Republic of the Philippines
CENTRAL BOARD OF ASSESSMENT APPEALS M a n I l a

CENTRAL AZUCARERA DE BAIS, INC. Petitioner-Appellant,

– versus –

THE CITY ASSESSOR OF BAIS, CITY, Respondent- Appellee,

CBAA CASE NO. V-24

In Re:
LBAA CASE NO. 03-B-01

– and –

THE LOCAL BOARD OF ASSESSMENT APPEALS OF BAIS CITY,
Appellee.
x———————————————————–x

D E C I S I O N

Before us is an appeal by Petitioner-Appellant Central Azucarera de Bais,

Inc (“CAB” for brevity) from the decision of the Local Board of Assessment

Appeals of the City of Bais (“Local Board”) in LBAA Case No. 03-B-1, the

dispositive portion of which decision reads as follows:

“WHEREFORE, premises considered, and fining no merit in the instant petition this Board hereby orders the same DISMISSED.”

This appeal questions the assessments made by Respondent City

Assessor per Tax Declaration Nos. 2003-6-456 and 2003-6-462, both of which

were issued on December 31, 2002 and made effective on January 1, 2003.

Background of the Case

Earlier on, the City Assessor assessed CAB’S Sugar Factory and Paper

Factory machineries, thus:

Tax Dec. Eff. Original Depreciation Market
No. Year Cost Cost Value
Sugar Factory Machinery:
TD 6323 1960 P 327,993.94 P163,996.97 P 163,996.97 TD 10598 1970 5,312,215.73 0.00 5,312,215.73
Sub-Totals P5,640,209.67 P163,996.97 P5,476,212.70

Paper Factory Machinery:
TD 7885 1970 P 500,000.00 TD 10599 1970 4,651,505.30
Sub-Totals P5,151,505.30 Grand Totals P10,791,714.97

P 0.00
0.00 P 0.00 P163,996.97

P 500,000.00
4,651,505.30 P5,151,505.30
P10,627,718.00

Reference: Book XIII, pp. 81-106

On December 27, 1974, the City Assessor issued TD No. 137-C, which

took effect on January 1, 1974, canceling and consolidating TD Nos. 6323,

10598, 7885 and 10599, thus:

Replacement Cost

Less: Depreciation (50%)

Market Value Assessment Level

Assessed Value

P143,996,538.10 71,983,269.05
———————
P 71,983,269.05 x 70% ———————-P 50,388,290.00 =============

On September 12, 1979, the Assessor, supposedly pursuant to the Local

Board’s decision dated June 25, 1979, revised TD No. 137-C by issuing TD No.

137-E which also took effect on January 1, 1974, revising the market value and

assessment level, thus:

Market Value Assessment Level

Assessed Value

P67,948,804.52 x 50% ——————-P33,974,400.00 ============

A lot of revisions or reassessments were made whereby TD 4-137-E was

superseded by RD 147-08-006-00-079-M-9, then by TD 147-08-006-00-079-M-1,

then by TD 3-363, the by 6-392, then by TD 6-520.

Tax Declaration No. 6-520 was also cancelled by TD 6-322 which was

issued on December 1, 1993 and made effective on January 1, 1994, for the

combined old sugar and paper factory machineries, thus:

Replacement Cost Less: Depreciation

Market Value Assessment Value

Assessed Value

P257,191,295.79 205,753,036.63
———————P 51,438,259.16 x 80% ———————P 41,150,610.00 =============

In Ruling No. 11 of a resolution dated February 24, 1995 in LBAA Case

No. 94-B-01, the Local Board directed the City Assessor to correct Tax

Declaration No. 6-322 “to reflect the actual coverage which are the old

machineries of CAB sugar and paper factories.” In compliance therewith, the City

Reference: Book XIII, pp. 81-106

Assessor cancelled TD 6-322 and issued TD Nos. 6-500 and 6-501, both also

effective January 1, 1994, thus:

TD NO. 6-500 TD NO. 6-501 TOTALS
(SUGAR MILL) (PAPER MILL) (COMBINED)
Original Cost P17,925,431.60 P2,357,793.62 P20,283,225.22 Conversion Factor x 12.80 12.80 12.80
——————— ——————- ———————Replacement/Production Cost P229,445,524.48 P30,179,758.30 P259,625,282.78 Less: Depreciation Cost (80%) 183,556,419.59 24,143,806.64 207,700,226.23
——————— ——————– ———————–Market Value/Retention Cost (20%) P45,889,104.89 P 6,035,951.66 P 51,925,056.55 Assessment Level x 80% x 80% 80%
——————– ——————— ———————–Assessed Value P36,711,280.00 P4,828,760.00 P41,540,040,.00
=========== ========== ============

Tax Declaration No. 6-501 was “cancelled effective the year 1995, per

ocular inspection conducted by the City Assessor and members of the LBAA on

September 20, 1994 and per letter and/or Notice of Demolition sent by the

President of the Central Azucarera de Bais, Bais City, dated January 25, 1995.”

Tax Declaration No. 6-500 was canceled by TD No. 2003-6-456, which

appear to have been approved by the City Assessor on December 31, 2002 and

made effective the year 2003, Tax Declaration No. 2003-6-456 and is attached

computations sheet bear the following figures:

Estimated Life – 50 years P 17,925,431.60 Original Cost
Conversion Factor [53.20(2002 US$1=P rate)

Divided by 2.00 (1959 US$1=P rate)]

Replacement Cost
Less: Depreciation (80%)

x 26.60 ———————-P476,816,480.36
381,453,184.48 ———————

Market Value/Retention (20%) Assessment Level

P 95,363,296.11 x 80%

———————Assessed Value P 76,290,640.00
=============

Tax Declaration No. 2003-6-462, also approved on December 31, 2002

and made effective the year 2003, has the following figures, thus:

Estimated Life – 50 years Original Cost
Conversion Factor

[53.20(2002) US$1=P Rate) over 26.50 (1995 US$=P Rate)]

Replacement Cost

P251,231,400.00

x 2.00 ———————P502,462,800.50

Reference: Book XIII, pp. 81-106

Less: Depreciation for 7 years @ 2% per Year or 14%

Market Value Assessment Level

Assessed Value

The Appeal Before the LBAA

60,496,521.10 ———————P432,118,008.40 x 80% ———————-P345,694,410.00 =============

So, on May 9, 2003, as aforesaid, CAB filed with the Local Board an

“Appeal On Assessment”, docketed as LBAA Case No. 03-B-01, questioning the

assessments of CAB’s Refinery Plant Machineries under Tax Declaration No.

2003-6-462 and CAB’s Old Sugar Factory Machineries under Tax Declaration

No. 2003-6-456, both tax declarations having been made effective January 1,

2003.

In his Position Paper filed with the Local Board on September 23, 2004,

Respondent City Assessor, through Acting City Assessor, Mr. Vicente Galera,

stated:

1. that “the residual issue is whether or not there would be legal as well as factual basis to alter TD 2003-6-456”;
2. that “there is nothing in the facts and the law that warrants the modification of the figures of said TD”;
3. that “appellants had already incurred in estoppel, if not laches”;

In its “Comments on Respondent’s Position Paper” filed on October 4,

2004, CAB had these to say:

1. Petitioner CAB did not receive from Respondent the written Notice of Assessment required of him under Section 226 of RA 7160;
2. Respondent did not comply with the provisions of Section 9 of Assessment Regulations No. 1-92 dated October 6, 1992, addressed to all Provincial, City, and Municipal Assessors;
3. Appellant seasonably filed his Appeal on TD 2003-6-456, revision of assessment of the Old Sugar factory Machinery of Appellant (further revising the previous TD on said property (No. TD-6-500). Appellant came to know that there was such TD-6-500 after it received TD 2003-6-456.

In its decision dated November 29, 2005, the Local Board said that “The

issue to be resolved is whether or not appellant is estopped to question the Tax

Declaration No. 6-500” and that, to this issue, “The answer is in the affirmative.”

Reference: Book XIII, pp. 81-106

The Local Board quoted the provisions of Sections 226 and 252, both of

R.A. 7160, otherwise known as the Local Government Code of 1991, clearly

implying that CAB’s appeal did not conform to the requirements of either

Sections.

As to the allegation of CAB that it only knew of the existence of Tax

Declaration No. 6-500 upon its receipt of Tax Declaration No. 2003-6-456, the

Local Board said:

“The allegation of the Appellant deserves scant consideration, TD No. 500 and TD NO. 6-501 both dated March 21, 1997 were the results of the ruling of this board in a LBAA 94-B-1. The Official Receipt No. 9973648 dated March 21, 2003 will show that Appellant CAB paid taxes covering TD 6-500 was for the ‘First Quarter of 2003’. Following the contention of the Appellant CAB that it knew TD No. 6-500 only upon receipt of TD No. 2003-6-456 then it follows that the appellant did not pay taxes from 1997 to 2003. Or if it did pay taxes, what was the Tax Declaration (Assessment value) did it use as basis from 1997 to 2002? Appellant CAB could not possibly used the assessed value in TD No. 6-322 as the basis for taxes for the years 1997 to 2002 because it has already been revised per decision of LBAA 94-B-1.

“Further, the contention of appellant CAB that it did know the existence of TD No. 6-500 upon receipt of TD 2003-6-456, contradict the fact that the Old Paper Factory machineries was demolished in 1997 leading to the cancellation of TD No. 6-501 with the notations to wit:

‘Note: This Tax Declaration is cancelled effective the year 1995, per ocular inspection conducted by the City Assessor and members of LBAA on September 20, 1994 and per letter and/or Notice of Demolition sent by the President of the Central Azucarera de Bais, Bais City Jan. 25, 1995’

Then a handwritten notations:

“The notation stated in this Tax Declaration was made by the City Assessor R.F. Grapa and made this cancellation by himself dated May 21, 1997

‘Unreadable signature ‘5/23/97’

“This shows that indeed the appellee City Assessor of Bais, revised TD No. 6-322 and issued TD No. 6-500 and TD No. 6-501 following the directives of LBAA 94-B-1 ruling.

The Instant Appeal

Alleging that it received a copy of the assailed decision in LBAA Case

No.03-B-01 on January 10, 2006, CAB assigned the following errors, to wit:

I. Estoppel cannot be applied to prevent appellant from questioning Tax Declaration (TD) No. 6-500.

II. Without the requisite written notice of assessment, the prescriptive period has not even began to run. A contrary finding would violate appellant’s right to due process.

Reference: Book XIII, pp. 81-106

III. The LBAA has already acknowledged the validity and correctness of appellant’s computation.

IV. Bodies other than the Sanggunian of Bais City have no power to set market valuations for assessment purposes.

The First and Second Issues

We shall discuss the first two errors or issues together since they are inter-

related with one another.

Petitioner-Appellant CAB argues:

1. That, “Despite the insistence by the LBAA on appellant’s alleged knowledge of TD 6-500 prior to the latter’s receipt of TD 2003-6-456 on 12 March 2003, the indubitable fact remains that a tax declaration alone can never cure the lack of a notice of assessment that is required by law.

2. That “Section 226 of the Local Government Code (LGC) is crystal clear” on the requirement of the written notice of assessment.

3. That “Obviously, the written notice of assessment is different from copies of tax declarations that, under said Section 226, must be separately submitted in support of the appeal made to the LBAA. Had these documents been the same, then there would have been no need to identify them individually in said Section”;

4. That “TD 6-500 can be questioned, for estoppel cannot be applied.

On May 29, 2006, this Board, through its Visayas Field Office, received

Respondent’s Answer (dated March 20, 2006) to the instant appeal. Respondent-

Appellee says:

1. It is well settled that an issue raised for the first time on appeal and not raised timely in the proceeding before the lower court is barred by estoppel, citing Caltex (Phil) Inc. vs. CA, 212 SCRA 748; and

2. The claim of lack of Notice is a factual question; as shown in Official Receipt No. 9953960 dated March 31, 1998, it is very clear that the Appellant CAB must have received the Notice of Assessment considering that the said Assessment is the outcome of Ruling 11 in the Decision of the Local Board in LBAA Case No. 94-B-01.

In its Reply dated June 19, 2006 (received by this Board in Manila on June

20, 2006), Petitioner-Appellant reiterates that “A notice of assessment is not a tax

Reference: Book XIII, pp. 81-106

declaration. When the law requires a notice of assessment, that requirement

does not pertain to a tax declaration. Appellees should not muddle the issue

herein by insisting upon applying estoppel by laches against Appellant, when

their assessment, to begin with, has absolutely not basis . . . In like manner,

there is not estoppel by laches. This phrase is defined as the ‘failure or neglect

for an unreasonable or unexplained length of time to do that which, by exercising

due diligence, could or should have been done earlier, warranting a presumption

that the person has abandoned his right or declined to assert it.’ Appellant has

never abandoned or declined to assert its right to receive a written notice of

assessment. Hence, no failure or neglect can be attributed to it.

This Board is inclined to believe that Petitioner-Appellant actually received

the owner’s copy of Tax Declaration No. 6-500, or had actual knowledge thereof,

prior to its receipt of TD 2003-6-456. Our belief, however, does not matter. What

matters is the mandate of Section 226 of RA 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 affidavit or documents submitted in support of the appeal.” (Emphasis ours)

The importance of the written notice of assessment is emphasized by the

provisions of Assessment Regulations No. 1-92 dated October 6, 1992, Section 9

of which described in meticulous detail (a) when a written notice of assessment

should be given, (b) how, to whom and where it shall be delivered, (c) the

documents to be kept as proof of its delivery, thus:

“Section 9. Notification of New or Revised Assessments. When real property is assessed for the first time or when an existing assessment is increased or decreased, the provincial, city or municipal assessor shall, within thirty days, give written notice of such new or revised assessment to the person in whose name the property is declared. The notice may be delivered personally to such person or to the occupant in possession, if any, or by mail to the last known address of the person to be served, or through the assistance of the punong barangay.

“a. Purpose of service of Notice of Assessment

“Although the real property tax is levied against the real property, it is the owner who pays the tax. After the tax is fixed, he is entitled to a hearing on the assessment of his property, notice of hearing constitute part of the due process

Reference: Book XIII, pp. 81-106

(not strictly judicial) in taxation. If he is not satisfied with the action of the assessor in the assessment of his property, he may, within sixty (60) days from the date of receipt by him of the written notice of assessment of his property, appeal to the Board of Assessment Appeals of the province or city where the Assessment Appeals of the province or city is located. If he does not appeal within the period, he will be deprived of the right to be heard in the Board.

“b. To whom and where the notice shall be delivered.

“The written notice together with the owner’s copy of the declaration shall be addressed to the person in whose name the property is declared. It may be delivered to him personally or to the occupant in possession of the property, or by mail to the last known address of the owner through the assistance of the punong barangay.

‘If personally delivered to the owner or person in possession of the property, the person serving the notice shall secure the signature of the owner or occupant on the duplicate copy of the notice, with a notation of the date when notice was served and identification, whether the recipient is the owner or occupant of the property. If the assistance of the barrio captain is secured, he should be requested to place his signature on the duplicate copy of the notice.

“If the notice of assessment is coursed through the mail, the notice of assessment and owner’s copy of the tax declaration shall be registered with return card.”

“For obvious reasons, the duplicated copies of the notice of assessment signed by the owners or occupants of the property and the return card shall be filed in the office of the provincial, city or municipal assessor. Those are important in ascertaining whether appeals filed by owners or real property are filed within the reglementary period of sixty days from date of receipt of such notices.

“The notice of assessment and owner’s copy of the tax declaration shall be delivered or mailed to the property owners within thirty days from entry of tax declarations covering assessments of property in the Record of Assessments.

“x x x

“Form of Notice of Assessment of real property, RFA Form No.2, marked as Annex ‘H’ (should be Annex ‘X’) should be used. It may be mimeographed by assessors for their use.” (Emphasis supplied)

The requirements of a written Notice of Assessment, as provided for in

Section 226 of RA 7160 and in Section 9 of Assessment Regulations No. 1-92,

needless to say, are mandatory. The prescriptive period of sixty (60) days from

the date of receipt of the written Notice of Assessment within which to appeal to

the Local Board, as provided for in Section 226, RA 7160, does not start to run if

no such notice is given in the first place.

Respondent-Appellee City Assessor argues that “it is very clear that the

Appellant CAB must have received the Notice of Assessment” for two reason,

namely: (1) Petitioner-Appellant paid taxes on TD 6-500 as shown in Official

Receipt No. 9953960 dated March 31, 1998; and (2) TD 6-500 and TD 6-501

Reference: Book XIII, pp. 81-106

were the outcome of Ruling No. 11 in the Decision of the Local Board in LBAA

Case No. 94-B-01.

As stated somewhere in Section 9 of Assessment Regulations No. 1-92,

“For obvious reasons, the duplicated copies of the notice of assessment

signed by the owners or occupants of property owner or occupant of the

written notice of assessment cannot be allowed.

We grant, for the sake of argument, that Petitioner-Appellant received its

copy of TD 6-500. Without the Notice of Assessment, an ordinary person who is

not conversant with existing assessment laws would not have the instinct to

examine meticulously a tax declaration by comparing it with a next preceding

one. To him, the newer tax declaration is just a “renewal” of the older one,

without any increase or decrease in assessment.

More so with a person who is conversant with existing assessment laws.

He knows that when a real property is assessed for the first time or when an

existing assessment is increased or decreased, the assessor is obligated to give

a written notice thereof. Without such notice, he also knows that, if the

assessment is wrong, his right to appeal such assessment to the local board

does not prescribe.

This is especially true in this case. Prior to TD 6-322, the Sugar Factory

machineries and the Paper Factory machineries were assessed separately with

original market values of P5,640,209.67 and P5,151,505.30, respectively. Later,

the City Assessor consolidated the assessment of the machineries of both

factories under TD 6-322. Then the Local Board, in Ruling No. 11 of its Decision

dated June 25, 1979 in LBAA Case No. 94-B-01, directed the City Assessor to

revise TD 6-322 by separating the coverage of the Sugar Factory machineries

from those of the Paper Factory machineries.

Tax Declaration Nos. 6-500 and 6-501 were just the result of the said

direction of the Local Board. Petitioner-Appellant was too confident that the total

“original cost” of P20,283,225.22 in TD 6-322 would be apportioned between the

Reference: Book XIII, pp. 81-106

Sugar and Paper Factories based on the ratios prevailing prior to TD 6-322,

which was P5,640,209.67 (52.2642572%) for the Sugar Factory to

P5,151,505.30 (47.735728%) for the Paper Factory. As it turned out, however,

the City Assessor arbitrarily apportioned the said total “original cost” by assigning

P17,925,431.60 (88.3756474%) to the Sugar Factory machinery (TD 6-500) and

P2,357,793.62 (11.6243526%) to the Paper Factory machinery (TD 6-501). The

apportionment made in TD 6-322 was arbitrary since there is nothing in the

records supporting such abrupt shift of values. There is no showing there was

any change, major or minor, in the composition of the machineries, nor is there

proof that machineries were transferred from the Paper Factory to the Sugar

Factory.

Respondent-Appellee says that “it is well settled that an issue raised for

the first time on appeal and not raised timely in the proceeding before the lower

court is barred by estoppels”, citing Caltex (Phil) vs. CA, 212 SCRA 748.

We are not quite certain as to what Respondent-Appellee means by “issue

raised for the first time on appeal and not raised timely in the proceeding before

the lower court.” As far as we are concerned, all the issues raised to this Board

were ventilated in the Local Board. Respondent-Appellee might have been

confused with the word “appeal” used in Section 226 of RA 7160 for, under the

provisions of Book II, Title Two of RA 7160, there is no board lower than the

Local Board of Assessment Appeals.

As estoppels by laches, the Supreme Court explained the same in a

number of cases, among which were:

1. Salud Lopez, et al. versus Robert P. David, et al., G.R. No. 152145, March 20, 2004, citing Tijam v. Sibonghanoy (131 Phil. 556, April 15, 1968):

“Applying the rule on estoppels by laches, we declared therein that the failure to raise the question of jurisdiction at an earlier stage barred the party from questioning it later. We explained:

‘A party may be stopped or barred from raising a question in different ways and for different reasons. Thus, we speak of estoppels in pais, of estoppels by deed or by record, and of estoppels by laches.

Reference: Book XIII, pp. 81-106

‘Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.

‘The doctrine of laches or of ‘stale demands’ is based upon grounds of public policy which requires, for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.”

2. Republic v. Sandiganbayan, G.R. No. 152154, July 15, 2004, citing Maeja vs. Patcho, 123 SCRA 540 [1983]:

“. . . Estoppel by laches is the failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. In effect, therefore, the principle of laches is one of estoppels because ‘it prevents people who have slept on their rights from prejudicing the rights of third parties who have placed reliance on the inaction of the original parties and their successors-in-interest.”

3. Manila International Airport Authority (MIAA) vs. Ala Industries Corporation, G.R. No. 147349, February 13, 2004, citing Padcom Condominium Corporation v. Ortigas Center Association, Inc. 382 SCRA 222, 230, May 9, 2002, per Davide Jr. CJ; citing Cruz v. CA, Phil. 1036, July 27, 1998:

“. . . In estoppels, a person, who by his act or conduct has induced another to act in a particular manner, is barred from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to another.”

As stated by the Supreme Court in the above-cited decisions, the

characteristics of the doctrine or principle of laches are:

1. The doctrine of laches is principally a question of the inequity or

unfairness of permitting a right or claim to be enforced or asserted (Tijam v.

Sibonghanoy);

2. The principle of laches is one of estoppels because ‘it prevents

people who have slept on their rights from prejudicing the rights of third parties

who have placed reliance on the inaction of the original parties and their

successors-in-interest (Republic vs. Sandiganbayan).

3. In estoppels, a person, who by his act or conduct has induced

another to act in particular manner, is barred from adopting an inconsistent

position, attitude or course of conduct that thereby causes loss or injury to

another (Manila International Airport Authority (MIAA) vs. Ala Industries

Corporation).

Reference: Book XIII, pp. 81-106

None of the above circumstances are present in this case. In fact, it was

the late City Assessor who committed the unfair action of arbitrarily re-

apportioning the replacement cost of the Sugar Factory and Paper Factory

machineries and neglected to send a written notice thereof to the taxpayer. The

inaction by the Petitioner-Appellant to appeal to the Local Board earlier was due

to the failure of the City Assessor to give the required Notice of Assessment.

Such inaction by Petitioner-Appellant did not prejudice any third party and,

certainly, did not cause any loss or injury to the City Assessor or the City of Bais.

In view of the foregoing, we believe, and so hold, that Petitioner-Appellant

was not or is not barred by prescription because the prescriptive period has not

begun to run in the first place. Nor is CAB stopped by laches from questioning

TD 6-500 for the same reason. Even if CAB were considered negligent, such

neglect did not cause any loss or injury to any third person, much less to the City

of Bais.

The Third and Fourth Issues

Anent the third and fourth issues, CAB questioned the use by the City

Assessor of the amount of P17,925,431.60 as the Original Cost of its Sugar

Factory machinery in TD 2003-6-456. This tax declaration (TD 2003-6-456) was

a revision of TD 6500 and both tax declarations appear to have the same

“original cost” of P17,925,431.60. The question, therefore, is virtually directed

against TD 6-500.

CAB alleged that, when the Sugar Factory and Paper Factory machineries

were originally acquired in 1959, the Peso-Dollar exchange rate was PhP2.00 to

US$1.00 and when TD 6-322 was issued in 1993, the Peso-Dollar exchange rate

was PhP25.3605 to US$1.00; and that, therefore, the Conversion Factor was

used in arriving at the amount of P257,191,295.79 as Replacement Cost in TD 6-

322 was 12.68, that is, dividing P25.3605 by P2.00.

When the amount of P257,191,295.79 (Replacement Cost in TD 6-322) is

divided by the Conversion Factor of 12.68, the amount of P20,283,225.22 would

Reference: Book XIII, pp. 81-106

result as the combined Original Cost of the Sugar Factory and Paper Factory

machineries.

CAB further stated that the said combined “original cost” of

P20,283,225.22 (as computed above) could now be apportioned between the old

sugar factory machinery and the old paper factory machinery by multiplying their

respective original costs as of January 1, 1970 by the common factor of

1.879518248 [P20,283,225.22 (after Ruling No.11, LBAA Case No. 94-B-01),

thus:

Before
Ruling #11 Factor Original Cost

After Ruling #11

Old Sugar Factory Old Paper Factory

P5,640,209.67 x 1.879518248 = P10,600,877.00
5,151,505.30 x 1.879518248 = 9,682,348.22

Totals P10,791,714.97 P20,283,225.22

CAB further argued that, since TD 6-501 for the Paper Mill Factory

machinery was cancelled effective the year 1995, the subject matter of TD 2003-

6-456 should only be the Sugar Factory machinery and the “original cost” to be

used should be P10,600,877.00, instead of P17,925,431.60 as used in TD 2003-

6-456, thus:

Estimated Life – 50 years Original Cost
Conversion Factor [53.20 (2002) rate] divided By 2.00 [1959 rate])

Replacement Cost

Less: Depreciation (80%)

Market Value/Retention (20%)

P 10,600,877.00

x 26.60 ———————P281,983,328.20
225,586,662.50 ———————P 56,396,665.70

Assessment Level x 80% ———————
Assessed Value P 45,117,332.56 =============

Respondent City Assessor, in his one-page answer dated November 27,

2003, merely stated that “After carefully and painstakingly studying the

petitioner’s appeal, the respondent finds and strongly maintains, after a thorough

and tedious review of the disputed assessment, that such assessment is done by

the Office of the City Assessor of Bais as contained in the aforesaid new Tax

Reference: Book XIII, pp. 81-106

Declarations, are in consonance with law, established policy and standing

guidelines issued by the Department of Finance. Consequently, the appeal

merits immediate dismissal.”

In his Position Paper filed with the Local Board on September 23, 2004,

Respondent City Assessor, this time, through Acting City Assessor, Mr. Vicente

Galera, stated that “the residual issue is whether or not there would be legal as

well as factual basis to alter TD 2003-6-456” and that “there is nothing in the

facts and the law that warrants the modification of the figures of said TD.”

As agreed during the preliminary conference before the Local Board, TD

No. 2003-6-462, which cancelled TD No. 6-478, was left out in the discussion

since TD No. 6-478 was the subject of CAB’s appeal under LBAA Case No. 96-

B-02, which case was still pending resolution by the Local Board.

The Local Board said that “through the computation of the Appellant CAB

is mathematically correct, unfortunately however, the original cost as the basis in

computing the replacement cost should be P17,925,431.60 as shown in TD No.

6-500” and that ‘the Board could not decipher as to how the “Original Cost” in

both TD No. 6-500 (P17,925,431.60) and TD No. 6-501 (P2,357,793.62) was

arrived at. Only the late Rolando F. Grapa, the City Assessor knows.”

Tax Declaration No. 6-322, before being cancelled by, and split into, TD 6-

500 and TD 6-501, covered both the Sugar Factory and Paper Factory

machineries. As shown by TDs 6323, 10598, 7885 and 10599 discussed earlier,

the machineries of both factories had a combined ‘original’ market value of

P10,791,714.97 – P5,640,209.67 for Sugar Factory machinery and

P5,151,505.30 for Paper Factory machinery. The ratio, therefore, is

52.2642572% for Sugar Factory machinery to 47.7357428% for Paper Factory

machinery.

What both the Local Board and the Central Board could not understand is

how the City Assessor came up with the original costs of P17,925,431.60 for the

Sugar Factory machinery in TD 6-500 and only P2,357,793.62 for the Paper

Reference: Book XIII, pp. 81-106

Factory machinery for TD 6-501 – a ratio of 88.3756474% for the Sugar Factory

and 11. 6243526%. There is no evidence showing that any Paper Factory

machinery were transferred to the Sugar Factory or that any significant changes

in the composition of the machineries took place.

In view of the foregoing, we believe, and so hold, that the “original cost” of

P20,283,225.22 derived in TD 6-322 should have been apportioned between the

Old Sugar Factory and the Old Paper Factory at a ratio of P52.2642572% for the

Sugar Factory to 47.7357428% for the Paper Factory, thus:

Original Costs:

Old Sugar FactoryP20,283,225.22 x 52.2642572% = P10,600,877.00 Old Paper FactoryP20,283,225.22 x 47.7357428% = 9,682,348.22
—————– = ———————100.0000000% = P20,283,225.22

WHEREFORE, premises considered, the Decision of the Local Board of

Assessment Appeals of the City of Bais dated November 29, 2005 is hereby

REVERSED and the City Assessor of Bais City is hereby ORDERED to revise

Tax Declaration No. 2003-6-456 to conform to the following figures, with its

effectivity retroactive to January 1, 2003, viz:

Estimateed Life – 50 years

Original Cost P 10,600,877.00 Conversion Factor [53.20 (2002) rate) divided
by 2.00 [1959 rate]) x 26.60

Replacement Cost

Less: Depreciation (80%)

Market Value/Retention (20%) Assessment Level

Assessed Value
Effective Date: January 1, 2003

———————P281,983,328.20
225,586,662.50 ———————P 56,396,665.70 x 80% ———————P 45,117,332.56 ============

SO ORDERED.

Manila, Philippines, December 20, 2006.

(Signed) CESAR S. GUTIERREZ
Chairman

Reference: Book XIII, pp. 81-106

(Signed)
ANGEL P. PALOMARES Member

(Signed) RAFAEL O. CORTES
Member

Reference: Book XIII, pp. 81-106