Republic of the Philippines

CENTRAL BOARD OF ASSESSMENT APPEALS Manila

PROVINCIAL ASSESSOR OF AGUSAN DEL SUR,
Respondent-Appellant,

– versus –

CBAA CASE NO. M-12 LOCAL BOARD OF ASSESSMENT APPEALS
OF AGUSAN DEL SUR,

Appellee,

– and –

FILIPINAS PALMOIL PLANTATION, INC., Petitioner-Appellee.
x – – – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

This is an appeal filed on July 16, 1999 by Respondent-Appellant

Provincial Assessor of Agusan del Sur from the decision rendered by the Local

Board of Assessment Appeals of the Province of Agusan del Sur on June 8,

1999 in an unnumbered case entitled “Pilipinas Palm Oil Co., Inc., Petitioner,

versus The Provincial Assessor’s Office of Agusan del Sur, Respondent.”

Respondent-Appellant alleges that he received a copy of the questioned decision

on June 18, 1999.

The records of this case are not complete but Respondent-Appellant

stated that in “February and March 1993, the company filed appeals with the

appellee Local Board, contesting herein appellant’s revised assessments for the

period 1991 to 1993, on the market value of said company’s oil palm trees, its

density per hectare, plantation roads, culverts, bridges, pipes and canals, the

lands, staff houses and road equipment and haulers.” We assume, therefore, that

the appeal of the Petitioner-Appellee before the Local Board was filed

seasonably and that the assessments questioned were those for 1991-1993

revisions.

Respondent-Appellant assigned the following errors or issues, to wit:

Reference: Book X, pp. 188-211

I. The Decision rendered by Appellee is null and void ab initio, its proceedings fatally defective.

II. On the merits, the Appellee Local Board ERRED in finding that:

A. The market value of one-fruit bearing oil palm tree is P85.00 when, as duly assessed, it should be P207.

B. The total number of fruit-bearing oil palm tree is only 98 per hectare when as duly assessed, it is 110.

C. The company’s plantation roads, whether primary, secondary or tertiary, and its bridges, culverts, pipes and canals should not be subject to tax when in fact, even the company itself does not seek exemption but merely asks for the reduction of the market value thereof which, as duly assessed per linear kilometer are:

Primary Road -Secondary -Tertiary –

P279,270 (62.550 km.) 135,135 (171.050 km.)
67,567 (289.652 km.)

while bridges, culverts and pipes, being separate and distinct structures with different cost estimates should be, as they are, being appraised/assessed separately from the roads.

D. The market value for the lands assessed at P11,000 per hectare as against the company’s claim of P6,000, should be resolved in accordance with the rules and regulations of the Department of Agrarian Reform, when under Republic Act No. 7160, same shall be prepared in accordance with the rules and regulations of the Department of Finance.

E. Residential housing units with market valuation of P150,000 or less are exempt from taxation, when under Republic Act 7160 and local ordinance, the exemption for qualified buildings (P150,000 or less) is effective only starting 1994, not for the revision period in question (1991-1993).

F. The company’s road equipment and haulers are not real properties but movables, when under Republic Act 7160 they are properties subject to taxation.

G. The milling plant shall be assessed at only 20% of its acquisition cost even if fully depreciated when, under Republic Act 7160, the depreciation allowance shall not exceed 5% of original/replacement cost for each year or use.

ISSUE NO. I

Respondent-Appellant says that the Decision rendered by Appellee is null

and void ab initio, its proceedings fatally defective on the following grounds:

1. The Board members took no oath of office.

2. The Appellee Local Board never had a quorum; only one member appeared at the

hearing.

3. The Local Board never deliberated on its Decision, never conducted an ocular

inspection.

4. The assailed Decision speaks for itself; it was not on substantial evidence, but purely

on the company’s self-serving documents and bare assertions, totally ignoring the

evidence for respondent-appellant.

Reference: Book X, pp. 188-211

In support of the above statement, Respondent-Appellant cited the

testimony of Engr. Domingo A. Ranario during a joing hearing of the committees

on Ways and Means, Justice and Human Rights, and Civil Service of the

Sangguniang Panlalawigan of Agusan del Sur on July 7, 1999. Engr. Ranario

was the Assistant Provincial Engineer/OIC of the Provincial Engineering Office of

Agusan del Sur.

The gist of Mr. Ranario’s testimony in said joint hearing was to the effect

that they (the Register of Deeds, Atty. Eduardo Sanchez as Chairman, the

Provincial Prosecutor, Atty. Hilarion Clapis, and Engr. Ranario) did not take their

oaths of office as Chairman and Members of the Local Board; that the Local

Board did not conduct any ocular inspection of the subject properties; and that

the Local Board never deliberated on the case.

In its Comment/Answer dated September 30, 1999, Petitioner-Appellee

Filipinas Palm Oil Plantation, Inc. contends that “respondent-appellant is already

estopped from questioning the authority of the appellee just because of the so-

called lack of oath of office of the members of the LBAA when they took action on

the petition of the herein petitioner/appellee. Granting for the sake of argument

that the appellee took no oath of office when they assumed as chairman and

members of the LBAA, this issue is not enough to nullify or void the decision it

rendered. Their membership in the Board is not by virtue of appointment but by

virtue of their respective offices they are holding of which they took their

necessary oath. Furthermore, Petitioner-Appellee should not be made to share

the blame nor suffer from the alleged lack of oath of office of the Chairman and

Members of the LBAA as it has no hand or control over them.”

With respect to the second ground of Issue No. I, Petitioner-Appellee says

that “Again, respondent-appellant should have questioned this right then and

there for he was around and actively participated in the hearing and was even

presented by his counsel. And why only now? As to the third ground that the

appellee never deliberated on its decision and never conducted an ocular

Reference: Book X, pp. 188-211

inspection is a matter best address(ed) to the appellee and should not in any way

affect the petitioner-appellee. The fact that the chairman and all the members of

the board affixed their signatures in their written decision is already sufficient to

prove that they have deliberated the issues raised by both parties before coming

up with their decision.”

On August 15, 2000, this Board received in Manila from Respondent-

Appellant a “Manifestation With Motion to Admit Additional Evidence” alleging

that Provincial Prosecutor Hilarion Clapis was a member of the Board of

Directors of NDC-Guthrie Plantations, Inc. (NGPI), predecessor of herein

petitioner-appellee at the time petitioner-appellee filed its appeal with the LBAA in

February and June 1994. Attached to said manifestation was a machine copy of

NGPI’s General Information Sheet as of 08 March 1994 filed with the Securities

and Exchange Commission wherein it was shown that a “Hilarion Clapis, Jr.” was

a member of the Board of Directors of NGPI.

Also received in Manila on September 22, 2000 by this Board was a

“Motion to Admit Another Newly Discovered Evidence.” Attached to said motion

was a “Counter-Affidavit” supposedly executed by Atty. Eduardo C. Sanchez,

Acting Register of Deeds for Agusan del Sur, wherein it was stated that Atty.

Sanchez “do not recall having convened the Board of Assessment Appeals for

Agusan Province on September 16, 1998 which, as records show, was presided

over, without my knowledge or consent, by respondent HILARION CLAPIS, the

then incumbent Provincial Prosecutor of Agusan del Sur” and “I have not even

been aware, except at this time, that respondent Clapis had been a member of

the Board of Directors of Filipinas Palm Oil Plantation, Inc., the tax assessment

of which were the subject of the September 6, 1998 proceedings held by

respondent Clapis in my absence.”

It amazes us to note that Atty. Eduardo Sanchez, as Chairman, and Engr.

Domingo Ranario, as a Member, of the LBAA of Agusan del Sur, after voluntarily

affixing their signatures unto the decision under review, disclaims any

Reference: Book X, pp. 188-211

responsibility for it. In a criminal case, this is tantamount to pleading insanity as a

defense.

Anyway, since this case has been pending for a long period of time, this

Board has decided to set aside the questioned decision and decide this case on

its merits.

ISSUE NOS. II(A) AND II(B)

We shall discuss Issues II(A) and II(B) together since they are inter-related

with each other.

On Issue No. II(A), the Respondent-Appellant maintains that the market

value of each fruit-bearing oil palm tree should be P207.00, instead of P85.00 as

stated in the contested decision of the Local Board. Respondent-Appellant

explained that the market value of P42.00 per tree had “stagnated” from 1981 to

1990; that the increase in value in 1991 was only130%. The increase in value for

1992 and 1993 was only 260% – gradually implemented as provided for under

BLGF MC No. 36-90; that P207.00 was the third class market value applied in

the 1991-93 revaluation duly approved by the Department of Finance.

The position of Respondent-Appellant is that the P207.00 market value per

tree is based on his findings; that there are 110 effective fruit-bearing trees out of

128 trees density per hectare; that are two (2) Fresh Fruit Bunches (FFBs) per

tree per harvest; that there are three (3) harvests in a month during the eight-

month high yielding season the total production is 5,280 FFBs per hectare; the

during the low-yielding season of four months the average yield is 50 FFBs for all

110 trees per harvest; that there are three (3) harvests per month with a total of

600 FFBs for four (4) months per hectare; that the total harvest in a year is 5,880

FFBs per hectare; and that the average weight of each FFB is ten (10) kilograms.

In short, therefore, Respondent-Appellee, based the market value of P207.00 per

tree on the assumption that each hectare of 110 trees yields 58.80 metric tons of

FFBs per year.

Reference: Book X, pp. 188-211

Petitioner-Appellee, for its part, stated that Respondent-Appellant came up

with the questioned assessment in 1993 using the data coming from KENRAM

(Phils.), Inc. of Sultan Kudarat and Menzi Agricultural Corporation of Basilan

which alleged that for every one hectare of palm oil tree plantation 51.8 metric

tons of Fresh Fruit Bearing Bunches is produced per year – which data are more

than 100% higher than the actual yearly production of petitioner-appellee (19.04)

metric tons per hectare per year).

Attached to Petitioner-Appellee’s Comment/Answer are: (a) a Certification

dated July 19, 1999 from Kenram (Philippines) Inc., as Exhibit “D”, stating the

annual production for Fresh Fruit Bunches (FFB) from 1991 through 1998 with an

average of 15.103 FFBs for the period; (b) a Certification dated July 16, 1999

from Menzi Agricultural Corporation, as Exh. “E”, stating that “per records the

279-hectare oil palm plantation of MENZI AGRICULTURAL CORPORATION in

Isabela Basilan produced an average of 3,730 tons of fresh fruit bunches (FFB)

annually from 1990 to 1993 before its turn-over to land reform. This translates to

710 tons palm oil annually at an average FFB to palm oil recovery of 19%, or a

plantation average of 13.40 tons FFB and 2.54 tons palm oil per hectare per

year”; and (c) a Certification from AMOIL, Incorporated dated July 22, 1999, as

Exh. “F”, stating the number of tons FFB produced from 1991 to 1998. This last

certification shows that the average number of tons FFB per hectare per year is

14.774. For the year 1998 the average was 16.28 tons FFB per hectare.

Respondent-Appellant cited a portion of Petitiioner-Appellee’s ‘Motion to

Dismiss/Answer’ dated November 07, 1995 in Civil Case No. 1038, RE: National

Power Corporation (Plaintiff) versus Filipinas Palm Oil Industries, Inc. et al.,

(Defendant), viz:

X X X “3. The defendant admits partially the allegations in Paragraph 4, but denies that the unit per tree (highest) is P207.00, the truth being that the unit value per palm oil tree is P2,903.23. This is based on the compensation paid by Philippine Long Distance Telephone Company for thirty one (31) oil palm trees it cut down to put up its relay station in Bayugan per Official Receipt No. 0929, xxx.”

Reference: Book X, pp. 188-211

Petitioner-Appellee explains that “The P2,903.23 as compensation for

every oil palm tree affected by the NPC lines is based on the life expectancy of

the tree and its economic value for its entire life span.

On Issue No. II(B), Respondent-Appellant says that the total number of

fruit-bearing oil palm tree per hectare is 110, instead of only 98 as stated the

Local Board’s decision.

It (Respondent-Appellant) cited the letter (Annex K of Appeal) of the

general of NDC-Guthrie Plantation, Inc. (predecessor of Petitioner-Appellee)

dated 4 May 1998 and addressed to the Sangguniang Panlalawigan of Agusan

del Sur in which it is stated that the density and effective number of trees per

hectare is 107. Respondent-Appellant also stated that KENRAM (Phils.) Inc.

(Sultan Kudarat) has a plant density and effective number of trees of 142 per

hectare; that Menzi Agricultural Corp. (Isabela, Basilan) has a density of 140

trees with effective trees of 135-137 per hectare; and that Agusan Plantations,

Inc. (Agusan del Sur) has a density of 128 trees per hectare with effective trees

of 102.

Petitioner-Appellee opined that its predecessor, NDC-Guthrie Plantation,

Inc. could have erred in claiming that for every hectare of palm oil tree plantation

there is an average density of 107 hills and its effective or fruit bearing trees is

also 107. “Petitioner-Appellee may agree that the average density per hectare is

107 but cannot agree on the claim that every hectare has an average density of

107 hills also because it is an admitted fact that not all growing trees are fruit-

bearing. In fact the claim of Petitioner-Appellee is that for every hectare, the

effective or fruit-bearing trees is 92.”

To support its claim, Petitioner-Appellee attached to its Comment-Answer,

as Exh. “G”, a document entitled “HECTARAGE STATEMENT (ACQUISITION

RECORDS) ACTUAL PALM COUNT 1996 & PALMS PER HECTARE”, which

document is reproduced as follows:

Reference: Book X, pp. 188-211

MALIGAYA
CABANTAO

Field No.
Hectares
Actual Hill Count
Palms per Hectare
Hectares
Actual Hill Count
Palms per Hectare

1 2 3 4 5 6 7 8 9 10 11
123 102 101 106 56 118 101 138 129 64 –
13,970 10,743 10,710 10,996 6,880 14,267 12,721 11,784 10,021 5,944 –
114 105 106 104 123 121 126 85 78 93
91 104 109 103 102 136 125 59 91 110 –
9,393 9,840 10,209 10,332 9,424 14,756 12,400 6,448 9,102 12,322 –
103 95 94 100 92 109 99 109 100 112 –

1,038
108,036
106
1,030
104,226
101

MATI
LAPINIGAN

Field No.
Hectares
Actual Hill Count
Palms per Hectare
Hectares
Actual Hill Count
Palms per Hectare

1 2 3 4 5 6 7 8 9 10 11
102 114 115 102 117 100 102 98 96 111 –
8,804 10,540 10,664 11,656 10,292 10,912 14,508 8,804 10,168 12,028
86 92 93 114 88 109 142 90 106 108 –
166 135 118 137 94 74 140 135 —
16,740 12,028 13,020 11,160 8,184 7,936 12,400 10,416 —
101 89 110 81 87 107 89 77 —

1,057
108,376
103
999
91,884
93

EBRO
BUENA SUERTE

Field No.
Hectares
Actual Hill Count
Palms per Hectare
Hectares
Actual Hill Count
Palms per Hectare

1 2 3 4 5 6 7 8 9 10 11
48 130 86 118 110 113 77 116 96 72 –
6,514 12,761 10,141 12,342 10,369 11,081 7,987 11,927 9,448 7,312 –
136 98 118 105 94 98 104 103 98 102 –
117 111 111 91 69 126 116 108 —
13,013 11,550 11,288 11,001 6,844 13,384 11,433 9,932 —
1111111 104 102 121 99 106 99 92 —

966
99,882
106
849
88,445
104

TAGBAYAGAN
BAYUGAN

Field No.
Hectares
Actual Hill Count
Palms per Hectare
Hectares
Actual Hill Count
Palms per Hectare

1 2 3 4 5 6 7 8 9 10 11
115 85 89 119 111 122 130 101 124 106 63
14,146 10,145 10,963 14,189 13,870 12,969 15,319 12,453 13,332 11,969 7,431
123 119 123 119 125 106 118 123 108 113 –
112 105 78 123 82 80 78 93 129 41 –
12,162 12,699 9,484 12,594 8,795 8,866 8,432 10,401 14,541 5,112 –
109 121 122 102 107 111 108 112 —

1,165
136,786
118
921
103,086
112

Reference: Book X, pp. 188-211

During the hearing of this case on November 24, 1999 in Patin-ay,

Prosperidad, Agusan del Sur, the Hearing Officer pushed for an actual count to

be conducted on the entire plantation, but both parties informed that it would take

a long period of time to complete the task. Therefore, it was agreed, and so

ordered by the Hearing Officer, that a sample field inventory be conducted jointly

by authorized representatives of both parties. Field No. 8, containing an area of

108 hectares, located at Barangay Suerte, San Francisco, Agusan del Sur was

chosen as the subject of the sample field inventory.

The actual field count was conducted on December 1, through 14, 1999.

Sent to this Board in Cebu under cover dated January 4, 2000, the

Inspection/Inventory Report dated December 22, 1999 shoed the actual number

of trees counted in the Field No. 8 abovementioned as 9,820. The report

concluded that the number of trees per hectare was 119.75 or 119, arrived at by

dividing 9,820 by 82 hectares, because the remaining 26 hectares did not count

for being allegedly brushland and swampland where no palm oil tree was

planted. The report was signed by representatives of the Municipal and

Provincial Assessment Offices. Contrary to the agreement, the representatives of

petitioner-appellee were left out in the reporting process, for which, Petitioner-

Appellee cries foul.

The 26 hectares of brushland or swampland is equivalent to 24.07% of the

total area of Field No. 8 mentioned above. There is no evidence showing that

Field No. 8 is differently situated from the other fields in the plantations. Hence, it

is safe to assume that the condition of Field No. 8 is true to all the Fields in the

entire plantation.

If we used the figure 119.75 or 119 as the average number of trees per

hectare to arrive at the total number of trees in the plantation, we should deduct

from the total plantation area 24.07% thereof before we multiply the net area

(75.93%) by 119.75 or 119 trees per hectare.

Reference: Book X, pp. 188-211

If we divided the total number of trees in Field No. 8, which is 9,820 trees,

by the total number of hectares in the same field, which is 108 hectares, the

answer would be 90.926 trees per hectare. This, more or less, coincides with the

Petitioner-Appellee’s “Hectarage Statement” shown above which lists Field No. 8

in Buena Suerte as having an area of 108 hectares with a total 9,932 trees or 92

trees per hectare. We are, therefore, inclined to believe, as we do believe, the

listings under the “Hectarage Statement” of Petitioner-Appellee as true and

correct.

Annex “A” to the Petitioner-Appellee’s original appeal to the LBAA, which is

the “Crop Statement For Years 1991-1997”, reveals that the harvests for the

years 1991 through 1993 were as follows:

1991
1992
1993

Area Has
% of Bunches
# of Tons
Yield /Yr.
% of Bunches
# of Tons
Yield /Yr.
% of Bunches
# of Tons
Yield /Yr.

Maligaya Cabantao Mati Lapinigan Ebro Buena
Suerte Tagbayagan Bayugan Total
1,038 1,030 1,057 999 966

849 1,165 921
1,079,322 824,179 1,159,822 1,210,479 1,532,346

1,406,898 2,343,616 1,525,723
14,890 11,985 16,478 13,601 16,356

13,375 22,910 15,394
14.34 11.64 15.59 13.61 16.93

15.75 19.67 16.71
1,151,305 886,933 1,106,871 1,187,364 1,411,978

1,440,284 2,374,391 1,519,012
17,308 14,419 17,077 15,285 17,970

15,710 24,275 17,758
16.67 14.00 16.16 15.30 18.60

18.50 20.84 19.28
927,166 664,765 890,064 934,193 1,165,517

1,151,754 1,913,099 1,388,483
15,769 12,452 16,207 14,846 16,782

14,745 21,440 17,563
15.19 12.09 15.33 14.86 17.37

17.37 18.40 19.07

8,025
11,082,385
124,989
15.57
11,078,138
139,802
17.42
9,035,041
129,804
16.07

On the other hand, the Notes to Financial Statements prepared by the

Commission on Audit reveal the following:

Total production for the year in metric tons:

Fresh Fruit Bunches: – Harvested
– Processed Crude Palm Oil Palm Kernel

1991

124,958 144,964 33,665 7,599

1992

139,597 153,579 34,767 7,970

1993

129,810 146,447 33,638 7,555

Sales for the year in metric tons:

Crude Palm Oil Palm Kernel

34,805 32,525 33,975 7,654 7,713 7,289

If we divided the tons of FFBs found by the Commission on Audit by the

total number of hectares (8,025) in Petitioner-Appellee’s plantation, the results

would be 15.57, 16.175 and 17.395 tons per hectare for the years 1991, 1992

Reference: Book X, pp. 188-211

and 1993, respectively, figures which are, more or less, equal to those reported

by Petitioner-Appellee. We are, therefore, inclined to believe, as we do believe,

as true and correct, the findings of the Commission on Audit for we have no

reason to doubt it.

There are a total of 840,721 trees in Petitioner-Appellee’s plantations.

Divide this by 8,025 hectares and we have an average of 104.76 trees per

hectare.

The market value of P207.00 per tree used by the Assessors is based on

110 trees per hectare producing 58.80 metric tons per year. Since there are only

104.76 trees per hectare, the production per year per hectare, as far as the

Assessors are concerned, should have been 56.00 metric tons, that is, 58.80

divided by 110 and multiplied by 104.76.

As we said earlier, we believe that the average yield per hectare per year

for 1993 was 15.57 metric tons. This is equivalent to 27.80% of the assessors’

findings based on 104.76 trees per hectare. The correct market value per tree, is

P57.55, that is, 15.57 divided by 56.00 and multiplied by P207.00.

In view of the foregoing, the market value for each oil palm tree should be

FIFTY-SEVEN & 55/100 (P57.55). the assessment for each municipality shall be

based on the corresponding number of trees as listed in Petitioner-Appellee’s

“Hectarage Statement” discussed hereinabove.

ISSUE NO. II(C)

On Issue No. II(C), Respondent-Appellant stated that Appellee Local

Board erred in finding that the Company’s plantation roads are not subject to tax

on the ground “that these roads are intermittently used by the general public”

since these roads “are accessible only to outsiders who sign under oath a

company form ‘Undertaking/Waiver’ . . . whereby for a limited period the outsider

‘obligates himself to voluntarily submit to searches by the company guards.”

While Petitioner-Appellant impliedly admits that it claimed that the correct

assessed values of the roads are P105,000.00 for Primary Roads, P52,500.00

Reference: Book X, pp. 188-211

for Secondary Roads and P26,250.00 for Tertiary Roads, it disclaims any liability

for realty taxes on the roads and bridges on the ground that Petitioner-Appellee

is but the lessee of these properties, the owner of the land being the lessor-

cooperative. The roads are permanent improvements on the land and, although

the same improvements were introduced by Petitioner-Appellee, they inure to the

benefit of the landowner by right of accession. Further these roads and bridges,

although built for the use and benefit of Petitioner-Appellee are also being used

by members of the lessor-cooperative and by the general public.

To support its contention, Petitioner-Appellee cited the case of Bislig Bay

Lumber Company, Inc. versus the Provincial Government of Surigao, 100 Phil.

303, where the Supreme Court ruled as follows:

“We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs to the government by right of accession not only because it is inherently incorporated or attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government (Art. 440 and 445, New Civil Code, Tabotabo vs. Molero, 22 Phil. 418). In the second place, while the road was constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract entered by the appellee and the government, its use can also be availed of by the employees of the government and by the public in general.”

Petitioner-Appellee also stated that, although the lease contract between

Petitioner-Appellee and the cooperative provides that real property taxes on the

improvements made by the Petitioner-Appellee shall be for the account of the

latter, there are no realty taxes to speak of since the lessor, being a duly

registered Multi-Purpose Cooperative, is exempted from payment of the realty

taxes pursuant to the provisions of Section 234 of R.A. 7160, otherwise known as

the Local Government Code of 1991, thus:

“Sec. 234. Exemption from Realty Property Tax. – The following are exempted from payment of the Real Property Tax:

“xxx

“(d) All real property owned by duly registered cooperative as provided for under R.A. No. 6939, and

“xxx”

During the clarificatory hearing of this case on November 24, 1999 it was

established that the Petitioner-Appellant requires persons entering the compound

Reference: Book X, pp. 188-211

to sign a certain undertaking for security purposes only. Other than this, the

general public used the roads freely.

On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and

NDC-Guthrie Plantations, Inc., as Lessee, entered into a “Lease Agreement”

(acknowledged before Notary Public Ms. Nora C. Dimagondayao as Doc. No. 68,

Page No. 15, Book No. 1, Series of 1990) covering the agricultural lands

transferred by NDC to the DAR, which lands the DAR ultimately distributed

undivided to qualified workers-beneficiaries. As stated in the first “whereas”

clause of this lease agreement, the same agricultural lands were originally

covered by a Contract of Lease executed by and between NDC as Lessor and

NGPI as Lessee on December 29, 1982, the term of lease being twenty-five (25)

years from January 1, 1982. The second “whereas” clause of this Lease

agreement states that the transfer of subject lands from NDC to DAR was made

on September 27, 1988.

On RENTALS, the same agreement between NGPI Multi-Purpose

Cooperative, Inc. and NDC-Guthrie Plantations, Inc. provides thus:

“2.1 In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following annual rentals:

“1) An annual fixed rental, in the following amount – “SIX HUNDRED THIRTY FIVE PESOS” (P635.00) PER HECTARE PER ANNUM which would cover the following:

“(1)All Taxes on the Land “(2)Administrative charges “(3)Amortization charges

“It is understood that, if the annual fixed rental of “SIX HUNDRED THIRTY FIVE PESOS” (P635.00) is insufficient to pay any increase on the land taxes, the Lessee shall pay the difference, provided such increase does not exceed ten percent (10%) of the immediately preceding tax imposed on the land; provided further, that any increase beyond these percentage shall be borne equally by the LESSOR and LESSEE.

“The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty taxes on the Leased Property Primarily and principally lies with the LESSOR and any reference herein to payment by LESSEE of said taxes is only for purposes of earmarking the proceeds of the rentals herein agreed upon.”

Clause No. 6.3 of the same lease agreement provides that “All taxes due

on the improvements on the Leased Property except those improvements on the

Reference: Book X, pp. 188-211

Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for

the account of the LESSEE.”

Clause No. 9.4 of the same lease agreement provides that “. . . All fixed

and permanent improvements, such as roads and palm trees introduced on the

Leased Property, shall automatically accrue to the LESSOR upon termination of

this Leas Agreement without need of reimbursement.”

All the above-cited stipulations in the lease agreement between NGPI

Multi-Purpose Cooperative and NDC-Guthrie Plantations, Inc. were reconfirmed

and reaffirmed in the Addendum to Lease Agreement entered into by and

between NGPI Multi-Purpose Cooperative and Filipinas Palmoil Plantations, Inc.

on January 30, 1998 and acknowledged before Notary Public Mr. Nicasio R.

Paderra as Doc. No. 18, Page No. 04, Book No. 1, Series of 1998. The main

subject of said Addendum was the extension of the term of the lease agreement

up to December 31, 2032, along with economic benefits to the lessor other than

rentals.

There is no dispute that the roads are on the land owned by NGPI Multi-

Purpose Cooperative which leased the same to Petitioner-Appellee. These roads

belong to the Multi-Purpose Cooperative, not only by right of accession but also

by express provisions of the Contract of Lease. The liability of Petitioner-Appellee

for realty taxes, if any, on these roads would be due to the Multi-Purpose

Cooperative in accordance with the lease agreement.

ISSUE NO. II(D)

The appellee Local Board ERRED in finding that the market value for the lands assessed at P11,000 per hectare as against the company’s claim of P6,000, should be resolved in accordance with the rules and regulations of the Department of Agrarian Reform, when under Republic Act No. 7160, same shall be prepared in accordance with the rules and regulations of the Department of Finance.

Respondent-Appellant stated that, based on the average conversion factor

of the Foreign Exchange Rate of Peso/Dollar (FOREX) and the Consumer Price

Index (CPI) of all Income Household in the Philippines, of years 1979 and 1988,

Reference: Book X, pp. 188-211

the equivalent value of P4,300.00 cost per hectare in 1979 would be P13,659.38

per hectare in 1988. This based on the following computations:

FOREX 1988 = 21.8500

—————————— = 2.9617 or 296.17% FOREX 1979 = 7.3776

CPI 1988 = 398.5

——————————- = 3.3915 or 339.15% CPI 1979 = 117.5

296.17% + 339.15%

Average Conversion Factor: ————————- = 317.66% 2

The acquisition cost of P4,300.00 per hectare in 1979 by NDC, when

multiplied by the average conversion factor of 317.66%, would translate to

P13,659.38 per hectare in 1988. Respondent-Appellant assessment for 1991-93

was P11,290.00 per hectare.

Petitioner-Appellee contends that when NDC acquired the land at

P4,300.00 per hectare the land was still undeveloped, forested and with no

infrastructures, like roads and bridges, yet. When the DAR acquired it from the

NDC at P6,000.00 per hectare, the subject land was already fully planted to oil

palm trees, with several improvements, such as roads and bridges. The amount

of P6,000.00 per hectare was the valuation made by independent land valuation

officers from the Land Bank of the Philippines. Hence, it is the contention of

Petitioner-Appellee that the P6,000.00 per hectare is the correct land valuation of

these so-called service areas and not P11,000.00 per hectare as assessed by

Respondent-Appellant.

We are talking here of lands acquired by NDC in 1979 at P4,300.00 per

hectare, then purchased by the DAR from NDC on September 28, 1988 at

P6,000.00 per hectare which lands, the DAR distributed on November 28, 1988

to qualified workers-beneficiaries who formed themselves into Multi-Purpose

Cooperatives, which cooperatives leased back the same properties to Petitioner-

Appellee.

Reference: Book X, pp. 188-211

We are puzzled as to why Petitioner-Appellee, while disclaiming any

liability for real property taxes on subject properties, continues to be willing to pay

certain amounts of said taxes. As to the subject agricultural lands, the liability of

Petitioner-Appellee, formerly NDC-Guthrie Plantations, Inc., for realty taxes

thereon ceased the moment the National Development Company (NDC), on

September 27, 1988, transferred, ceded or sold the same lands to the

Department of Agrarian Reform (DAR) for distribution to qualified workers-

beneficiaries. If at all, said liability continued only up to November 28, 1988 when

the DAR awarded these properties to the Multi-Purpose Cooperatives.

As quoted in the discussions under Issue Nos. II(A) and II(B), the terms

and conditions of the Contract of Lease by and between the Multi-Purpose

Cooperatives and Petitioner-Appellee are explicit. Petitioner-Appellee is not

directly liable for any real property taxes on said lands. The liability of Petitioner-

Appellee is to the Multi-Purpose Cooperatives, if the latter is at all liable for the

real property taxes on said land.

ISSUE NO. II(E)

The appellee Local Board ERRED in finding that Residential housing units with market valuation of P150,000 or less are exempt from taxation, when under Republic Act 7160 and local ordinance, the exemption for qualified buildings (P150,000 or less) is effective only starting 1994, not for the revision period in question (1991-1993).

Respondent-Appellant stated that “The effectivity of the adjustments for

qualified buildings (P175,000 or less) is 1994, pursuant to Article 309 and 310 of

the Implementing Rules and Regulations (IRR) of RA 7160, and under

Sangguniang Panlalawigan Ordinance No. 11, series of 1995. Prior years shall

be covered by P.D. 464 as amended, pursuant to Article 309(c) of the IRR.”

Petitioner-Appellee stated in its Comment/Answer that in its appeal before

the LBAA it prayed only for the striking out of its realty tax liability on the

residential units except for those units which have an assessed value of more

than P175,000.00 and petitioner-appellee agreed that it should be made effective

starting 1994.

Reference: Book X, pp. 188-211

Republic Act No. 7160, otherwise known as the Local Government Code of

1991, took effect on January 1st, 1992, thus:

“SEC. 536. Effectivity Clause. – This Code shall take effect on January first, nineteen hundred ninety-two, unless otherwise provided herein, after its complete publication in at least one (1) newspaper of general circulation.”

Sec. 218 of the same Code provides as follows:

“SEC. 218. Assessment Levels. – The assessment level to be applied to the fair market value of real property to determine its assessed value shall be fixed by ordinances of the sangguniang panlalawigan, sangguniang panglungsod or sangguniang bayan of a municipality within the Metropolitan Manila Area, at the rates not exceeding the following:

“(a) x x x

“(b) On Buildings and other Structures:

“(1) Residential

Over

————————–

P 175,000.00 300,000.00 500,000.00 750,000.00
1,000,000.00 2,000,000.00 5,000,000.00 10,000,000.00

Not Over

————————–P 175,000.00
300,000.00 500,000.00 750,000.00 1,000,000.00 2,000,000.00 5,000,000.00
10,000,000.00

Assessment Levels
————————0%
10% 20% 25% 30% 35% 40% 50% 60%

“(2) xxx”

We should like to think that both Sections 536 and 218 of the Code are

self-explanatory. Note, however, the phrase “rates not exceeding” in Section 218.

This means that the Municipal or City Councils or Provincial Boards may not

increase the rates of the assessment levels provided under Section 218 of the

Code. Likewise, the Councils or the Boards may not delay or postpone the

effectivity of the exemption enjoyed or to be enjoyed by taxpayers, like

postponing the 0% assessment level to 1994, or otherwise do anything which

would tend to increase the burden by Section 218, like reducing the value for 0%

assessment level from P175,000.00 to P150,000.00.

Since, however, Petitioner-Appellee “agreed” to have the zero percent

(0%) assessment level on residential unit with market values of P175,000.00 or

less to be made effective in 1994, so be it.

ISSUE NO. II(F)

Reference: Book X, pp. 188-211

The appellee Local Board ERRED in finding that the company’s road equipment and haulers are not real properties but movables, when under Republic Act 7160 they are properties subject to taxation.

Respondent-Appellant stated that the company’s transport and road

equipment/machineries are necessary to the Petitioner-Appellee’s business and,

therefore, should be taxable as ‘machinery’.

On the other hand, Petitioner-Appellee said that road equipment and

haulers, from their very nature, are movables. These properties are merely

incidental to the business of Petitioner-Appellee and should not be considered as

machineries in the ambit of the Local Government Code of 1991.

Section 199(O) of R.A. 7160 provides and we quote:

“SEC. 199. Definitions. – When used in this title:

“xxx

“(O) “Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances and apparatus which may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installation 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; x x x.”

While it is true that the roads shall necessarily be maintained, it is not

necessary for Petitioner-Appellee to own the road equipment to be used in

maintaining the roads. Haulers are similar in nature to delivery trucks and yet the

latter are never considered real property for purposes of the real property tax.

Not all things which are actually, directly and exclusively used to meet the

needs of a particular industry, business or activity are considered real property

for purposes of the real property tax. Central airconditioning systems have the

same functions as window airconditioning units and yet the latter are never

considered realty for purposes of the real property tax.

Adding machines and/or calculators are always necessary to any kind of

business, yet they are not subject to real property tax. To classify, therefore, the

Reference: Book X, pp. 188-211

road equipment and haulers as real properties for purposes of the real property

tax would be stretching the meaning of Section 199(O) too far.

ISSUE NO. II(G)

The appellee Local Board ERRED in finding that the milling plant shall be assessed at only 20% of its acquisition cost even if fully depreciated when, under Republic Act 7160, the depreciation allowance shall not exceed 5% of original/replacement cost for each year of use.

Respondent-Appellant says that the company’s equipment/machineries

were appraised pursuant to Section 224(a) of R.A. 7160, by dividing its remaining

economic useful life by its estimated economic life and multiplied by its

replacement or reproduction cost, and correspondingly applied with the

appropriate depreciation allowance under Section 225 of R.A. 7160, where the

depreciation rate shall not exceed five percent of its replacement or reproduction

cost for each year of use.

Petitioner-Appellee desires that a reassessment of the milling plant be

made on the existing laws to come up with a more accurate and acceptable

assessed value.

We do not really have an inkling as to what the parties are squabbling

about. There is no mention of how much the milling plant was assessed by the

Respondent-Appellant nor on how much Petitioner-Appellee wants the plant to

be valued.

Petitioner-Appellee “desires that a reassessment of the milling plant be

made on the existing laws to come up with a more accurate and acceptable

assessed value” but neglected to mention the acceptable amount at which the

milling plant should be valued or on how it could be arrived at.

Despite our requests, this Board was not furnished a copy of the tax

declarations in question or copies of any documents which may support any

valuation.

The Notes to Financial Statements prepared by the Commission on Audit

for the Calendar Years 1993 and 1992 state as follows:

Reference: Book X, pp. 188-211

“Property, Plant and Equipment —————————————-

“Property, determined on

plant and equipment are carried at appraised values as February, 1990 by and independent firm of appraisers.

Subsequent additions are stated at cost.

“The net appraisal increment resulting from the revaluation was credited to the Revaluation Increment in Property account shown under Stockholder’s Equity in the balance sheets. The amount of the revaluation increment absorbed through depreciation is being transferred to retained earnings (deficit).

“Depreciation is computed on a straight line method over the estimated useful lives of the property ranging from three (3) to fifteen (15) years.

The Audited Financial Statements for the years ended December 31, 1990

through 1993 show the appraised values, net of depreciation of the Property,

Plant and Equipment as follows:

1990
——————P229,440,509

1991
—————–P276,068,570

1992
—————-P233,367,109

1993
—————–P204,933,679

The phrase “Property, Plant and Equipment” used in the Financial

Statements could not be synonymous with the term “milling plant” since, as

shown in the statements, the former term embraces all fixed assets, including

personal properties, except Plantation Development Cost, Deferred Charges and

Other Assets. We are, therefore, leaving the assessment for the “milling plant”

alone.

WHEREFORE, this Board has decided to set aside, as it does hereby set

aside, the decision rendered by the Local Board of Assessment Appeals of the

Province of Agusan del Sur on June 8, 1999 in an unnumbered case entitled

“Pilipinas Palm Oil Co., Inc., Petitioner, versus The Provincial Assessor’s Office

of Agusan del Sur, Respondent,” and hereby orders as follows:

A. The market value for each oil palm tree should be FIFTY-SEVEN &

55/100 PESOS (P57.55), effective January 1, 1991. The assessment for each

municipality shall be based on the corresponding number of trees as listed in

Petitioner-Appellee’s “Hectarage Statement” discussed hereinabove;

Reference: Book X, pp. 188-211

B. Petitioner-Appellee should not be made to pay for real property

taxes due on the roads starting from January 1, 1991;

C. Petitioner-Appellee is not liable to the Government for real property

taxes on the lands owned by the Multi-Purpose Cooperatives;

D. The housing units with a market value of P175,000.00 or less each

shall be subjected to 0% assessment level, starting from the year 1994;

E. Road equipment and haulers are not real properties and,

accordingly, Petitioner-Appellee is not liable for real property tax thereon;

F. Any real property taxes already paid by Petitioner-Appellee which,

by virtue of this decision, were not due, shall be applied to future taxes rightfully

due from Petitioner-Appelle.

SO ORDERED.

Manila, Philippines, November 21, 2001.

(Signed) CESAR S. GUTIERREZ
Chairman

(Signed) BENJAMIN M. KASALA
Member

(Signed)
ANGEL P. PALOMARES Member

Reference: Book X, pp. 188-211