factory v. Central Bank, G.R. No. L-8888, November 29, 1957, 54 O.G. 615).
IN VIEW HEREOF, the decision appealed from, being in accordance with law and the
evidence, is affirmed, with costs against petitioner.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes J.B.L. and Dizon, JJ., concur.
Barrera, J., on leave, took no part.
Board of Assessment Appeals v. MERALCO [G.R. No. L-15334. January 31, 1964.]

Jun28
En Banc, Paredes (J): 8 concur, 1 concur in result, 1 took no part.
Facts: On 20 October 1902, the Philippine Commission enacted Act 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 44
approved on 24 March 1903. Meralco 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 hydroelectric plant in the province of Laguna to the City of
Manila. Meralco has constructed 40 of these steel towers within Quezon City, on land
belonging to it.
On 15 November 1955, City Assessor of Quezon City declared the aforesaid steel towers for
real property tax under Tax Declaration 31992 and 15549. After denying Meralco’s petition to
cancel these declarations an appeal was taken by Meralco to the Board of Assessment Appeals
of Quezon City, which required Meralco to pay the amount of P11,651.86 as real property tax
on the said steel towers for the years 1952 to 1956. Meralco paid the amount under protest,
and filed a petition for review in the Court of Tax Appeals which rendered a decision on 29
December 1958, ordering the cancellation of the said tax declarations and the City Treasurer
of Quezon City to refund to Meralco the sum of P11,651.86. The motion for reconsideration
having been denied, on 22 April 1959, the petition for review was filed.
Issue: Whether or not the steel towers of an electric company constitute real property for the
purposes of real property tax.
Held: The steel towers of an electric company don’t constitute real property for the purposes
of real property tax.
Steel towers are not immovable property under paragraph 1, 3 and 5 of Article 415.
The steel towers or supports 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 constructions
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 cannot 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
or 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 works on the land in which the steel supports or
towers are constructed.
The Supreme Court affirmed the decision appealed from, with costs against the petitioners.
Caltex v. Central Board of Assesment
Caltex (Philippines) Inc., vs. Central Board of Assessment Appeals and City Assessor of
Pasay
Facts:
This case is about the realty tax on machinery and equipment installed by Caltex (Philippines)
Inc. in its gas stations located on leased land. The machines and equipment consists of
underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps,
computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and
tireflators. The city assessor of Pasay City characterized the said items of gas station
equipment and machinery as taxable realty. The realty tax on said equipment amounts to
P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are personalty.
The assessor appealed to the Central Board of Assessment Appeals. The Board, which was in
its decision of June 3, 1977 that the said machines and equipment are real property under the
Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974. The
decision was reiterated by the Board in its resolution of January 12, 1978, denying Caltex's
motion for reconsideration, a copy of which was received by its lawyer on April 2, 1979.On
May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the
Board's decision and for a declaration that t he said machines and equipment are personal
property not subject to realty tax. We hold that the said equipment and machinery, as
appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to
realty tax) and which fixtures are necessary to the operation of the gas station, for without
them the gas station would be useless, and which have been attached or affixed permanently to
the gas station site or embedded therein, are taxable improvements and machinery within the
meaning of the Assessment Law and the Real Property Tax Code. Caltex invokes the rule that
machinery which is movable in its nature only becomes immobilized when placed in a plant
by the owner of the property or plant 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
(Davao Saw Mill Co. vs. Castillo, 61 Phil 709).
Issue:
Whether the pieces of gas station equipment and machinery already enumerated are subject to
realty tax
Held:
Yes. This issue has to be resolved primarily under the provisions of the Assessment Law and
the Real Property Tax Code. Under, Sec. 38 of the said law: “Machinery shall embrace
machines, mechanical contrivances, instruments, appliances and apparatus attached to the real
estate. It includes the physical facilities available for production, as well as the installations
and appurtenant service facilities, together with all other equipment designed for or essential
to its manufacturing, industrial or agricultural purposes.” The equipment and machinery, are
considered as appurtenances to the gas station building or shed owned by Caltex (as to which
it is subject to realty tax) and which fixtures are necessary to the operation of the gas station,
for without them the gas station would be useless, and which have been attached or affixed
permanently to the gas station site or embedded therein, are taxable improvements and
machinery within the meaning of the Assessment Law and the Real Property Tax Code.
Improvements on land are commonly taxed as realty even though for some purposes they
might be considered personalty. "It is a familiar phenomenon to see things classed as real
property for purposes of taxation which on general principle might be considered personal
property"
G.R. No. L-46245 May 31, 1982
MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT
APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA, respondents.
AQUINO, J.:
In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the
decision of the Central Board of Assessment Appeals (composed of the Secretary of Finance
as chairman and the Secretaries of Justice and Local Government and Community
Development as members) dated May 6, 1976, holding that Meralco Securities' oil pipeline is
subject to realty tax.
The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of
1949, Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline
system consisting of cylindrical steel pipes joined together and buried not less than one meter
below the surface along the shoulder of the public highway. The portion passing through
Laguna is about thirty kilometers long.
The pipes for white oil products measure fourteen inches in diameter by thirty-six feet with a
maximum capacity of 75,000 barrels daily. The pipes for fuel and black oil measure sixteen
inches by forty-eight feet with a maximum capacity of 100,000 barrels daily.
The pipes are embedded in the soil and are firmly and solidly welded together so as to
preclude breakage or damage thereto and prevent leakage or seepage of the oil. The valves are
welded to the pipes so as to make the pipeline system one single piece of property from end to
end.
In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be
cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of
the ground where they are buried. In points where the pipeline traversed rivers or creeks, the
pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can be moved from one place
to another as shown in the permit issued by the Secretary of Public Works and
Communications which permit provides that the government reserves the right to require the
removal or transfer of the pipes by and at the concessionaire's expense should they be affected
by any road repair or improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of
Laguna treated the pipeline as real property and issued Tax Declarations Nos. 6535-6537, San
Pedro; 7473-7478, Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Biñan and 15806-15810,
Calamba, containing the assessed values of portions of the pipeline.
Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna
composed of the register of deeds as chairman and the provincial auditor as member. That
board in its decision of June 18, 1975 upheld the assessments (pp. 47-49, Rollo).
Meralco Securities brought the case to the Central Board of Assessment Appeals. As already
stated, that Board, composed of Acting Secretary of Finance Pedro M. Almanzor as chairman
and Secretary of Justice Vicente Abad Santos and Secretary of Local Government and
Community Development Jose Roño as members, ruled that the pipeline is subject to realty
tax (p. 40, Rollo).
A copy of that decision was served on Meralco Securities' counsel on August 27, 1976.
Section 36 of the Real Property Tax Code, Presidential Decree No. 464, which took effect on
June 1, 1974, provides that the Board's decision becomes final and executory after the lapse of
fifteen days from the date of receipt of a copy of the decision by the appellant.
Under Rule III of the amended rules of procedure of the Central Board of Assessment Appeals
(70 O.G. 10085), a party may ask for the reconsideration of the Board's decision within fifteen
days after receipt. On September 7, 1976 (the eleventh day), Meralco Securities filed its
motion for reconsideration.
Secretary of Finance Cesar Virata and Secretary Roño (Secretary Abad Santos abstained)
denied the motion in a resolution dated December 2, 1976, a copy of which was received by
appellant's counsel on May 24, 1977 (p. 4, Rollo). On June 6, 1977, Meralco Securities filed
the instant petition for certiorari.
The Solicitor General contends that certiorari is not proper in this case because the Board
acted within its jurisdiction and did not gravely abuse its discretion and Meralco Securities
was not denied due process of law.
Meralco Securities explains that because the Court of Tax Appeals has no jurisdiction to
review the decision of the Central Board of Assessment Appeals and because no judicial
review of the Board's decision is provided for in the Real Property Tax Code, Meralco
Securities' recourse is to file a petition for certiorari.
We hold that certiorari was properly availed of in this case. It is a writ issued by a superior
court to an inferior court, board or officer exercising judicial or quasi-judicial functions
whereby the record of a particular case is ordered to be elevated for review and correction in
matters of law (14 C.J.S. 121-122; 14 Am Jur. 2nd 777).
The rule is that as to administrative agencies exercising quasi-judicial power there is an
underlying power in the courts to scrutinize the acts of such agencies on questions of law and
jurisdiction even though no right of review is given by the statute (73 C.J.S. 506, note 56).
"The purpose of judicial review is to keep the administrative agency within its jurisdiction and
protect substantial rights of parties affected by its decisions" (73 C.J.S. 507, See. 165). The
review is a part of the system of checks and balances which is a limitation on the separation of
powers and which forestalls arbitrary and unjust adjudications.
Judicial review of the decision of an official or administrative agency exercising quasi-judicial
functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion,
fraud or collusion or in case the administrative decision is corrupt, arbitrary or capricious
(Mafinco Trading Corporation vs. Ople, L-37790, March 25, 1976, 70 SCRA 139, 158; San
Miguel Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56, 60, Mun.
Council of Lemery vs. Prov. Board of Batangas, 56 Phil. 260, 268).
The Central Board of Assessment Appeals, in confirming the ruling of the provincial assessor
and the provincial board of assessment appeals that Meralco Securities' pipeline is subject to
realty tax, reasoned out that the pipes are machinery or improvements, as contemplated in the
Assessment Law and the Real Property Tax Code; that they do not fall within the category of
property exempt from realty tax under those laws; that articles 415 and 416 of the Civil Code,
defining real and personal property, have no application to this case; that even under article
415, the steel pipes can be regarded as realty because they are constructions adhered to the soil
and things attached to the land in a fixed manner and that Meralco Securities is not exempt
from realty tax under the Petroleum Law (pp. 36-40).
Meralco Securities insists that its pipeline is not subject to realty tax because it is not real
property within the meaning of article 415. This contention is not sustainable under the
provisions of the Assessment Law, the Real Property Tax Code and the Civil Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property,
including land, buildings, machinery, and other improvements" not specifically exempted in
section 3 thereof. This provision is reproduced with some modification in the Real Property
Tax Code which provides:
SEC. 38. Incidence of Real Property Tax.— There 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. *
It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes
of exempt real property enumerated in section 3 of the Assessment Law and section 40 of the
Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying
liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying
with it the right to the use of the soil in which it is placed (Note 21[10],54 C.J.S. 561).
Article 415[l] and [3] provides that real property may consist of constructions of all kinds
adhered to the soil and 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.
The pipeline system in question is indubitably a construction adhering to the soil (Exh. B, p.
39, Rollo). It is attached to the land in such a way that it cannot be separated therefrom
without dismantling the steel pipes which were welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is
in a sense machinery within the meaning of the Real Property Tax Code.
It should be borne in mind that what are being characterized as real property are not the steel
pipes but the pipeline system as a whole. Meralco Securities has apparently two pipeline
systems.
A pipeline for conveying petroleum has been regarded as real property for tax purposes
(Miller County Highway, etc., Dist. vs. Standard Pipe Line Co., 19 Fed. 2nd 3; Board of
Directors of Red River Levee Dist. No. 1 of Lafayette County, Ark vs. R. F. C., 170 Fed. 2nd
430; 50 C. J. 750, note 86).
The other contention of Meralco Securities is that the Petroleum Law exempts it from the
payment of realty taxes. The alleged exemption is predicated on the following provisions of
that law which exempt Meralco Securities from local taxes and make it liable for taxes of
general application:
ART. 102. Work obligations, taxes, royalties not to be changed.— Work
obligations, special taxes and royalties which are fixed by the provisions
of this Act or by the concession for any of the kinds of concessions to
which this Act relates, are considered as inherent on such concessions
after they are granted, and shall not be increased or decreased during the
life of the concession to which they apply; nor shall any other special
taxes or levies be applied to such concessions, nor shall 0concessionaires
under this Act be subject to any provincial, municipal or other local taxes
or levies; nor shall any sales tax be charged on any petroleum produced
from the concession or portion thereof, manufactured by the
concessionaire and used in the working of his concession. All such
concessionaires, however, shall be subject to such taxes as are of general
application in addition to taxes and other levies specifically provided in
this Act.
Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general
application. This argument is untenable because the realty tax has always been imposed by the
lawmaking body and later by the President of the Philippines in the exercise of his lawmaking
powers, as shown in section 342 et seq. of the Revised Administrative Code, Act No. 3995,
Commonwealth Act No. 470 and Presidential Decree No. 464.
The realty tax is enforced throughout the Philippines and not merely in a particular
municipality or city but the proceeds of the tax accrue to the province, city, municipality and
barrio where the realty taxed is situated (Sec. 86, P.D. No. 464). In contrast, a local tax is
imposed by the municipal or city council by virtue of the Local Tax Code, Presidential Decree
No. 231, which took effect on July 1, 1973 (69 O.G. 6197).
We hold that the Central Board of Assessment Appeals did not act with grave abuse of
discretion, did not commit any error of law and acted within its jurisdiction in sustaining the
holding of the provincial assessor and the local board of assessment appeals that Meralco
Securities' pipeline system in Laguna is subject to realty tax.
WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed.
No costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Justice Abad Santos, Concepcion, Jr., JJ., took no part.
G.R. No. 106041 January 29, 1993
BENGUET CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT
APPEALS OF ZAMBALES, PROVINCIAL ASSESSOR OF ZAMBALES, PROVINCE
OF ZAMBALES, and MUNICIPALITY OF SAN MARCELINO, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
CRUZ, J.:
The realty tax assessment involved in this case amounts to P11,319,304.00. It has been
imposed on the petitioner's tailings dam and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said
properties as taxable improvements. The assessment was appealed to the Board of Assessment
Appeals of the Province of Zambales. On August 24, 1988, the appeal was dismissed mainly
on the ground of the petitioner's "failure to pay the realty taxes that fell due during the
pendency of the appeal."
The petitioner seasonably elevated the matter to the Central Board of Assessment
Appeals,1 one of the herein respondents. In its decision dated March 22, 1990, the Board
reversed the dismissal of the appeal but, on the merits, agreed that "the tailings dam and the
lands submerged thereunder (were) subject to realty tax."
For purposes of taxation the dam is considered as real property as it comes
within the object mentioned in paragraphs (a) and (b) of Article 415 of the
New Civil Code. It is a construction adhered to the soil which cannot be
separated or detached without breaking the material or causing destruction
on the land upon which it is attached. The immovable nature of the dam as
an improvement determines its character as real property, hence taxable
under Section 38 of the Real Property Tax Code. (P.D. 464).
Although the dam is partly used as an anti-pollution device, this Board
cannot accede to the request for tax exemption in the absence of a law
authorizing the same.
xxx xxx xxx
We find the appraisal on the land submerged as a result of the construction
of the tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market
Values for Zambales which was reviewed and allowed for use by the
Ministry (Department) of Finance in the 1981-1982 general revision. No
serious attempt was made by Petitioner-Appellant Benguet Corporation to
impugn its reasonableness, i.e., that the P50.00 per square meter applied
by Respondent-Appellee Provincial Assessor is indeed excessive and
unconscionable. Hence, we find no cause to disturb the market value
 applied by Respondent Appellee Provincial Assessor of Zambales on the
properties of Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266.
This petition for certiorari now seeks to reverse the above ruling.
The principal contention of the petitioner is that the tailings dam is not subject to realty tax
because it is not an "improvement" upon the land within the meaning of the Real Property Tax
Code. More particularly, it is claimed —
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from
and independent of the mine; hence, by itself it cannot
be considered an improvement separately assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the
petitioner corporation in the area, the tailings dam will
benefit the local community by serving as an irrigation
facility;
(d) that the building of the dam has stripped the
property of any commercial value as the property is
submerged under water wastes from the mine;
(e) that the tailings dam is an environmental pollution
control device for which petitioner must be
commended rather than penalized with a realty tax
assessment;
(f) that the installation and utilization of the tailings
dam as a pollution control device is a requirement
imposed by law;
(2) as regards the valuation of the tailings dam and the submerged lands:
(a) that the subject properties have no market value as
they cannot be sold independently of the mine;
(b) that the valuation of the tailings dam should be
based on its incidental use by petitioner as a water
reservoir and not on the alleged cost of construction of
the dam and the annual build-up expense;
(c) that the "residual value formula" used by the
Provincial Assessor and adopted by respondent CBAA
is arbitrary and erroneous; and
(3) as regards the petitioner's liability for penalties for
non-declaration of the tailings dam and the submerged lands for realty tax
purposes:
(a) that where a tax is not paid in an honest belief that
it is not due, no penalty shall be collected in addition
to the basic tax;
(b) that no other mining companies in the Philippines
operating a tailings dam have been made to declare the
dam for realty tax purposes.
The petitioner does not dispute that the tailings dam may be considered realty within the
meaning of Article 415. It insists, however, that the dam cannot be subjected to realty tax as a
separate and independent property because it does not constitute an "assessable improvement"
on the mine although a considerable sum may have been spent in constructing and maintaining
it.
To support its theory, the petitioner cites the following cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the dikes
and gates constructed by the taxpayer in connection with a fishpond operation as integral parts
of the fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303), involving a
road constructed by the timber concessionaire in the area, where this Court did not impose a
realty tax on the road primarily for two reasons:
In the first place, it cannot be disputed that the ownership of the road that
was constructed by appellee belongs to the government by right of
accession not only because it is inherently incorporated or attached to the
timber land . . . but also because upon the expiration of the concession said
road would ultimately pass to the national government. . . . In the second
place, while the road was constructed by appellee primarily for its use and
benefit, the privilege is not exclusive, for . . . appellee cannot prevent the
use of portions of the concession for homesteading purposes. It is also
duty bound to allow the free use of forest products within the concession
for the personal use of individuals residing in or within the vicinity of the
land. . . . In other words, the government has practically reserved the rights
to use the road to promote its varied activities. Since, as above shown, the
road in question cannot be considered as an improvement which belongs
to appellee, although in part is for its benefit, it is clear that the same
cannot be the subject of assessment within the meaning of Section 2 of
C.A.
No. 470.
Apparently, the realty tax was not imposed not because the road was an integral part of the
lumber concession but because the government had the right to use the road to promote its
varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it was
declared that the reservoir dam went with and formed part of the reservoir and that the dam
would be "worthless and useless except in connection with the outlet canal, and the water
rights in the reservoir represent and include whatever utility or value there is in the dam and
headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This
case involved drain tunnels constructed by plaintiff when it expanded its mining operations
downward, resulting in a constantly increasing flow of water in the said mine. It was held that:
Whatever value they have is connected with and in fact is an integral part
of the mine itself. Just as much so as any shaft which descends into the
earth or an underground incline, tunnel, or drift would be which was used
in connection with the mine.
On the other hand, the Solicitor General argues that the dam is an assessable improvement
because it enhances the value and utility of the mine. The primary function of the dam is to
receive, retain and hold the water coming from the operations of the mine, and it also enables
the petitioner to impound water, which is then recycled for use in the plant.
There is also ample jurisprudence to support this view, thus:
. . . The said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax)
and which fixtures are necessary to the operation of the gas station, for
without them the gas station would be useless and which have been
attached or affixed permanently to the gas station site or embedded
therein, are taxable improvements and machinery within the meaning of
the Assessment Law and the Real Property Tax Code. (Caltex [Phil.] Inc.
v. CBAA, 114 SCRA 296).
 We hold that while the two storage tanks are 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. It is
undeniable that the two tanks have been installed with some degree of
permanence as receptacles for the considerable quantities of oil needed by
MERALCO for its operations. (Manila Electric Co. v. CBAA, 114 SCRA
273).
The pipeline system in question is indubitably a construction adhering to
the soil. It is attached to the land in such a way that it cannot be separated
therefrom without dismantling the steel pipes which were welded to form
the pipeline. (MERALCO Securities Industrial Corp. v. CBAA, 114
SCRA 261).
The tax upon the dam was properly assessed to the plaintiff as a tax upon
real estate. (Flax-Pond Water Co. v. City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they are designed and
used by the owner as permanent improvement of the free hold, and that for
such reasons they were properly assessed by the respondent taxing district
as improvements. (Standard Oil Co. of New Jersey v. Atlantic City, 15 A
2d. 271)
The Real Property Tax Code does not carry a definition of "real property" and simply says that
the realty tax is imposed on "real property, such as lands, buildings, machinery and other
improvements affixed or attached to real property." In the absence of such a definition, we
apply Article 415 of the Civil Code, the pertinent portions of which state:
Art. 415. The following are immovable property.
(1) Lands, buildings 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.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty
tax is due "on the real property, including land, buildings, machinery and other improvements"
not specifically exempted in Section 3 thereof. A reading of that section shows that the tailings
dam of the petitioner does not fall under any of the classes of exempt real properties therein
enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code
defines improvement as follows:
(k) Improvements — is 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 adopt it for new or further purposes.
The term has also been interpreted as "artificial alterations of the physical condition of the
ground that are reasonably permanent in character."2
The Court notes that in the Ontario case the plaintiff admitted that the mine involved therein
could not be operated without the aid of the drain tunnels, which were indispensable to the
successful development and extraction of the minerals therein. This is not true in the present
case.
Even without the tailings dam, the petitioner's mining operation can still be carried out because
the primary function of the dam is merely to receive and retain the wastes and water coming
from the mine. There is no allegation that the water coming from the dam is the sole source of
water for the mining operation so as to make the dam an integral part of the mine. In fact, as a
result of the construction of the dam, the petitioner can now impound and recycle water
without having to spend for the building of a water reservoir. And as the petitioner itself points
out, even if the petitioner's mine is shut down or ceases operation, the dam may still be used
for irrigation of the surrounding areas, again unlike in the Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not applicable because it
involved water reservoir dams used for different purposes and for the benefit of the
surrounding areas. By contrast, the tailings dam in question is being used exclusively for the
benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate
existence, just as vigorously contends that at the end of the mining operation the tailings dam
will serve the local community as an irrigation facility, thereby implying that it can exist
independently of the mine.
From the definitions and the cases cited above, it would appear that whether a structure
constitutes an improvement so as to partake of the status of realty would depend upon the
degree of permanence intended in its construction and use. The expression "permanent" as
applied to an improvement does not imply that the improvement must be used perpetually but
only until the purpose to which the principal realty is devoted has been accomplished. It is
sufficient that the improvement is intended to remain as long as the land to which it is annexed
is still used for the said purpose.
The Court is convinced that the subject dam falls within the definition of an "improvement"
because it is permanent in character and it enhances both the value and utility of petitioner's
mine. Moreover, the immovable nature of the dam defines its character as real property under
Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property
Tax Code.
The Court will also reject the contention that the appraisal at P50.00 per square meter made by
the Provincial Assessor is excessive and that his use of the "residual value formula" is
arbitrary and erroneous.
Respondent Provincial Assessor explained the use of the "residual value formula" as follows:
A 50% residual value is applied in the computation because, while it is
true that when slime fills the dike, it will then be covered by another dike
or stage, the stage covered is still there and still exists and since only one
face of the dike is filled, 50% or the other face is unutilized.
In sustaining this formula, the CBAA gave the following justification:
We find the appraisal on the land submerged as a result of the construction
of the tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market
Values for San Marcelino, Zambales, which is fifty (50.00) pesos per
square meter for third class industrial land (TSN, page 17, July 5, 1989)
and Schedule of Market Values for Zambales which was reviewed and
allowed for use by the Ministry (Department) of Finance in the 1981-1982
general revision. No serious attempt was made by Petitioner-Appellant
Benguet Corporation to impugn its reasonableness, i.e, that the P50.00 per
square meter applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find no cause to disturb
the market value applied by Respondent-Appellee Provincial Assessor of
Zambales on the properties of Petitioner-Appellant Benguet Corporation
covered by Tax Declaration Nos. 002-0260 and 002-0266.
It has been the long-standing policy of this Court to respect the conclusions of quasi-judicial
agencies like the CBAA, which, because of the nature of its functions and its frequent exercise
thereof, has developed expertise in the resolution of assessment problems. The only exception
to this rule is where it is clearly shown that the administrative body has committed grave abuse
of discretion calling for the intervention of this Court in the exercise of its own powers of
review. There is no such showing in the case at bar.
We disagree, however, with the ruling of respondent CBAA that it cannot take cognizance of
the issue of the propriety of the penalties imposed upon it, which was raised by the petitioner
for the first time only on appeal. The CBAA held that this "is an entirely new matter that
petitioner can take up with the Provincial Assessor (and) can be the subject of another protest
before the Local Board or a negotiation with the local sanggunian . . ., and in case of an
adverse decision by either the Local Board or the local sanggunian, (it can) elevate the same to
this Board for appropriate action."
There is no need for this time-wasting procedure. The Court may resolve the issue in this
petition instead of referring it back to the local authorities. We have studied the facts and
circumstances of this case as above discussed and find that the petitioner has acted in good
faith in questioning the assessment on the tailings dam and the land submerged thereunder. It
is clear that it has not done so for the purpose of evading or delaying the payment of the
questioned tax. Hence, we hold that the petitioner is not subject to penalty for its
non-declaration of the tailings dam and the submerged lands for realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure to show that the questioned decision of
respondent Central Board of Assessment Appeals is tainted with grave abuse of discretion
except as to the imposition of penalties upon the petitioner which is hereby SET ASIDE. Costs
against the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero,
Nocon, Bellosillo, Melo and Campos, Jr., JJ., concur.
Feliciano, J., took no part.
RAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA,
in his capacity as Governor of the Land Authority; and LORENZO GELLA, in his
capacity as Register of Deeds of Manila, petitioners-appellants,
vs.
HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII, Court of First
Instance of Manila; ANTONIO J. VILLEGAS, in his capacity as Mayor of the City of
Manila; and the CITY OF MANILA, respondents-appellees.
Facts:
City of Manila – owner in fee simple of a parcel of land known as Lot 1, Block 557 of
Cadastral Survey of City of Manila, containing an area of 9689.80 sqm. On various dates in
1927, City of Manila sold portions of the parcel of land. When the last sale was effected
August 1924, Transfer Certificate of Title 22547 covering the residue of the land 7490.10 sam
was issued in the name of City of Manila.
On September 1960, Municipal Board of Manila adopted a resolution requesting the President
to consider the feasibility of declaring the land under Transfer Certificate of Title 25545-
25547 as patrimonial property of Manila for the purpose of selling these lots to the actual
occupants thereof. The resolution was then transmitted to the Congress. The bill was then
passed by Congress and approved by President, and became Republic Act 4118, converting
the land from communal property to disposable and alienable land of State.
To implement RA 4118, Land Authority requested City of Manila to deliver the City’s TCT
22547 in order to obtain title thereto in the name of Land Authority. The request was granted
with the knowledge and consent of City mayor, cancelling TCT 22547 and issuing TCT 80876
in the name of Land Authority.
City of Manila, for some reasons, brought an action to restrain, prohibit, and enjoin Land
Authority and Register of Deeds from implementing RA 4118, and praying for the declaration
of RA 4118 as unconstitutional.
Trial court declared RA 4118 to be unconstitutional and invalid on the ground that it deprived
City of its property without due process of law and payment of just compensation.
Land Authority and Register of Deeds argued that the land is a communal land, or a portion of
public domain owned by State; that the land has not been used by City of Manila for any
public purpose; that it was originally a communal land not because it was needed in
connection with its organisation as a municipality but rather for the common use of its
inhabitants; that the City mayor merely enjoys the usufruct over said land and its exercise of
acts of ownership by selling parts thereof did not necessarily convert the land into a
patrimonial property of City of Manila nor divert the State of its paramount title.
Issue:
Whether the aforementioned land is a private or patrimonial property of the City of Manila.
Held:
The land is public property.
As a general rule, regardless of the source or classification of the land in the possession of
municipality, excepting those which it acquired in its own funds in its private or corporate
capacity, such property is held for the State for the benefit of its inhabitants, whether it be for
governmental or proprietary purposes. The legal situation is the same if the State itself holds
the property and puts it to a different use.
When it comes to property of municipality which it did not acquire in its private or corporate
capacity with its own funds (the land was originally given to City by Spain), the legislature
can transfer its administration and disposition to an agency of the National Government to be
disposed of according to its discretion. Here it did so in obedience to the constitutional
mandate of promoting social justice to insure the well-being and economic security of the
people.
The property was not acquired by the City of Manila with its own funds in its private or
proprietary capacity. The land was part of the territory of City of Manila granted by sovereign
in its creation. Furthermore, City expressly recognised the paramount title of the State over its
land when it requested the President to consider the feasibility of declaring the lot as
patrimonial property for selling.
There could be no more blatant recognition of the fact that said land belongs to the State and
was simply granted in usufruct to the City of Manila for municipal purposes. But since the
City did not actually use said land for any recognized public purpose and allowed it to remain
idle and unoccupied for a long time until it was overrun by squatters, no presumption of State
grant of ownership in favor of the City of Manila may be acquiesced in to justify the claim that
it is its own private or patrimonial property.
WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed with
the free and untrammeled implementation of Republic Act No. 4118 without any obstacle from
the respondents. Without costs.
G.R. No. L-28379 March 27, 1929
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant-appellant,
vs.
CONSORCIA CABANGIS, ET AL., claimants-appellees.
Attorney-General Jaranilla for appellant.
Abad Santos, Camus & Delgado for appellees.
VILLA-REAL, J.:
The Government of the Philippine Islands appeals to this court from the judgment of the Court
of First Instance of Manila in cadastral proceeding No. 373 of the Court of First Instance of
Manila, G. L. R. O. Cadastral Record No. 373, adjudicating the title and decreeing the
registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey of the City of
Manila in favor of Consuelo, Consorcia, Elvira and Tomas, surnamed Cabangis, in equal parts,
and dismissing the claims presented by the Government of the Philippine Islands and the City
of Manila.
In support of its appeal, the appellant assigns the following alleged errors as committed by the
trial court in its judgment, to wit:
 1. The lower court erred in not holding that the lots in question are of the public
domain, the same having been gained from the sea (Manila Bay) by accession, by
fillings made by the Bureau of Public Works and by the construction of the break-
water (built by the Bureau of Navigation) near the mouth of Vitas Estero.
2. The lower court erred in holding that the lots in question formed part of the big
parcel of land belonging to the spouses Maximo Cabangis and Tita Andres, and in
holding that these spouses and their successors in interest have been in continuous,
public, peaceful and uninterrupted possession of said lots up to the time this case
came up.
3. The lower court erred in holding that said lots existed before, but that due to the
current of the Pasig River and to the action of the big waves in Manila Bay during
the south-west monsoons, the same disappeared.
4. The lower court erred in adjudicating the registration of the lands in question in
the name of the appellees, and in denying the appellant's motion for a new trial.
A preponderance of the evidence in the record which may properly be taken into consideration
in deciding the case, proves the following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L. R.
O. Record No. 373, were formerly a part of a large parcel of land belonging to the predecessor
of the herein claimants and appellees. From the year 1896 said land began to wear away, due
to the action of the waves of Manila Bay, until the year 1901 when the said lots became
completely submerged in water in ordinary tides, and remained in such a state until 1912 when
the Government undertook the dredging of Vitas Estuary in order to facilitate navigation,
depositing all the sand and silt taken from the bed of the estuary on the low lands which were
completely covered with water, surrounding that belonging to the Philippine Manufacturing
Company, thereby slowly and gradually forming the lots, the subject matter of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the purposes of taxation,
and it was only in the year 1926 that Dr. Pedro Gil, in behalf of the claimants and appellees,
declared lot No. 40 for such purpose.
In view of the facts just stated, as proved by a preponderance of the evidence, the question
arises: Who owns lots 36, 39 and 40 in question?
The claimants-appellees contend that inasmuch as the said lots once formed a part of a large
parcel of land belonging to their predecessors, whom they succeeded, and their immediate
predecessor in interest, Tomas Cabangis, having taken possession thereof as soon as they were
reclaimed, giving his permission to some fishermen to dry their fishing nets and deposit
their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is —
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, riverbanks, shorts, roadsteads, and that of a similar
character.
xxx xxx xxx
Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:
ARTICLE 1. The following are part of the national domain open to public use:
xxx xxx xxx
3. The Shores. By the shore is understood that space covered and uncovered by the
movement of the tide. Its interior or terrestrial limit is the line reached by the highest
equinoctial tides. Where the tides are not appreciable, the shore begins on the land
side at the line reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article 339 of
the Civil Code just quoted, this court said:
We should not be understood, by this decision, to hold that in a case of gradual encroachment
or erosion by the ebb and flow of the tide, private property may not become 'property of public
ownership,' as defined in article 339 of the code, where it appears that the owner has to all
intents and purposes abandoned it and permitted it to be totally destroyed, so as to become a
part of the 'playa' (shore of the seas), 'rada' (roadstead), or the like. . . .
In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances
and private properties are permanently invaded by the waves, and in this case they
become part of the shore or beach. They then pass to the public domain, but the
owner thus dispossessed does not retain any right to the natural products resulting
from their new nature; it is a de facto case of eminent domain, and not subject to
indemnity.
Now then , when said land was reclaimed, did the claimants-appellees or their predecessors
recover it as their original property?
As we have seen, the land belonging to the predecessors of the herein claimants-appellees
began to wear way in 1896, owing to the gradual erosion caused by the ebb and flow of the
tide, until the year 1901, when the waters of Manila Bay completely submerged a portion of it,
included within lots 36, 39 and 40 here in question, remaining thus under water until reclaimed
as a result of certain work done by the Government in 1912. According to the above-cited
authorities said portion of land, that is, lots 36, 39 and 40, which was private property, became
a part of the public domain. The predecessors of the herein claimants-appellees could have
protected their land by building a retaining wall, with the consent of competent authority, in
1896 when the waters of the sea began to wear it away, in accordance with the provisions of
Article 29 of the aforecited Law of Waters of August 3, 1866, and their failure to do so until
1901, when a portion of the same became completely covered by said waters, remaining thus
submerged until 1912, constitutes abandonment.
Now then: The lots under discussion having been reclaimed from the seas as a result of certain
work done by the Government, to whom do they belong?
The answer to this question is found in article 5 of the aforementioned Law of Waters, which
is as follows:
ART. 5. Lands reclaimed from the sea in consequence of works constructed by the
State, or by the provinces, pueblos or private persons, with proper permission, shall
become the property of the party constructing such works, unless otherwise provided
by the terms of the grant of authority.
The fact that from 1912 some fishermen had been drying their fishing nets and depositing
their bancas on lots 36, 39 and 40, by permission of Tomas Cabangis, does not confer on the
latter or his successors the ownership of said lots, because, as they were converted into public
land, no private person could acquire title thereto except in the form and manner established
by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil., 324), cited by the
claimants-appellees, this court, admitting the findings and holdings of the lower court, said the
following:
If we heed the parol evidence, we find that the seashore was formerly about one
hundred brazas distant from the land in question; that, in the course of time, and by
the removal of a considerable quantity of sand from the shore at the back of the land
for the use of the street car company in filling in Calle Cervantes, the sea water in
ordinary tides now covers part of the land described in the petition.
The fact that certain land, not the bed of a river or of the sea, is covered by sea water
during the period of ordinary high tide, is not a reason established by any law to
cause the loss thereof, especially when, as in the present case, it becomes covered by
water owing to circumstances entirely independent of the will of the owner.
In the case of Director of Lands vs. Aguilar (G.R. No. 22034), 1 also cited by the claimants-
appellees, wherein the Government adduced no evidence in support of its contention, the
lower court said in part:
The contention of the claimants Cabangis is to the effect that said lots are a part of
the adjoining land adjudicated to their deceased father, Don Tomas Cabangis, which,
for over fifty years had belonged to their deceased grandmother, Tita Andres, and
that, due to certain improvements made in Manila Bay, the waters of the sea covered
a large part of the lots herein claimed.
The Government of the Philippine Islands also claims the ownership of said lots,
because, at ordinary high tide, they are covered by the sea.
Upon petition of the parties, the lower court made an ocular inspection of said lots
on September 12, 1923, and on said inspection found some light material houses
built thereon, and that on that occasion the waters of the sea did not reach the
aforesaid lots.
From the evidence adduced at the trial of this cause, it may be inferred that Tita
Andres, during her lifetime was the owner of a rather large parcel of land which was
adjudicated by a decree to her son Tomas Cabangis; the lots now in question are
contiguous to that land and are covered by the waters of the sea at extraordinary high
tide; some 50 years before the sea did not reach said strip of land, and on it were
constructed, for the most part, light material houses, occupied by the tenants of Tita
Andres, to whom they paid rent. Upon her death, her son Tomas Cabangis
succeeded to the possession, and his children succeeded him, they being the present
claimants, Consuelo, Jesus, Tomas, and Consorcia Cabangis.
The Government of the Philippine Islands did not adduce any evidence in support of
its contention, with the exception of registry record No. 8147, to show that the lots
here in question were not excluded from the application presented in said
proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited
above, the rise of the waters of the sea that covered the lands there in dispute, was due not to
the action of the tide but to the fact that a large quantity of sand was taken from the sea at the
side of said land in order to fill in Cervantes Street, and this court properly held that because of
this act, entirely independent of the will of the owner of said land, the latter could not lose the
ownership thereof, and the mere fact that the waters of the sea covered it as a result of said act,
is not sufficient to convert it into public land, especially, as the land was high and appropriate
for building purposes.
In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the
Insular Government did not present any evidence in support of its contention, thus leaving
uncontradicted the evidence adduced by the claimants Aguilar et al., as to the ownership,
possession and occupation of said lots.
In the instant case the evidence shows that from 1896, the waves of Manila Bay had been
gradually and constantly washing away the sand that formed the lots here in question, until
1901, when the sea water completely covered them, and thus they remained until the year
1912. In the latter year they were reclaimed from the sea by filling in with sand and silt
extracted from the bed of Vitas Estuary when the Government dredged said estuary in order to
facilitate navigation. Neither the herein claimants-appellees nor their predecessors did
anything to prevent their destruction.
In conclusion, then, we hold that the lots in question having disappeared on account of the
gradual erosion due to the ebb and flow of the tide, and having remained in such a state until
they were reclaimed from the sea by the filling in done by the Government, they are public
land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs. Government of the
Philippine Islands, 28 Phil., 505).
By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40 of
cadastral proceeding No. 373 of the City of Manila are held to be public land belonging to the
Government of the United States under the administration and control of the Government of
the Philippine Islands. So ordered.
Johnson, Street, Malcolm, Ostrand, Johns and Romualdez, JJ., concur.
G.R. No. L-24440 March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF
INTERNAL REVENUE,defendants-appellants.
Facts:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the
provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act
39 was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of
the Act also provided that “Buildings and properties which the province shall abandon upon
the transfer of the capital to another place will be acquired and paid for by the City of
Zamboanga at a price to be fixed by the Auditor General.”
Such properties include lots of capitol site, schools, hospitals, leprosarium, high school
playgrounds, burleighs, and hydro-electric sites.
On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into
two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the assets and obligations
of the old province were to be divided between the two new ones, Sec. 6 of that law provided
“Upon the approval of this Act, the funds, assets and other properties and the obligations of
the province of Zamboanga shall be divided equitably between the Province of Zamboanga del
Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the
recommendation of the Auditor General.”
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of
Commonwealth Act 39 by providing that, “All buildings, properties and assets belonging to
the former province of Zamboanga and located within the City of Zamboanga are hereby
transferred, free of charge, in favor of the said City of Zamboanga.”
This constrained Zamboanga del Norte to file on March 5, 1962, a complaint against
defendants-appellants Zamboanga City; that, among others, Republic Act 3039 be declared
unconstitutional for depriving Zamboanga del Norte of property without due process and just
compensation.
Lower court declared RA 3039 unconstitutional as it deprives Zamboanga del Norte of its
private properties.
Hence the appeal.
Issue:
Whether RA 3039 is unconstitutional on the grounds that it deprives Zamboanga del Norte of
its private properties.
Held:
No. RA 3039 is valid. The properties petitioned by Zamboanga del Norte is a public property.
The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in
question. For, the matter involved here is the extent of legislative control over the properties of
a municipal corporation, of which a province is one. The principle itself is simple: If the
property is owned by the municipality (meaning municipal corporation) in its public and
governmental capacity, the property is public and Congress has absolute control over it. But if
the property is owned in its private or proprietary capacity, then it is patrimonial and Congress
has no absolute control. The municipality cannot be deprived of it without due process and
payment of just compensation.
The capacity in which the property is held is, however, dependent on the use to which it is
intended and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining
under the law of Municipal Corporations, must be used in classifying the properties in
question?
Civil Code
The Civil provide: ART. 423. The property of provinces, cities, and municipalities is divided
into property for public use and patrimonial property; ART. 424. Property for public use, in
the provinces, cities, and municipalities, consists of the provincial roads, city streets,
municipal streets, the squares, fountains, public waters, promenades, and public works for
public service paid for by said provinces, cities, or municipalities. All other property possessed
by any of them is patrimonial and shall be governed by this Code, without prejudice to the
provisions of special laws.
Applying the above cited norm, all the properties in question, except the two (2) lots used as
High School playgrounds, could be considered as patrimonial properties of the former
Zamboanga province. Even the capital site, the hospital and leprosarium sites, and the school
sites will be considered patrimonial for they are not for public use. They would fall under the
phrase “public works for public service” for it has been held that under the ejusdem generis
rule, such public works must be for free and indiscriminate use by anyone, just like the
preceding enumerated properties in the first paragraph of Art 424. The playgrounds, however,
would fit into this category.
Law of Municipal Corporations
On the other hand, applying the norm obtaining under the principles constituting the law of
Municipal Corporations, all those of the 50 properties in question which are devoted to public
service are deemed public; the rest remain patrimonial. Under this norm, to be considered
public, it is enough that the property be held and, devoted for governmental purposes like local
administration, public education, public health, etc.
Final Ruling
The controversy here is more along the domains of the Law of Municipal Corporations —
State vs. Province — than along that of Civil Law. If municipal property held and devoted to
public service is in the same category as ordinary private property, then that would mean they
can be levied upon and attached; they can even be acquired thru adverse possession — all
these to the detriment of the local community. It is wrong to consider those properties as
ordinary private property.
Lastly, the classification of properties other than those for public use in the municipalities as
patrimonial under Art. 424 of the Civil Code — is “… without prejudice to the provisions of
special laws.” For purpose of this article, the principles, obtaining under the Law of Municipal
Corporations can be considered as “special laws”. Hence, the classification of municipal
property devoted for distinctly governmental purposes as public should prevail over the Civil
Code classification in this particular case.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby
entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte
in lump sum the amount of P43,030.11 which the former took back from the latter out of the
sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance
remains of plaintiff’s 54.39% share in the 26 patrimonial properties, after deducting
therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of
the Appraisal Committee formed by the Auditor General, by way of quarterly payments from
the allotments of defendant City, in the manner originally adopted by the Secretary of Finance
and the Commissioner of Internal Revenue. No costs. So ordered.