Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS M a n i l a
PALAWAN ELECTRIC COOPERATIVE (PALECO),
CBAA CASE NO. L – 75 -versus-
THE LOCAL BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF PALAWAN,
THE PROVINCIAL PALAWAN AND
ASSESSOR OF THE MUNICIPAL
ASSESSOR OF BROOKE’S POINT, PALAWAN,
D E C I S I O N
THIS IS an appeal from the Resolution of the Local Board of Assessment
Appeals of the Province of Palawan (the “Local Board”) dated January 5, 2007 in
LBAA Case No. 3-2006, the dispositive portion of which reads as follows, to wit:
“WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of merit and the decision of the Local Board of Assessment Appeals of the Province of Palawan in LBAA Case No. 1-2005 shall be executed immediately.”
Alleging that it received a copy of the aforementioned resolution on
January 31, 2007, Petitioner-Appellant filed its Notice of Appeal and
Memorandum on Appeal through the Local Board which received the same on
February 1, 2007.
In turn, the same Notice of Appeal and Memorandum on Appeal, along
with the complete records of the case, were transmitted by the Local Board and
received by this Board (Central Board of Assessment Appeals) in Manila on
February 16, 2007.
ROBERTO D. GEOTINA Member
Prior to this instant case, Petitioner-Appellant also questioned before the
Local Board the assessment of Petitioner-Appellant’s transmission and
distribution lines under Tax Declaration No. 06-0596-C which was made effective
on January 1, 2005. In that appeal, docketed as LBAA Case No. 1-2005,
Petitioner-Appellant said that PALECO was not liable for the payment of the real
property tax on its properties on the following grounds: (1) that it was so exempt
under the provisions of §234 (c) of Rep. Act No. 7160, otherwise known as the
Local Government Code of 1991; and (2) that its properties were considered as
‘special classes of property’ under §216 of the same Code.
On September 30, 2005, the Local Board ruled against Petitioner-
Not satisfied, Petitioner-Appellant appealed that September 30, 2005
decision of the Local Board to the Central Board of Assessment Appeals (CBAA).
In that Appeal, which reached the CBAA on November 2, 2005 and docketed as
CBAA Case No. L-66-A, Appellant alleged that the Local Board erred:
a) in ruling that Appellant is not a government controlled cooperative;
b) in ruling that the properties of the Appellant do not fall within the special classes of properties;
c) in not ruling that the properties consisting of transmission lines, distribution lines, post and transformer covered by Tax Declaration No. 06-0596-C are exempted from real property taxes; and
d) in holding that the assessment of the properties of the Appellant made by the Municipal Assessor of the Municipality of Brooke’s Point is excessive, unjust, erroneous and confiscatory (sic).
On February 16, 2006, this Board rendered a decision in CBAA Case No.
L-66-A dismissing the appeal for lack of merit.
Still not satisfied, Petitioner-Appellant, on July 12, 2006, filed a Motion for
Reconsideration on the following ground:
“THIS HONORABLE BOARD SHOULD HAVE RESOLVED THE
MATTER AS APPELLANT
TO WHETHER OR NOT IS EXEMPTED IN THE
HEREIN PETITIONER-PAYMENT OF REAL
PROPERTY TAXES OVER THE TRANSMISSION AND DISTRIBUTION LINES, POSTS AND TRANSFORMERS LOCATED OR INSTALLED IN THE MUNICIPALITY OF BROOKE’S POINT.”
Quoting the Supreme Court’s decision in Board of Assessment Appeals,
Q.C. vs. MERALCO (10 SCRA 68), Petitioner-Appellant argued that the subject
properties did not come under any of the enumeration of ‘immovable’ or ‘real’
properties under Article 415 of the New Civil Code of the Philippines: ergo, they
are ‘personal’ properties.
The matter of exemption of the transmission and distribution lines, etc.,
was also raised as the third issue in Appellant’s Memorandum on Appeal in
CBAA Case No. L-66-A. However, the bases of exemptions claimed by Appellant
in its Memorandum on Appeal were the provisions of §§216 and 234 (c) of Rep.
Act 7160, unlike the arguments in its Motion for Reconsideration which were
based on the provisions of Article 415 of the Civil Code.
This Board, in a Resolution dated November 3, 2006, stated, thus:
“Failing to get a favorable decision on its claim for exemption under the provisions of Section 234(c) of RA 7160, Petitioner-Appellant now shifts to a new and completely different ground, that is, Art. 415 of the New Civil Code.
“This cannot be allowed as it would result in mockery of the tenets of fair play (Rodolfo Suarez vs. Court of Appeal, G.R. No. 80199, June 6, 1990). In Aguinaldo Industries Corporation vs. Commissioner of Internal Revenue and the Court of Tax Appeals (L-29790, February 25, 1982, 112 SCRA 136, cited in Benguet Corporation vs. Central Board of Assessment Appeals, et al., G.R. No. 100959, June 29, 1992), the Supreme Court held:
‘To allow a litigant to assume a different posture when he comes before the court and challenge the position he had accepted at the administrative level, would be to sanction a procedure whereby the court – which is supposed to review administrative determinations – would not review, but determine and decide for the first time, a question not raised in administrative forum. This cannot be permitted, for the same reason that underlies the requirement of prior exhaustion of administrative remedies to give administrative authorities the prior opportunity to decide controversies within its competence, and in much the same way that, on the judicial level, issues not raised in the lower court cannot be raised for the first time on appeal.’
Tax Declaration No. 06-0596-C (subject matter of LBAA Case No. 1-2005
and CBAA Case No. L-66-A) was superseded by Tax Declaration No. 06-0480-C
effective January 1, 2006. Both tax declarations are similar in all respects, except
as to the effective dates and the fact that a fifty-five percent (55%) allowance for
depreciation is provided for in TD 06-0480-C. Both TDs cover the same ‘Electric
Poles and accessories’ as machinery.
On March 26, 2006, PALECO filed its “Appeal on Assessment” with the
Local Board of Assessment Appeals of the Province of Palawan which docketed
the appeal as LBAA Case No. 3-2006.
PALECO alleged that under the law (Art. 415 of the Civil Code of the
Philippines) which enumerates the properties which are classified as immovable
or real properties, power transmission and distribution lines covered by TD No.
06-480-C are not included in the enumeration thereof and are therefore classified
as personal properties which are not subject to real property taxation.
In an Order dated September 25, 2006, the Local Board stated, thus:
“Acting upon the assessment appeal filed by the Palawan Electric Cooperative (Paleco) on July 28, 2006, it is hereby ordered that the appellant pay the assessed realty taxes due to the government within twenty (20) days from the receipt hereof and show proof of payment before the Board shall proceed with the hearing of the case in compliance with Sec. 231 and Sec. 252 of R.A. 7160 otherwise known as the Local Government Code of 1991, and should the appellant fail to comply therewith, this appeal shall be dismissed.”
On October 5, 2006, PALECO filed a Motion for Reconsideration of the
above-cited Order, contending that “(1) payment of the assessed realty taxes is
not a condition precedent before an appeal on assessment could be entertained
by the Honorable Board;” and “(2) that the issue based in the appeal is not the
reasonableness of the amount of the assessment but on the legality of the
On the ground that, under the principle of RES JUDICATA, the appeal in
LBAA Case No. 3-2006 is barred by the judgment in LBAA Case No. 1-2005, in
an Order dated November 10, 2006, the Local Board dismissed the appeal in
LBAA Case No. 3-2006 and ordered the immediate execution of the judgment in
LBAA Case No. 1-2005.
On November 24, 2006, PALECO filed a Motion for Reconsideration of the
Local Board’s Order dated November 10, 2006, arguing that PALECO’s Motion
for Reconsideration of the Local Board’s Order dated September 25, 2006 had to
be resolved by the Local Board before deciding on the merits of the case.
In a Resolution dated January 5, 2006 (should be 2007), the Local Board
denied, for lack of merit, Appellant’s Motion for Reconsideration filed on
November 24, 2006.
Hence, this appeal.
In its Memorandum on Appeal, Petitioner-Appellant assigned the following
errors, to wit:
“a) THE LOCAL BOARD OF ASSESSMENT APPEAL OF PALAWAN, WITH DUE RESPECT, ERRED IN ISSUING THE ORDER DATED NOVEMBER 10, 2006 DISMISSING THE APPEAL UNDER THE PRINCIPLE OF RES JUDICATA AND ORDERING THE EXECUTION OF THE DECISION OF THE LOCAL BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF PALAWAN IN LBAA CASE NO. 1-2005;
“b) THE LOCAL BOARD OF ASSESSMENT APPEAL OF PALAWAN ERRED IN RULING THAT THE CENTRAL BOARD OF ASSESSMENT APPEALS HAS CONCLUDED IN LBAA CASE NO. 1-2005 THAT THE TRANSMISSION AND DISTRIBUTION LINES OF PALECO ARE IN THE NATURE OF REAL PROPERTIES SUBJECT TO REAL PROPERTY TAXATION;
“c) THE LOCAL BOARD OF ASSESSMENT APPEAL OF THE PROVINCE OF PALAWAN, WITH DUE RESPECT, ERRED IN NOT RULING THAT THE POWER TRANSMISSION AND DISTRIBUTION SYSTEM SPECIFIED UNDER TAX DECLARATION NO. 06-0480-C ARE NOT REAL PROPERTIES AND THEREFORE SHOULD NOT BE SUBJECTED TO REAL PROPERTY TAXATION.”
On the first assigned error, Appellant argues that the principle of res
judicata is not applicable in this case because, while the parties and the
properties involved in both LBAA Case No. 1-2005 and 3-2006 are the same, the
issues raised in LBAA Case No. 1-2005 are different from that raised in LBAA
Case No. 3-2006.
On the second assigned error, Appellant contradicts the Local Board’s
statement to the effect that the Central Board “has concluded in LBAA Case No.
1-2005 that the transmission and distribution lines of PALECO are in the nature
of real properties subject to real property taxation.
Anent the third issue, Appellant maintains that, since its transmission and
distribution lines are not included in the enumeration of immovable under Article
415 of the New Civil Code of the Philippines, they (transmission and distribution
lines) are considered ‘movables’ or ‘personal’ properties – not real properties.
The real issues involved in this appeal could be reduced to a question
consisting of two parts, thus:
Is the appeal IN LBAA Case No. 3-2006 barred by the judgment in LBAA Case No. 1-2005 under the doctrine of res judicata? and if not so barred, are the transmission and distribution lines of Appellant ‘personal’ – not ‘real’ – properties?
The phrase ‘res judicata’ is defined in Black’s Law Dictionary (Eight
Edition), as follows:
res judicata (rays joo-di-kay-te or –kah-te). (Latin “a thing adjudicated”] 1. An issue that has been definitely settled by judicial decision. 2. An affirmative defense barring the same parties from litigating a second law suit on the same claim, or any other claim arising from transaction or series of transactions and that could have been – but was not – raised in the first suit. * The three essential elements are (1) an earlier decision on the issue, (2) a final judgment on the merits, and (3) the involvement of the same parties, or parties in privity with the original parties. Restatement (Second) of Judgments §§ 17, 24 (1982). – Also termed res adjudicate; claim preclusion; doctrine of res judicata.
Admittedly, the parties and the properties involved in both cases (LBAA
Case No. 1-2005 and LBAA Case No. 3-2006) are the same. However, the
issues raised and the subject assessments made are quite different. LBAA Case
No. 1-2005, claimed exemption from payment of the real property tax on its
transmission and distribution lines under the provisions of Sections 216 and 234
(c) of Rep. Act No. 7160, otherwise known as the Local Government Code of
1991. In LBAA Case No. 3-2006, on the other hand, Appellant claims that the
same properties are ‘persona’ in nature – therefore, not subject to real property
taxation – for the simple reason that they are not among those enumerated as
‘immovables’ under Article 415 of the New Civil Code of the Philippines.
Although Appellant raised belatedly the matter of Article 415 of the New
Civil Code Appellant’s Motion for Reconsideration of the Central Board’s decision
in CBAA Case No. L-66-A, this particular issues is considered as not having
been raised at all for failure of Appellant to raise it before the Local Board.
In LBAA Case No. 1-2005, Appellant questioned the assessment under
Tax Declaration No. 06-0596-C, while in LBAA Case No. 3-2006 the subject
matter of the appeal is Tax Declaration No. 06-0480-C.
Under the premises, therefore, this Board believes, and so holds, that the
doctrine or principles of res judicata does not apply.
Anent the second part of the question, Appellant insists that, since the
Local Government Code of 1991 does not define the term “real property,” the
definition and/or enumeration of immovable properties in Article 415 of the New
Civil Code of the Philippines should control.
Appellant likened its “electric posts, electric wires and transformers” to the
steel towers of Manila Electric Co. (Meralco) which were the subject matters in
Board of Assessment Appeals, City Assessor and City Treasurer of Quezon City
vs. Manila Electric Company (L-15334, January 31, 1964, 10 SCRA 68). In the
said case, the Supreme Court ruled:
“Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the logical question posited is whether they constitute real properties, so that they can be subject to a real property tax. The tax law does not provide for a definition of real property; but Article 415 of the civil code does, by stating the following are immovable property:
‘(1) Lands, buildings, roads and construction of all kinds adhered to the soil;
XXXX XXX XXX
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated without breaking the materials or deterioration of the object;
XXX XXX XXX
(5) Machinery, receptacles, instrument or implements intended by the owner of the tenement for an industry or works which 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;’
XXX XXX XXX
The steel towers or supports in question, do not come within the object 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 those 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.”
When the Supreme Court promulgated its decision in the above-entield
case (L-15334), there was as yet no Rep. Act No. 7160, otherwise known as the
Local Government Code of 1991, which took effect on January 1, 1992.
This Board had the opportunity to rule on similar issues involving the same
company in the case of Manila Electric Company (MERALCO) vs. Board of
Assessment Appeals of Lucena City, City Assessor and City Treasurer of Lucena
City (CBAA Case No. L-20-98, May 3, 1998). In this case, MERALCO said that
the Local Board of Lucena City erred “IN NOT HOLDING THAT POLES, WIRES,
INSULATORS, TRANSFORMERS AND ELECTRIC METERS ARE PERSONAL
PROPERTIES, HENCE, NOT SUBJECT TO REAL PROPERTY TAX, AS
EARLIER DECIDED BY THE LOCAL BOARD OF ASSESSMENT APPEALS OF
LUCENA CITY IN LBAA CASE NO. 89-2 AND AFFIRMED BY THE CENTRAL
BOARD OF ASSESSMENT APPEALS IN CBAA CASE NO. 248.”
In the decision of May 3, 2011, this Board said:
“On the first assignment of error, we disagree with Petitioner-Appellant. Indeed, the Central Board of Assessment Appeals has had the opportunity of ruling in its favor in connection with this very same issue. The matter was settled on April 10, 1991 where this authority ruled that ‘wires, insulators, transformers and electric meters which are mounted on poles and can be separated from the poles and moved from place to placed without breaking the material or causing deterioration of the object, are deemed movable or personal property’. The same position of MERALCO would have been tenable and that decision may have stood firm prior to the enactment of R.A. 7160 but not anymore in this jurisdiction. The Code provides and now sets a more stringent het broadened concept of machinery, thus:
‘Section 199(o), “Machinery” embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which, by their very nature and purpose, are designed for or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes;’
“The pivotal point where the difference lie(s) between the former and the current case is that by the very wordings of aforesaid provision, the ground being anchored upon by MERALCO concerning the properties in question being personal in nature does not hold anymore for the sole reason that these come now within the purview and new concept of Machineries. The new law has treated these in an unequivocal manner as machineries in the sense that they are instruments, mechanical contrivances or apparatus though not attached permanently to the real properties of petitioner-appellant are actually, directly and exclusively used to meet their business of distributing electricity.”
Incidentally, the above-cited decision of the CBAA was affirmed by the
Court of Appeals, in Manila Electric Company vs. The City Assessor and City
Treasurer of Lucena City (CA-G.R. SP No. 67027, May 13, 2004), where the said
“Petitioner further avers that the properties subject of the questioned Notice of Assessment are personal properties and do not constitute as real property or machinery within the contemplation of Article 415 of the New Civil Code; that the provisions of the Local Government Code of 1991 including its definition of “machinery” under Section 199(o) must be harmonized with the provisions of the New Civil Code.
“We are not persuaded.
“For a better understanding of the said issue, We deem it best to cite Section 199 of the said Code, to wit:
‘SEC. 199. Definition of Terms. – When used in this Title, the term:
xxx xxx xxx
‘(o) ‘Machinery’ embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which, by their very nature and purpose, are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes;’
xxx xxx xxx
“In the instant case, applying the above-stated principle of law, We firmly believe and so hold that the wires, insulators, transformers and electric meters mounted on the poles of the petitioner may nevertheless be considered as improvements on the land, enhancing its utility and rendering it useful in distributing electricity. The said properties are actually, directly and exclusively used to meet the needs of the petitioner in the distribution of electricity.
“In addition, ‘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 purpose of taxation which on general principle might be considered personal property.’ (Caltex (Phil.) Inc. vs. Central Board of Assessment Appeals, 114 SCRA 296, 301-302)”
WHEREFORE, premises considered, the instant appeal is hereby DENIED
for lack of merit.
Manila, Philippines, June 28, 2007.
(Signed) CESAR S. GUTIERREZ
ANGEL P. PALOMARES Member
(Signed) RAFAEL O. CORTES