PNB vs CA – 82 SCAD 472

FACTS:
Marinduque Mining and Industrial Corporation (MMIC) was founded by Jesus S.
Cabarrus. In 1953, Cabarrus established J. Cabarrus, Inc. which was renamed Industrial
Enterprises, Inc. (IEI). Cabarrus was the President of both companies.

IEI entered into a coal operating contract with the Bureau of Energy Development
(BED), with Cabarrus and then Minister of Energy Geronimo Velasco as signatories. The
contract covered two coal blocks in Barrio Carbon, Magsaysay, Eastern Samar. IEI filed an
application for another coal operating contract with these 3 newly discovered coal blocks
adjacent to the first two. All of these coal blocks were collectively known as the Giporlos Coal
Project. Minister Velasco informed Cabarrus that IEI's application for exploration of the three
coal blocks had been disapproved and that, instead, the contract would be awarded to MMIC.
Thereafter, MMIC and IEI respectively, entered into a Memorandum of Agreement (MOA)
whereby IEI assigned to MMIC all its rights and interests under the coal operating contract.
The MOA also said that MMIC would reimburse IEI for the expenses they had incurred on the
project before it assigned its rights to MMIC.

MMIC took over possession and control of the coal blocks even before the MOA was
finalized. However, instead of continuing the exploration and development work, MMIC
completely stopped all works and dismissed the work force thereon, leaving only a caretaker
crew. Consequently, IEI made written demands to MMIC, pursuant to the MOA, for the
reimbursement of all costs and expenses amounting to P31.66 million as audited.

In view of MMIC's failure to comply with its obligations under the MOA, IEI filed a
complaint against MMIC for rescission of the MOA and damages. Meanwhile, for various credit
accommodations secured from the Philippine National Bank (PNB), as well as from the DBP,
MMIC entered into a Mortgage Trust Agreement (MTA) whereby it constituted a mortgage of its
assets in favor of PNB and DBP.

MMIC defaulted in the payment of its loan obligation with PNB and DBP. As a
consequence thereof, PNB and DBP simultaneously filed in the provinces of Rizal, Samar,
Negros and Surigao, joint petitions for sale on foreclosure of the MMIC assets including those in
the Bagacay and Giporlos Coal Projects in Samar. IEI then advised PNB and DBP that the
purchase price of the Giporlos Coal Project that it had assigned to MMIC per the MOA, was still
unpaid. However, despite said notice, the foreclosure sale proceeded as scheduled and the
various machineries and equipment of MMIC were sold to PNB as the sole bidder for
P33,940,940.00.

In its letter to PNB and DBP, IEI requested that the movable properties in the Giporlos
Coal Project, be excluded from the foreclosed assets of MMIC as the purchase price thereof
under the MOA had remained unpaid. IEI further informed PNB and DBP that a suit for
rescission of the assignment of the Giporlos Coal Project to MMIC (and damages) had been filed
before the Regional Trial Court of Makati. Because PNB and DBP refused to return MMIC’s
foreclosed assets that were unpaid, IEI included PNB as a defendant in the complaint. The lower
court rendered the decision of November 27, 1992 finding MMIC and PNB jointly and severally
liable to IEI for damages and declaring null and void the extrajudicial foreclosure sale in
Catbalogan, Samar.

ISSUE:
Whether or not MMIC owned the chattels involved at the time of foreclosure?

HELD:

YES. MMIC owned the chattels involved at the time of the foreclosure.

Privy between MMIC and private respondent was established by the execution of the MOA.
The MOA was an assignment of private respondent's "rights and interests on the Coal Operating
Contract" thereof. In its most general and comprehensive sense, an assignment is "a transfer or
making over to another of the whole of any property, real or personal, in possession or in action,
or of any estate or right therein. It includes transfers of all kinds of property, and is peculiarly
applicable to intangible personal property and, accordingly, it is ordinarily employed to describe
the transfer of non-negotiable choses in action and of rights in or connected with property as
distinguished from the particular item or property."

However, a close scrutiny of the contract reveals that the MOA includes all tangible
things found in the coal-bearing land. Unquestionably, rights may be assigned as they are
intangible personal properties. The term "interests," on the other hand, is broader and more
comprehensive. It is practically synonymous with the word "estate" which is the totality of
interest that a person has from absolute ownership down to naked possession. An "interest" in
land is the legal concern of a person in the thing or property, or in the right to some of the
benefits or uses from which the property is inseparable.

That the MOA conveyed to MMIC more than the title to or rights over the coal operating
contract but also the "things" covered thereby, is manifest in the manner by which the parties
implemented the MOA. While the MOA was expressly a contract for the assignment of
rights and interests, it is in fact a contract of sale. By the MOA, private respondent obligated
itself to transfer ownership of the coal operating contract and the properties found therein.

It is important to note that IEI has insisted on the payment of MMIC's obligations under the
MOA by attaching a statement of account to most of its demand letters. In assignments, a
consideration is not always a requisite, unlike in sales. Since the MOA was actually a contract of
sale, MMIC acquired ownership over the Giporlos Project when IEI delivered it to MMIC. In
other words, payment of the purchase price is not essential to the transfer of ownership as
long as the property sold has been delivered. Consequently, the properties in the Giporlos
Project were, therefore, owned by MMIC notwithstanding its failure to pay the consideration
stipulated in the MOA.
 Leung Yee vs Strong Machinery – 37 Phil 644

Facts:
Leung Yee’s company bought cleaning equipment from Strong Machinery company. As
payment, it executed a chattel mortgage in favour of the defendant on its building in which the
machinery was installed. This mortgage made no reference as to the land from where the
property was located. Since the plaintiff’s company, was not able to pay, the building together
with the equipment attached to it was foreclosed and the respondent was able to possess the
property. Hence, this action by the plaintiff to recover possession of the building.
Issue: Whether or not the building can be classified as a real property, so as to subject it to a real
estate mortgage
Held:
The disputed building was considered by the court as Real property.
The mere fact that the parties seem to have dealt with it separately and apart from the land would
change its character as real property. Hence, such mortgage would still be a real estate mortgage
for the building that served as a security and the executed chattel mortgage and its consequences
cannot be said to have any legal effect.

PRUDENTIAL BANK, petitioner,
vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First
Instance of Zambales and Olongapo City; FERNANDO MAGCALE & TEODULA
BALUYUT-MAGCALE, respondents.
G.R. No. L-50008 August 31, 1987
Facts:
Spouses Magcale secured a loan from Prudential Bank. As security, respondent’s spouses
executed a real estate mortgage, their residential building as security. Since the respondents was
not able to fulfil their obligation, the security was extrajudiciaily foreclosed and was eventually
sold in a public auction. Hence this case, to assail the validity of the mortgage and to recover the
foreclosed land.
Issue:
Whether or not a real estate mortgage can be instituted on the building of a land belonging to
another
Held:
While it is true that a mortgage of land necessarily includes in the absence of  stipulation  of  the 
improvements  thereon,  buildings,  still  a  building  in itself may be mortgaged by itself apart
from the land on which it is built.  Such a mortgage would still be considered as a REM for the
building would still be considered as immovable property even if dealt with separately and apart
from the land.  The original mortgage on the building and right to occupancy of the land was 
executed  before  the  issuance  of  the  sales  patent  and  before  the government  was  divested 
of  title  to  the  land.    Under  the  foregoing,  it  is evident  that  the  mortgage  executed  by 
private  respondent  on  his  own building was a valid mortgage.

Biblia Toledo-Banaga and Jovita Tan v CA, GR nO, 127941, January 28, 1989 (302 SCRA 331)
Buyer in Good Faith
Facts:
Petitioner Banaga filed an action for redemption of her property which was earlier foreclosed and
later sold in a public auction to the respondent. The trial court declared petitioner to have lost her
right for redemption and ordered that certificate of title be issued to the respondent which the
petitioner caused an annotation of notice of lis pendens to the title. On appeal, the CA reversed
the decision and allowed the petitioner to redeem her property within a certain period. Banaga
tried to redeem the property by depositing to the trial court the amount of redemption that was
financed by her co-petitioner Tan. Respondent opposed in that she made the redemption beyond
the period ordered by the court. The lower court however upheld the redemption and ordered the
Register of Deeds to cancel the respondent’s title and issue a new title in favor of the petitioner.
In a petition for certiorari before the CA by the respondent, another notice of lis pendens was
annotated to the title. CA issued a temporary restraining order to enjoin the execution of the
court order. Meanwhile, Banaga sold the property to Tan in the absolute deed of sale that
mentions the title of the property still in the name of the respondent which was not yet cancelled.
Despite the lis pendens on the title, Tan subdivided the lot into a subdivision plan which she
made not in her own name but that of the respondent. Tan then asked the Register of Deeds to
issue a new title in her name. New titles were issued in Tan’s name but carried the annotation of
the two notices of lis pendens. Upon learning the new title of Tan the respondent impleaded her
in his petition. The CA later sets aside the trial court’s decision and declared the respondent as
the absolute owner of the property for failure of the petitioner to redeem the property within the
period ordered by the court. The decision was final and executory and ordered the Register of
Deeds to reinstate the title in the name of the respondent. The Register of Deeds refused alleging
that Tan’s certificate must be surrendered first. The respondent cited the register of deeds in
contempt but the court denied contending that the remedy should be consultation with the Land
Registration Commissioner and in its other order denied the motion of respondent for writ of
possession holding that the remedy would be to a separate action to declare Tan’s title as void. In
its motion for certiorari and mandamus to the CA, the court set aside the two assailed orders of
the trial court and declared the title of Tan as null and void and ordered the Register of Deeds to
reinstate the title in the name of the respondent. Petitioners now argued that Tan is a buyer in
good faith and raised the issue on ownership of the lot.
Issue:
Whether or not petitioner Tan is a buyer in good faith?
Ruling:
The court held that Tan is not a buyer in good faith because when the property was sold to her
she was aware of the interest of the respondent over the property. She even furnished the amount
used by Banaga to redeem the property. When she bought the property from Banaga she knows
that at that time the property was not registered to the seller’s name. The deed of sale mentioned
the title which was named to the respondent. Moreover the title still carries 2 notices of lis
pendens. Tan therefore cannot feign ignorance on the status of the property when she bought it.
Because Tan was also impleaded as a party to the litigation, she is bound by the decision
promulgated to the subject of such litigation. It is a settled rule that the party dealing with a
registered land need not go beyond the Certificate of Title to determine the true owner thereof so
as to guard or protect her interest. She has only to look and rely on the entries in the Certificate
of Title. By looking at the title Tan would know that the certificate is in the name of respondent.
Being a buyer in bad faith, Tan does not acquire any better right over the property. The
adjudication of the ownership in favor to the respondent includes the delivery of the possession
by the defeated party to the respondent.

DAVAO SAW MILL CO. VS. CASTILLO

G.R. No. L-40411     August 7, 1935
MALCOLM, J.:

FACTS:
Petitioner is the holder of a lumber concession.  It operated a sawmill on a land, which it doesn’t
own.  Part of the lease agreement was a stipulation in which after the lease agreement, all
buildings and improvements would pass to the ownership of the lessor, which would not include
machineries and  accessories.    In  connection  to  this,  petitioner  had  in  its  sawmill
machineries and other equipment wherein some were bolted in foundations of cement.  
Issue:
Whether or not the trial judge erred in finding that the subject properties are personal in nature.
HELD:
The machinery must be classified as personal property.

The lessee placed the machinery in the building erected on land belonging to another, with the
understanding that the machinery was not included in the improvements which would pass to the
lessor on the expiration of the lease  agreement.    The  lessee  also  treated  the  machinery  as 
personal
property  in  executing  chattel  mortgages  in  favor  of  third  persons.    The machinery was
levied upon by the sheriff as personalty pursuant to a writ of execution obtained without any
protest being registered.

Furthermore, machinery only becomes immobilized when placed in a plant by the owner of the
property or plant, but not when so placed by a tenant, usufructuary,  or  any  person  having 
temporary  right,  unless  such  person acted as the agent of the owner.

G.R. No. L-41643 July 31, 1935

BERKENKOTTER vs. CU UNJIENG
61 Phil 663
Facts:
The Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga,
obtained from 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. In
order to
carryout this plan, 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.
The 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, on
April 27,
1927, together with whatever additional equipment acquired with said loan. B.A. Green failed to
obtain
said loan.
Issues:
Whether or not the additional machinery and equipment as improvement can be permanently
attached to a mortgage of the sugar central.
Held:
The Court ruled 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.

G.R. No. L-17500, May 16, 1967

People's Bank and Trust Co. and Atlantic Gulf and Pacific Co. of Manila
vs Dahican Lumber Company, Dahican American Lumber Corporation and Connell Bros. Co.
Ponente: Dizon

Facts:

September 1948, Atlantic, a West Virginia corporation licensed to do business in the Philippines
sold and assigned all its rights in the Dahican Lumber concession to Dahican Lumber Company.
To fully paid and develop the concession, DALCO obtained a loan from the bank evidence by 5
promissory notes of $50K maturing on different dates.

As security for the payment of loans, DALCO mortgage five lands in Camarines Norte together
with the buildings existing thereon and other personal properties located in its place of business.
Another mortgage on the same properties was made in favor of Atlantic to secure the payment of
the unpaid balance.

Upon DALCO's and DAMCO's failure to pay the fifth promissory note upon its maturity, the
BANK paid the same to the Export-Import Bank of Washington D.C. and the latter assigned to
the former its credit and the first mortgage securing it. Subsequently, the BANK gave DALCO
and DAMCO up to April 1,1953 to pay the overdue promissory note. DALCO purchased various
machineries, equipment, spare parts and supplies in addition to, or in replacement of some of
those already owned and used by it on the date aforesaid. Pursuant to the provision of the
mortgage deeds quoted heretofore regarding "after acquired properties", the BANK requested
DALCO to submit complete lists of said properties but the latter failed to do so. On December
16, 1952, the Board of Directors of DALCO in a special meeting called for the purpose, passed a
resolution agreeing to rescind the alleged sales of equipment, spare parts and supplies by
CONNELL and DAMCO to it.On January 23, 1953, the BANK, in its own behalf and that of
ATLANTIC, demanded that said agreements be cancelled but CONNELL and DAMCO refused
to do so. As a result, on February 12,1953, ATLANTIC and the BANK, commenced foreclosure
proceedings in the Court of First Instance of Camarines Norte against DALCO and DAMCO.

Issues:
(1) Whether acquired properties are covered by the subject of deeds of mortgage subject of
foreclosure (2) are the mortgages valid? what is the effect?

Held:
(1) All property of every nature and description taken in exchange or replacement, as well as all
buildings, machineries, fixtures, tools, equipment, and other property that the mortgagor may
acquire, construct, install, attach; or use in, to upon, or in connection with the premises — that is,
its lumber concession — "shall immediately be and become subject to the lien" of both
mortgages in the same manner and to the same extent as if already included therein at the time of
their execution.

As the language thus used leaves no room for doubt as to the intention of the parties, we see no
useful purpose in discussing the matter extensively. Suffice it to say that the stipulation referred
to is common, and We might say logical, in all cases where the properties given as collateral are
perishable or subject to inevitable wear and tear or were intended to be sold, or to be used —
thus becoming subject to the inevitable wear and tear — but with the understanding — express
or implied — that they shall be replaced with others to be thereafter acquired by the mortgagor.

Article 415 does not define real property but enumerates what are considered as such, among
them being machinery, receptacles, instruments or replacements intended by owner of the
tenement for an industry or works which may be carried on in a building or on a piece of land,
and shall tend directly to meet the needs of the said industry or works. On the strength of the
above-quoted legal provisions, the lower court held that inasmuch as "the chattels were placed in
the real properties mortgaged to plaintiffs, they came within the operation of Art. 415, paragraph
5 and Art. 2127 of the New Civil Code".

(2) As regard the proceeds obtained from the sale of the of after acquired properties" and the
"undebated properties", it is clear, in view of our opinion sustaining the validity of the mortgages
in relation thereto, that said proceeds should be awarded exclusively to the plaintiffs in payment
of the money obligations secured by the mortgages under foreclosure. 

G.R. No. L-15334, January 31, 1964

Board of Assessment Appeals
vs Manila Electronic Company
Ponente: Paredes

Facts:

October 1902, Philippine Commission enacted Act. No. 484 authorizing the Municipal Board of
Manila to grant a franchise to operate an electric street railway and electric light in Manila to the
most favorable bid. Swift was awarded the franchise on March 1903.

Meralco's electric power is transmitted by means of electric transmission wires which are
fastened to insulators on steel towers.

November 1955, city assessor of QC declared the steel towers (Espana, Kamuning and Kamias
towers) for real property tax. After the denial of Meralco's petition to cancel the declarations, an
appeal was taken to the Board of Assessment Appeals of QC, which required Meralco to pay real
property tax for year 1952-1956. Meralco paid the amount under protest, and filed for review in
CTA which rendered a decision to cancel the tax declarations and refund Meralco. The motion
for reconsideration was denied too, an instant petition for review was filed.
CTA held that: (1) the steel towers come within the term "poles" which are declared exempt
from taxes under part II paragraph 9 of respondent's franchise; (2) the steel towers are personal
properties and are not subject to real property tax; and (3) the City Treasurer of Quezon City is
held responsible for the refund of the amount paid.

The tax exemption privilege of the petitioner is quoted hereunder:

PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators), machinery and personal property as other
persons are or may be hereafter required by law to pay ...

It is evident, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object
for which the franchise was granted. The poles as contemplated thereon, should be understood
and taken as a part of the electric power system of the respondent Meralco, for the conveyance of
electric current from the source thereof to its consumers.

Issue: Whether the steel towers constitute real properties, so that they can be subject to real
property tax.

Article 415 of the Civil Code; the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxxxxxxxx
(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;
xxxxxxxxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for
an industry
or works which may be carried in a building or on a piece of land, and which tends directly to
meet the needs
of the said industry or works;

Held:
The steel towers or supports in question do not come within the objects mentioned in paragraph
1, because they do not constitute buildings or constructions adhered to the soil. They are not
construction analogous to buildings nor adhering to the soil. As per description, given by the
lower court, they are removable and merely attached to a square metal frame by means of bolts,
which when unscrewed could easily be dismantled and moved from place to place. They 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.

These steel towers or supports do not also fall under paragraph 5, for they are not machineries,
receptacles, instruments or implements, and even if they were, they are not intended for industry
or works on the land. Petitioner is not engaged in an industry or works in the land in which the
steel supports or towers are constructed.
CAPITOL WIRELESS v. PROVINCIAL TREASURER OF BATANGAS, GR No. 180110,
2016-05-30
Facts:
Petitioner Capitol Wireless Inc. (Capwire) is a Philippine corporation in the business of
providing international telecommunications services.[3] As such provider, Capwire has signed
agreements with other local and foreign telecommunications companies covering an international
network of submarine cable systems such as the Asia Pacific Cable Network System (APCN)
(which connects Australia, Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea, Japan,
Indonesia and the Philippines); the Brunei-Malaysia-Philippines Cable Network System (BMP-
CNS), the Philippines-Italy (SEA-ME-WE-3 CNS), and the Guam Philippines (GP-CNS)
systems.[4] The agreements provide for co-ownership and other rights among the parties over the
network.[5]
Petitioner Capwire claims that it is co-owner only of the so-called "Wet Segment" of the APCN,
while the landing stations or terminals and Segment E of APCN located in Nasugbu, Batangas
are allegedly owned by the Philippine Long Distance Telephone Corporation (PLDT).[6]
Moreover, it alleges that the Wet Segment is laid in international, and not Philippine, waters.[7]
Capwire claims that as co-owner, it does not own any particular physical part of the cable system
but, consistent with its financial contributions, it owns the right to use a certain capacity of the
said system.[8] This property right is allegedly reported in its financial books as "Indefeasible
Rights in Cable Systems.
However, for loan restructuring purposes, Capwire claims that "it was required to register the
value of its right," hence, it engaged an appraiser to "assess the market value of the international
submarine cable system and the cost to Capwire."[
Alter the filing of the public respondents' Comment,[16] on May 5, 2003, the RTC issued an
Order dismissing the petition for failure of the petitioner Capwire to follow the requisite of
payment under protest as well as failure to appeal to the Local Board of Assessment Appeals
(LBAA), as provided for in Sections 206 and 226 of Republic Act (R.A.) No. 7160, or the Local
Government Code.[17]
Issues:
May submarine communications cables be classified as taxable real property by the local
governments?... whether submarine wires or cables used for communications may be taxed like
other real estate.
Ruling:
The petition is denied. No error attended the ruling of the appellate court that the case involves
factual questions that should have been resolved before the appropriate administrative bodies.
We hold in the affirmative.
Principles:
Submarine or undersea communications cables are akin to electric transmission lines which this
Court has recently declared in Manila Electric Company v. City Assessor and City Treasurer of
Lucena City,[37] as "no longer exempted from real property tax" and may qualify as
"machinery" subject to real property tax under the Local Government Code. To the extent that
the equipment's location is determinable to be within the taxing authority's jurisdiction, the Court
sees no reason to distinguish between submarine cables used for communications and aerial or
underground wires or lines used for electric transmission, so that both pieces of property do not
merit a different treatment in the aspect of real property taxation. Both electric lines and
communications cables, in the strictest sense, are not directly adhered to the soil but pass through
posts, relays or landing stations, but both may be classified under the term "machinery" as real
property under Article 415(5)[38] of the Civil Code for the simple reason that such pieces of
equipment serve the owner's business or tend to meet the needs of his industry or works that are
on real estate. Even objects in or on a body of water may be classified as such, as "waters" is
classified as an immovable under Article 415(8)[39] of the Code. A classic example is a
boathouse which, by its nature, is a vessel and, therefore, a personal property but, if it is tied to
the shore and used as a residence, and since it floats on waters which is immovable, is considered
real property.[40] Besides, the Court has already held that "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."[41]Thus, absent any showing from Capwire of any express grant
of an exemption for its lines and cables from real property taxation, then this interpretation
applies and Capwire's submarine cable may be held subject to real property tax.Having
determined that Capwire is liable, and public respondents have the right to impose a real property
tax on its submarine cable, the issue that is unresolved is how much of such cable is taxable
based on the extent of Capwire's ownership or co-ownership of it and the length that is laid
within respondents' taxing jurisdiction. The matter, however, requires a factual determination
that is best performed by the Local and Central Boards of Assessment Appeals, a remedy which
the petitioner did not avail of.At any rate, given the importance of the issue, it is proper to lay
down the other legal bases for the local taxing authorities' power to tax portions of the submarine
cables of petitioner. It is not in dispute that the submarine cable system's Landing Station in
Nasugbu, Batangas is owned by PLDT and not by Capwire. Obviously, Capwire is not liable for
the real property tax on this Landing Station. Nonetheless, Capwire admits that it co-owns the
submarine cable system that is subject of the tax assessed and being collected by public
respondents. As the Court takes judicial notice that Nasugbu is a coastal town and the
surrounding sea falls within what the United Nations Convention on the Law of the Sea
(UNCLOS) would define as the country's territorial sea (to the extent of 12 nautical miles
outward from the nearest baseline, under Part II, Sections 1 and 2) over which the country has
sovereignty, including the seabed and subsoil, it follows that indeed a portion of the submarine
cable system lies within Philippine territory and thus falls within the jurisdiction of the said local
taxing authorities.[42] It easily belies Capwire's contention that the cable system is entirely in
international waters. And even if such portion does not lie in the 12-nautical-mile vicinity of the
territorial sea but further inward, in Prof. Magallona v. Hon. Ermita, et al.[43] this Court held
that "whether referred to as Philippine 'internal waters' under Article I of the Constitution[44] or
as 'archipelagic waters' under UNCLOS Part III, Article 49(1, 2, 4),[45] the Philippines exercises
sovereignty over the body of water lying landward of (its) baselines, including the air space over
it and the submarine areas underneath." Further, under Part VI, Article 79[46] of the UNCLOS,
the Philippines clearly has jurisdiction with respect to cables laid in its territory that are utilized
in support of other installations and structures under its jurisdiction.And as far as local
government units are concerned, the areas described above are to be considered subsumed under
the term "municipal waters" which, under the Local Government Code, includes "not only
streams, lakes, and tidal waters within the municipality, not being the subject of private
ownership and not comprised within the national parks, public forest, timber lands, forest
reserves or fishery reserves, but also marine waters included between two lines drawn
perpendicularly to the general coastline from points where the boundary lines of the municipality
or city touch the sea at low tide and a third line parallel with the general coastline and fifteen
(15) kilometers from it."[47] Although the term "municipal waters" appears in the Code in the
context of the grant of quarrying and fisheries privileges for a fee by local governments,[48] its
inclusion in the Code's Book II which covers local taxation means that it may also apply as guide
in determining the territorial extent of the local authorities' power to levy real property
taxation.Thus, the jurisdiction or authority over such part of the subject submarine cable system
lying within Philippine jurisdiction includes the authority to tax the same, for taxation is one of
the three basic and necessary attributes of sovereignty,[49] and such authority has been delegated
by the national legislature to the local governments with respect to real property taxation.[50]As
earlier stated, a way for Capwire to claim that its cable system is not covered by such authority is
by showing a domestic enactment or even contract, or an international agreement or treaty
exempting the same from real property taxation. It failed to do so, however, despite the fact that
the burden of proving exemption from local taxation is upon whom the subject real property is
declared.[51] Under the Local Government Code, every person by or for whom real property is
declared, who shall claim tax exemption for such property from real property taxation "shall file
with the provincial, city or municipal assessor within thirty (30) days from the date of the
declaration of real property sufficient documentary evidence in support of such claim."[52]
Capwire omitted to do so. And even under Capwire's legislative franchise, RA 4387, which
amended RA 2037, where it may be derived that there was a grant of real property tax exemption
for properties that are part of its franchise, or directly meet the needs of its business,[53] such
had been expressly withdrawn by the Local Government Code, which took effect on January 1,
1992, Sections 193 and 234 of which provide:[54]

MANILA ELECTRIC COMPANY v. CITY ASSESSOR, GR No. 166102, 2015-08-05

Facts:
MERALCO is a private corporation organized and existing under Philippine laws to operate as a
public utility engaged in electric distribution.
MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No. 019-
6500[13] covering the following electric facilities, classified as capital investment, of the
company: (a) transformer and electric post; (b)... transmission line; (c) insulator; and (d) electric
meter, located in Quezon Ave. Ext., Brgy. Gulang-Gulang, Lucena City. Under Tax Declaration
No. 019-6500, these electric facilities had a market value of P81,811,000.00 and an assessed
value of P65,448,800.00, and were subjected... to real property tax as of 1985.
MERALCO claimed that its capital investment consisted only of its substation facilities, the true
and correct value of which was only P9,454,400.00; and that
MERALCO was exempted from payment of real property tax on said substation facilities.
Issues:
whether or not the poles, wires, insulators, transformers, and electric meters of MERALCO were
real properties
Ruling:
LBAA cited the 1964 case of Board of Assessment Appeals v. Manila Electric
Company[16] (1964 MERALCO case) in which the Court held that: (1) the steel towers fell
within the term "poles" expressly exempted from taxes under the franchise of MERALCO; and
(2) the steel towers were personal properties under the provisions... of the Civil Code and, hence,
not subject to real property tax. The LBAA lastly ordered that Tax Declaration No. 019-6500
would remain and the poles, wires, insulators, transformers, and electric meters of MERALCO
would be continuously assessed, but the City Assessor would stamp... on the said Tax
Declaration the word "exempt.
Board overrules the claim of the [City Assessor of Lucena] and sustain the claim of
[MERALCO].
Appellant (Meralco) is hereby ordered to render an accounting to the City Treasurer of Lucena
and to pay the City Government of Lucena the amount corresponding to the Five (5%) per
centum of the gross earnings in compliance with paragraph 13 both Resolutions 108 and
2679, respectively, retroactive from November 9, 1957 to date, if said tax has not yet been paid.

G.R. No. 68557, Feb. 16, 2007

FEL'S ENERGY, INC. vs. Province of Batangas, et.al
FACTS:
Sometime in 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30MW
diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract,
denominated as
an Energy Conversion Agreement (Agreement), was for a period of five years. Part of the
agreement
states that NPC shall be responsible for the payment of all taxes, import duties, fees, charges and
other
levies imposed by the National Government of the Philippines or any agency or instrumentality
thereof.
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. On August
1995, FELS
received an assessment of real property taxes on the power barges from Provincial Assessor of
Batangas City. FELS referred the matter to NPC, reminding it of its obligation under the
Agreement to
pay all real estate taxes. NPC then sought reconsideration of the Provincial Assessor’s decision
to assess
6
real property taxes on the power barges. However, the motion was denied on September 22,
1995, and
the Provincial Assessor advised NPC to pay the assessment. This prompted NPC to file a petition
with the
Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the
declaration of
the barges as non-taxable items. In its Answer to the petition, the Provincial Assessor averred
that the
barges were real property for purposes of taxation under Section 199(c) of Republic Act (R.A.)
No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that
the
Department of Finance (DOF) had rendered an opinion dated May 20, 1996, where it is clearly
stated
that power barges are not real property subject to real property assessment. On August 26, 1996,
the
LBAA rendered a Resolution denying the petition.
ISSUE:
Whether or not power barges can be considered a taxable property.
HELD:
The Court ruled Article 415 (9) of the New Civil Code provides that docks and structures which,
though floating, are intended by their nature and object to remain at a fixed place on a river, lake,
or
coast are considered immovable property. Thus, power barges are categorized as immovable
property
by destination, being in the nature of machinery and other implements intended by the owner for
an
industry or work which may be carried on in a building or on a piece of land and which tend
directly to
meet the needs of said industry or work. In a Supreme Court of New York ruling it held that the
barges
on which were mounted gas turbine power plants designated to generate electrical power, the
fuel oil
barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted
on the
barges were subject to real property taxation.