Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS Manila

COMPOSTELA PLANTATIONS, INC., Petitioner-Appellant,

– versus –

LOCAL BOARD OF ASSESSMENT APPEALS OF THE PROVINCE OF DAVAO DEL NORTE,
Appellee,

– and –

PROVINCIAL ASSESSOR OF DAVAO DEL NORTE,
Respondent-Appellee.
x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

CBAA CASE NO. M-11 In Re:
LBAA Case No. 95-02

T.D. No. 8390 and LBAA Case No. 95-03
T.D. Nos.

93-006-3014 & 3015

D E C I S I O N

This is an appeal from the Decision of the Appellee Local Board dated

March 11, 1996 in LBAA Case Nos. 95-02 and 95-03, the dispositive portion of

which reads as follows:

“WHEREFORE, the classification and assessment of the Provincial Assessor on Tax Declaration No. 93-006-3015 and 8390, as far as cableway system and irrigation are concerned, is sustained. Appellee is directed to effect the necessary amendment on assessment on aerial proppings as reflected on Tax Declaration Nos. 93-006-3014 and 8390.

“It should likewise ruled that the corrected level should be effective as of the 4th quarter of 1995.”

It appears from the records that herein Petitioner-Appellant, Compostela

Plantations, Inc., filed with the Appellee Board on May 16, 1995 two separate

petitions for review. One petition involved Tax Declaration No. 8390 for

properties situated in Babag, Monkayo, Davao del Norte (LBAA Case No. 95-02);

and the other, Tax Declaration Nos. 93-006-3014 and 93-006-3015 for properties

located in Pilar, Mangayon, Compostela, Davao del Norte (LBAA Case No. 95-

03).

The properties subject of this case are aerial proppings, cableways and

irrigation systems. They were all classified by Respondent-Appellee Provincial

Assessor of Davao del Norte as agricultural “building and other improvements” or

Reference: Book X, pp. 168-187

structures subject to the graduated assessment level of fifty percent (50%)

effective the year 1994.

Petitioner-Appellant alleged that “aerial propping” is a device usually made

of metal or wooden poles with cable wire supports pinned to the ground to resist

the lateral force across the lines; that “aerial propping system” is installed

primarily to serve as support and to save harvestable fruits from falling down and

prevent damages to fruit-bearing trees; and that “cableways” are metal cables

which are laid out in strategic points around the banana farms and these are

used as a means of transporting banana fruits from the farms to the fruit patios in

the packing plant during harvest.

Petitioner-Appellant argued that, since the subject properties operate as

agricultural plantation implements which were installed primarily as part of an in

connection with the banana plantation operations of the company – not as

ordinary improvements or additions to the property to add to its value or condition

– they (subject properties) fall squarely within the definition of “machinery” as

provided in Section 199(o) of the Local Government Code.

In her Answer dated May 29, 1995, the Provincial Assessor, Mrs. Rosario

C. Magnaye, stated that the assessed values appearing on Tax Declaration No.

8390 were in order, contrary to the contention of the Petitioner-Appellant that the

same were excessive, erroneous and unjust, since the market values were just

lifted from the sworn statement that the company filed and were given the

corresponding depreciation. The Provincial Assessor, however, agreed with

Petitioner-Appellant’s allegation as to the purpose and use of the aerial

proppings, but stook pat on the classification of the same as agricultural

“structures”, not machinery. As far as the cableways are concerned, the

Provincial Assessor stated that the same “may reasonably be classified as

agricultural machinery, but not prior to the effectivity of the general revision of

real property assessments.” The Provincial Assessor further stated that

“considering the date the appeal was filed, it is reminded whether this may be

Reference: Book X, pp. 168-187

considered within the prescriptive period of sixty (60) days from the date of

receipt of the notice of assessment.”

In its Reply dated July 12, 1995, Petitioner-Appellant clarified that “the

issue in this case is not the values given on the subject properties, but instead

the assessment levels used by the Appellee Provincial Assessor in arriving at the

taxable value of the properties”; and that the “appeal was filed on time based on

Section 252 (a) and (d) of Republic Act No. 7160, in relation to Chapter 3, Title II

Book II (Section 226) of the same law . . .”

The Provincial Assessor introduced into the records a letter dated

September 13, 1995 from Director Hamjan A. Usman of the Local Government

Finance, Region XI. Said letter, which was an answer to a query by the Provincial

Assessor, opined that the subject aerial propping and irrigation system were

agricultural improvements and structures while the cableways were agricultural

machinery.

Without touching on the issue of jurisdiction posed as a “reminder” by the

Provincial Assessor, the Local Board proceeded to try the case(s) on the merits

and on March 11, 1996, rendered the assailed decision.

The Appellee Board concurred with the opinion of Director Usman. Thus,

on Page 3 of its Decision (Page 75, Records) the Appellee Board said:

“The Board, after a thorough deliberation on the issues raised and hearing the side(s) of both parties, concluded that while cableways may be classified as agricultural machineries, there is no basis in changing that of the concrete canals and sump tank as well as that of the aerial proppings. The classification made by Regional Director, Hamjan A. Usman, is correct. The Board has decided to adopt the same. The opinion stated that:

“1. Aerial proppings are considered land improvements;

“2. Irrigation system is an agricultural structure, and

“3. Cableways are agricultural machineries.”

Tax Declaration No. 8390 covers aerial proppings, cableways and

irrigation system located in Babag, Monkayo. Tax Declaration No. 93-006-3014

covers aerial proppings situated in Pilar, Mangayon, Compostela, and Tax

Declaration No. 93-006-3015 covers cableways also located in Pilar, Mangayon,

Reference: Book X, pp. 168-187

Compostela. In the dispositive portion of its decision, however, the Appellee

Board stated that “the classification and assessment of the Provincial Assessor

on Tax Declaration No. 93-006-3015 and 8390, as far as cableway system and

irrigation system are concerned, is sustained” and directed the Provincial

Assessor “to reflect the necessary amendment on assessment on aerial

proppings as reflected on Tax Declaration No. 93-006-3014 and 8390” and “ruled

that the corrected assessment level should be effective as of the 4th quarter of

1995.”

Petitioner-Appellant, on April 15, 1995, moved for the correction of the

apparent mistake in the dispositive portion of the decision but the motion was not

acted upon by the Appellee Board.

In its appeal to this Board dated April 24, 1996, Petitioner-Appellant

alleged that it received the Appellee Board’s decision on March 25, 1996 and that

on April 16, 1996 a motion for correction of clerical errors in the decision was

filed but correction had not been effected as of the date of filing the instant

appeal. Petitioner-Appellant reiterated its allegations in its petitions for review

before the Local Board and prayed of this Board to order:

“1. The correction of the Tax Declaration for aerial propping and

irrigation system in order that the subject properties will properly be classified as

agricultural machinery and equipment and that the proper assessment level of

40% will be reflected.

“2. The effectivity of the correct assessment levels be made effective as

of January 1, 1994 and for taxable years 1995 and 1996.

“3. Other relief or remedies it may deem proper under the premises.”

The Provincial Assessor, in her Answer dated July 25, 1996, re-stated her

stand that the aerial proppings and the irrigation system are agricultural

improvements or structures subject to the graduated assessment levels under

Section 218(b) (2) of R.A. 7160, otherwise known as the Local Government Code

of 1991. She agreed, however, that the cableways are agricultural machineries

Reference: Book X, pp. 168-187

subject to the fixed assessment level of 40% under Section 218(c) of the same

Code, but prayed that the adjustment of the assessment level – from 50% to 40%

– be made effective as of the 4th quarter of 1995.

The issues involved in this appeal are as follows:

1. Whether the subject properties are “structures” (buildings and other

improvements) or “machineries”; and

2. Whether the adjustment or corrections, if any, should be effective as

of January 1, 1994 or as of October 1, 1995.

Lack of jurisdiction on the part of the local board is not an issue in the

instant appeal. However, since Respondent-Appellee sometime during the

proceedings before the Local Board “reminded” the said Board of its probable

lack of jurisdiction, we feel obligated to touch, discuss and clarify such matter.

The records do not show when Petitioner-Appellant received the written

notice of assessment required under Section 226 of R.A. 7160, which states,

thus:

“Sec. 226. Local Board of Assessment Appeals. – Any owner or person having legal interest in the property who is not satisfied with the action of the provincial city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declaration and such affidavits or documents submitted in support of the appeal.”

The records do show, however, that Petitioner-Appellant started paying the

taxes due as assessed by Respondent-Appellee on March 29, 1994 (O.R. Nos.

9089139-P and 9089189-P) for Tax Declaration No. 8390 (Monkayo) and on

March 30, 1994 (O.R. Nos. 2050705-Q and 2050673-Q) for Tax Declaration Nos.

93-006-3014 and 93-006-3015 (Compostela). We can, therefore, safely assume

that Petitioner-Appellant had notice of the questioned Monkayo assessment not

later than March 29, 1994 and of those in Compostela not later than March 30,

1994, at the latest.

The records also disclose that Petitioner-Appellant’s twin petitions for

review on the Monkayo and Compostela assessments were both officially

Reference: Book X, pp. 168-187

received by the Appellee Board on May 16, 1995. There are exactly 413 days

between March 29, 1994 and May 16, 1995. Under the provisions of Section 226,

supra, the said petitions for review were clearly filed out of time.

The Local Board might not even have acquired jurisdiction over the case.

Settled is the principle that the requirement regarding the perfection of appeals

within the reglementary period is not only mandatory but also jurisdictional

(Provincial Assessor of Bulacan vs. Luzon Cement Corporation and Lucenco

Marketing, Inc. and BAA of Bulacan, CBAA Case No. 16). However,

Respondent-Appellee is estopped from raising the issue of jurisdiction since,

apart from ‘reminding’ the Local Board of the tardiness of the appeals before said

board, Respondent-Appellee did nothing else to press the issue during the trial of

the cases. On the contrary, Respondent-Appellee filed her answer and

memorandum and introduced evidence in the form of an opinion of the Regional

Director of the Bureau of Local Government Finance, Region XI.

The Supreme Court, in Benguet Corporation vs. Central Board of

Assessment Appeals, et al. (G.R. No. 100959, June 29, 1992 [In re CBAA Case

No. 237, May 28, 1990]), said:

“As we held in Suarez v. Court of Appeals (G.R. No. 80199, June 6, 1990; 186 SCRA 339):

“x x x It is settled that any decision rendered without jurisdiction is a total nullity and must be struck down at any time, even on appeal before this Court. The only exception is where the party raising the issue is barred by estoppel (Tijam v. Sibonghanoy, 23 SCRA 29, reiterated in Solid Homes, Inc. vs. Payawal and Court of Appeals, G.R. No. 84811, August 29, 1989).

“While the petitioner could have prevented the trial court from exercising jurisdiction over the case by seasonably taking exception thereto, they instead invoked the very same jurisdiction by filing an answer and seeking relief from it. What is more, they participated in the trial of the case by cross-examining respondent. Upon the premises, petitioner cannot be allowed belatedly to adopt an inconsistent posture by attacking the jurisdiction of the court to which they had submitted themselves voluntarily (Tijam v. Sibonghanoy, supra).

Now, to the first issue of the instant appeal: Are the subject properties

“structures” (buildings and other improvements) or are they “machineries”?

Reference: Book X, pp. 168-187

The real properties of Petitioner-Appellant located in Pilar, Mangayon,

Compostela and in Babag, Monkayo, both in Davao del Norte, were assessed in

1993 to take effect on January 1, 1994, as follows:

A. Properties in Pilar, Mangayo, Compostela:

Tax Dec. No. and Description

T.D. No. 93-006-3025: 2 Goulds Pumps 75 HP Irrigation System

Total

T.D. No. 93-006-9841:
5 Goulds Pumps 75 HP w/ Complete Accessories
Irrigation System

Total

T.D. No. 93-006-3014: Aerial Propping

T.D. No. 93-006-3015: Cableway System

Market Assmt Value Level

P 601,691.97 40% 8,429,587.90 40%
——————-P 9,031,279.87
============

P 2,100,019.44 40% 14,129,727.93 40%
——————–P16,229,747.17 ===========

P15,996,417.92 50% ===========

P 8,649,131.00 50% ===========

Assessed Value

P 240,680 3,371,830
—————P3,612,510 =========

P 840,010 5,651,890
—————-P 6,491,900 =========

P 7,998,210 =========

P 4,324,570 =========

B. Properties in Babag, Monkayo:

T.D. No. 8390: Aerial Propping Cableway System Irrigation System

Total

P 2,539,113.00 50% 1,372,879.00 50% 3,612,680.00 50%
——————–P 7,524,670.00 ===========

P 1,269,560 686,440
1,806,340 —————–P 3,762,340 ==========

Tax Declaration Nos. 93-006-3025 and 93-006-9841 for the Gould pumps

and irrigation systems situated in Sitio Pilar, Barangay Mangayon, Municipality of

Compostela are not subjects of the instant appeal. Nor were they subjects of the

appeal before the Local Board.

As far as the “Cableway Systems” are concerned, we do not have to delve

deeper into their classifications and assessments since both the Provincial

Assessor and the Appellee Board adopted the opinion of the Regional Director of

the Bureau of Local Government Finance, Region XI, that the same should be

classified and assessed as agricultural “machinery” subject to the fixed

assessment level of forty percent (40%) under Section 218(c) of R.A. 7160. The

Reference: Book X, pp. 168-187

error in the dispositive portion of the Appellee Board’s decision is plainly and

purely typographical in nature. This leaves us with the “aerial proppings” and the

“irrigation systems”.

This Board conducted an ocular inspection of the subject properties on

November 28, 1996 and heard this case the following day at the Session Hall of

the Provincial Board of Davao del Norte in Tagum, Davao del Norte.

During said ocular inspection and hearing, it was established that the

prime purpose of a “propping system” is to support the banana plant during fruit-

bearing stage to prevent it from toppling or turning over due to the weight of the

fruit. A “prop” is a support, as a pole, placed under or against a banana or

something sought to be protected. Props may also consist of bamboo or wooden

poles.

Petitioner-Appellant’s “aerial propping system” consists of “lines”

independent from each other. A “line”, in turn, consists of two primary posts

connected at the tips by a cable wire. A primary post measures six inches by six

inches at the base section, four inches by four inches at the tip section and six

meters or about twenty feet in length. Four feet of the base section of the primary

post is buried in the ground, without any foundation, leaving sixteen feet of

height, supporting the cable wire between the primary posts are secondary posts

laid out thirty meters apart.

The “lines” are usually installed a month or two after planting the banana

trees when survival of the plants is already assured, but before they begin to

bear fruits, to prevent damages to the plants which may occur during the

installation process. When a banana tree bears fruit, the same is supported by a

twine tied to the bunch and hung up from the cable. When a fruit is harvested the

twine is naturally disconnected but the “line” itself is retained for as long as there

are other bunches or plants in the same “line”. The productive life of a particular

line of plants varies from six to ten years.

Reference: Book X, pp. 168-187

The aerial propping systems are properties of Petitioner-Appellant but

installed in areas owned by growers. When an area needs re-cultivation using

bulldozers, the propping systems thereon are removed. When Petitioner-

Appellant decides to abandon an area, the propping systems thereon are also

removed and carried or utilized elsewhere.

The “aerial propping system” and the bamboo or wooden propping system”

have the same purpose or function, except that in the “aerial propping system”,

the support comes from the air, while in the “bamboo or wooden propping

system”, the support comes from the ground. Bamboo or wooden props are not

subject to real property tax simply because they are not considered real

properties.

As stated beforehand, Respondent-Appellee consider the aerial propping

system as “structures” subject to the graduated assessment levels under Section

218(b)(2) of R.A. 7160, otherwise known as the Local Government Code of 1991,

while Petitioner-Appellant insists that the same properties are “machineries” as

defined by Section 199(o) of the same Code, subject to the fixed assessment

level of 40% under Section 218(c) thereof.

Section 218(b)(2) of R.A. 7160 speaks only of agricultural “buildings and

other structures”. The same law does not define the terms “buildings” and “other

structures”. However, Section 6 of the National Building Code defines “building”

as “any structure built for the support, shelter, or enclosure of persons, animals,

chattels or property of any kind.” Real Estate Appraisal Technology (Rev. Ed. p.

34) also defines “building” as “a structure erected to stand more or less

permanently and designed for human use and occupancy or as a shelter for

animals or goods.” (As quoted in Cabaluna, Real Property Taxation, 1992 Ed. p.

26)

On the other hand, Section 199(o) of R.A. 7160 defines “machinery” thus:

“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 shall include the physical facilities for production, the installations and appurtenant service facilities,

Reference: Book X, pp. 168-187

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.” (Emphasis supplied)

Appellees suggest ‘permanency’ as a factor qualifying the aerial proppings

as “structures”. But this is beside the point since, under R.A. 7160, an

improvement may be subject to the real property tax without being permanently

attached to the real property. In our view, the more controlling factor is the actual

use of the property in question. Thus, Section 198(b) of R.A. 7160 provides that

“Real property shall be classified for assessment purposes on the basis of its

actual use” and Section 217 of the same law also provides that “real property

shall be classified, valued and assessed on the basis of its actual use regardless

of where located, whoever owns it, and whoever uses it.”

The subject aerial propping systems, like the bamboo or wooden propping

systems, are service facilities actually, directly and exclusively used by

Petitioner-Appellant to meet the needs of its industry and which, by their very

nature and purpose, are designed for, or necessary to, its agricultural activity.

Like the bamboo or wooden proppings, the aerial propping systems are as

permanent or as temporary as the lines of banana plants they support.

We believe, therefore, and so hold, that the aerial propping systems in

question are “machinery” as defined under Section 199(o) of R.A. 7160, subject

to the fixed assessment level of forty percent (40%) under Section 218(c) thereof.

Also during said inspection and hearing it was likewise established that the

irrigation system of Petitioner-Appellant starts from Pilar, Mangayon,

Compostela. From a river in Pilar, water is allowed to enter a sump tank. The

“sump tank” is some kind of water basin dugged out of the earth. It is initially the

filtration or settlement tank. From the sump tank, water is pumped by five (5)

units of Goulds pumps of 75 HP each and distributed through tapered pipes and

sprinklers all over the plantations in Compostela and Monkayo. Dugged-out

canals, not concrete, were found in the plantations but without water. The

Reference: Book X, pp. 168-187

purpose of the said canals was to avoid stagnation of water. Roots of banana

plant rot easily when submerged in water.

The “irrigation systems” within the Compostela plantation consist of the

sump tank, pipings and sprinklers. The same “irrigation systems” and the water

pumps, also within the Compostela plantation under Tax Declaration Nos. 93-

006-3025 and 93-006-9841, are not subjects of this case as Petitioner-Appellant

is satisfied with their classifications and assessments as agricultural “machinery”.

We believe that the Municipal Assessor of Compostela was correct in classifying

and assessing the said sump tanks, pipings and sprinklers as parts and parcels

of the irrigation systems.

Admittedly, the pipings and sprinklers within the Monkayo plantation are

but extensions of the entire irrigation systems originating from Compostela. Since

the pipings and sprinklers within the Compostela plantation are correctly

classified and assessed as agricultural machinery, there is no basis for the

Municipal Assessor of Monkayo in classifying the pipings and sprinklers within

the Monkayo plantation differently from those within the Compostela plantation.

On the second issue in this instant appeal, should the change in the

classifications and, consequently, the assessment levels of the properties

involved be made effective on January 1, 1994 or on October 1, 1995?

Petitioner-Appellant prayed that the changes in the classifications (from

“structures” to “machinery”) and the assessment levels (from 50% to 40%) of the

properties involved be made effective January 1, 1994, while the Respondent-

Appellee prayed that such changes be made effective a of the fourth (4th) quarter

of 1995.

The subject properties were assessed in 1993 pursuant to the provisions

of Section 219 of R.A. 7160. In accordance with the provisions of Section 221 of

the same law, the said assessments took effect on January 1, 1994. If we were

to grant the prayer of Respondent-Appellee, that would tantamount to saying that

the questioned assessments were correct from January 1, 1994 through

Reference: Book X, pp. 168-187

September 30, 1995 and, without any changes or factors affecting the same

assessments, became incorrect starting October 1, 1995. We could not find any

basis or justification in fact and in law for such a decision. The questioned

assessments were defective ab initio. It is but proper and just that corrections to

the same be also made effective ab initio, i.e., on January 1, 1994.

WHEREFORE, premises considered, judgment is hereby rendered in favor

of the Petitioner-Appellant. Respondent-Appellee is hereby ordered to adjust or

correct Tax Declaration Nos. 93-006-3014 and 93-006-3015 for the Aerial

Proppings and Cableway System, respectively, situated in Pilar, Mangayon,

Compostela, and Tax Declaration No. 8390 for the Aerial Propping, Cableway

System and Irrigation situated in Babag, Monkayo by classifying said properties

as “machinery” subject to the fixed assessment level of forty percent (40%)

effective January 1, 1994.

SO ORDERED.

Manila, Philippines, September 3, 1998.

(Signed) MARGARITA G. MAGISTRADO
Chairman

(Signed)
ANGEL P. PALOMARES Member

(Signed) BENJAMIN M. KASALA
Member

Reference: Book X, pp. 168-187