ON THE TAXABILITY OF MACHINERY AS REAL PROPERTY

 

I. Introduction and Brief History

We shall begin the discussion on machinery with the following backdrop. Essentially, machinery and equipment are movable. However, machineries and equipment, by way of exception, can be considered as immovable and hence subject to real property tax.

Republic Act No. 386 or the “New” Civil Code (NCC) of the Philippines enumerated those which are real properties in Book II. NCC was approved in 1949 and took effect in 1950. The new civil code is highly influenced by the 1889 Spanish Civil Code[1].

In 1991, the Local Government Code (LGC) took effect. The LGC is a landmark legislation that gave rise to a major shift in local governance. It consolidated and amended the Local Government Code of 1983, the Local Tax Code (Presidential Decree 231), and the Real Property Tax Code (Presidential Decree 464). The Code includes far-reaching provisions affecting the assignment of functions across different levels of government, the revenue sharing between the central and the local governments, the resource generation/utilization authorities of LGUs and the participation of civil society in various aspects of local governance. In toto, these provisions are aimed at providing the framework in support of increased local autonomy.[2]

NCC is more of a general law while the LGC operates as a special law.

With these basic propositions and backgrounds let us now begin to investigate the concept and meaning of machineries as immovable and taxable real property with jurisprudential evidence to support this inquiry and analysis.

A. Destinados and Separarse

            1. 415 (5): Destinados

Article 415 of the NCC enumerates the immovable properties. The NCC does not define what an immovable property is. In one case[3] there was a classification of real properties based on the enumeration of 415, these are:

(a) Real property by nature

(b) Real property by incorporation

(c) Real property by destination or purpose (e.g. machinery)

(d) Real property by analogy

Article 415 is lifted from Spain’s Codigo Civil de 1889. Paragraph 5 of the Codigo Civil specifically mentions maquinas or machineries. Articulo 334 (5) provides

Son bienes inmuebles:

xxx     xxx     xxx

  1. Las máquinas, vasos, instrumentos o utensilios destinados por el propietario de la finca a la industria o explotación que se realice en un edificio o heredad, y que directamente concurran a satisfacer las necesidades de la explotación misma.[4]

 

Real property consists of:

xxx    xxx    xxxx

(5) Machinery, vessels, instruments, or implements, intended by the owner of the tenement for the industry or works that he may carry on in a building or tenement and which directly tend to meet the necessities of the same industry or works.[5]

Article 415 (5) of the Philippine New Civil Code provides the same with little variation in grammatical style and translation from that of Clifford:

(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;

It should be noted, that if the machine which is still in the building, but is no longer used in the industry conducted therein, the machine reverts to the condition of a chattel.[6]

  1. 415 (3): Separarse

In addition to the intent of the owner of the machinery in fixing or attaching the latter to an immovable 415 (3) must also be taken into consideration which speaks of separarse or separating everything (including machinery) attached de una manera fija (in a fixed manner) from the immovable.

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.

The above provision in the NCC is lifted from Article 334 (3) of 1889 Codigo Civil[7] which provides:

Todo lo que esté unido a un inmueble de una manera fija, de suerte que no pueda separarse de él sin quebrantamiento de la materia o deterioro del objeto.

Clifford translates the provision as:

All that is attached to real property, in a fixed manner, in such a way that it cannot be separated from it without breaking the matter or causing injury to the object.[8]

Furthermore, the provision requires that attachment must be in a fixed manner and Justice Paras noted that for the incorporated thing to be considered real property, the injury or breakage or deterioration in case of separation, must be substantial.[9]

In the case of Board of Assessment Appeals vs. City Treasurer[10], the QC City Assessor declared the MERALCO’s steel towers subject to real property tax. After the denial of MERALCO’s petition to cancel these declarations, an appeal was taken to the QC Board of Assessment Appeals, which required respondent to pay P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956.

MERALCO paid the amount under protest, and filed a petition for review in the Court of Tax Appeals (CTA) which rendered a decision ordering the cancellation of the said tax declarations and the refunding to MERALCO by the QC City Treasurer of P11,651.86.

The issue here is whether the steel posts of MERALCO is real property or personal property. The SC held that steel towers are not immovable property under paragraph 1, 3 and 5 of Art. 415. They cannot be included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same.[11]

Suppose the machinery is separated from the tenement temporarily without causing substantial damage or deterioration but still needed for the industry, the property is still immovable, by virtue of paragraph 5 above which refers to real property by destination or purpose.[12]

In order to determine whether a property is movable or immovable, Paras[13], quoting Manresa mentions three general tests:

  • If the property is capable of being carried from place to place (test by description);
  • If such change in location can be made without injuring the real property to which it may in the meantime be attached (test by description); and
  • If finally, the object is not one of those enumerated or included in Art. 415 (test by exclusion). Then the inevitable conclusion is that the property is personal property. Test by exclusion is superior to the test by description.

 

II. The OWNER of the immovable can only IMMOBILIZE a machinery

One requirement for the machinery to be considered as immovable is when it is fixed by the owner of the immovable himself, with the two requirements discussed above on intent and separation. In one case[14] decided before the effectivity of the NCC, we can already ascertain the direction of the SC in interpreting Article 415 (5) of NCC which took effect 15 years after the promulgation of this case.

The main question here is whether the machinery which is installed by the owner in a real property (Sugar Central) after mortgaging the latter is permanent? The SC held in the affirmative by pointing a doctrine which provides that [i]n a mortgage of real estate, the improvements on the same are included; therefore, all objects permanently attached to a mortgaged building or land, although they may have been placed there after the mortgage was constituted, are also included.

The SC adds that inasmuch as the sugar central [immovable] is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent. Provided that, first, the installation of a machinery and equipment…[is] for the purpose of carrying out the industrial functions…constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon [sugar central]. The court ruled further as to the ownership saying that  that the sale of the machinery and equipment in question by the [MSCI, borrower] to [Berkenkotter, the creditor], after the incorporation thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery and equipment but simply with the right of redemption.[15]

Gleaned from the above doctrines, the machineries and equipment installed in an immovable (e.g. a sugar central), for the purpose of carrying out the industrial functions constitutes a permanent improvement. The agreement of the contracting parties to exclude a machinery as part of the mortgaged real property does not alter the permanent character of the said machinery but only its exclusion in the mortgage agreement. In like manner, the debtor who purchased the machinery using the purchase money from the creditor does not alter the permanent character of the incorporation of said machinery and equipment to the immovable property even though said machinery and equipment are used as security for the credit.

This jurisprudence provides that permanency of the affixation of the machinery intended by the owner of the tenement for an industry is not affected by any contractual agreement as long as the machinery directly satisfacer las necesidades of the industry.

In another elucidating jurisprudence just 4 years after the effectivity of the New Civil Code, the same reasons are provided in considering the immovable or permanent character of a machinery or equipment by utilizing 415 (5) and (3) of the NCC in resolving whether an immovable machinery can be subjected to replevin. The SC concludes in the negative and ratiocinated that, first, a machinery is considered permanent when…machinery and equipment in question appeared to be attached to the land…in a fixed manner, in such a way that the former [machinery] could not be separated from the latter [land] “without breaking the material or deterioration of the object.” And secondly, when the machinery and equipment were “intended by the owner of the tenement for an industry” carried on said immovable…”

For these reasons, they were already immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil Code of the Philippines hence the action of replevin does not lie for articles so annexed to the realty as to be part thereof.[16]

 

III.  The MERE POSSESSOR of the immovable CANNOT IMMOBILIZE a machinery; exception

Logically, deducing from above, the opposite of which i.e. a machinery which is not placed by the owner of the immovable, is not considered as an integral part of the immovable, hence movable. Machinery may be immobilized, as discussed above, if placed in a real property by the owner of the property or plant. However, immobilization cannot be made by a tenant, a usufructuary, or any person having only a temporary right.

But by way of exception, the machinery or equipment placed by tenant, usufructuary, or temporary possessor when acting as an agent of the owner of the premises or he (tenant, usufructuary, or temporary possessor) intended to permanently give away the property in favor of the owner. Valdez vs. Central Altagracia[17] case tells us that machinery placed on property by a tenant does not become immobilized. The case laid down the doctrine that a machinery placed in the plant, – it is plain, both under the provisions of the Porto Rican law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right… The distinction rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it, by an act of immobilization, to become the property of another.

The following cases elucidate us.

  1. Davao Sawmill Co. v. Castillo

This case was decided before NCC took effect hence 1889 Codigo Civil was in force. The issue in this case was whether the machinery mounted on foundations of cement and installed by the lessee (Davao Sawmill) on leased land should be regarded as real property for purposes of execution of a judgment against the lessee. The sheriff treated the machinery as personal property. This Court sustained the sheriff’s action. The SC drew its ratio decidendi from a case in Puerto Rico[18] which had a similar question. Here the Court said, machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.[19]

      2. Caltex (Phil.), Inc. v. CBAA

This case is about the realty tax on machinery and equipment[20] installed by Caltex (Phil.) Inc. in its gas stations located on leased land. The lessor of the land, where the gas station is located, does not become the owner of the machines and equipment installed therein. Caltex retains the ownership thereof during the term of the lease.

The conflict arose when the city assessor characterized the said items of gas station equipment and machinery as taxable realty but the city board of tax appeals ruled that they are personality. The CBAA sided with the city assessor and said that the machines and equipment are real property within the meaning Real Property Tax Code of 1974, and that the definitions of real property and personal property in articles 415 and 416 of the Civil Code are not applicable to this case.

The SC held that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code.[21]

 IV. Machinery which is NOT ESSENTIAL to Industry is NOT IMMOBILIZED

A 1962 case[22] resolves the question whether a bus company is liable to the payment of the realty tax on its maintenance and repair equipment.

The case commenced when the city assessor of CDO City considered the maintenance and repair equipment of Mindanao Bus as a realty taxable entity. These machineries are sitting on cement or wooden platforms. Mindanao Bus is also the owner of the land where the talyer and garage are located. These machineries have never been or were never used as industrial equipment to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public for business or commercial purposes.

According to Mindanao Bus, said tools, equipment or machineries are NOT immovable taxable real properties by reason of their being intended or destined for use in an industry based on the interpretation of paragraph 5 of Article 415.

The SC ruled in favor of Mindanao Bus, contending that movable equipment[s] to be immobilized in contemplation of the law must first be “essential and principal elements” of an industry or works without which such industry or works would be “unable to function or carry on the industrial purpose for which it was established.” We may here distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for those which may not be so considered immobilized because they are merely incidental, not essential and principal.

Here the machineries in question, by their nature, not essential and principal elements of [Mindanao Bus] business of transporting passengers and cargoes by motor trucks. They are merely incidentals — acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another.

Another reason pointed out by the SC is that Article 415 (5) of NCC requires that the industry or works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the “machinery, liquid containers, and instruments or implements” are found in a building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land or building.

But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property.

Taxability of Permanently Attached and “Mobile” Machinery

The discussion about NCC’s Art 415 (3) and (5) above provided us that a machinery by incorporation (3) and destination and purpose (5) is immovable. The next and last topic of our discussion regarding machinery is its taxability under real property tax (RPT). In the case of Manila Electric Company vs. The City Assessor,[23] the Court highlights that under Section 199(o) of the Local Government Code (LGC), machinery, to be deemed real property subject to real property tax, need no longer be annexed to the land or building as these “may or may not be attached, permanently or temporarily to the real property,” and in fact, such machinery may even be “mobile.”[24]

These machineries subject to real property tax which are mobile, self-powered or self-propelled, or not permanently attached to the real property require that they:

(a) must be actually, directly, and exclusively used to meet the needs of the particular industry, business, or activity; and

(b) by their very nature and purpose, are designed for, or necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.

There are however exemptions[25]: Machinery which are of general purpose use including but not limited to office equipment, typewriters, telephone equipment, breakable or easily damaged containers (glass or cartons), microcomputers, facsimile machines, telex machines, cash dispensers, furniture and fixtures, freezers, refrigerators, display cases or racks, fruit juice or beverage automatic dispensing machines which are not directly and exclusively used to meet the needs of a particular industry, business or activity shall not be considered within the definition of machinery under this Rule.

Article 415, paragraph (1) of the Civil Code declares as immovables or real properties “[l]and, buildings, roads and constructions of all kinds adhered to the soil.” The land, buildings, and roads are immovables by nature “which cannot be moved from place to place,” whereas the constructions adhered to the soil are immovables by incorporation “which are essentially movables, but are attached to an immovable in such manner as to be an integral part thereof.”[26]

Article 415, paragraph (3) of the Civil Code, referring to “[e]verything 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,” are likewise immovables by incorporation.[27]

In contrast, the Local Government Code considers as real property machinery which “may or may not be attached, permanently or temporarily to the real property,” and even those which are “mobile.”

Article 415, paragraph (5) of the Civil Code considers as immovables or real properties “[m]achinery, 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.”[28]

The Civil Code, however, does not define “machinery.” The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or “those which are essentially movables, but by the purpose for which they have been placed in an immovable, partake of the nature of the latter because of the added utility derived therefrom.” These properties, including machinery, become immobilized if the following requisites concur:

(a) they are placed in the tenement by the owner of such tenement;

(b) they are destined for use in the industry or work in the tenement; and

(c) they tend to directly meet the needs of said industry or works.[29]

The first two requisites are not found anywhere in the Local Government Code.

As between the Civil Code, a general law governing property and property relations, and the Local Government Code (LGC), a special law granting local government units (LGUs) the power to impose real property tax, then the latter shall prevail.[30]

Lex specialis derogant generali.[31] “[A]nother basic principle of statutory construction mandates that general legislation must give way to special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the special provisions are not applicable, that specific statute prevails over a general statute and that where two statutes are of equal theoretical application to a particular case, the one designed therefor specially should prevail.”[32]

For determining whether machinery is real property subject to real property tax, the definition and requirements under the Local Government Code (LGC) are controlling. MERALCO maintains that its electric posts are not machinery subject to real property tax because said posts are not being exclusively used by MERALCO; these are also being utilized by cable and telephone companies. This, however, is a factual issue which the Court cannot take cognizance of in the Petition at bar as it is not a trier of facts.[33]

 

 


Endnotes:

[1] “In its present form, the Spanish Civil Code owes its origin to the Constitutional Cortes of Cadiz, which in 1811, through a special commission, undertook to codify the most important branches of the Spanish laws. The work of codification, continued at intervals through successive sovereignties, was finally completed in 1899, and the code went into effect upon the Spanish peninsula in May of that year.” See: William Hale Beckford, The Spanish Civil Code, http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=5996&context=penn_law_review. It is also important to trace that which influenced the Spanish Civil Code which in turn influenced heavily the New Civil Code of the Philippines at least in our attempt to shed light on the meaning of machineries (las maquinas) in relation to property rights and taxation. Beckford provides a good starting point to trace the influences on property laws of Spanish Civil Code:

  1. Justinian Law
  2. There may also be traced in the code survivals of the Visigothic conquest, where the Teuton individualism has modified property rights, as in the “conjugal community” and the “advantages” allowed to intestate heirs.
  3. Traces of the Arabic occupation can be seen in special customs and in excellent provisions relating to agrarian laws and irrigation privileges and rights.

The civil provisions on property is considered in the Second Book of the code entitled “Property, Ownership and Its Modifications.” Real Property include:

  1. Lands, buildings, roads, and constructions of every kind adherent to the soil.
  2. Trees, and plants, and ungathered fruits, while they are not separated from the land and form an integral part of the real property.
  3. All that is attached to real property, in a fixed manner, in such a way that it cannot be separated from it without breaking the matter or causing injury to the object.
  4. Statues, reliefs, paintings or other objects of use or ornament placed in a building and on lands or tenements by the owner of the same in such a manner as to reveal the intent of attaching them in a permanent way to the tenement.
  5. Machinery, vessels, instruments, or implements, intended by the owner of the tenement for the industry or works that he may carry on in a building or tenement and which directly tend to meet the necessities of the same industry or works.
  6. Vivaries for animals, pigeon-houses, beehives, fish-ponds or beds for similar purposes, when the owner has placed or kept them with the intent of maintaining the same attached to the tenement and forming a permanent part thereof.
  7. Manures intended for the cultivation of lands when they are on the place where they are to be employed.
  8. Mines, quarries, and slag lands, while the matter forms part of the beds, and waters, either running or stagnant.
  9. Docks, and constructions, which, though floating, are intended by their purposes and conditions to remain at a fixed place in a river, lake or on a coast.
  10. Administrative concessions for public works, and easements, and other real rights attached to real property. See: Clifford S. Walton and Nestor Ponce de Leon (trans.), The Spanish Civil Code in Force in Spain, Cuba, Puerto Rico and the Philippines, ed. Clifford Walton (Havana: La Propaganda Literaria Printing House), pp. 75-76. Available at https://archive.org/stream/spanishcivilcode00spairich#page/n13/mode/2up. Last Accessed July 21, 2016.

 

[2] Rosario G. Manasan, Local Public Finance in the Philippines: Balancing Autonomy and Accountability, Philippine Institute for Development Studies, 2004. Pp 3-4.

[3] Presbitero v. Fernandez, L-19527, (Mar. 30, 1963). Available at http://www.lawphil.net/judjuris/juri1963/mar1963/gr_l-19527_1963.html.

[4] Libro Segundo, Título I, Capítulo I, Artículo 334 (5). Agencia Estatal Boletin Oficial del Estado, Boletín Oficial del Estado, Ministerio de Gracia y Justicia BOEnúm. 206, de 25 de julio de 1889 (Reference: BOE-A-1889-4763) available at https://www.boe.es/buscar/pdf/1889/BOE-A-1889-4763-consolidado.pdf

[5] Clifford S. Walton and Nestor Ponce de Leon (trans.), The Spanish Civil Code in Force in Spain, Cuba, Puerto Rico and the Philippines, ed. Clifford Walton. The translation was made through special order no. 68 directing Maj. Walton to translate to English the Spanish Civil Code. Through a Royal Deccree by Queen Regent Maria Cristina dated Jul 31, 1889, the Spanish Civil Code was extended to Cuba, Puerto Rico and the Philippines. The Code will take effect on said islands 20 days after its publication in the official papers of said islands. Available at https://archive.org/stream/spanishcivilcode00spairich#page/n13/mode/2up (One of the early administrative acts of the military governor of Havana, General William Ludlow, was to authorize a special translation of the Spanish Civil Code for the use of American officials, the work being entrusted to Dr. Clifford S. Walton, a learned practitioner of the civil law in Havana, as well as a member of the bar of the United States Supreme Court. William Hale Beckford, The Spanish Civil Code, http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=5996&context=penn_law_review )

[6] Edgardo L. Paras, Civil Code of the Philippines Annotated, 16th edition, Vol. Two, (QC: Rex Bookstore), p. 23

[7] Libro Segundo, Título I, Capítulo I, Artículo 334 (3). Available at https://www.boe.es/buscar/pdf/1889/BOE-A-1889-4763-consolidado.pdf

[8] Clifford S. Walton and Nestor Ponce de Leon (trans.), The Spanish Civil Code in Force in Spain, Cuba, Puerto Rico and the Philippines, ed. Clifford Walton.

[9] Paras, p. 20.

[10]G.R. No. L-15334 (January 31, 1964). Available at http://www.lawphil.net/judjuris/juri1964/jan1964/gr_l-15334_1964.html

[11] Suppose the properties referred to in paragraph 3 are temporarily removed, but there is an intention to replace them, should they be considered real or personal property? It is believed that they should be regarded as personal property inasmuch as the “incorporation” has ceased. The Partidas contained an express provision making said property real, but in view of the elimination in the Code of said provision, we may say that same should no longer apply, despite a contrary opinion expressed by a member of the Code Commission. (Capistrano, 1 Civil Code, p. 338). Cited in Edgardo L. Paras, Civil Code of the Philippines Annotated, 16th edition, Vol. Two, (QC: Rex Bookstore, 2008), p. 21.

[12] See: Paras, p. 23.

[13] Paras, p. 34.

[14] Berkenkotter v. Cu Unjieng E Hijos, Yek Tong Lin Fire and Marine Insurance Company, Mabalacat Sugar Company and the Province Sheriff of Pampanga, G.R. No. L-41643 (July 31, 1935). Available at http://www.lawphil.net/judjuris/juri1935/jul1935/gr_l-41643_1935.html

[15] Those in brackets are provided by the author.

[16] Machinery & Engineering Supplies, Inc. vs. The honorable Court of Appeals, Hon. Potenciano Pecson, judge of the Court of First Instance of Manila, Ipo Limestone Co., Inc., and Antonio Villarama. G.R. No. L-7057 (October 29, 1954). Available at http://www.lawphil.net/judjuris/juri1954/oct1954/gr_l-7057_1954.html. See also Pastor D. Ago vs. The Hon. Court of Appeals, G.R. No. L-17898. (October 31, 1962. Available at  http://www.lawphil.net/judjuris/juri1962/oct1962/gr_l-17898_1962.html. Here, the SC ruled that by the installment of the sawmill machineries in the building of the Gold Pacific Sawmill, Inc., for use in the sawing of logs carried on in said building, the same became a necessary and permanent part of the building or real estate on which the same was constructed, converting the said machineries and equipments into real estate within the meaning of Article 415(5).

[17] Valdez vs. Central Altagracia, 225 U.S. 76. Available at http://documents.tips/documents/valdes-v-altagracia.html cited in Davao Sawmill Co., Inc. vs. Castillo, see footnote 20.

[18] It is to be noted that 1889 Codigo Civil similarly applied to Puerto Rico. See Note 3, supra.

[19] Davao Saw Mill Co., Inc. vs. Castillo and Davao Light & Power Co., Inc. G.R. No. L-40411. (August 7, 1935). Available at http://www.lawphil.net/judjuris/juri1935/aug1935/gr_l-40411_1935.html.

[20] The following machineries and equipments namely: underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators are loaned by Caltex to gas station operators under an appropriate lease agreement or receipt. It is stipulated in the lease contract that the operators, upon demand, shall return to Caltex the machines and equipment in good condition as when received, ordinary wear and tear excepted.

[21] Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). “It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property” (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).

This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil. 328, where Meralco’s steel towers were considered poles within the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The steel towers were considered personalty because they were attached to square metal frames by means of bolts and could be moved from place to place when unscrewed and dismantled.

Nor are Caltex’s gas station equipment and machinery the same as tools and equipment in the repair shop of a bus company which were held to be personal property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).

[22] Mindanao Bus Company vs. The City Assessor & Treasurer and The Board Of Tax Appeals Of Cagayan De Oro City. G.R. No. L-17870 (September 29, 1962). Available at http://www.lawphil.net/judjuris/juri1962/sep1962/gr_l-17870_1962.html

[23] G.R. No. 166102, (August 5, 2015). Available at http://www.chanrobles.com/cralaw/2015augustdecisions.php?id=705

[24] MERALCO vs. The City Assessor and City Treasurer of Lucena City

[25] Article 290(o) of the Rules and Regulations Implementing the Local Government Code of 1991

[26] MERALCO vs. The City Assessor and City Treasurer of Lucena City.

[27] Ibid.

[28] Ibid.

[29] Ibid.

[30] Ibid

[31] Disomangcop v. The Secretary of the Department of Public Works and Highways Simeon A. Datumanong, 444 SCRA 203 (2004)

[32] Primitivo Leveriza, Fe Leveriza, Parungao & Antonio c. Vasco vs. Intermediate Appellate Court, Mobil Oil Philippines & Civil Aeronautics Administration, G.R. No. L-66614 (January 25, 1988). Available at, http://www.lawphil.net/judjuris/juri1988/jan1988/gr_l_66614_1988.html.

[33] MERALCO vs. The City Assessor and City Treasurer of Lucena City

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