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G.R. No. L-46245 May 31, 1982

MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,
vs.
CENTRAL BOARD O ASSESSMENT APPEALS, BOARD O ASSESSMENT APPEALS O LAGUNA
a!" PRO#INCIAL ASSESSOR O LAGUNA, respondents.

A$UINO, J.:
In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the decision of the
Central Board of Assessment Appeals (composed of the Secretary of Finance as chairman and the
Secretaries of Justice and Local overnment and Community !evelopment as mem"ers# dated May $,
%&'$, holdin( that Meralco Securities) oil pipeline is su"*ect to realty ta+.
,he record reveals that pursuant to a pipeline concession issued under the -etroleum Act of %&.&,
/epu"lic Act 0o. 12', Meralco Securities installed from Batan(as to Manila a pipeline system consistin( of
cylindrical steel pipes *oined to(ether and "uried not less than one meter "elo3 the surface alon( the
shoulder of the pu"lic hi(h3ay. ,he portion passin( throu(h La(una is a"out thirty 4ilometers lon(.
,he pipes for 3hite oil products measure fourteen inches in diameter "y thirty5si+ feet 3ith a ma+imum
capacity of '6,777 "arrels daily. ,he pipes for fuel and "lac4 oil measure si+teen inches "y forty5ei(ht feet
3ith a ma+imum capacity of %77,777 "arrels daily.
,he pipes are em"edded in the soil and are firmly and solidly 3elded to(ether so as to preclude "rea4a(e
or dama(e thereto and prevent lea4a(e or seepa(e of the oil. ,he valves are 3elded to the pipes so as to
ma4e the pipeline system one sin(le piece of property from end to end.
In order to repair, replace, remove or transfer se(ments of the pipeline, the pipes have to "e cold5cut "y
means of a rotary hard5metal pipe5cutter after di((in( or e+cavatin( them out of the (round 3here they are
"uried. In points 3here the pipeline traversed rivers or cree4s, the pipes 3ere laid "eneath the "ed thereof.
8ence, the pipes are permanently attached to the land.
8o3ever, Meralco Securities notes that se(ments of the pipeline can "e moved from one place to another
as sho3n in the permit issued "y the Secretary of -u"lic 9or4s and Communications 3hich permit
provides that the (overnment reserves the ri(ht to re:uire the removal or transfer of the pipes "y and at
the concessionaire)s e+pense should they "e affected "y any road repair or improvement.
-ursuant to the Assessment La3, Common3ealth Act 0o. .'7, the provincial assessor of La(una treated
the pipeline as real property and issued ,a+ !eclarations 0os. $6165$61', San -edro; '.'15'.'2,
Ca"uyao; '&$'5'&'%, Sta. /osa; &22<5&226, Bi=an and %627$5%62%7, Calam"a, containin( the assessed
values of portions of the pipeline.
Meralco Securities appealed the assessments to the Board of Assessment Appeals of La(una composed
of the re(ister of deeds as chairman and the provincial auditor as mem"er. ,hat "oard in its decision of
June %2, %&'6 upheld the assessments (pp. .'5.&, /ollo#.
Meralco Securities "rou(ht the case to the Central Board of Assessment Appeals. As already stated, that
Board, composed of Actin( Secretary of Finance -edro M. Alman>or as chairman and Secretary of Justice
?icente A"ad Santos and Secretary of Local overnment and Community !evelopment Jose /o=o as
mem"ers, ruled that the pipeline is su"*ect to realty ta+ (p. .7, /ollo#.
A copy of that decision 3as served on Meralco Securities) counsel on Au(ust <', %&'$. Section 1$ of the
/eal -roperty ,a+ Code, -residential !ecree 0o. .$., 3hich too4 effect on June %, %&'., provides that the
Board)s decision "ecomes final and e+ecutory after the lapse of fifteen days from the date of receipt of a
copy of the decision "y the appellant.
@nder /ule III of the amended rules of procedure of the Central Board of Assessment Appeals ('7 A..
%7726#, a party may as4 for the reconsideration of the Board)s decision 3ithin fifteen days after receipt. An
Septem"er ', %&'$ (the eleventh day#, Meralco Securities filed its motion for reconsideration.
Secretary of Finance Cesar ?irata and Secretary /o=o (Secretary A"ad Santos a"stained# denied the
motion in a resolution dated !ecem"er <, %&'$, a copy of 3hich 3as received "y appellant)s counsel on
May <., %&'' (p. ., /ollo#. An June $, %&'', Meralco Securities filed the instant petition for certiorari.
,he Solicitor eneral contends that certiorari is not proper in this case "ecause the Board acted 3ithin its
*urisdiction and did not (ravely a"use its discretion and Meralco Securities 3as not denied due process of
la3.
Meralco Securities e+plains that "ecause the Court of ,a+ Appeals has no *urisdiction to revie3 the
decision of the Central Board of Assessment Appeals and "ecause no *udicial revie3 of the Board)s
decision is provided for in the /eal -roperty ,a+ Code, Meralco Securities) recourse is to file a petition for
certiorari.
9e hold that certiorari 3as properly availed of in this case. It is a 3rit issued "y a superior court to an
inferior court, "oard or officer e+ercisin( *udicial or :uasi5*udicial functions 3here"y the record of a
particular case is ordered to "e elevated for revie3 and correction in matters of la3 (%. C.J.S. %<%5%<<; %.
Am Jur. <nd '''#.
,he rule is that as to administrative a(encies e+ercisin( :uasi5*udicial po3er there is an underlyin( po3er
in the courts to scrutini>e the acts of such a(encies on :uestions of la3 and *urisdiction even thou(h no
ri(ht of revie3 is (iven "y the statute ('1 C.J.S. 67$, note 6$#.
B,he purpose of *udicial revie3 is to 4eep the administrative a(ency 3ithin its *urisdiction and protect
su"stantial ri(hts of parties affected "y its decisionsB ('1 C.J.S. 67', See. %$6#. ,he revie3 is a part of the
system of chec4s and "alances 3hich is a limitation on the separation of po3ers and 3hich forestalls
ar"itrary and un*ust ad*udications.
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Judicial revie3 of the decision of an official or administrative a(ency e+ercisin( :uasi5*udicial functions is
proper in cases of lac4 of *urisdiction, error of la3, (rave a"use of discretion, fraud or collusion or in case
the administrative decision is corrupt, ar"itrary or capricious (Mafinco ,radin( Corporation vs. Aple, L5
1''&7, March <6, %&'$, '7 SC/A %1&, %62; San Mi(uel Corporation vs. Secretary of La"or, L51&%&6, May
%$, %&'6, $. SC/A 6$, $7, Mun. Council of Lemery vs. -rov. Board of Batan(as, 6$ -hil. <$7, <$2#.
,he Central Board of Assessment Appeals, in confirmin( the rulin( of the provincial assessor and the
provincial "oard of assessment appeals that Meralco Securities) pipeline is su"*ect to realty ta+, reasoned
out that the pipes are machinery or improvements, as contemplated in the Assessment La3 and the /eal
-roperty ,a+ Code; that they do not fall 3ithin the cate(ory of property e+empt from realty ta+ under those
la3s; that articles .%6 and .%$ of the Civil Code, definin( real and personal property, have no application
to this case; that even under article .%6, the steel pipes can "e re(arded as realty "ecause they are
constructions adhered to the soil and thin(s attached to the land in a fi+ed manner and that Meralco
Securities is not e+empt from realty ta+ under the -etroleum La3 (pp. 1$5.7#.
Meralco Securities insists that its pipeline is not su"*ect to realty ta+ "ecause it is not real property 3ithin
the meanin( of article .%6. ,his contention is not sustaina"le under the provisions of the Assessment La3,
the /eal -roperty ,a+ Code and the Civil Code.
Section < of the Assessment La3 provides that the realty ta+ is due Bon real property, includin( land,
"uildin(s, machinery, and other improvementsB not specifically e+empted in section 1 thereof. ,his
provision is reproduced 3ith some modification in the /eal -roperty ,a+ Code 3hich providesC
SDC. 12. Incidence of Real Property Tax.E ,here shall "e levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on real
property, such as land, "uildin(s, machinery and other improvements affi+ed or
attached to real property not hereinafter specifically e+empted. %
It is incontesta"le that the pipeline of Meralco Securities does not fall 3ithin any of the classes of e+empt
real property enumerated in section 1 of the Assessment La3 and section .7 of the /eal -roperty ,a+
Code.
-ipeline means a line of pipe connected to pumps, valves and control devices for conveyin( li:uids, (ases
or finely divided solids. It is a line of pipe runnin( upon or in the earth, carryin( 3ith it the ri(ht to the use of
the soil in 3hich it is placed (0ote <%F%7G,6. C.J.S. 6$%#.
Article .%6FlG and F1G provides that real property may consist of constructions of all kinds adhered to the
soil and everythin( attached to an immova"le in a fi+ed manner, in such a 3ay that it cannot "e separated
therefrom 3ithout "rea4in( the material or deterioration of the o"*ect.
,he pipeline system in :uestion is indu"ita"ly a construction adherin( to the soil (D+h. B, p. 1&, /ollo#. It is
attached to the land in such a 3ay that it cannot "e separated therefrom 3ithout dismantlin( the steel
pipes 3hich 3ere 3elded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to maintain the flo3 of oil, it is in a sense
machinery 3ithin the meanin( of the /eal -roperty ,a+ Code.
It should "e "orne in mind that 3hat are "ein( characteri>ed as real property are not the steel pipes "ut
the pipeline system as a 3hole. Meralco Securities has apparently t3o pipeline systems.
A pipeline for conveyin( petroleum has "een re(arded as real property for ta+ purposes (Miller County
8i(h3ay, etc., !ist. vs. Standard -ipe Line Co., %& Fed. <nd 1; Board of !irectors of /ed /iver Levee !ist.
0o. % of Lafayette County, Ar4 vs. /. F. C., %'7 Fed. <nd .17; 67 C. J. '67, note 2$#.
,he other contention of Meralco Securities is that the -etroleum La3 e+empts it from the payment of realty
ta+es. ,he alle(ed e+emption is predicated on the follo3in( provisions of that la3 3hich e+empt Meralco
Securities from local ta+es and ma4e it lia"le for ta+es of (eneral applicationC
A/,. %7<. Work obligations, taxes, royalties not to be changed.E 9or4 o"li(ations,
special ta+es and royalties 3hich are fi+ed "y the provisions of this Act or "y the
concession for any of the 4inds of concessions to 3hich this Act relates, are
considered as inherent on such concessions after they are (ranted, and shall not "e
increased or decreased durin( the life of the concession to 3hich they apply; nor shall
any other special taxes or levies "e applied to such concessions, nor shall
7concessionaires under this Act "e su"*ect to any provincial, municipal or other local
taxes or levies;nor shall any sales ta+ "e char(ed on any petroleum produced from
the concession or portion thereof, manufactured "y the concessionaire and used in
the 3or4in( of his concession. All such concessionaires, ho3ever, shall "e su"*ect
to such taxes as are of general application in addition to ta+es and other levies
specifically provided in this Act.
Meralco Securities ar(ues that the realty ta+ is a local ta+ or levy and not a ta+ of (eneral application. ,his
ar(ument is untena"le "ecause the realty ta+ has al3ays "een imposed "y the la3ma4in( "ody and later
"y the -resident of the -hilippines in the e+ercise of his la3ma4in( po3ers, as sho3n in section 1.< et
se. of the /evised Administrative Code, Act 0o. 1&&6, Common3ealth Act 0o. .'7 and -residential
!ecree 0o. .$..
,he realty ta+ is enforced throu(hout the -hilippines and not merely in a particular municipality or city "ut
the proceeds of the ta+ accrue to the province, city, municipality and "arrio 3here the realty ta+ed is
situated (Sec. 2$, -.!. 0o. .$.#. In contrast, a local ta+ is imposed "y the municipal or city council "y
virtue of the Local ,a+ Code, -residential !ecree 0o. <1%, 3hich too4 effect on July %, %&'1 ($& A..
$%&'#.
9e hold that the Central Board of Assessment Appeals did not act 3ith (rave a"use of discretion, did not
commit any error of la3 and acted 3ithin its *urisdiction in sustainin( the holdin( of the provincial assessor
and the local "oard of assessment appeals that Meralco Securities) pipeline system in La(una is su"*ect to
realty ta+.
98D/DFA/D, the :uestioned decision and resolution are affirmed. ,he petition is dismissed. 0o costs.
SA A/!D/D!.
!arredo "#hairman$, %uerrero, &e #astro and 'scolin, ((., concur.
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(ustice )bad *antos, #oncepcion, (r., ((., took no part.

oo&!o&'(
H ,he /eal -roperty ,a+ Code contains the follo3in( definitions in its section 1C
B4# Improvements 5 is a valua"le addition made to property or an amelioration in its
condition, amountin( to more than mere repairs or replacement of 3aste, costin( la"or
or capital and intended to enhance its value, "eauty or utility or to adapt it for ne3 or
further purposes. B
Bm# +achinery 5 shall em"race machines, mechanical contrivances, instruments,
appliances and apparatus attached to the real estate. It includes the physical facilities
availa"le for production, as 3ell as the installations and appurtenant service facilities,
to(ether 3ith all other e:uipment desi(ned for or essential to its manufacturin(,
industrial or a(ricultural purposes.B (See sec. 1FfG, Assessment La3#.