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

O R D E R

On November 21, 2001, this Board promulgated its Decision in the above-

entitled case. Not satisfied, Respondent-Appellant filed a Motion for

Reconsideration by registered mail (which ultimately reached by this Board on

April 16, 2002) claiming that he received a copy of said decision on March 4,

2002.

Respondent-Appellant seeks to reconsider Paragraphs A, B, C and E of

the dispositive portion of this Board’s decision. The entire dispositive portion of

said decision is reproduced hereunder, thus:

“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;

“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-Appellee.

Reference: Book X, pp. 212-222

“SO ORDERED.”

In Support of Paragraph “A” above, this Board took into consideration the

“Inspection/Inventory Report” (hereinafter referred to as the “Report”) dated

December 22, 1999 and the supporting document thereof entitled “Actual Palm

Count & Palms per Hectare as of Dec. 1999” (hereinafter referred to as the

“Count”). The “Count” was, as correctly stated by Respondent-Appellant, signed

by representative of both parties: Mr. Cesar T. Rufila, Jr. For Respondent-

Appellant, and Mr. Charlie Cinco for Petitioner-Appellee. The “Report” however,

was signed by representatives of Respondent-Appellant only, to the exclusion of

representatives of Petitioner-Appellee.

The subject of the “Count” (as agreed to during the hearing on November

24, 1999 in Patin-ay, Prosperidad, Agusan del Sur) was Field No. 8, containing

an area of 108 hectares, located at Buena Suerte, San Francisco, Agusan del

Sur. The “Count” revealed that there were actually a total of 9,820 palm trees in

said Field No. 8. This gives us 90.926 trees per hectare, that is, 9,280 trees

divided by 108 hectares. However, the “Report” stated that the number of trees

per hectare was 119.75 or 119 (that is, 9,820 divided by 82) because 26 hectares

of Field No. 8 were allegedly brushland or swampland and, therefore, should not

be included in the computation.

Respondent-Appellant tried to convey that only Field No. 8 in Barangay

Buena Suerte, San Francisco, Agusan del Sur, had brushland or swampland and

that all other areas of the subject plantations were planted to palm trees; On the

other hand, Petitioner-Appellee alleged that some areas of the plantations were

not planted to palm trees for being brushland or swampland. Because of the vast

area of the plantations, the parties ruled out a meticulous physical examination of

said plantations. Fair play dictates that the conditions of Field No. 8 should be

applied to all areas in question.

On Paragraph “B” and “C” above-stated, Respondent-Appellant cited the

provisions of Section 234 of R.A. 7160, especially the “beneficial use” theory

Reference: Book X, pp. 212-222

thereof, In effect, Respondent-Appellant classified cooperatives as part of the

Republic of the Philippines and, in doing so, admitted that the owners of the

lands and roads in question were the NGEI Multi-Purpose Cooperative, Inc.

and/or the NGPI Multi-Purpose Cooperative, Inc.

The multi-purpose cooperatives have their own personalities separate and

distinct from that of Petitioner-Appellee or that of the Republic of the Philippines.

In fact, as correctly quoted by Respondent-Appellant, Section 234(d) of R.A.

7160 ordains that all real property owned by duly registered cooperatives as

provided for under R.A. No. 6938 are exempted from payment of the real

property tax. But this is a matter of defense for the said cooperatives, not the

Petitioner-Appellee.

On Paragraph “E”, Respondent-Appellant continues to dwell on the

definition of “Machinery” as real property under Section 199(o) of R.A. 7160. We

would have agreed with Respondent-Appellant since, as stated by the Supreme

Court in Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, “it is a familiar

phenomenon to see things classified as real property for purposes of taxation

which on general principle might be considered personal property.” Also, we said

in MSIC vs. Board of Assessment Appeals and Provincial Assessor of Laguna

(CBAA Case No. 61, May 26, 1976), that “since the law on real property taxation

enumerates what are real property for purposes thereof, there is no justification

to resort to the Civil Code.”

However, the definition of “machinery” as real property under Section

199(o) of R.A. 7160 is so vague, ambiguous and sweeping as to include all

things which are actually, directly, and exclusively used to meet the needs of a

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. Therefore, we find it compelling,

necessary and proper to resort to the legislative intent behind Section 199(o) of

R.A. 7160.

Reference: Book X, pp. 212-222

Hereunder are quoted the proceedings found on pages 414 to 416 of the

Journal and Record of the House of Representatives Proceedings and Debates,

4th Regular Session 1990-1991, Volume Two (September 4 – November 6,

1990), viz:

“CONSIDERATION OF H.B. No. 31046 (Local Government Code)

Continuation

PERIOD OF SPONSORSHIP AND DEBATE

MR. DEL MAR. Mr. Speaker, I move that we continue the consideration of House Bill No. 31046 submitted jointly by the Committee on Local Government, the Committee on Appropriations, and the Committee on Ways and Means, the tile of which I request the Secretary to read.

THE PRESIDING OFFICER (Mr. Matti). Is there any objection? (Silence) The Chair hears none; the motion is approved.
The Secretary is directed to read the title of the bill.

THE SECRETARY. House Bill No. 31046, entitled AN ACT PROVIDING FOR A LOCAL GOVERNMENT CODE.

MR. DEL MAR. Mr. Speaker, the parliamentary status of the measure is that it is under the period of sponsorship and debate and I ask that the Gentlemen from Antique, the Honorable Exequiel Javier be recognized to continue sponsorship of the measure.

SUSPENSION OF SESSION

THE PRESIDING OFFICER (Mr. Matti). With leave of the House, the session is suspended.

It was 6:04 p.m.

RESUMPTION OF SESSION

At 6:05 p.m. the session was resumed.

THE PRESIDING OFFICER (Mr. Matti). The Acting Floor Leader is recognized.

SUSPENSION OF SESSION

THE PRESIDING OFFICER (Mr. Matti). The session is resumed. The distinguished Gentleman from Antique is hereby recognized.

MR. JAVIER (E.) Thank you, Mr. Speaker.

MR. DEL MAR. Mr. Speaker, may I ask also that the Gentleman from Quezon City, the Hon. Antonio Aquino, be recognized to continue his interpellation of the sponsor.

THE PRESIDING OFFICER (Mr. Matti). The Gentleman from Quezon City is hereby recognized to continue his interpellation of the sponsor.

MR. AQUINO (A.). Thank you, Mr. Speaker.
Mr. Speaker, to continue with the interpellation, may I refer the honorable sponsor to page 147 of Book II. On Item 13, under the title “machinery,” this Representation believes that the definition of machinery here for purposes of appraisal and assessment of real property for taxation should include movable machines but immovable by destination or purpose or for purposes of taxation to

Reference: Book X, pp. 212-222

cover sewing machines, forklifts, cranes, bulldozers, and similar equipment as falling under the purview of the coverage of machinery as has been defined?

MR. JAVIER (E.). Mr. Speaker, this provision involves real property taxation and, therefore, the taxation should only be limited to real properties. Movable machines like sewing machines, bulldozers could not be classified as real property if they can be mobilized or can be moved from the place of production or from the place of activity. But there are some machines, defined under the Civil Code, which are considered as real property by destination, Mr. Speaker.

MR. AQUINO (A.). Yes. That is what this Representation was referring to. That is why we specifically mentioned sewing machines, forklifts, cranes, bulldozers, and similar equipment which under the Civil Code are really defined as movable machines but immovable by destination or purpose.

MR. JAVIER (E.). We are trying to preserve the definition of real property, Mr. Speaker, under the Civil Code. And that is the definition that we have used here in defining machinery as real property. Therefore, if we accede to the request of the honorable Gentleman from Quezon City, what will happen is all types of movables will be taxed as real property, and where do we stop, Mr. Speaker.
So, Mr. Speaker, I do not think we can agree on a redefinition of machinery as real property under this provision because if we agree, what will prevent, let us say, the assessors from taxing movable equipment or property although they are not really real property? This will give the assessors discretion, Mr. Speaker. If we give these functionaries so much discretion, we will be giving them the opportunity for graft. So we have to stick by the definition under this provision, Mr. Speaker.
Before the honorable Gentleman from Quezon City proceeds to his next question, Mr. Speaker, may I request that the Chairman of the Committee of Local Government be recognized. He has some important announcements.

THE PRESIDING OFFICER (Mr. Matti). The chairman of the Committee on Local Government is hereby recognized.

MR. MARTINEZ. Thank you, Mr. Speaker.
Mr. Speaker, I would like to propose a timetable wherein we will have the schedules for the interpellation and for the period of amendments so that we can finish, as promised by the leadership of this House, the Local Government Code by the end of this year, Mr. Speaker.

THE PRESIDING OFFICER (Mr. Matti). What does the Committee on Rules say?

MR. DEL MAR. The chairman will still give the schedule of the committee discussions on the Local Government Code.
Can we hear first the sponsor.

THE PRESIDING OFFICER (Mr. Matti). The chairman may proceed.

MR. MARTINEZ. Thank you, Mr. Speaker. The following is the proposed timetable: on October 10 and 11, that will be today and tomorrow, we will close the debate on Book II; on October 15, Monday, we will start with Book III; on October 16, Tuesday, we will have Book IV; on October 17 and 18, Wednesday and Thursday, we will be presenting the committee amendments; on October 22 to 26, we will have the individual amendments and the approval on Second Reading, Mr. Speaker, and then on November 5, we will have the final approval of the Local Government Code.
Mr. Speaker, that is the proposed timetable for the Local Government Code.

THE PRESIDING OFFICER (Mr. Matti). Is the chairman making a motion now?

MR. LAGUDA. Yes, Mr. Speaker.

Reference: Book X, pp. 212-222

MR. MARTINEZ. Yes, Mr. Speaker, I move that this timetable be approved.

MR. ANTONIO. Mr. Speaker, I have a reservation on the timetable.

THE PRESIDING OFFICER (Mr. Matti). The Gentleman from South Cotabato is recognized.

MR. ANTONIO. Mr. Speaker, on this schedule being proposed by the honorable chairman, I had reservations also to interpellate or have clarificatory questions on Book I. May that also be taken on Monday after we take Book II?

MR. MARTINEZ. We can still take Book I during the committee amendments, Mr. Speaker.

MR. ANTONIO. These are clarificatory interpellations, Mr. Speaker, based on my amendments.

MR. MARTINEZ. We will have the clarificatory discussions during the period of committee amendments, Mr. Speaker.

MR. ABAYA. Parliamentary inquiry, Mr. Speaker.
Did I hear the Gentleman from Cebu right, Mr. Speaker, when he said that only one day was allotted for Book III and another day for Book IV?

MR. MARTINEZ. Yes, Mr. Speaker, because I would like that the committee amendment be first presented because there are some committee amendments which answer some of the questions.

MR. ABAYA. Nonetheless, may we propose that each book be given at least two days for debate, Say, Book III, Monday, Tuesday, Book IV, Wednesday, Thursday and the proper adjustments can be made somewhere.

THE PRESIDING OFFICER (Mr. Matti). What does the chairman say?

SUSPENSION OF SESSION

MR. MARTINEZ. May we request a suspension, Mr. Speaker?

THE PRESIDING OFFICER (Mr. Matti). The session is suspended.

It was 6:15 p.m.

RESUMPTION OF SESSION

At 6:18 p.m., the session was resumed.

THE PRESIDING OFFICER (Mr. Matti). The session is resumed.

MR. MARTINEZ. Mr. Speaker, after consulting with our colleagues, I am formally withdrawing the motion for the proposed timetable. Instead, I suggest that this timetable be accepted by the Rules Committee and that this Local Government Code be the only bill treated for these dates, Mr. Speaker.

THE PRESIDING OFFICER (Mr. Matti). What does the Committee on Rules say?

MR. DEL MAR. Mr. Speaker, the Committee on Rules has not been able to meet on this matter yet, since it was just brought up now by the Committee on Local Government. But I assure the chairman that in tomorrow’s meeting, we will take up this request of the committee and I see no reason why the Committee on Rules will not follow the schedule recommended by the committee.

THE PRESIDING OFFICER (Mr. Matti). Is that acceptable to the proponent of the timetable?

MR. MARTINEZ. So it is understood that tomorrow, upon start of the session, we will take up the Local Government Code right away?

Reference: Book X, pp. 212-222

THE PRESIDING OFFICER (Mr. Matti). The Rules Committee will consider the proposal and will report to the House tomorrow after the start of the session.
The Gentleman from Quezon City may continue his interpellation of the Gentleman from Antique.

MR. AQUINO (A.). Thank you, Mr. Speaker.
Mr. Speaker, with the clarification made by the honorable sponsor as to the contemplation of the Civil Code in defining movable machines, but immovable by destination or purpose, this Representation will desist from further discussing this issue.”

It is clear from the words of Congressman E. Javier that the intention of

Congress behind Section 199(o) of R.A. 7160 was to limit the definition of

“machinery” as real property within the meaning of Article 415 of the New Civil

Code, thus:

“MR. JAVIER (E.). Mr. Speaker, this provision involves real property taxation and, therefore, the taxation should only be limited to real properties. Movable machines like sewing machines, bulldozers, could not be classified as real property if they can be mobilized or can be moved from the place of production or from the place or activity. But there are some machines, defined under the Civil Code, which are considered as real property by destination, Mr. Speaker. (Underscoring supplied)

MR. AQUINO (A.). Yes. That is what this Representation was referring to. That is why we specifically mentioned sewing machines, forklifts, cranes, bulldozers, and similar equipment which under the Civil Code are really defined as movable machines but immovable by destination or purpose.

MR. JAVIER (E.). We are trying to preserve the definition of real property, Mr. Speaker, under the Civil Code. And that is the definition that we have used here in defining machinery as real property. Therefore, if we accede to the request of the honorable Gentleman from Quezon City, what will happen is all types of movables will be taxed as real property, and where do we stop, Mr. Speaker.
So, Mr. Speaker, I do not think we can agree on a redefinition of machinery as real property under this provision because if we agree, what will prevent, let us say, the assessors from taxing movable equipment or property although they are not really real property? This will give the assessors discretion, Mr. Speaker. If we give these functionaries so much discretion, we will be giving them the opportunity for graft. So we have to stick by the definition under this provision, Mr. Speaker. (Underscoring supplied)

Article 415 of the New Civil Code provides as follows:

“Art. 415. The following are immovable property:
“(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
“(2) Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;
“(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;
“(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements;
“(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;

Reference: Book X, pp. 212-222

“X X X”

On the other hand, Section 199(o) of the Local Government Code of 1991

provides thus:

“(o) “Machinery” embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes;”

Section 199(o) of R.A. 7160 seems to convey that all things “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” should be considered “machinery” for

purposes of the real property tax. On the other hand, Article 415 of the New Civil

code provides that, in order for an apparently movable equipment to be

“immovable”, the intention of the owner thereof to make that equipment

“immovable” must be manifest.

As we said, 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. Adding machines and calculators are always

necessary to any kind of business, yet they are not subject to the payment of real

property tax.

Centralized airconditioning systems have the same functions as window-

type airconditioning units and yet the latter are never considered as real property

for purposes of the real property tax because window-type airconditioning units

could be moved from place to place, while centralized airconditioning systems

could not be.

Reference: Book X, pp. 212-222

In view of the foregoing, we find untenable the stand of Respondent-

Appellant Provincial Assessor of Agusan del Sur as far as road equipment and

haulers are concerned. The properties in question are personal in nature and,

therefore, not subject to payment of the real property tax. To uphold the

contention of Respondent-Appellant Provincial Assessor would be to give him

extra wise discretion which could be used as an avenue for graft. This is

precisely what the Congress of the Philippines seeked to prevent.

WHEREFORE, the Motion for Reconsideration is hereby DENIED for lack

of merit.

Manila, Philippines, August 23, 2002.

(Signed) CESAR S. GUTIERREZ
Chairman

(Signed)
ANGEL P. PALOMARES Member

(VACANT) Member

Reference: Book X, pp. 212-222