Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No.171496               March 3, 2014

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS
(DPWH), Petitioner,
vs.
ORTIGAS AND COMPANY LIMITED PARTNERSHIP, Respondents.

DECISION

LEONEN, J.:

Owners whose properties were taken for public use are entitled to just compensation.

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to nullify and set aside the Court of
Appeals' resolution dated October 14, 2005. The Court of Appeals' resolution dismissed petitioner Republic of the
Philippines' appeal from the decision of the Regional Trial Court granting private respondent Ortigas' petition for authority
to sell. This petition also seeks to nullify the Court of Appeals’ resolution dated February 9, 2006, which denied petitioner
Republic of the Philippines' motion for reconsideration.

Respondent, Ortigas and Company Limited Partnership, is the owner of a parcel of land known as Lot 5-B-2 with an area
of 70,278 square meters in Pasig City.1

Upon the request of the Department of Public Works and Highways, respondent Ortigas caused the segregation of its
property into five lots and reserved one portion for road widening for the C-5 flyover project. 2 It designated Lot 5-B-2-A, a
1,445-square-meter portion of its property, for the road widening of Ortigas Avenue. 3 Respondent Ortigas also caused the
annotation of the term "road widening" on its title. The title was then inscribed with an encumbrance that it was for road
widening and subject to Section 50 of Presidential Decree No. 1529 or the Property Registration Decree. 4

The C-5-Ortigas Avenue flyover was completed in 1999, utilizing only 396 square meters of the 1,445-square-meter
allotment for the project.5

Consequently, respondent Ortigas further subdivided Lot 5-B-2-A into two lots: Lot 5-B-2-A-1, which was the portion
actually used for road widening, and Lot 5-B-2-A-2, which was the unutilized portion of Lot 5-B-2-A. 6

On February 14, 2001, respondent Ortigas filed with the Regional Trial Court of Pasig a petition for authority to sell to the
government Lot 5-B-2-A-1.7 Respondent Ortigas alleged that the Department of Public Works and Highways requested
the conveyance of the property for road widening purposes. 8 The case was raffled to Branch 267.9

In an order dated March 9, 2001,10 the Regional Trial Court set the case for hearing on April 27, 2001, giving opportunity
to any interested person to appear, oppose, and show cause why respondent Ortigas' petition may not be granted. In the
same order, respondent Ortigas was directed to cause the publication of both the Regional Trial Court’s order and
respondent Ortigas' petition. The trial court also directed the Sheriff to serve copies of its order and respondent Ortigas'
petition to the Office of the Solicitor General, Office of the City Prosecutor, Department of Public Works and Highways,
City Engineer of Pasig, and the Register of Deeds of Pasig.

Despite due notice to the public, including the Office of the Solicitor General and the Department of Public Works and
Highways, no one appeared to oppose respondent Ortigas’ petition in the hearing on April 27, 2001. 11 Respondent Ortigas
was able to establish the jurisdictional facts of the case and was allowed to present evidence ex parte before the
appointed Commissioner, the Branch Clerk of Court, Atty. Edelyn M. Murillo. 12

Respondent Ortigas presented Mr. Romulo Rosete to support its allegations in its petition for authority to sell to the
government.13 Rosete was respondent Ortigas' liaison officer who represented respondent Ortigas in government
transactions.14 He testified that he was aware of respondent Ortigas' ownership of the 70,278-square-meter property in

1
Pasig and its subdivision for the purpose of designating an area for the C-5-Ortigas Avenue flyover project. 15 He also
testified that only 396 square meters of the 1,445-square-meter designated lot was actually utilized after the road had
been finished being constructed in 1999.16 This caused respondent Ortigas to further subdivide the designated property
into two lots.17 Rosete presented a certified true copy of the title of the utilized portion of the lot to prove respondent
Ortigas' ownership.18 He also alleged that respondent Ortigas was not compensated for the use of its property, and
respondent Ortigas was requested by the Department of Public Works and Highways to convey the utilized property to the
government.19 Hence, to facilitate the processing of its compensation, respondent Ortigas filed a petition with the Regional
Trial Court.20

Finding merit in respondent Ortigas' petition, the Regional Trial Court issued an order on June 11, 2001, authorizing the
sale of Lot 5-B-2-A-1 to petitioner Republic of the Philippines. 21

On June 27, 2001, petitioner Republic of the Philippines, represented by the Office of the Solicitor General, filed an
opposition, alleging that respondent Ortigas' property can only be conveyed by way of donation to the government, citing
Section 50 of Presidential Decree No. 1529, also known as the Property Registration Decree. 22

On June 29, 2001, petitioner Republic of the Philippines filed a motion for reconsideration of the Regional Trial Court
order dated June 11, 2001, reiterating its argument in its opposition. 23

In an order dated October 3, 2001, the Regional Trial Court denied petitioner Republic of the Philippines' motion for
reconsideration.24

Petitioner Republic of the Philippines filed a notice of appeal on October 24, 2001, which reads:

The REPUBLIC OF THE PHILIPPINES, by counsel, hereby respectfully serves notice of appeal to the Court of Appeals
from this Honorable Court's Order dated October 3, 2001 (copy of which was received by the Office of the Solicitor
General on October 15, 2001) on the ground that said Order is contrary to law and evidence. 25 (Emphasis supplied)

In its appellant's brief, petitioner Republic of the Philippines argued that the Regional Trial Court erred in granting
respondent Ortigas the authority to sell its property to the government because the lot can only be conveyed by donation
to the government.26

In a resolution dated October 14, 2005, the Court of Appeals dismissed petitioner Republic of the Philippines’ appeal on
the ground that an order or judgment denying a motion for reconsideration is not appealable. 27

Petitioner Republic of the Philippines filed a motion for reconsideration of the Court of Appeals' resolution. In its motion for
reconsideration, petitioner Republic of the Philippines pointed out that its reference in the notice of appeal to the October
3, 2001 order denying the motion for reconsideration of the trial court’s decision was merely due to inadvertence. In any
case, Rule 37, Section 9 of the Rules of Procedure contemplates as non-appealable only those orders which are not yet
final. The October 3, 2001 order was already final as it confirmed the June 11, 2001 judgment of the court. 28

In its resolution dated February 9, 2006, the Court of Appeals denied the motion for reconsideration on the ground of lack
of jurisdiction. The Court of Appeals noted that even if the order denying the motion for reconsideration was appealable,
the appeal was still dismissible for lack of jurisdiction because petitioner Republic of the Philippines raised only a question
of law.29

The issues for our consideration are the following:30

a) Whether the Court of Appeals gravely erred in denying petitioner Republic of the Philippines’ appeal based on
technicalities;

b) Whether the Court of Appeals gravely erred in dismissing the appeal from the trial court order granting
respondent Ortigas authority to sell the land to the Republic of the Philippines.

The Office of the Solicitor General argued that strict application of the rules of procedure overrides substantial justice, in
this case, to the detriment of petitioner Republic of the Philippines. 31

On the trial court's grant of authority to respondent Ortigas to sell its property to the government, the Office of the Solicitor
General stated while citing Young v. City of Manila 32 that respondent Ortigas' subdivision of its land for road widening

2
automatically withdrew the land from the commerce of man. 33 Further, a piece of land segregated by a private owner for
public use may only be conveyed by donation to the government based on Section 50 of Presidential Decree No.
1529.34 "Presently, said land is already being used by the public as part of the ‘widened’ road beside the C-5 [flyover] x x
x."35

In its comment dated July 25, 2006, respondent Ortigas argued that the Office of the Solicitor General committed a fatal
mistake when it brought by way of appeal the denial of its motion for reconsideration before the Court of Appeals. 36

This petition lacks merit.

Appeals from the Regional Trial Court to the Court of Appeals under Rule 41 must raise both questions of fact and law

Section 2 of Rule 50 of the Rules of Court provides that appeals taken from the Regional Trial Court to the Court of
Appeals raising only pure questions of law are not reviewable by the Court of Appeals. In which case, the appeal shall not
be transferred to the appropriate court. Instead, it shall be dismissed outright.

Appeals from the decisions of the Regional Trial Court, raising purely questions of law must, in all cases, be taken to the
Supreme Court on a petition for review on certiorari in accordance with Rule 45. 37 An appeal by notice of appeal from the
decision of the Regional Trial Court in the exercise of its original jurisdiction to the Court of Appeals is proper if the
appellant raises questions of fact or both questions of fact and questions of law. 38

There is a question of law when the appellant raises an issue as to what law shall be applied on a given set of
facts.39 Questions of law do "not involve an examination of the probative value of the evidence presented." 40 Its resolution
rests solely on the application of a law given the circumstances. 41 There is a question of fact when the court is required to
examine the truth or falsity of the facts presented. 42 A question of fact "invites a review of the evidence." 43

The sole issue raised by petitioner Republic of the Philippines to the Court of Appeals is whether respondent Ortigas’
property should be conveyed to it only by donation, in accordance with Section 50 of Presidential Decree No. 1529. This
question involves the interpretation and application of the provision. It does not require the Court of Appeals to examine
the truth or falsity of the facts presented. Neither does it invite a review of the evidence. The issue raised before the Court
of Appeals was, therefore, a question purely of law. The proper mode of appeal is through a petition for review under Rule
45. Hence, the Court of Appeals did not err in dismissing the appeal on this ground.

Nevertheless, we take time to emphasize that Rule 41, Section 1, paragraph (a) of the Rules of Court, which provides that
"[n]o appeal may be taken from [a]n order denying a x x x motion for reconsideration," is based on the implied premise in
the same section that the judgment or order does not completely dispose of the case. The pertinent portion of Rule 41,
Section 1 provides:

Section 1. Subject of appeal. – An appeal may be taken from a judgment or final order that completely disposes of the
case, or of a particular matter therein when declared by these Rules to be appealable.

In other words, what Section 1 of Rule 41 prohibits is an appeal taken from an interlocutory order. An interlocutory order
or judgment, unlike a final order or judgment, does "not completely dispose of the case [because it leaves to the court]
something else to be decided upon."44 Appeals from interlocutory orders are generally prohibited to prevent delay in the
administration of justice and to prevent "undue burden upon the courts." 45

Orders denying motions for reconsideration are not always interlocutory orders. A motion for reconsideration may be
considered a final decision, subject to an appeal, if "it puts an end to a particular matter," 46 leaving the court with nothing
else to do but to execute the decision.

"An appeal from an order denying a motion for reconsideration of an order of dismissal of a complaint is effectively an
appeal of the order of dismissal itself."47 It is an appeal from a final decision or order.

The trial court’s order denying petitioner Republic of the Philippines’ motion for reconsideration of the decision granting
respondent Ortigas the authority to sell its property to the government was not an interlocutory order because it
completely disposed of a particular matter. An appeal from it would not cause delay in the administration of justice.
Petitioner Republic of the Philippines’ appeal to the Court of Appeals, however, was properly dismissed because the
former used the wrong mode of appeal.

3
In any event, we resolve the substantive issue on whether respondent Ortigas may not sell and may only donate its
property to the government in accordance with Section 50 of Presidential Decree No. 1529.

Section 50 of Presidential Decree No. 1529 does not apply in a case that is the proper subject of an expropriation
proceeding

Respondent Ortigas may sell its property to the government. It must be compensated because its property was taken and
utilized for public road purposes.

Petitioner Republic of the Philippines insists that the subject property may not be conveyed to the government through
modes other than by donation. It relies on Section 50 of the Property Registration Decree, which provides that delineated
boundaries, streets, passageways, and waterways of a subdivided land may not be closed or disposed of by the owner
except by donation to the government. It reads:

Section 50. Subdivision and consolidation plans. Any owner subdividing a tract of registered land into lots which do not
constitute a subdivision project as defined and provided for under P.D. No. 957, shall file with the Commissioner of Land
Registration or the Bureau of Lands a subdivision plan of such land on which all boundaries, streets, passageways and
waterways, if any, shall be distinctly and accurately delineated.

If a subdivision plan, be it simple or complex, duly approved by the Commissioner of Land Registration or the Bureau of
Lands together with the approved technical descriptions and the corresponding owner’s duplicate certificate of title is
presented for registration, the Register of Deeds shall, without requiring further court approval of said plan, register the
same in accordance with the provisions of the Land Registration Act, as amended: Provided, however, that the Register of
Deeds shall annotate on the new certificate of title covering the street, passageway or open space, a memorandum to the
effect that except by way of donation in favor of the national government, province, city or municipality, no portion of any
street, passageway, waterway or open space so delineated on the plan shall be closed or otherwise disposed of by the
registered owner without the approval of the Court of First Instance of the province or city in which the land is situated.
(Emphasis supplied)

Petitioner Republic of the Philippines’ reliance on Section 50 of the Property Registration Decree is erroneous. Section 50
contemplates roads and streets in a subdivided property, not public thoroughfares built on a private property that was
taken from an owner for public purpose. A public thoroughfare is not a subdivision road or street.

More importantly, when there is taking of private property for some public purpose, the owner of the property taken is
entitled to be compensated.48

There is taking when the following elements are present:

1. The government must enter the private property;

2. The entrance into the private property must be indefinite or permanent;

3. There is color of legal authority in the entry into the property;

4. The property is devoted to public use or purpose;

5. The use of property for public use removed from the owner all beneficial enjoyment of the property. 49

All of the above elements are present in this case. Petitioner Republic of the Philippines’ construction of a road — a
permanent structure — on respondent Ortigas’ property for the use of the general public is an obvious permanent entry on
petitioner Republic of the Philippines’ part. Given that the road was constructed for general public use stamps it with
public character, and coursing the entry through the Department of Public Works and Highways gives it a color of legal
authority.

As a result of petitioner Republic of the Philippines’ entry, respondent Ortigas may not enjoy the property as it did before.
It may not anymore use the property for whatever legal purpose it may desire. Neither may it occupy, sell, lease, and
receive its proceeds. It cannot anymore prevent other persons from entering or using the property. In other words,
respondent Ortigas was effectively deprived of all the bundle of rights 50 attached to ownership of property.

4
It is true that the lot reserved for road widening, together with five other lots, formed part of a bigger property before it was
subdivided. However, this does not mean that all lots delineated as roads and streets form part of subdivision roads and
streets that are subject to Section 50 of the Property Registration Decree. Subdivision roads and streets are constructed
primarily for the benefit of the owners of the surrounding properties. They are, thus, constructed primarily for private use
— as opposed to delineated road lots taken at the instance of the government for the use and benefit of the general
public.

In this case, the lot was reserved for road widening at the instance of petitioner Republic of the Philippines. While the lot
segregated for road widening used to be part of the subdivided lots, the intention to separate it from the delineated
subdivision streets was obvious from the fact that it was located at the fringes of the original lot 51 — exactly at petitioner
Republic of the Philippines’ intended location for the road widening project. Moreover, petitioner Republic of the
Philippines’ intention to take the property for public use was obvious from the completion of the road widening for the C-5
flyover project and from the fact that the general public was already taking advantage of the thoroughfare.

Delineated roads and streets, whether part of a subdivision or segregated for public use, remain private and will remain as
such until conveyed to the government by donation or through expropriation proceedings. 52 An owner may not be forced to
donate his or her property even if it has been delineated as road lots because that would partake of an illegal taking. 53 He
or she may even choose to retain said properties. 54 If he or she chooses to retain them, however, he or she also retains
the burden of maintaining them and paying for real estate taxes.

An owner of a subdivision street which was not taken by the government for public use would retain such burden even if
he or she would no longer derive any commercial value from said street. To remedy such burden, he or she may opt to
donate it to the government. In such case, however, the owner may not force the government to purchase the property.
That would be tantamount to allowing the government to take private property to benefit private individuals. This is not
allowed under the Constitution, which requires that taking must be for public use. 55

Further, since the Constitution proscribes taking of private property without just compensation, 56 any taking must entail a
corresponding appropriation for that purpose. Public funds, however, may only be appropriated for public
purpose.57 Employment of public funds to benefit a private individual constitutes malversation. 58 Therefore, private
subdivision streets not taken for public use may only be donated to the government.

In contrast, when the road or street was delineated upon government request and taken for public use, as in this case, the
government has no choice but to compensate the owner for his or her sacrifice, lest it violates the constitutional provision
against taking without just compensation, thus:

Section 9. Private property shall not be taken for public use without just compensation. 59

As with all laws, Section 50 of the Property Registration Decree cannot be interpreted to mean a license on the part of the
government to disregard constitutionally guaranteed rights.

The right to compensation under Article III, Section 9 of the Constitution was put in place to protect the individual from and
restrain the State’s sovereign power of eminent domain, 60 which is the government’s power to condemn private properties
within its territory for public use or purpose. 61 This power is inherent and need not be granted by law. 62 Thus, while the
government’s power to take for public purpose is inherent, immense, and broad in scope, it is delimited by the right of an
individual to be compensated. In a nutshell, the government may take, but it must pay.

Respondent Ortigas, immediately upon the government’s suggestion that it needed a portion of its property for road
purposes, went so far as to go through the process of annotating on its own title that the property was reserved for road
purposes. Without question, respondent Ortigas allowed the government to construct the road and occupy the property
when it could have compelled the government to resort to expropriation proceedings and ensure that it would be
compensated. Now, the property is being utilized, not for the benefit of respondent Ortigas as a private entity but by the
public. Respondent Ortigas remains uncompensated. Instead of acknowledging respondent Ortigas’ obliging attitude,
however, petitioner Republic of the Philippines refuses to pay, telling instead that the property must be given to it at no
cost. This is unfair.

In the parallel case of Alfonso v. Pasay City 63 wherein Alfonso was deprived of his property for road purposes, was
uncompensated, and was left without any expropriation proceeding undertaken, this court said:

When a citizen, because of this practice loses faith in the government and its readiness and willingness to pay for what it
gets and appropriates, in the future said citizen would not allow the Government to even enter his property unless

5
condemnation proceedings are first initiated, and the value of the property, as provisionally ascertained by the Court, is
deposited, subject to his disposal. This would mean delay and difficulty for the Government, but all of its own making. 64

"There is nothing that can more speedily and effectively embitter a citizen and taxpayer against his Government and
alienate his faith in it, than an injustice and unfair dealing like the present case." 65

Title to the subject lot remains under respondent Ortigas’ name. The government is already in possession of the property
but is yet to acquire title to it. To legitimize such possession, petitioner Republic of the Philippines must acquire the
property from respondent Ortigas by instituting expropriation proceedings or through negotiated sale, which has already
been recognized in law as a mode of government acquisition of private property for public purpose. 66

In a negotiated sale, the government offers to acquire for public purpose a private property, and the owner may accept or
reject it. A rejection of the offer, however, would most likely merely result in the commencement of an expropriation
proceeding that would eventually transfer title to the government. Hence, the government's offer to acquire for public
purpose a private property may be considered as an act preparatory to an expropriation proceeding. Therefore, a private
owner's initiative to segregate a property to accommodate government needs saves the government from a long and
arduous expropriation proceeding. This is a commendable act on the part of the owner. It must be encouraged, not
dampened by threats of property deprivation without compensation.

Respondent Ortigas, which merely accommodated petitioner Republic of the Philippines' request, remains
uncompensated for the taking of its property. Respondent Ortigas could have brought action to recover possession of the
property, but it instead chose to sell its property to petitioner Republic of the Philippines. This is both fair and convenient
as the road construction had long been completed, and the road is already being utilized by the public.

Taking of private property without just compensation is a violation of a person's property right.1âwphi1 In situations where
the government does not take the trouble of initiating an expropriation proceeding, the private owner has the option to
compel payment of the property taken, when justified. The trial court should continue to proceed with this case to
determine just compensation in accordance with law.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED. The trial court is directed to
proceed with the case with due and deliberate dispatch in accordance with this decision.

SO ORDERED.

6
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-40411             August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.

Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.

MALCOLM, J.:

The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel
for the parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial
judge found that those properties were personal in nature, and as a consequence absolved the defendants from the
complaint, with costs against the plaintiff.

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has
operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon
which the business was conducted belonged to another person. On the land the sawmill company erected a building
which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict
concerning machines which were placed and mounted on foundations of cement. In the contract of lease between the
sawmill company and the owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by
the party of the second part shall pass to the exclusive ownership of the party of the first part without any
obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the
second part should leave or abandon the land leased before the time herein stipulated, the improvements and
buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had
expired: Provided, however, That the machineries and accessories are not included in the improvements which
will pass to the party of the first part on the expiration or abandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the
defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of
execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party
claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff
herein. Indeed the bidder, which was the plaintiff in that action, and the defendant herein having consummated the sale,
proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale
executed in its favor by the sheriff of Davao.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of
occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of
such persons is the appellee by assignment from the original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of —

1. Land, buildings, roads and constructions of all kinds adhering to the soil;

xxx     xxx     xxx

7
 5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in
connection with any industry or trade being carried on therein and which are expressly adapted to meet the
requirements of such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the
trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.

In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of
the sale of this property. It must further be pointed out that while not conclusive, the characterization of the property as
chattels by the appellant is indicative of intention and impresses upon the property the character determined by the
parties. In this connection the decision of this court in the case of Standard Oil Co. of New York  vs. Jaramillo ( [1923], 44
Phil., 630), whether obiter dicta or not, furnishes the key to such a situation.

It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery
which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith,
but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the
expiration or abandonment of the lease.

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that
machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property
or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such
person acted as the agent of the owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is
well known, it was in part said:

To determine this question involves fixing the nature and character of the property from the point of view of the
rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as a judgment creditor
of the Altagracia Company and the rights derived by them from the execution levied on the machinery placed by
the corporation in the plant. Following the Code Napoleon, the Porto Rican Code treats as immovable (real)
property, not only land and buildings, but also attributes immovability in some cases to property of a movable
nature, that is, personal property, because of the destination to which it is applied. "Things," says section 334 of
the Porto Rican Code, "may be immovable either by their own nature or by their destination or the object to which
they are applicable." Numerous illustrations are given in the fifth subdivision of section 335, which is as follows:
"Machinery, vessels, instruments or implements intended by the owner of the tenements for the industrial or
works that they may carry on in any building or upon any land and which tend directly to meet the needs of the
said industry or works." (See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable, may be immobilized.) So far as the subject-matter
with which we are dealing — machinery placed in the plant — it is plain, both under the provisions of the Porto
Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized
when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by
the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions
quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed out by
Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is
not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing
it by an act of immobilization to become the property of another. It follows that abstractly speaking the machinery
put by the Altagracia Company in the plant belonging to Sanchez did not lose its character of movable property
and become immovable by destination. But in the concrete immobilization took place because of the express
provisions of the lease under which the Altagracia held, since the lease in substance required the putting in of
improved machinery, deprived the tenant of any right to charge against the lessor the cost such machinery, and it
was expressly stipulated that the machinery so put in should become a part of the plant belonging to the owner
without compensation to the lessee. Under such conditions the tenant in putting in the machinery was acting but
as the agent of the owner in compliance with the obligations resting upon him, and the immobilization of the
machinery which resulted arose in legal effect from the act of the owner in giving by contract a permanent
destination to the machinery.

xxx     xxx     xxx

The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia
Company, being, as regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it
under the execution upon the judgment in their favor, and the exercise of that right did not in a legal sense conflict
with the claim of Valdes, since as to him the property was a part of the realty which, as the result of his obligations

8
 under the lease, he could not, for the purpose of collecting his debt, proceed separately against. (Valdes  vs.
Central Altagracia [192], 225 U.S., 58.)

Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid
by the appellant.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17870             September 29, 1962

MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City, respondents.

Binamira, Barria and Irabagon for petitioner.

Vicente E. Sabellina for respondents.

LABRADOR, J.:

This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the
petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment
hereunder referred to.

Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment.
Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty.
The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals
a petition for the review of the assessment.

In the Court of Tax Appeals the parties submitted the following stipulation of facts:

Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:

1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over
its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission;

2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations
at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province;

3. That the machineries sought to be assessed by the respondent as real properties are the following:

(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";

(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";

(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";

(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";

(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";

(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F";
and

(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".

9
 4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs
which form part of this agreed stipulation of facts;

5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a
repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks
are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land
transportation business it operates;

6. That these machineries have never been or were never used as industrial equipments to produce finished
products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for
business or commercial purposes for which petitioner has never engaged in, to date.1awphîl.nèt

The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for
reconsideration, petitioner brought the case to this Court assigning the following errors:

1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned
assessments are valid; and that said tools, equipments or machineries are immovable taxable real properties.

2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that
pursuant thereto the movable equipments are taxable realties, by reason of their being intended or destined for
use in an industry.

3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's power to
assess and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act
No. 521; and

4. The Tax Court erred in denying petitioner's motion for reconsideration.

Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5
of Article 415 of the New Civil Code which provides:

Art. 415. — The following are immovable properties:

xxx     xxx     xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and  which tend directly to meet the needs of
the said industry or works. (Emphasis ours.)

Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be
moved around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the
Supreme Court said:

Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to "machinery,
liquid containers, 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 and industry, converted them into real property by
reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character
because, as essential and principle elements of a sugar central, without them the sugar central would be unable
to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in
character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has
been established must necessarily be permanent. (Emphasis ours.)

So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements"
of an industry or works without which such industry or works would be "unable to function or carry on the industrial
purpose for which it was established." We may here distinguish, therefore, those movable which become immobilized by

10
destination because they are essential and principal elements in the industry for those which may not be so considered
immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually
found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered
immobilized by destination, for these businesses can continue or carry on their functions without these equity comments.
Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials,
and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and
soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery
trucks and adding machines which they usually own and use and are found within their industrial compounds are merely
incidental and retain their movable nature.

Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle
municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely
incidentals — acquired as movables and used only for expediency to facilitate and/or improve its service. Even without
such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before
the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is
repaired or serviced in another shop belonging to another.

The law that governs the determination of the question at issue is as follows:

Art. 415. The following are immovable property:

xxx     xxx     xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of
the said industry or works; (Civil Code of the Phil.)

Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on  in
a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers,
and instruments or implements" are found in a building constructed on the land. A sawmill would also be installed in a
building on land more or less permanently, and the sawing is conducted in the land or building.

But in the case at bar the equipments in question are destined only to repair or service the transportation business, which
is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not,
therefore, be deemed real property.

Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the
petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a specified
land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the Civil Code.

WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared
not subject to assessment as real estate for the purposes of the real estate tax. Without costs.

So ordered.

11
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-50466 May 31, 1982

CALTEX (PHILIPPINES) INC., petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents.

AQUINO, J.:

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 described the said equipment and machinery in this manner:

A gasoline service station is a piece of lot where a building or shed is erected, a water tank if there is any
is placed in one corner of the lot, car hoists are placed in an adjacent shed, an air compressor is attached
in the wall of the shed or at the concrete wall fence.

The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more
or less, a few meters away from the shed. This is done to prevent conflagration because gasoline and
other combustible oil are very inflammable.

This underground tank is connected with a steel pipe to the gasoline pump and the gasoline pump is
commonly placed or constructed under the shed. The footing of the pump is a cement pad and this
cement pad is imbedded in the pavement under the shed, and evidence that the gasoline underground
tank is attached and connected to the shed or building through the pipe to the pump and the pump is
attached and affixed to the cement pad and pavement covered by the roof of the building or shed.

The building or shed, the elevated water tank, the car hoist under a separate shed, the air compressor,
the underground gasoline tank, neon lights signboard, concrete fence and pavement and the lot where
they are all placed or erected, all of them used in the pursuance of the gasoline service station business
formed the entire gasoline service-station.

As to whether the subject properties are attached and affixed to the tenement, it is clear they are, for the
tenement we consider in this particular case are (is) the pavement covering the entire lot which was
constructed by the owner of the gasoline station and the improvement which holds all the properties
under question, they are attached and affixed to the pavement and to the improvement.

The pavement covering the entire lot of the gasoline service station, as well as all the improvements,
machines, equipments and apparatus are allowed by Caltex (Philippines) Inc. ...

The underground gasoline tank is attached to the shed by the steel pipe to the pump, so with the water
tank it is connected also by a steel pipe to the pavement, then to the electric motor which electric motor is
placed under the shed. So to say that the gasoline pumps, water pumps and underground tanks are
outside of the service station, and to consider only the building as the service station is grossly erroneous.
(pp. 58-60, Rollo).

12
The said machines and equipment are loaned by Caltex to gas station operators under an appropriate lease agreement or
receipt. It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and
equipment in good condition as when received, ordinary wear and tear excepted.

The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment
installed therein. Caltex retains the ownership thereof during the term of the lease.

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 composed of Secretary of Finance Cesar Virata as chairman, Acting Secretary of Justice Catalino
Macaraig, Jr. and Secretary of Local Government and Community Development Jose Roño, held in its decision of June 3,
1977 that the said machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real
Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974, and that the definitions of real
property and personal property in articles 415 and 416 of the Civil Code are not applicable to this case.

The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) 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 (p. 16, Rollo).

The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate jurisdiction over this case is not
correct. When Republic act No. 1125 created the Tax Court in 1954, there was as yet no Central Board of Assessment
Appeals. Section 7(3) of that law in providing that the Tax Court had jurisdiction to review by appeal decisions of provincial
or city boards of assessment appeals had in mind the local boards of assessment appeals but not the Central Board of
Assessment Appeals which under the Real Property Tax Code has appellate jurisdiction over decisions of the said local
boards of assessment appeals and is, therefore, in the same category as the Tax Court.

Section 36 of the Real Property Tax Code provides that the decision of the Central Board of Assessment Appeals shall
become final and executory after the lapse of fifteen days from the receipt of its decision by the appellant. Within that
fifteen-day period, a petition for reconsideration may be filed. The Code does not provide for the review of the Board's
decision by this Court.

Consequently, the only remedy available for seeking a review by this Court of the decision of the Central Board of
Assessment Appeals is the special civil action of certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.

The issue is whether the pieces of gas station equipment and machinery already enumerated are subject to realty tax.
This issue has to be resolved primarily under the provisions of the Assessment Law and the Real Property Tax 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.

The Code contains the following definitions in its section 3:

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 adapt it for new or further purposes.

m) 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

13
 the installations and appurtenant service facilities, together with all other equipment designed for or
essential to its manufacturing, industrial or agricultural purposes (See sec. 3[f], Assessment Law).

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).

That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes real
property by destination. In the Davao Saw Mills case the question was whether the machinery mounted on foundations of
cement and installed by the lessee on leased land should be regarded as real property for purposes of execution of a
judgment against the lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff's
action. (Compare with Machinery & Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case
machinery was treated as realty).

Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas station
and pavement (which are indubitably taxable realty) should be subject to the realty tax. This question is different from the
issue raised in the Davao Saw Mill case.

Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty
(84 C.J.S. 181-2, Notes 40 and 41). "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" (Standard Oil Co. of New York vs. Jaramillo,
44 Phil. 630, 633).

This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where
Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles
from taxation. The steel towers were considered personalty because they were attached to square metal frames by
means of bolts and could be moved from place to place when unscrewed and dismantled.

Nor are Caltex's gas station equipment and machinery the same as tools and equipment in the repair shop of a bus
company which were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil.
501).

The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city assessor's is
imposition of the realty tax on Caltex's gas station and equipment.

WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are affirmed. The
petition for certiorari is dismissed for lack of merit. No costs.

SO ORDERED.

14