12. BOARD OF ASSESSMENT APPEALS VS.

MERALCO
10 SCRA 68

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.

1. Caltex Philippines Inc. vs. Board of Assessment Appeals, 114 SCRA 297
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”

2. Manila Electric Co. vs. Central Board of Assessment Appeals, 114 SCRA 273
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.

3. Hongkong and Shanghai Bank vs. Aldecoa & Co., 33 Phil. 255
FACTS:
Aldecoa and Co. obtained a credit worth P450,000 from HSBC secured by a mortgage of shares and real properties. On
Dec. of 1906, the firm of Aldecoa and Co. went into liquidation and obtained another P50,000 from the bank upon the
condition that this would be covered by the previous mortgage. In October 1908, Joaquin and Zoilo Ibañez de Aldecoa
filed an action against the bank for the purpose of annulling the mortgages executed by them on the grounds that they
were minors at the time incapable of creating a valid mortgage upon their real property. The Court of First Instance
dismissed the complaint as to Joaquin upon the ground that he had ratified those mortgages after becoming of age, but
entered a judgment annulling said mortgages with respect to Zoilo. Both parties appealed from this decision and the
case was still pending in the Supreme Court when HSBC filed an action against Aldecoa and Co. and its partners for
the collection of a sum of money and foreclosure of the mortgaged properties. Judgement was entered in favor of the
bank.
 
ISSUE:
Whether or not the action filed by the bank should be dismissed on the ground of lis pendens.
RULING:
No. A plea of the pendency of a prior action is not available unless the prior action is of such a character that, had a
judgment been rendered therein on the merits, such a judgment would be conclusive between the parties and could be
pleaded in bar of the second action.
In the instant case, the former suit is to annul the mortgages while the other one is for the foreclosure. If the final
judgment in the former action is that the mortgages be annulled, such an adjudication will deny the right of the bank to
foreclose the mortgages. But a valid decree will not prevent the bank from foreclosing them. In such an event, the
judgment would not be a bar to the prosecution of the present action. The rule is not predicated upon such a
contingency. It is applicable, between the same parties, only when the judgment to be rendered in the action first
instituted will be such that, regardless of which party is successful, it will amount to res adjudicata against the second
action.

4. Rabuco vs. Villegas, February 28, 1974

Doctrine: When a property is owned by a political subdivision in its public and

governmental capacity, the Congress has absolute control as distinguished from
patrimonial property owned by it in its private or proprietary capacity of which it could not
be deprived without due process and without just compensation.

Facts: In the early morning of April 19, 1970, a large fire of undetermined origin gutted
the Malate area including the lot on which petitioners had built their homes and
dwellings. Respondents city officials then took over the lot and kept petitioners from
reconstructing or repairing their burned dwellings. At petitioners’ instance, the Court
issued on June 17, 1970 a temporary restraining order enjoining respondents city
officials “from performing any act constituting an interference in or disturbance of herein
petitioners’ possession of Lot No. 21-B, Block No. 610, of the Cadastral Survey of the
City of Manila” as safeguarded them under the Court’s subsisting preliminary injunction
of August 17, 1965 pursuant to RA 3120.

Issue: Whether RA 3120 is unconstitutional as it infringes the right to due process.

Held: No. The Court herein upholds the constitutionality of Republic Act 3120 on the
strength of the established doctrine that the subdivision of communal land of the State
(although titled in the name of the municipal corporation) and conveyance of the
resulting subdivision lots by sale on installment basis to bona fide occupants by
Congressional authorization and disposition does not constitute infringements of the due
process clause or the eminent domain provisions of the Constitution but operates simply
as a manifestation of the legislature’s right of control and power to deal with State
property.

5. Macasiano vs. Diokno, August 10, 1992

Facts: On June 13, 1990, the municipality of Paranaque passed an ordinance

authorizing the closure of some streets located at Baclaran, Paranaque, Metro Manila
and the establishment of a flea market thereon. By virtue of this Paranaque Mayor Ferrer
was authorized to enter into a contract to any service cooperative for the establishment,
operation, maintenance and management of flea market and/or vending areas. Because
of this purpose, respondent Palanyag entered into an agreement with the municipality of
Paranaque with the obligation to remit dues to the treasury. Consequently, market stalls
were put up by respondent Palanyag on the said streets.

          On September 30, 1990, Brig. Gen Macasiano, PNP Superintendent of

Metropolitan Traffic Command ordered the destruction and confiscation of the stalls.
These stalls were later returned to Palanyag. Petitioner then sent a letter to Palanyag
giving the latter 10 days to discontinue the flea market otherwise the market stalls shall
be dismantled. Hence, respondents filed with the court a joint petition for prohibition and
mandamus with damages and prayer for preliminary injunction, to which the petitioner
filed his memorandum/opposition to the issuance of the writ of preliminary injunction.
The court issued a temporary restraining order to enjoin petitioner from enforcing his
letter pending the hearing on the motion for writ of preliminary injunction.

Issue: Whether an ordinance issued by the municipality of Paranaque authorizing the

lease and use of public streets or thoroughfares as sites for flea market is valid?

Held: Article 424 lays down the basic principle that properties of public domain devoted
to public use and made available to the public in general are outside the commerce of
man and cannot be disposed or leased by the local government unit to private persons.
Aside from the requirement of due process, the closure of the road should be for the sole
purpose of withdrawing the road or other public property from public use when
circumstances show that such property is no longer intended or necessary for public use
or public service. When it is already withdrawn from public use, the property becomes
patrimonial property of the local government unit concerned. It is only then that
respondent municipality can use or convey them for any purpose for which other real
property belonging to the local unit concerned might lawfully used or conveyed.

          Those roads and streets which are available to the public in general and ordinarily
used for vehicular traffic are still considered public property devoted to public use. In
such case, the local government has no power to use it for another purpose or to
dispose of or lease it to private persons. Hence the ordinance is null and void.

6. Republic vs. CA, November 14, 1997

 7. Chavez vs. PEA, July 9, 2002

Fact:
In 1973, the Comissioner on Public Highways entered into a contract to reclaim areas of
Manila Bay with the Construction and Development Corportion of the Philippines
(CDCP).

PEA (Public Estates Authority) was created by President Marcos under P.D. 1084,
tasked with developing and leasing reclaimed lands. These lands were transferred to the
care of PEA under P.D. 1085 as part of the Manila Cavite Road and Reclamation Project
(MCRRP). CDCP and PEA entered into an agreement that all future projects under the
MCRRP would be funded and owned by PEA.

By 1988, President Aquino issued Special Patent No. 3517 transferring lands to PEA. It
was followed by the transfer of three Titles (7309, 7311 and 7312) by the Register of
Deeds of Paranaque to PEA covering the three reclaimed islands known as the
FREEDOM ISLANDS.

Subsquently, PEA entered into a joint venture agreement (JVA) with AMARI, a Thai-
Philippine corporation to develop the Freedom Islands. Along with another 250 hectares,
PEA and AMARI entered the JVA which would later transfer said lands to AMARI. This
caused a stir especially when Sen. Maceda assailed the agreement, claiming that such
lands were part of public domain (famously known as the “mother of all scams”).

Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus, a writ of
preliminary injunction and a TRO against the sale of reclaimed lands by PEA to AMARI
and from implementing the JVA. Following these events, under President Estrada’s
admin, PEA and AMARI entered into an Amended JVA and Mr. Chaves claim that the
contract is null and void.

Issue:
w/n: the transfer to AMARI lands reclaimed or to be reclaimed as part of the stipulations
in the (Amended) JVA between AMARI and PEA violate Sec. 3 Art. XII of the 1987
Constitution
w/n: the court is the proper forum for raising the issue of whether the amended joint
venture agreement is grossly disadvantageous to the government.

Held:
On the issue of Amended JVA as violating the constitution:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now
covered by certificates of title in the name of PEA, are alienable lands of the public
domain. PEA may lease these lands to private corporations but may not sell or transfer
ownership of these lands to private corporations. PEA may only sell these lands to
Philippine citizens, subject to the ownership limitations in the 1987 Constitution and
existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural
resources of the public domain until classified as alienable or disposable lands open to
disposition and declared no longer needed for public service. The government can make
such classification and declaration only after PEA has reclaimed these submerged
areas. Only then can these lands qualify as agricultural lands of the public domain,
which are the only natural resources the government can alienate. In their present state,
the 592.15 hectares of submerged areas are inalienable and outside the commerce of
man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership
of 77.34 hectares110 of the Freedom Islands, such transfer is void for being contrary to
Section 3, Article XII of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156
hectares111 of still submerged areas of Manila Bay, such transfer is void for being
contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of
natural resources other than agricultural lands of the public domain.

PEA may reclaim these submerged areas. Thereafter, the government can classify the
reclaimed lands as alienable or disposable, and further declare them no longer needed
for public service. Still, the transfer of such reclaimed alienable lands of the public
domain to AMARI will be void in view of Section 3, Article XII of the 1987Constitution
which prohibits private corporations from acquiring any kind of alienable land of the
public domain.

8. Villarico vs. Sarmiento, November 11, 2004

FACTS:

Spouses Villarico sought for the confirmation of title over a parcel of land to which they
allege that they absolutely own the land.  This was opposed to by a person who posed
himself also to be the rightful owner of the land, as well as by the Director of Forestry
who said that the subject land is part of forest  land  and  may  not  be  appropriated.   
Trial  and  appellate  court dismissed application of petitioners.

ISSUE:
Whether or not the plaintiff-appellant has acquired a right of way over the land of the
government which is between his property and the ninoy aquino avenue.

RULING:
There  has  been  no  showing  that  a  declassification  has  been  made  of  the land  in 
question  as  disposable  or  alienable.    And  the  record  indeed disclosed  that 
applicants  have  not  introduced  any  evidence  which  would have led the court a quo
to rule otherwise.

Forest lands cannot be owned by private persons.  Possession thereof, no matter  how 
long  doesn’t  ripen  to  a  registrable  title.    The  adverse possession which may be the
basis of a grant or title or confirmation of an imperfect title refers only to alienable or
disposable portions of the public domain.