Board of Assessment Appeals vs.

Manila Electric Company

10 SCRA 63, January 31, 1964
Paredes, J. / kam

SUBJECT MATTER: Immovable or real property vs movable or personal property

CASE SUMMARY: The City Assessor of Quezon City declared MERALCOs steel towers located in QC for real
property tax. CTA cancelled such tax declarations as the steel towers are embraced in the term poles, the tax on
which MERALCO is exempted to pay as granted by its franchise / tax exemption privilege. Even if the steel towers
are not embraced in the definition of poles, the Court held that they cannot be subject to real property tax as the
steel towers are not found in the definition of immovable property under Article 415 of the Civil Code.

DOCTRINE: The steel towers of an electric company do not constitute real property for the purpose of the real
property tax.

FACTS:
October 20, 1902 Philippine Commission enacted Act No. 484 which authorized the Municipal Board of
Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light,
heat and power system in the City of Manila.
March 1903 Said franchise was awarded to Charles M. Swift, the terms and conditions of which were
embodied in Ordinance No. 44.
Manila Electric Co. (MERALCO) became the transferee and owner of the franchise.

MERALCO
Its electric power is generated by its hydro-electric plant in Botocan Falls, Laguna, and is transmitted to
Manila by means of electric transmission wires. These electric transmission wires carry high voltage
current so they are fastened to insulators attached on steel towers constructed at intervals from Laguna to
Manila.
There are 40 of these steel towers within Quezon City on land belonging to it. Three steel towers were
inspected by the lower court and the parties and descriptions were given by the court.
The steel towers inspected were located in (1) South Tatalon, Espana Extension, QC; (2) Kamuning Road,
QC; and (3) Kamias Road, QC.
Description of the first tower: xxx the ground around one of the four posts was excavated to a depth of about eight (8) feet,
with an opening of about one (1) meter in diameter, decreased to about a quarter of a meter as it went deeper until it reached the
bottom of the posts; at the bottom of the post were two parallel steel bars attached to the leg by means of bolts; the tower proper
was attached to the leg by three bolts; with two cross metals to prevent mobility; there was no concrete foundation but there was
adobe stone underneath xxxx
Third tower: xxxx It was found that there was no concrete foundation. Like the two previous ones, the bottom arrangement of
the legs thereof were found to be resting on -soft adobe, which, probably due to high humidity, looks like mud or clay. It was also
found that the square metal frame supporting the legs were not attached to any material or foundation."

Quezon City Tax Assessment

November 15, 1955 City Assessor of QC declared aforesaid steel towers for real property tax.
MERALCO tried to appeal to the Board of Assessment Appeals of QC, but said board still required
MERALCO to pay Php 11,651.86 as real property tax on the said steel towers from 1952 to 1956.
MERALCO paid the amount under protest and filed a petition for review in the Court of Tax Appeals.

Court of Tax Appeals (CTA)

Dec. 29, 1958 CTA ordered the cancellation of the tax declarations and ordered the City Treasurer to
refund the sum of Php 11,651.86. MR was denied by CTA. Thus, this instant petition for review (filed on
April 22, 1959).

ISSUES (HOLDING):
1. Are the steel towers included in the exemption of taxes granted by the respondents franchise? (YES)
2. (RELATED TO LESSON) Are the steel towers considered as real property as to be subject to real
property tax? (NO)
3. Can the City Treasurer of QC be held responsible for the refund of the amount paid? (YES)
RATIO DECIDENDI:
1. The tax exemption privilege of MERALCO under part II paragraph 9 of the franchise is quotes as: PAR. 9
The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles, wires, transformers,
and insulators), machinery and personal property as other persons are or may be hereafter required by law to pay. xxxx Said
percentage shall be due and payable x x x and shall be in lieu of all taxes and assessments of whatsoever nature, and by
whatsoever authority upon the privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the
grantee from which taxes and assessments the grantee is hereby expressly exempted."

The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as
typically, the stem of a small tree stripped of its branches; also, by extension, a similar typically cylindrical
piece or object of metal or the like". They are called "poles" notwithstanding the fact that they are not made
of wood (not restricted to wood). The concept of the "poles" for which exemption is granted, is not
determined by their location, nor by the character of the electric current it carries, nor the material or form
of which it is made, but the use to which they are dedicated.

The SC cited several US cases in order to support its affirmation of the CTAs declaration that the steel
towers in question are embraced in the term poles. In their decisions the words "towers" and "poles" were
used interchangeably, and it is well understood in that jurisdiction that a transmission tower or pole means
the same thing.

2. Granting that for the sake of argument that the steel supports or towers in question are not embraced within
the term poles, the logical question posited is whether they constitute real properties, so that they can be
subject to a real property tax. Article 415 of the Civil Code states that the following are immovable
property (opposite the provision would be the explanation WHY the steel towers are not included there):

soil The steel towers are not constructions analogous

"(1) Land, buildings, roads, and constructions of all kinds adhered to the
to buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely
attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved
from place to place.
xxx (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; - 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.
xxx 5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be
carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry or works - They are not
machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or
works on the land.

3. Petitioner contended that the City Treasurer is not the real party in interest but it should be Quezon City,
which is not a party to the case. This question has not been raised in the court below and therefore, cannot
be properly raised for the first time on appeal. Having acted in his official capacity as City Treasurer of
Quezon City when he insisted for the payment of such taxes, he would surely know what to do now, under
the circumstances.

DISPOSITIVE: CTA decision affirmed, costs against petitioners.