G.R. No. L-40411 August 7, 1935 1.

Land, buildings, roads and constructions of all kinds

adhering to the soil;
DAVAO SAW MILL CO., INC., plaintiff-appellant,
vs. 5. Machinery, liquid containers, instruments or implements
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., intended by the owner of any building or land for use in
INC., defendants-appellees. connection with any industry or trade being carried on
therein and which are expressly adapted to meet the
MALCOLM, J.: requirements of such trade of industry.

The issue in this case, as announced in the opening sentence Appellant emphasizes the first paragraph, and appellees the
of the decision in the trial court and as set forth by counsel last mentioned paragraph. We entertain no doubt that the
for the parties on appeal, involves the determination of the trial judge and appellees are right in their appreciation of the
nature of the properties described in the complaint. The trial legal doctrines flowing from the facts.
judge found that those properties were personal in nature,
and as a consequence absolved the defendants from the In the first place, it must again be pointed out that the
complaint, with costs against the plaintiff. appellant should have registered its protest before or at the
time of the sale of this property. It must further be pointed
The Davao Saw Mill Co., Inc., is the holder of a lumber out that while not conclusive, the characterization of the
concession from the Government of the Philippine Islands. It property as chattels by the appellant is indicative of intention
has operated a sawmill in the sitio of Maa, barrio of Tigatu, and impresses upon the property the character determined
municipality of Davao, Province of Davao. However, the land by the parties. In this connection the decision of this court in
upon which the business was conducted belonged to another the case of Standard Oil Co. of New York vs. Jaramillo ( [1923],
person. On the land the sawmill company erected a building 44 Phil., 630), whether obiter dicta or not, furnishes the key
which housed the machinery used by it. Some of the to such a situation.
implements thus used were clearly personal property, the
conflict concerning machines which were placed and It is, however not necessary to spend overly must time in the
mounted on foundations of cement. In the contract of lease resolution of this appeal on side issues. It is machinery which
between the sawmill company and the owner of the land is involved; moreover, machinery not intended by the owner
there appeared the following provision: of any building or land for use in connection therewith, but
intended by a lessee for use in a building erected on the land
That on the expiration of the period agreed upon, all the by the latter to be returned to the lessee on the expiration or
improvements and buildings introduced and erected by the abandonment of the lease.
party of the second part shall pass to the exclusive ownership
of the party of the first part without any obligation on its part A similar question arose in Puerto Rico, and on appeal being
to pay any amount for said improvements and buildings; also, taken to the United States Supreme Court, it was held that
in the event the party of the second part should leave or machinery which is movable in its nature only becomes
abandon the land leased before the time herein stipulated, immobilized when placed in a plant by the owner of the
the improvements and buildings shall likewise pass to the property or plant, but not when so placed by a tenant, a
ownership of the party of the first part as though the time usufructuary, or any person having only a temporary right,
agreed upon had expired: Provided, however, That the unless such person acted as the agent of the owner. In the
machineries and accessories are not included in the opinion written by Chief Justice White, whose knowledge of
improvements which will pass to the party of the first part on the Civil Law is well known, it was in part said:
the expiration or abandonment of the land leased.
To determine this question involves fixing the nature and
In another action, wherein the Davao Light & Power Co., Inc., character of the property from the point of view of the rights
was the plaintiff and the Davao, Saw, Mill Co., Inc., was the of Valdes and its nature and character from the point of view
defendant, a judgment was rendered in favor of the plaintiff of Nevers & Callaghan as a judgment creditor of the Altagracia
in that action against the defendant in that action; a writ of Company and the rights derived by them from the execution
execution issued thereon, and the properties now in question levied on the machinery placed by the corporation in the
were levied upon as personalty by the sheriff. No third party plant. Following the Code Napoleon, the Porto Rican Code
claim was filed for such properties at the time of the sales treats as immovable (real) property, not only land and
thereof as is borne out by the record made by the plaintiff buildings, but also attributes immovability in some cases to
herein. Indeed the bidder, which was the plaintiff in that property of a movable nature, that is, personal property,
action, and the defendant herein having consummated the because of the destination to which it is applied. "Things,"
sale, proceeded to take possession of the machinery and says section 334 of the Porto Rican Code, "may be immovable
other properties described in the corresponding certificates either by their own nature or by their destination or the
of sale executed in its favor by the sheriff of Davao. object to which they are applicable." Numerous illustrations
are given in the fifth subdivision of section 335, which is as
As connecting up with the facts, it should further be explained follows: "Machinery, vessels, instruments or implements
that the Davao Saw Mill Co., Inc., has on a number of intended by the owner of the tenements for the industrial or
occasions treated the machinery as personal property by works that they may carry on in any building or upon any land
executing chattel mortgages in favor of third persons. One of and which tend directly to meet the needs of the said
such persons is the appellee by assignment from the original industry or works." (See also Code Nap., articles 516, 518 et
mortgages. seq. to and inclusive of article 534, recapitulating the things
which, though in themselves movable, may be immobilized.)
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. So far as the subject-matter with which we are dealing
According to the Code, real property consists of 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. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12,
Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in
Fuzier-Herman ed. Code Napoleon under articles 522 et seq.)
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. It follows that abstractly speaking the
machinery put by the Altagracia Company in the plant
belonging to Sanchez did not lose its character of movable
property and become immovable by destination. But in the
concrete immobilization took place because of the express
provisions of the lease under which the Altagracia held, since
the lease in substance required the putting in of improved
machinery, deprived the tenant of any right to charge against
the lessor the cost such machinery, and it was expressly
stipulated that the machinery so put in should become a part
of the plant belonging to the owner without compensation to
the lessee. Under such conditions the tenant in putting in the
machinery was acting but as the agent of the owner in
compliance with the obligations resting upon him, and the
immobilization of the machinery which resulted arose in legal
effect from the act of the owner in giving by contract a
permanent destination to the machinery.

The machinery levied upon by Nevers & Callaghan, that is,

that which was placed in the plant by the Altagracia Company,
being, as regards Nevers & Callaghan, movable property, it
follows that they had the right to levy on it under the
execution upon the judgment in their favor, and the exercise
of that right did not in a legal sense conflict with the claim of
Valdes, since as to him the property was a part of the realty
which, as the result of his obligations under the lease, he
could not, for the purpose of collecting his debt, proceed
separately against. (Valdes vs. Central Altagracia [192], 225
U.S., 58.)

Finding no reversible error in the record, the judgment

appealed from will be affirmed, the costs of this instance to
be paid by the appellant.
G.R. No. L-17870 September 29, 1962 blacksmith and carpentry shops, and with these machineries
which are placed therein, its TPU trucks are made; body
MINDANAO BUS COMPANY, petitioner, constructed; and same are repaired in a condition to be
vs. serviceable in the TPU land transportation business it
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX operates;
APPEALS of Cagayan de Oro City,respondents.
6. That these machineries have never been or were never
This is a petition for the review of the decision of the Court of used as industrial equipments to produce finished products
Tax Appeals in C.T.A. Case No. 710 holding that the petitioner for sale, nor to repair machineries, parts and the like offered
Mindanao Bus Company is liable to the payment of the realty to the general public indiscriminately for business or
tax on its maintenance and repair equipment hereunder commercial purposes for which petitioner has never engaged
referred to. in, to date.1awphl.nt

Respondent City Assessor of Cagayan de Oro City assessed at The Court of Tax Appeals having sustained the respondent city
P4,400 petitioner's above-mentioned equipment. Petitioner assessor's ruling, and having denied a motion for
appealed the assessment to the respondent Board of Tax reconsideration, petitioner brought the case to this Court
Appeals on the ground that the same are not realty. The assigning the following errors:
Board of Tax Appeals of the City sustained the city assessor, so
petitioner herein filed with the Court of Tax Appeals a petition 1. The Honorable Court of Tax Appeals erredin upholding
for the review of the assessment. respondents' contention that the questioned assessments
are valid; and that said tools, equipments or machineries
In the Court of Tax Appeals the parties submitted the are immovable taxable real properties.
following stipulation of facts:
2. The Tax Court erred in its interpretation of paragraph 5 of
Petitioner and respondents, thru their respective counsels Article 415 of the New Civil Code, and holding that pursuant
agreed to the following stipulation of facts: thereto the movable equipments are taxable realties, by
reason of their being intended or destined for use in an
1. That petitioner is a public utility solely engaged in industry.
transporting passengers and cargoes by motor trucks, over its
authorized lines in the Island of Mindanao, collecting rates 3. The Court of Tax Appeals erred in denying petitioner's
approved by the Public Service Commission; contention that the respondent City Assessor's power to
assess and levy real estate taxes on machineries is further
2. That petitioner has its main office and shop at Cagayan de restricted by section 31, paragraph (c) of Republic Act No.
Oro City. It maintains Branch Offices and/or stations at Iligan 521; and
City, Lanao; Pagadian, Zamboanga del Sur; Davao City and
Kibawe, Bukidnon Province; 4. The Tax Court erred in denying petitioner's motion for
reconsideration.
3. That the machineries sought to be assessed by the
respondent as real properties are the following: Respondents contend that said equipments, tho movable, are
immobilized by destination, in accordance with paragraph 5
(a) Hobart Electric Welder Machine, appearing in the attached of Article 415 of the New Civil Code which provides:
photograph, marked Annex "A";
Art. 415. The following are immovable properties:
(b) Storm Boring Machine, appearing in the attached
photograph, marked Annex "B"; xxx xxx xxx

(c) Lathe machine with motor, appearing in the attached (5) Machinery, receptacles, instruments or implements
photograph, marked Annex "C"; 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
(d) Black and Decker Grinder, appearing in the attached land, and which tend directly to meet the needs of the said
photograph, marked Annex "D"; industry or works. (Emphasis ours.)

(e) PEMCO Hydraulic Press, appearing in the attached Note that the stipulation expressly states that the equipment
photograph, marked Annex "E"; are placed on wooden or cement platforms. They can be
moved around and about in petitioner's repair shop. In the
case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the
(f) Battery charger (Tungar charge machine) appearing in the
Supreme Court said:
attached photograph, marked Annex "F"; and

Article 344 (Now Art. 415), paragraph (5) of the Civil Code,
(g) D-Engine Waukesha-M-Fuel, appearing in the attached
gives the character of real property to "machinery, liquid
photograph, marked Annex "G".
containers, instruments or implements intended by the
owner of any building or land for use in connection with any
4. That these machineries are sitting on cement or wooden industry or trade being carried on therein and which
platforms as may be seen in the attached photographs which are expressly adapted to meet the requirements of such trade
form part of this agreed stipulation of facts; or industry."

5. That petitioner is the owner of the land where it maintains

and operates a garage for its TPU motor trucks; a repair shop;
If the installation of the machinery and equipment in question installed in a building on land more or less permanently, and
in the central of the Mabalacat Sugar Co., Inc., in lieu of the the sawing is conducted in the land or building.
other of less capacity existing therein, for its sugar and
industry, converted them into real property by reason of their But in the case at bar the equipments in question are
purpose, it cannot be said that their incorporation therewith destined only to repair or service the transportation
was not permanent in character because, as essential and business, which is not carried on in a building or
principle elements of a sugar central, without them the sugar permanently on a piece of land , as demanded by the law.
central would be unable to function or carry on the industrial Said equipments may not, therefore, be deemed real
purpose for which it was established. Inasmuch as the central property.
is permanent in character, the necessary machinery and
equipment installed for carrying on the sugar industry for Resuming what we have set forth above, we hold that the
which it has been established must necessarily be permanent. equipments in question are not absolutely essential to the
(Emphasis ours.) petitioner's transportation business, and petitioner's business
is not carried on in a building, tenement or on a specified
So that movable equipments to be immobilized in land, so said equipment may not be considered real estate
contemplation of the law must first be "essential and within the meaning of Article 415 (c) of the Civil Code.
principal elements" of an industry or works without which
such industry or works would be "unable to function or WHEREFORE, the decision subject of the petition for review is
carry on the industrial purpose for which it was hereby set aside and the equipment in question declared not
established." We may here distinguish, therefore, those subject to assessment as real estate for the purposes of the
movable which become immobilized by destination because real estate tax. Without costs.
they are essential and principal elements in the industry for
those which may not be so considered immobilized because
So ordered.
they are merely incidental, not essential and principal. Thus,
cash registers, typewriters, etc., usually found and used in
hotels, restaurants, theaters, etc. are merely incidentals and
are not and should not be considered immobilized by
destination, for these businesses can continue or carry on
their functions without these equity comments. Airline
companies use forklifts, jeep-wagons, pressure pumps, IBM
machines, etc. which are incidentals, not essentials, and thus
retain their movable nature. On the other hand, machineries
of breweries used in the manufacture of liquor and soft
drinks, though movable in nature, are immobilized because
they are essential to said industries; but the delivery trucks
and adding machines which they usually own and use and are
found within their industrial compounds are merely incidental
and retain their movable nature.

Similarly, the tools and equipments in question in this instant

case are, by their nature, not essential and principle municipal
elements of petitioner's 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.

The law that governs the determination of the question at

issue is as follows:

Art. 415. The following are immovable property:

(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; (Civil Code of the Phil.)

Aside from the element of essentiality the above-quoted

provision also 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
G.R. No. 180110, May 30, 2016 Batangas," which is covered by a transfer certificate of title
and tax declarations in the name of PLDT. 11
CAPITOL WIRELESS, INC., Petitioner, v. THE PROVINCIAL
TREASURER OF BATANGAS, THE PROVINCIAL ASSESSOR OF As a result, the respondent Provincial Assessor of Batangas
BATANGAS, THE MUNICIPAL TREASURER AND ASSESSOR OF (Provincial Assessor) issued the following Assessments of Real
NASUGBU, BATANGAS, Respondents. Property (ARP) against Capwire:

DECISION ARP Cable System Assessed Value

019-00967 BMP-CNS P 52,529,600.00
PERALTA, J.:
019-00968 APCN P162,640,000.00
Before the Court is a petition for review on certiorari under
019-00969 SEA-ME-WE3-CNS P 6,032,000.00
Rule 45 of the Rules of Court seeking to annul and set aside
the Court of Appeals' Decision1 dated May 30, 2007 and 019-00970 GP-CNS P 1,431,200.00
Resolution2 dated October 8, 2007 in CA-G.R. SP No. 82264,
which both denied the appeal of petitioner against the
In essence, the Provincial Assessor had determined that the
decision of the Regional Trial Court.
submarine cable systems described in Capwire's Sworn
Statement of True Value of Real Properties are taxable real
Below are the facts of the case.
property, a determination that was contested by Capwire in
an exchange of letters between the company and the public
Petitioner Capitol Wireless Inc. (Capwire) is a Philippine
respondent.12 The reason cited by Capwire is that the cable
corporation in the business of providing international
system lies outside of Philippine territory, i.e., on international
telecommunications services. 3 As such provider, Capwire has
waters.13
signed agreements with other local and foreign
telecommunications companies covering an international
On February 7, 2003 and March 4, 2003, Capwire received a
network of submarine cable systems such as the Asia Pacific
Warrant of Levy and a Notice of Auction Sale, respectively,
Cable Network System (APCN) (which connects Australia,
from the respondent Provincial Treasurer of Batangas
Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Korea,
(Provincial Treasurer).14
Japan, Indonesia and the Philippines); the Brunei-Malaysia-
Philippines Cable Network System (BMP-CNS), the Philippines-
On March 10, 2003, Capwire filed a Petition for Prohibition
Italy (SEA-ME-WE-3 CNS), and the Guam Philippines (GP-CNS)
and Declaration of Nullity of Warrant of Levy, Notice of
systems.4 The agreements provide for co-ownership and other
Auction Sale and/or Auction Sale with the Regional Trial Court
rights among the parties over the network. 5
(RTC) of Batangas City.15
Petitioner Capwire claims that it is co-owner only of the so-
Alter the filing of the public respondents' Comment, 16 on May
called "Wet Segment" of the APCN, while the landing stations
5, 2003, the RTC issued an Order dismissing the petition for
or terminals and Segment E of APCN located in Nasugbu,
failure of the petitioner Capwire to follow the requisite of
Batangas are allegedly owned by the Philippine Long Distance
payment under protest as well as failure to appeal to the
Telephone Corporation (PLDT).6 Moreover, it alleges that the
Local Board of Assessment Appeals (LBAA), as provided for in
Wet Segment is laid in international, and not Philippine,
Sections 206 and 226 of Republic Act (R.A.) No. 7160, or the
waters.7
Local Government Code.17
Capwire claims that as co-owner, it does not own any
Capwire filed a Motion for Reconsideration, but the same
particular physical part of the cable system but, consistent
was likewise dismissed by the RTC in an Order19 dated August
with its financial contributions, it owns the right to use a
26, 2003. It then filed an appeal to the Court of Appeals. 20
certain capacity of the said system. 8This property right is
allegedly reported in its financial books as "Indefeasible
On May 30, 2007, the Court of Appeals promulgated its
Rights in Cable Systems." 9
Decision dismissing the appeal filed by Capwire and
affirming the order of the trial court. The dispositive portion
However, for loan restructuring purposes, Capwire claims that
of the CA's decision states:
"it was required to register the value of its right," hence, it
engaged an appraiser to "assess the market value of the
WHEREFORE, premises considered, the assailed Orders dated
international submarine cable system and the cost to
May 5, 2003 and August 26, 2003 of the Regional Trial Court,
Capwire."10 On May 15, 2000, Capwire submitted a Sworn
Branch 11 of Batangas City, are AFFIRMED.
Statement of True Value of Real Properties at the Provincial
Treasurer's Office, Batangas City, Batangas Province, for the
SO ORDERED.21
Wet Segment of the system, stating:
The appellate court held that the trial court correctly
System Sound Value dismissed Capwire's petition because of the latter's failure to
comply with the requirements set in Sections 226 and 229 of
APCN P 203,300,000.00
the Local Government Code, that is, by not availing of
BMP-CNS P 65,662,000.00 remedies before administrative bodies like the LBAA and the
Central Board of Assessment Appeals (CBAA).22 Although
SEA-ME-WE-3 CNS P P 7,540,000.00 Capwire claims that it saw no need to undergo administrative
GP-CNS P1,789,000.00 proceedings because its petition raises purely legal questions,
the appellate court did not share this view and noted that the
case raises questions of fact, such as the extent to which parts
Capwire claims that it also reported that the system of the submarine cable system lie within the territorial
"interconnects at the PLDT Landing Station in Nasugbu,
jurisdiction of the taxing authorities, the public distinguish a tactual finding from a legal conclusion."
respondents.23Further, the CA noted that Capwire failed to
pay the tax assessed against it under protest, another strict In Ramos v. Pepsi-Cola Bottling Co. of the P.I., the Court ruled:
requirement under Section 252 of the Local Government
Code.24 There is a question of law in a given case when the doubt or
difference arises as to what the law is on a certain state of
Hence, the instant petition for review of Capwire. facts; there is a question of fact when the doubt or difference
arises as to the truth or the falsehood of alleged facts.
Petitioner Capwire asserts that recourse to the Local Board of
Assessment Appeals, or payment of the tax under protest, is We shall label this the doubt dichotomy.
inapplicable to the case at bar since there is no question of
fact involved, or that the question involved is not the In Republic v. Sandiganbayan, the Court ruled:
reasonableness of the amount assessed but, rather, the
authority and power of the assessor to impose the tax and of x x x A question of law exists when the doubt or controversy
the treasurer to collect it.25 It contends that there is only a concerns the correct application of law or jurisprudence to a
pure question of law since the issue is whether its submarine certain set of facts; or when the issue docs not call for an
cable system, which it claims lies in international waters, is examination of the probative value of the evidence
taxable.26 Capwire holds the position that the cable system is presented, the truth or falsehood of facts being admitted. In
not subject to tax.27cralawred contrast, a question of fact exists when the doubt or
difference arises as to the truth or falsehood of facts or when
Respondents assessors and treasurers of the Province of the query invites calibration of the whole evidence
Batangas ana Municipality of Nasugbu, Batangas disagree considering mainly the credibility of the witnesses, the
with Capwire and insist that the case presents questions of existence and relevancy of specific surrounding circumstances
fact such as the extent and portion of the submarine cable as well as their relation to each other and to the whole, and
system that lies within the jurisdiction of the said local the probability of the situation.
governments, as well as the nature of the so-called
indefeasible rights as property of Capwire.28 Such questions For the sake of brevity, We shall label this the law application
are allegedly resolvable only before administrative agencies and calibration dichotomy.
like the Local Board of Assessment Appeals. 29
In contrast, the dynamic legal scholarship in the United States
The Court confronts the following issues: Is the case has birthed many commentaries on the question of law and
cognizable by the administrative agencies and covered by the question of fact dichotomy. As early as 1944, the law was
requirements in Sections 226 and 229 of the Local described as growing downward toward "roots of fact" which
Government Code which makes the dismissal of Capwire's grew upward to meet it. In 1950, the late Professor Louis Jaffe
petition by the RTC proper? May submarine communications saw fact and law as a spectrum, with one shade blending
cables be classified as taxable real property by the local imperceptibly into the other. Others have defined questions
governments? of law as those that deal with the general body of legal
principles; questions of fact deal with "all other phenomena x
The petition is denied. No error attended the ruling of the x x." Kenneth Gulp Davis also weighed in and noted that the
appellate court that the case involves factual questions that difference between fact and law has been characterized as
should have been resolved before the appropriate that between "ought" questions and "is" questions.34
administrative bodies.
Guided by the quoted pronouncement, the Court sustains the
In disputes involving real property taxation, the general rule is CA's finding that petitioner's case is one replete with
to require the taxpayer to first avail of administrative questions of fact instead of pure questions of law, which
remedies and pay the tax under protest before allowing any renders its filing in a judicial forum improper because it is
resort to a judicial action, except when the assessment itself instead cognizable by local administrative bodies like the
is alleged to be illegal or is made without legal authority. 30 For Board of Assessment Appeals, which are the proper venues
example, prior resort to administrative action is required for trying these factual issues. Verily, what is alleged by
when among the issues raised is an allegedly erroneous Capwire in its petition as "the crux of the controversy," that is,
assessment, like when the reasonableness of the amount is "whether or not an indefeasible right over a submarine cable
challenged, while direct court action is permitted when only system that lies in international waters can be subject to real
the legality, power, validity or authority of the assessment property tax in the Philippines,"35 is not the genuine issue that
itself is in question.31 Stated differently, the general rule of a the case presents - as it is already obvious and fundamental
prerequisite recourse to administrative remedies applies that real property that lies outside of Philippine territorial
when questions of fact are raised, but the exception of direct jurisdiction cannot be subjected to its domestic and sovereign
court action is allowed when purely questions of law are power of real property taxation - but, rather, such factual
involved.32 issues as the extent and status of Capwire's ownership of the
system, the actual length of the cable/s that lie in Philippine
This Court has previously and rather succinctly discussed the territory, and the corresponding assessment and taxes due on
difference between a question of fact and a question of law. the same, because the public respondents imposed and
In Cosmos Bottling Corporation v. Nagrama, Jr.,33 it held: collected the assailed real property tax on the finding that at
least a portion or some portions of the submarine cable
The Court has made numerous dichotomies between system that Capwire owns or co-owns lies inside Philippine
questions of law and fact. A reading of these dichotomies territory. Capwire's disagreement with such findings of the
shows that labels attached to law and fact are descriptive administrative bodies presents little to no legal question that
rather than definitive. We are not alone in Our difficult task of only the courts may directly resolve.
clearly distinguishing questions of feet from questions of law.
The United States Supreme Court has ruled that: "we [do not| Instead, Capwire argues and makes claims on mere
yet know of any other rule or principle that will unerringly assumptions of certain facts as if they have been already
admitted or established, when they have not, since no
evidence of such have yet been presented in the proper Thus, absent any showing from Capwire of any express
agencies and even in the current petition. As such, it remains grant of an exemption for its lines and cables from real
unsettled whether Capwire is a mere co-owner, not full property taxation, then this interpretation applies and
owner, of the subject submarine cable and, if the former, as Capwire's submarine cable may be held subject to real
to what extent; whether all or certain portions of the cable property tax.
are indeed submerged in water; and whether the waters
wherein the cable/s is/are laid are entirely outside of Having determined that Capwire is liable, and public
Philippine territorial or inland waters, i.e., in international respondents have the right to impose a real property tax on
waters. More simply, Capwire argues based on mere legal its submarine cable, the issue that is unresolved is how much
conclusions, culminating on its claim of illegality of of such cable is taxable based on the extent of Capwire's
respondents' acts, but the conclusions are yet unsupported ownership or co-ownership of it and the length that is laid
by facts that should have been threshed out quasi-judicially within respondents' taxing jurisdiction. The matter, however,
before the administrative agencies. It has been held that "a requires a factual determination that is best performed by the
bare characterization in a petition of unlawfulness, is merely a Local and Central Boards of Assessment Appeals, a remedy
legal conclusion and a wish of the pleader, and such a legal which the petitioner did not avail of.
conclusion unsubstantiated by facts which could give it life,
has no standing in any court where issues must be presented At any rate, given the importance of the issue, it is proper to
and determined by facts in ordinary and concise lay down the other legal bases for the local taxing authorities'
language."36Therefore, Capwire's resort to judicial action, power to tax portions of the submarine cables of petitioner. It
premised on its legal conclusion that its cables (the is not in dispute that the submarine cable system's Landing
equipment being taxed) lie entirely on international waters, Station in Nasugbu, Batangas is owned by PLDT and not by
without first administratively substantiating such a factual Capwire. Obviously, Capwire is not liable for the real property
premise, is improper and was rightly denied. Its proposition tax on this Landing Station. Nonetheless, Capwire admits that
that the cables lie entirely beyond Philippine territory, and it co-owns the submarine cable system that is subject of the
therefore, outside of Philippine sovereignty, is a fact that is tax assessed and being collected by public respondents. As
not subject to judicial notice since, on the contrary, and as will the Court takes judicial notice that Nasugbu is a coastal town
be explained later, it is in fact certain that portions of the and the surrounding sea falls within what the United Nations
cable would definitely lie within Philippine waters. Convention on the Law of the Sea (UNCLOS) would define as
Jurisprudence on the Local Government Code is clear that the country's territorial sea (to the extent of 12 nautical miles
facts such as these must be threshed out administratively, as outward from the nearest baseline, under Part II, Sections 1
the courts in these types of cases step in at the first instance and 2) over which the country has sovereignty, including the
only when pure questions of law are involved. seabed and subsoil, it follows that indeed a portion of the
submarine cable system lies within Philippine territory and
Nonetheless, We proceed to decide on whether submarine thus falls within the jurisdiction of the said local taxing
wires or cables used for communications may be taxed like authorities.42 It easily belies Capwire's contention that the
other real estate. cable system is entirely in international waters. And even if
such portion does not lie in the 12-nautical-mile vicinity of the
We hold in the affirmative. territorial sea but further inward, in Prof. Magallona v. Hon.
Ermita, et al.43 this Court held that "whether referred to as
Submarine or undersea communications cables are akin to Philippine 'internal waters' under Article I of the
electric transmission lines which this Court has recently Constitution44 or as 'archipelagic waters' under UNCLOS Part
declared in Manila Electric Company v. City Assessor and City III, Article 49(1, 2, 4),45 the Philippines exercises sovereignty
Treasurer of Lucena City,37as "no longer exempted from real over the body of water lying landward of (its) baselines,
property tax" and may qualify as "machinery" subject to including the air space over it and the submarine areas
real property tax under the Local Government Code. To the underneath." Further, under Part VI, Article 79 46of the
extent that the equipment's location is determinable to be UNCLOS, the Philippines clearly has jurisdiction with respect
within the taxing authority's jurisdiction, the Court sees no to cables laid in its territory that are utilized in support of
reason to distinguish between submarine cables used for other installations and structures under its jurisdiction.
communications and aerial or underground wires or lines
used for electric transmission, so that both pieces of And as far as local government units are concerned, the areas
property do not merit a different treatment in the aspect of described above are to be considered subsumed under the
real property taxation. Both electric lines and term "municipal waters" which, under the Local Government
communications cables, in the strictest sense, are not Code, includes "not only streams, lakes, and tidal waters
directly adhered to the soil but pass through posts, relays or within the municipality, not being the subject of private
landing stations, but both may be classified under the term ownership and not comprised within the national parks,
"machinery" as real property under Article 415(5)38 of the public forest, timber lands, forest reserves or fishery reserves,
Civil Code for the simple reason that such pieces of but also marine waters included between two lines drawn
equipment serve the owner's business or tend to meet the perpendicularly to the general coastline from points where
needs of his industry or works that are on real estate. Even the boundary lines of the municipality or city touch the sea at
objects in or on a body of water may be classified as such, as low tide and a third line parallel with the general coastline
"waters" is classified as an immovable under Article and fifteen (15) kilometers from it." 47 Although the term
415(8)39 of the Code. A classic example is a boathouse which, "municipal waters" appears in the Code in the context of the
by its nature, is a vessel and, therefore, a personal property grant of quarrying and fisheries privileges for a fee by local
but, if it is tied to the shore and used as a residence, and since governments,48 its inclusion in the Code's Book II which covers
it floats on waters which is immovable, is considered real local taxation means that it may also apply as guide in
property.40 Besides, the Court has already held that "it is a determining the territorial extent of the local authorities'
familiar phenomenon to see things classed as real property power to levy real property taxation.
for purposes of taxation which on general principle might be
considered personal property."41 Thus, the jurisdiction or authority over such part of the
subject submarine cable system lying within Philippine government-owned or controlled corporations arc hereby
jurisdiction includes the authority to tax the same, for withdrawn upon the effectivity of this Code.55
taxation is one of the three basic and necessary attributes of
sovereignty,49 and such authority has been delegated by the Such express withdrawal had been previously held effective
national legislature to the local governments with respect to upon exemptions bestowed by legislative franchises granted
real property taxation.50 prior to the effectivity of the Local Government
Code.56 Capwire fails to allege or provide any other privilege
As earlier stated, a way for Capwire to claim that its cable or exemption that were granted to it by the legislature after
system is not covered by such authority is by showing a the enactment of the Local Government Code. Therefore, the
domestic enactment or even contract, or an international presumption stays that it enjoys no such privilege or
agreement or treaty exempting the same from real property exemption. Tax exemptions are strictly construed against the
taxation. It failed to do so, however, despite the fact that the taxpayer because taxes are considered the lifeblood of the
burden of proving exemption from local taxation is upon nation.57
whom the subject real property is declared.51 Under the Local
Government Code, every person by or for whom real property WHEREFORE, the petition is DENIED. The Court of Appeals'
is declared, who shall claim tax exemption for such property Decision dated May 30, 2007 and Resolution dated October 8,
from real property taxation "shall file with the provincial, city 2007 are AFFIRMED.
or municipal assessor within thirty (30) days from the date of
the declaration of real property sufficient documentary SO ORDERED.cralawlawlibrary
evidence in support of such claim." 52 Capwire omitted to do
so. And even under Capwire's legislative franchise, RA 4387,
which amended RA 2037, where it may be derived that there
was a grant of real property tax exemption for properties that
are part of its franchise, or directly meet the needs of its
business,53 such had been expressly withdrawn by the Local
Government Code, which took effect on January 1, 1992,
Sections 193 and 234 of which provide:54

Section 193. Withdrawal of Tax Exemption Privileges. - Unless

otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or
controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, nonstock
and nonprofit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.

x x x x

Section 234. Exemptions from Real Property Tax. - The

following arc exempted from payment of the real property
tax:

(a) Real property owned by the Republic of the Philippines or

any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration of otherwise, to a
taxable person;

(b) Charitable institutions, churches, parsonages or convents

appurtenant thereto, mosques, nonprofit or religious
cemeteries and all lands, buildings, and improvements
actually, directly, and exclusively used for religious, charitable
or educational purposes;

(c) All machineries and equipment that are actually, directly

and exclusively used by local water districts and government-
owned or controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of
electric power;

(d) All real property owned by duly registered cooperatives as

provided for under R.A. No. 6938; and

(c) Machinery and equipment used for pollution control and

environmental protection.

Except as provided herein, any exemption from payment of

real property tax previously granted to, or presently enjoyed
by, all persons, whether natural or juridical, including all
 SERGS PRODUCTS, INC., and SERGIO T. In their Reply, petitioners asserted that the properties sought
GOQUIOLAY, petitioners, vs. PCI LEASING to be seized [were] immovable as defined in Article 415 of the
AND FINANCE, INC., respondent. Civil Code, the parties agreement to the contrary
notwithstanding. They argued that to give effect to the
DECISION agreement would be prejudicial to innocent third
parties. They further stated that PCI Leasing [was] estopped
PANGANIBAN, J.: from treating these machineries as personal because the
contracts in which the alleged agreement [were] embodied
After agreeing to a contract stipulating that a real or [were] totally sham and farcical.
immovable property be considered as personal or
movable, a party is estopped from subsequently On April 6, 1998, the sheriff again sought to enforce the writ
claiming otherwise. Hence, such property is a proper of seizure and take possession of the remaining
subject of a writ of replevin obtained by the other properties. He was able to take two more, but was prevented
contracting party. by the workers from taking the rest.
The Case
On April 7, 1998, they went to [the CA] via an original action
Before us is a Petition for Review on Certiorari assailing for certiorari.
the January 6, 1999 Decision[1] of the Court of Appeals
(CA)[2] in CA-GR SP No. 47332 and its February 26, 1999
Resolution[3] denying reconsideration. The decretal
Ruling of the Court of Appeals
portion of the CA Decision reads as follows:

WHEREFORE, premises considered, the assailed Order dated Citing the Agreement of the parties, the appellate court
February 18, 1998 and Resolution dated March 31, 1998 in held that the subject machines were personal property,
Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of and that they had only been leased, not owned, by
preliminary injunction issued on June 15, 1998 is petitioners. It also ruled that the words of the contract
hereby LIFTED.[4] are clear and leave no doubt upon the true intention of
the contracting parties. Observing that Petitioner
In its February 18, 1998 Order,[5] the Regional Trial Court Goquiolay was an experienced businessman who was
(RTC) of Quezon City (Branch 218)[6] issued a Writ of not unfamiliar with the ways of the trade, it ruled that
Seizure.[7] The March 18, 1998 Resolution[8] denied he should have realized the import of the document he
petitioners Motion for Special Protective Order, praying signed. The CA further held:
that the deputy sheriff be enjoined from seizing
immobilized or other real properties in (petitioners) Furthermore, to accord merit to this petition would be to
factory in Cainta, Rizal and to return to their original preempt the trial court in ruling upon the case below, since
place whatever immobilized machineries or equipments the merits of the whole matter are laid down before us via a
he may have removed.[9] petition whose sole purpose is to inquire upon the existence
of a grave abuse of discretion on the part of the [RTC] in
The Facts
issuing the assailed Order and Resolution. The issues raised
The undisputed facts are summarized by the Court of herein are proper subjects of a full-blown trial, necessitating
Appeals as follows:[10] presentation of evidence by both parties.The contract is being
enforced by one, and [its] validity is attacked by the other a
On February 13, 1998, respondent PCI Leasing and Finance, matter x x x which respondent court is in the best position to
Inc. (PCI Leasing for short) filed with the RTC-QC a complaint determine.
for [a] sum of money (Annex E), with an application for a
writ of replevin docketed as Civil Case No. Q-98-33500. Hence, this Petition.[11]
The Issues
On March 6, 1998, upon an ex-parte application of PCI
Leasing, respondent judge issued a writ of replevin (Annex B) In their Memorandum, petitioners submit the following
directing its sheriff to seize and deliver the machineries and issues for our consideration:
equipment to PCI Leasing after 5 days and upon the payment
of the necessary expenses. A. Whether or not the machineries purchased and imported
by SERGS became real property by virtue of immobilization.
On March 24, 1998, in implementation of said writ, the sheriff
proceeded to petitioners factory, seized one machinery with B. Whether or not the contract between the parties is a loan
[the] word that he [would] return for the other machineries. or a lease.[12]

On March 25, 1998, petitioners filed a motion for special In the main, the Court will resolve whether the said
protective order (Annex C), invoking the power of the court to machines are personal, not immovable, property which
control the conduct of its officers and amend and control its may be a proper subject of a writ of replevin. As a
processes, praying for a directive for the sheriff to defer preliminary matter, the Court will also address briefly
enforcement of the writ of replevin. the procedural points raised by respondent.
The Courts Ruling
This motion was opposed by PCI Leasing (Annex F), on the
ground that the properties [were] still personal and therefore The Petition is not meritorious.
still subject to seizure and a writ of replevin.

Preliminary Matter:Procedural Questions

Respondent contends that the Petition failed to indicate property because it had been made the subject of a
expressly whether it was being filed under Rule 45 or chattel mortgage. The Court ruled:
Rule 65 of the Rules of Court.It further alleges that the
Petition erroneously impleaded Judge Hilario Laqui as x x x. Although there is no specific statement referring to the
respondent. subject house as personal property, yet by ceding, selling or
transferring a property by way of chattel mortgage
There is no question that the present recourse is under
defendants-appellants could only have meant to convey the
Rule 45. This conclusion finds support in the very title of
house as chattel, or at least, intended to treat the same as
the Petition, which is Petition for Review on Certiorari. [13]
such, so that they should not now be allowed to make an
While Judge Laqui should not have been impleaded as a inconsistent stand by claiming otherwise.
respondent,[14] substantial justice requires that such
lapse by itself should not warrant the dismissal of the Applying Tumalad, the Court in Makati Leasing and
present Petition. In this light, the Court deems it proper Finance Corp. v. Wearever Textile Mills[20] also held that
to remove, motu proprio, the name of Judge Laqui the machinery used in a factory and essential to the
from the caption of the present case. industry, as in the present case, was a proper subject of
a writ of replevin because it was treated as personal
Main Issue: Nature of the Subject Machinery
property in a contract. Pertinent portions of the Courts
Petitioners contend that the subject machines used in ruling are reproduced hereunder:
their factory were not proper subjects of the Writ issued
by the RTC, because they were in fact real x x x. If a house of strong materials, like what was involved in
property. Serious policy considerations, they argue, the above Tumalad case, may be considered as personal
militate against a contrary characterization. property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no
Rule 60 of the Rules of Court provides that writs of
innocent third party will be prejudiced thereby, there is
replevin are issued for the recovery of personal property
absolutely no reason why a machinery, which is movable in its
only.[15] Section 3 thereof reads:
nature and becomes immobilized only by destination or
purpose, may not be likewise treated as such. This is really
SEC. 3. Order. -- Upon the filing of such affidavit and approval because one who has so agreed is estopped from denying the
of the bond, the court shall issue an order and the existence of the chattel mortgage.
corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the
In the present case, the Lease Agreement clearly
sheriff forthwith to take such property into his custody.
provides that the machines in question are to be
considered as personal property.Specifically, Section
On the other hand, Article 415 of the Civil Code 12.1 of the Agreement reads as follows: [21]
enumerates immovable or real property as follows:
12.1 The PROPERTY is, and shall at all times be and remain,
ART. 415. The following are immovable property: personal property notwithstanding that the PROPERTY or any
part thereof may now be, or hereafter become, in any
(5) Machinery, receptacles, instruments or implements manner affixed or attached to or embedded in, or
intended by the owner of the tenement for an industry or permanently resting upon, real property or any building
works which may be carried on in a building or on a piece of thereon, or attached in any manner to what is permanent.
land, and which tend directly to meet the needs of the said
industry or works; Clearly then, petitioners are estopped from denying the
characterization of the subject machines as personal
In the present case, the machines that were the property. Under the circumstances, they are proper
subjects of the Writ of Seizure were placed by subjects of the Writ of Seizure.
petitioners in the factory built on their own
land. Indisputably, they were essential and principal It should be stressed, however, that our holding -- that
elements of their chocolate-making industry. Hence, the machines should be deemed personal property
although each of them was movable or personal pursuant to the Lease Agreement is good only insofar
property on its own, all of them have become as the contracting parties are concerned.[22] Hence,
immobilized by destination because they are essential while the parties are bound by the Agreement, third
and principal elements in the industry. [16] In that sense, persons acting in good faith are not affected by its
petitioners are correct in arguing that the said stipulation characterizing the subject machinery as
machines are real, not personal, property pursuant to personal.[23] In any event, there is no showing that any
Article 415 (5) of the Civil Code.[17] specific third party would be adversely affected.

Be that as it may, we disagree with the submission of the

petitioners that the said machines are not proper
Validity of the Lease Agreement
subjects of the Writ of Seizure.
The Court has held that contracting parties may validly
stipulate that a real property be considered as personal. In their Memorandum, petitioners contend that the
[18]
After agreeing to such stipulation, they are Agreement is a loan and not a lease. [24] Submitting
consequently estopped from claiming otherwise. Under documents supposedly showing that they own the
the principle of estoppel, a party to a contract is subject machines, petitioners also argue in their Petition
ordinarily precluded from denying the truth of any that the Agreement suffers from intrinsic ambiguity
material fact found therein. which places in serious doubt the intention of the
parties and the validity of the lease agreement itself.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the [25]
In their Reply to respondents Comment, they further
intention of the parties to treat a house as a personal allege that the Agreement is invalid.[26]
These arguments are unconvincing. The validity and the that the seizure would nullify all efforts to rehabilitate
nature of the contract are the lis mota of the civil action the corporation.
pending before the RTC. A resolution of these questions,
Petitioners arguments do not preclude the
therefore, is effectively a resolution of the merits of the
implementation of the Writ. As earlier discussed, law
case. Hence, they should be threshed out in the trial,
and jurisprudence support its propriety.Verily, the
not in the proceedings involving the issuance of the Writ
above-mentioned consequences, if they come true,
of Seizure.
should not be blamed on this Court, but on the
Indeed, in La Tondea Distillers v. CA,[27] the Court petitioners for failing to avail themselves of the remedy
explained that the policy under Rule 60 was that under Section 5 of Rule 60, which allows the filing of a
questions involving title to the subject property counter-bond. The provision states:
questions which petitioners are now raising -- should be
determined in the trial. In that case, the Court noted SEC. 5. Return of property. -- If the adverse party objects to
that the remedy of defendants under Rule 60 was either the sufficiency of the applicants bond, or of the surety or
to post a counter-bond or to question the sufficiency of sureties thereon, he cannot immediately require the return of
the plaintiffs bond. They were not allowed, however, to the property, but if he does not so object, he may, at any time
invoke the title to the subject property. The Court ruled: before the delivery of the property to the applicant, require
the return thereof, by filing with the court where the action is
In other words, the law does not allow the defendant to file a pending a bond executed to the applicant, in double the value
motion to dissolve or discharge the writ of seizure (or of the property as stated in the applicants affidavit for the
delivery) on ground of insufficiency of the complaint or of the delivery thereof to the applicant, if such delivery be adjudged,
grounds relied upon therefor, as in proceedings on and for the payment of such sum to him as may be recovered
preliminary attachment or injunction, and thereby put at against the adverse party, and by serving a copy bond on the
issue the matter of the title or right of possession over the applicant.
specific chattel being replevied, the policy apparently being
that said matter should be ventilated and determined only at WHEREFORE, the Petition is DENIED and the
the trial on the merits.[28] assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
Besides, these questions require a determination of
SO ORDERED.
facts and a presentation of evidence, both of which have
no place in a petition for certiorari in the CA under Rule
65 or in a petition for review in this Court under Rule 45.
[29]

Reliance on the Lease Agreement

It should be pointed out that the Court in this case may

rely on the Lease Agreement, for nothing on record
shows that it has been nullified or annulled. In fact,
petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by
respondent. Accordingly, it must be presumed valid and
binding as the law between the parties.
Makati Leasing and Finance Corporation [30] is also
instructive on this point. In that case, the Deed of
Chattel Mortgage, which characterized the subject
machinery as personal property, was also assailed
because respondent had allegedly been required to sign
a printed form of chattel mortgage which was in a blank
form at the time of signing. The Court rejected the
argument and relied on the Deed, ruling as follows:

x x x. Moreover, even granting that the charge is true, such

fact alone does not render a contract void ab initio, but can
only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by
a proper action in court. There is nothing on record to show
that the mortgage has been annulled. Neither is it disclosed
that steps were taken to nullify the same. x x x

Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that if the Court allows these

machineries to be seized, then its workers would be out
of work and thrown into the streets.[31] They also allege
G.R. No. L-58469 May 16, 1983 A motion for reconsideration of this decision of the Court of
Appeals having been denied, petitioner has brought the case
MAKATI LEASING and FINANCE CORPORATION, petitioner, to this Court for review by writ of certiorari. It is contended by
vs. private respondent, however, that the instant petition was
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF rendered moot and academic by petitioner's act of returning
APPEALS, respondents. the subject motor drive of respondent's machinery after the
Court of Appeals' decision was promulgated.
Petition for review on certiorari of the decision of the Court of
Appeals (now Intermediate Appellate Court) promulgated on The contention of private respondent is without merit. When
August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain petitioner returned the subject motor drive, it made itself
Orders later specified herein, of Judge Ricardo J. Francisco, as unequivocably clear that said action was without prejudice to
Presiding Judge of the Court of First instance of Rizal Branch a motion for reconsideration of the Court of Appeals decision,
VI, issued in Civil Case No. 36040, as wen as the resolution as shown by the receipt duly signed by respondent's
dated September 22, 1981 of the said appellate court, representative. 1 Considering that petitioner has reserved its
denying petitioner's motion for reconsideration. right to question the propriety of the Court of Appeals'
decision, the contention of private respondent that this
It appears that in order to obtain financial accommodations petition has been mooted by such return may not be
from herein petitioner Makati Leasing and Finance sustained.
Corporation, the private respondent Wearever Textile Mills,
Inc., discounted and assigned several receivables with the The next and the more crucial question to be resolved in this
former under a Receivable Purchase Agreement. To secure Petition is , while the respondent claiming the contrary, and
the collection of the receivables assigned, private respondent was sustained by the appellate court, which accordingly held
executed a Chattel Mortgage over certain raw materials that the chattel mortgage constituted thereon is null and
inventory as well as a machinery described as an Artos Aero void, as contended by said respondent.
Dryer Stentering Range.
A similar, if not Identical issue was raised in Tumalad v.
Upon private respondent's default, petitioner filed a petition Vicencio, 41 SCRA 143 where this Court, speaking through
for extrajudicial foreclosure of the properties mortgage to it. Justice J.B.L. Reyes, ruled:
However, the Deputy Sheriff assigned to implement the
foreclosure failed to gain entry into private respondent's Although there is no specific statement referring to the
premises and was not able to effect the seizure of the subject house as personal property, yet by ceding, selling or
aforedescribed machinery. Petitioner thereafter filed a transferring a property by way of chattel mortgage
complaint for judicial foreclosure with the Court of First defendants-appellants could only have meant to convey the
Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, house as chattel, or at least, intended to treat the same as
the case before the lower court. such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise. Moreover, the
Acting on petitioner's application for replevin, the lower court subject house stood on a rented lot to which defendants-
issued a writ of seizure, the enforcement of which was appellants merely had a temporary right as lessee, and
however subsequently restrained upon private respondent's although this can not in itself alone determine the status of
filing of a motion for reconsideration. After several incidents, the property, it does so when combined with other factors to
the lower court finally issued on February 11, 1981, an order sustain the interpretation that the parties, particularly the
lifting the restraining order for the enforcement of the writ of mortgagors, intended to treat the house as personality.
seizure and an order to break open the premises of private Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza
respondent to enforce said writ. The lower court reaffirmed Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery &
its stand upon private respondent's filing of a further motion Williamson, wherein third persons assailed the validity of the
for reconsideration. chattel mortgage, it is the defendants-appellants themselves,
as debtors-mortgagors, who are attacking the validity of the
On July 13, 1981, the sheriff enforcing the seizure order, chattel mortgage in this case. The doctrine of estoppel
repaired to the premises of private respondent and removed therefore applies to the herein defendants-appellants, having
the main drive motor of the subject machinery. treated the subject house as personality.

The Court of Appeals, in certiorari and prohibition Examining the records of the instant case, We find no logical
proceedings subsequently filed by herein private justification to exclude the rule out, as the appellate court
respondent, set aside the Orders of the lower court and did, the present case from the application of the
ordered the return of the drive motor seized by the sheriff abovequoted pronouncement. If a house of strong
pursuant to said Orders, after ruling that the machinery in suit materials, like what was involved in the above Tumalad
cannot be the subject of replevin, much less of a chattel case, may be considered as personal property for purposes
mortgage, because it is a real property pursuant to Article 415 of executing a chattel mortgage thereon as long as the
of the new Civil Code, the same being attached to the ground parties to the contract so agree and no innocent third party
by means of bolts and the only way to remove it from will be prejudiced thereby, there is absolutely no reason why
respondent's plant would be to drill out or destroy the a machinery, which is movable in its nature and becomes
concrete floor, the reason why all that the sheriff could do to immobilized only by destination or purpose, may not be
enfore the writ was to take the main drive motor of said likewise treated as such. This is really because one who has
machinery. The appellate court rejected petitioner's argument so agreed is estopped from denying the existence of the
that private respondent is estopped from claiming that the chattel mortgage.
machine is real property by constituting a chattel mortgage
thereon. In rejecting petitioner's assertion on the applicability of the
Tumalad doctrine, the Court of Appeals lays stress on the
fact that the house involved therein was built on a land that
did not belong to the owner of such house. But the law
makes no distinction with respect to the ownership of the
land on which the house is built and We should not lay down
distinctions not contemplated by law.

It must be pointed out that the characterization of the

subject machinery as chattel by the private respondent is
indicative of intention and impresses upon the property the
character determined by the parties. As stated in Standard
Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable
that the parties to a contract may by agreement treat as
personal property that which by nature would be real
property, as long as no interest of third parties would be
prejudiced thereby.

Private respondent contends that estoppel cannot apply

against it because it had never represented nor agreed that
the machinery in suit be considered as personal property but
was merely required and dictated on by herein petitioner to
sign a printed form of chattel mortgage which was in a blank
form at the time of signing. This contention lacks
persuasiveness. As aptly pointed out by petitioner and not
denied by the respondent, the status of the subject machinery
as movable or immovable was never placed in issue before
the lower court and the Court of Appeals except in a
supplemental memorandum in support of the petition filed in
the appellate court. Moreover, even granting that the charge
is true, such fact alone does not render a contract void ab
initio, but can only be a ground for rendering said contract
voidable, or annullable pursuant to Article 1390 of the new
Civil Code, by a proper action in court. There is nothing on
record to show that the mortgage has been annulled.
Neither is it disclosed that steps were taken to nullify the
same. On the other hand, as pointed out by petitioner and
again not refuted by respondent, the latter has indubitably
benefited from said contract. Equity dictates that one should
not benefit at the expense of another. Private respondent
could not now therefore, be allowed to impugn the efficacy of
the chattel mortgage after it has benefited therefrom,

From what has been said above, the error of the appellate
court in ruling that the questioned machinery is real, not
personal property, becomes very apparent. Moreover, the
case of Machinery and Engineering Supplies, Inc. v. CA, 96
Phil. 70, heavily relied upon by said court is not applicable to
the case at bar, the nature of the machinery and equipment
involved therein as real properties never having been
disputed nor in issue, and they were not the subject of a
Chattel Mortgage. Undoubtedly, the Tumalad case bears more
nearly perfect parity with the instant case to be the more
controlling jurisprudential authority.

WHEREFORE, the questioned decision and resolution of the

Court of Appeals are hereby reversed and set aside, and the
Orders of the lower court are hereby reinstated, with costs
against the private respondent.

SO ORDERED.
G.R. No. L-50466 May 31, 1982 The said machines and equipment are loaned by Caltex to gas
station operators under an appropriate lease agreement or
CALTEX (PHILIPPINES) INC., petitioner, receipt. It is stipulated in the lease contract that the
vs. operators, upon demand, shall return to Caltex the machines
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY and equipment in good condition as when received, ordinary
ASSESSOR OF PASAY, respondents. wear and tear excepted.

This case is about the realty tax on machinery and equipment The lessor of the land, where the gas station is located, does
installed by Caltex (Philippines) Inc. in its gas stations located not become the owner of the machines and equipment
on leased land. installed therein. Caltex retains the ownership thereof during
the term of the lease.
The machines and equipment consists of underground tanks,
elevated tank, elevated water tanks, water tanks, gasoline The city assessor of Pasay City characterized the said items of
pumps, computing pumps, water pumps, car washer, car gas station equipment and machinery as taxable realty. The
hoists, truck hoists, air compressors and tireflators. The city realty tax on said equipment amounts to P4,541.10 annually
assessor described the said equipment and machinery in this (p. 52, Rollo). The city board of tax appeals ruled that they are
manner: personalty. The assessor appealed to the Central Board of
Assessment Appeals.
A gasoline service station is a piece of lot where a building or
shed is erected, a water tank if there is any is placed in one The Board, which was composed of Secretary of Finance
corner of the lot, car hoists are placed in an adjacent shed, an Cesar Virata as chairman, Acting Secretary of Justice Catalino
air compressor is attached in the wall of the shed or at the Macaraig, Jr. and Secretary of Local Government and
concrete wall fence. Community Development Jose Roo, held in its decision of
June 3, 1977 that the said machines and equipment are real
The controversial underground tank, depository of gasoline or property within the meaning of sections 3(k) & (m) and 38 of
crude oil, is dug deep about six feet more or less, a few the Real Property Tax Code, Presidential Decree No. 464,
meters away from the shed. This is done to prevent which took effect on June 1, 1974, and that the definitions of
conflagration because gasoline and other combustible oil are real property and personal property in articles 415 and 416 of
very inflammable. the Civil Code are not applicable to this case.

This underground tank is connected with a steel pipe to the The decision was reiterated by the Board (Minister Vicente
gasoline pump and the gasoline pump is commonly placed or Abad Santos took Macaraig's place) in its resolution of
constructed under the shed. The footing of the pump is a January 12, 1978, denying Caltex's motion for
cement pad and this cement pad is imbedded in the reconsideration, a copy of which was received by its lawyer
pavement under the shed, and evidence that the gasoline on April 2, 1979.
underground tank is attached and connected to the shed or
building through the pipe to the pump and the pump is On May 2, 1979 Caltex filed this certiorari petition wherein it
attached and affixed to the cement pad and pavement prayed for the setting aside of the Board's decision and for a
covered by the roof of the building or shed. declaration that t he said machines and equipment are
personal property not subject to realty tax (p. 16, Rollo).
The building or shed, the elevated water tank, the car hoist
under a separate shed, the air compressor, the underground The Solicitor General's contention that the Court of Tax
gasoline tank, neon lights signboard, concrete fence and Appeals has exclusive appellate jurisdiction over this case is
pavement and the lot where they are all placed or erected, all not correct. When Republic act No. 1125 created the Tax
of them used in the pursuance of the gasoline service station Court in 1954, there was as yet no Central Board of
business formed the entire gasoline service-station. Assessment Appeals. Section 7(3) of that law in providing that
the Tax Court had jurisdiction to review by appeal decisions of
As to whether the subject properties are attached and affixed provincial or city boards of assessment appeals had in mind
to the tenement, it is clear they are, for the tenement we the local boards of assessment appeals but not
consider in this particular case are (is) the pavement covering the Central Board of Assessment Appeals which under the
the entire lot which was constructed by the owner of the Real Property Tax Code has appellate jurisdiction over
gasoline station and the improvement which holds all the decisions of the said local boards of assessment appeals and
properties under question, they are attached and affixed to is, therefore, in the same category as the Tax Court.
the pavement and to the improvement.
Section 36 of the Real Property Tax Code provides that the
The pavement covering the entire lot of the gasoline service decision of the Central Board of Assessment Appeals shall
station, as well as all the improvements, machines, become final and executory after the lapse of fifteen days
equipments and apparatus are allowed by Caltex (Philippines) from the receipt of its decision by the appellant. Within that
Inc. ... fifteen-day period, a petition for reconsideration may be filed.
The Code does not provide for the review of the Board's
decision by this Court.
The underground gasoline tank is attached to the shed by the
steel pipe to the pump, so with the water tank it is connected
also by a steel pipe to the pavement, then to the electric Consequently, the only remedy available for seeking a review
motor which electric motor is placed under the shed. So to by this Court of the decision of the Central Board of
say that the gasoline pumps, water pumps and underground Assessment Appeals is the special civil action of certiorari, the
tanks are outside of the service station, and to consider only recourse resorted to herein by Caltex (Philippines), Inc.
the building as the service station is grossly erroneous. (pp.
58-60, Rollo).
The issue is whether the pieces of gas station equipment and Improvements on land are commonly taxed as realty even
machinery already enumerated are subject to realty tax. though for some purposes they might be considered
This issue has to be resolved primarily under the provisions personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar
of the Assessment Law and the Real Property Tax Code. phenomenon to see things classed as real property for
purposes of taxation which on general principle might be
Section 2 of the Assessment Law provides that the realty tax considered personal property" (Standard Oil Co. of New York
is due "on real property, including land, buildings, machinery, vs. Jaramillo, 44 Phil. 630, 633).
and other improvements" not specifically exempted in section
3 thereof. This provision is reproduced with some This case is also easily distinguishable from Board of
modification in the Real Property Tax Code which provides: Assessment Appeals vs. Manila Electric Co., 119 Phil. 328,
where Meralco's steel towers were considered poles within
SEC. 38. Incidence of Real Property Tax. There shall be the meaning of paragraph 9 of its franchise which exempts its
levied, assessed and collected in all provinces, cities and poles from taxation. The steel towers were considered
municipalities an annual ad valorem tax on real property, personalty because they were attached to square metal
such as land, buildings, machinery and other improvements frames by means of bolts and could be moved from place to
affixed or attached to real property not hereinafter specifically place when unscrewed and dismantled.
exempted.
Nor are Caltex's gas station equipment and machinery the
The Code contains the following definitions in its section 3: same as tools and equipment in the repair shop of a bus
company which were held to be personal property not
k) Improvements is a valuable addition made to property or subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116
an amelioration in its condition, amounting to more than Phil. 501).
mere repairs or replacement of waste, costing labor or capital
and intended to enhance its value, beauty or utility or to The Central Board of Assessment Appeals did not commit a
adapt it for new or further purposes. grave abuse of discretion in upholding the city assessor's is
imposition of the realty tax on Caltex's gas station and
m) Machinery shall embrace machines, mechanical equipment.
contrivances, instruments, appliances and apparatus attached
to the real estate. It includes the physical facilities available WHEREFORE, the questioned decision and resolution of the
for production, as well as the installations and appurtenant Central Board of Assessment Appeals are affirmed. The
service facilities, together with all other equipment designed petition for certiorari is dismissed for lack of merit. No costs.
for or essential to its manufacturing, industrial or agricultural
purposes (See sec. 3[f], Assessment Law). SO ORDERED.

We hold 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.

Caltex invokes the rule that 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 (Davao Saw Mill Co. vs. Castillo, 61 Phil 709).

That ruling is an interpretation of paragraph 5 of article 415 of

the Civil Code regarding machinery that becomes real
property by destination. In the Davao Saw Mills case the
question was whether the machinery mounted on
foundations of cement and installed by the lessee 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. (Compare with Machinery & Engineering
Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a
replevin case machinery was treated as realty).

Here, the question is whether the gas station equipment and

machinery permanently affixed by Caltex to its gas station and
pavement (which are indubitably taxable realty) should be
subject to the realty tax. This question is different from the
issue raised in the Davao Saw Mill case.
G.R. No. L-46245 May 31, 1982 of Acting Secretary of Finance Pedro M. Almanzor as
chairman and Secretary of Justice Vicente Abad Santos and
MERALCO SECURITIES INDUSTRIAL Secretary of Local Government and Community Development
CORPORATION, petitioner, Jose Roo as members, ruled that the pipeline is subject to
vs. realty tax (p. 40, Rollo).
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF
ASSESSMENT APPEALS OF LAGUNA and PROVINCIAL A copy of that decision was served on Meralco Securities'
ASSESSOR OF LAGUNA, respondents. counsel on August 27, 1976. Section 36 of the Real Property
Tax Code, Presidential Decree No. 464, which took effect on
In this special civil action of certiorari, Meralco Securities June 1, 1974, provides that the Board's decision becomes
Industrial Corporation assails the decision of the Central final and executory after the lapse of fifteen days from the
Board of Assessment Appeals (composed of the Secretary of date of receipt of a copy of the decision by the appellant.
Finance as chairman and the Secretaries of Justice and Local
Government and Community Development as members) Under Rule III of the amended rules of procedure of the
dated May 6, 1976, holding that Meralco Securities' oil Central Board of Assessment Appeals (70 O.G. 10085), a party
pipeline is subject to realty tax. may ask for the reconsideration of the Board's decision within
fifteen days after receipt. On September 7, 1976 (the eleventh
The record reveals that pursuant to a pipeline concession day), Meralco Securities filed its motion for reconsideration.
issued under the Petroleum Act of 1949, Republic Act No.
387, Meralco Securities installed from Batangas to Manila a Secretary of Finance Cesar Virata and Secretary Roo
pipeline system consisting of cylindrical steel pipes joined (Secretary Abad Santos abstained) denied the motion in a
together and buried not less than one meter below the resolution dated December 2, 1976, a copy of which was
surface along the shoulder of the public highway. The portion received by appellant's counsel on May 24, 1977 (p. 4, Rollo).
passing through Laguna is about thirty kilometers long. On June 6, 1977, Meralco Securities filed the instant petition
for certiorari.
The pipes for white oil products measure fourteen inches in
diameter by thirty-six feet with a maximum capacity of 75,000 The Solicitor General contends that certiorari is not proper in
barrels daily. The pipes for fuel and black oil measure sixteen this case because the Board acted within its jurisdiction and
inches by forty-eight feet with a maximum capacity of did not gravely abuse its discretion and Meralco Securities
100,000 barrels daily. was not denied due process of law.

The pipes are embedded in the soil and are firmly and solidly Meralco Securities explains that because the Court of Tax
welded together so as to preclude breakage or damage Appeals has no jurisdiction to review the decision of the
thereto and prevent leakage or seepage of the oil. The valves Central Board of Assessment Appeals and because no judicial
are welded to the pipes so as to make the pipeline system one review of the Board's decision is provided for in the Real
single piece of property from end to end. Property Tax Code, Meralco Securities' recourse is to file a
petition for certiorari.
In order to repair, replace, remove or transfer segments of the
pipeline, the pipes have to be cold-cut by means of a rotary We hold that certiorari was properly availed of in this case.
hard-metal pipe-cutter after digging or excavating them out of It is a writ issued by a superior court to an inferior court,
the ground where they are buried. In points where the board or officer exercising judicial or quasi-judicial functions
pipeline traversed rivers or creeks, the pipes were laid whereby the record of a particular case is ordered to be
beneath the bed thereof. Hence, the pipes are permanently elevated for review and correction in matters of law (14
attached to the land. C.J.S. 121-122; 14 Am Jur. 2nd 777).

However, Meralco Securities notes that segments of the The rule is that as to administrative agencies exercising quasi-
pipeline can be moved from one place to another as shown in judicial power there is an underlying power in the courts to
the permit issued by the Secretary of Public Works and scrutinize the acts of such agencies on questions of law and
Communications which permit provides that the government jurisdiction even though no right of review is given by the
reserves the right to require the removal or transfer of the statute (73 C.J.S. 506, note 56).
pipes by and at the concessionaire's expense should they be
affected by any road repair or improvement. "The purpose of judicial review is to keep the administrative
agency within its jurisdiction and protect substantial rights of
Pursuant to the Assessment Law, Commonwealth Act No. parties affected by its decisions" (73 C.J.S. 507, See. 165). The
470, the provincial assessor of Laguna treated the pipeline as review is a part of the system of checks and balances which is
real property and issued Tax Declarations Nos. 6535-6537, a limitation on the separation of powers and which forestalls
San Pedro; 7473-7478, Cabuyao; 7967-7971, Sta. Rosa; 9882- arbitrary and unjust adjudications.
9885, Bian and 15806-15810, Calamba, containing the
assessed values of portions of the pipeline. Judicial review of the decision of an official or administrative
agency exercising quasi-judicial functions is proper in cases of
Meralco Securities appealed the assessments to the Board of lack of jurisdiction, error of law, grave abuse of discretion,
Assessment Appeals of Laguna composed of the register of fraud or collusion or in case the administrative decision is
deeds as chairman and the provincial auditor as member. corrupt, arbitrary or capricious (Mafinco Trading Corporation
That board in its decision of June 18, 1975 upheld the vs. Ople, L-37790, March 25, 1976, 70 SCRA 139, 158; San
assessments (pp. 47-49, Rollo). Miguel Corporation vs. Secretary of Labor, L-39195, May 16,
1975, 64 SCRA 56, 60, Mun. Council of Lemery vs. Prov. Board
Meralco Securities brought the case to the Central Board of of Batangas, 56 Phil. 260, 268).
Assessment Appeals. As already stated, that Board, composed
The Central Board of Assessment Appeals, in confirming the Directors of Red River Levee Dist. No. 1 of Lafayette County,
ruling of the provincial assessor and the provincial board of Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note 86).
assessment appeals that Meralco Securities' pipeline is
subject to realty tax, reasoned out that the pipes are The other contention of Meralco Securities is that the
machinery or improvements, as contemplated in the Petroleum Law exempts it from the payment of realty taxes.
Assessment Law and the Real Property Tax Code; that they do The alleged exemption is predicated on the following
not fall within the category of property exempt from realty provisions of that law which exempt Meralco Securities from
tax under those laws; that articles 415 and 416 of the Civil local taxes and make it liable for taxes of general application:
Code, defining real and personal property, have no application
to this case; that even under article 415, the steel pipes can ART. 102. Work obligations, taxes, royalties not to be
be regarded as realty because they are constructions adhered changed. Work obligations, special taxes and royalties
to the soil and things attached to the land in a fixed manner which are fixed by the provisions of this Act or by the
and that Meralco Securities is not exempt from realty tax concession for any of the kinds of concessions to which this
under the Petroleum Law (pp. 36-40). Act relates, are considered as inherent on such concessions
after they are granted, and shall not be increased or
Meralco Securities insists that its pipeline is not subject to decreased during the life of the concession to which they
realty tax because it is not real property within the meaning apply; nor shall any other special taxes or levies be applied to
of article 415. This contention is not sustainable under the such concessions, nor shall 0concessionaires under this Act be
provisions of the Assessment Law, the Real Property Tax Code subject to any provincial, municipal or other local taxes or
and the Civil Code. levies; nor shall any sales tax be charged on any petroleum
produced from the concession or portion thereof,
Section 2 of the Assessment Law provides that the realty tax manufactured by the concessionaire and used in the working
is due "on real property, including land, buildings, machinery, of his concession. All such concessionaires, however, shall be
and other improvements" not specifically exempted in section subject to such taxes as are of general application in addition
3 thereof. This provision is reproduced with some to taxes and other levies specifically provided in this Act.
modification in the Real Property Tax Code which provides:
Meralco Securities argues that the realty tax is a local tax or
SEC. 38. Incidence of Real Property Tax. There shall be levy and not a tax of general application. This argument is
levied, assessed and collected in all provinces, cities and untenable because the realty tax has always been imposed by
municipalities an annual ad valorem tax on real property, the lawmaking body and later by the President of the
such as land, buildings, machinery and other improvements Philippines in the exercise of his lawmaking powers, as shown
affixed or attached to real property not hereinafter specifically in section 342 et seq. of the Revised Administrative Code, Act
exempted. * No. 3995, Commonwealth Act No. 470 and Presidential
Decree No. 464.
It is incontestable that the pipeline of Meralco Securities does
not fall within any of the classes of exempt real property The realty tax is enforced throughout the Philippines and not
enumerated in section 3 of the Assessment Law and section merely in a particular municipality or city but the proceeds of
40 of the Real Property Tax Code. the tax accrue to the province, city, municipality and barrio
where the realty taxed is situated (Sec. 86, P.D. No. 464). In
Pipeline means a line of pipe connected to pumps, valves and contrast, a local tax is imposed by the municipal or city
control devices for conveying liquids, gases or finely divided council by virtue of the Local Tax Code, Presidential Decree
solids. It is a line of pipe running upon or in the earth, No. 231, which took effect on July 1, 1973 (69 O.G. 6197).
carrying with it the right to the use of the soil in which it is
placed (Note 21[10],54 C.J.S. 561). We hold that the Central Board of Assessment Appeals did
not act with grave abuse of discretion, did not commit any
Article 415[l] and [3] provides that real property may consist error of law and acted within its jurisdiction in sustaining the
of constructions of all kinds adhered to the soil and holding of the provincial assessor and the local board of
everything attached to an immovable in a fixed manner, in assessment appeals that Meralco Securities' pipeline system
such a way that it cannot be separated therefrom without in Laguna is subject to realty tax.
breaking the material or deterioration of the object.
WHEREFORE, the questioned decision and resolution are
The pipeline system in question is indubitably a construction affirmed. The petition is dismissed. No costs.
adhering to the soil (Exh. B, p. 39, Rollo). It is attached to the
land in such a way that it cannot be separated therefrom SO ORDERED.
without dismantling the steel pipes which were welded to
form the pipeline.

Insofar as the pipeline uses valves, pumps and control

devices to maintain the flow of oil, it is in a sense machinery
within the meaning of the Real Property Tax Code.

It should be borne in mind that what are being characterized

as real property are not the steel pipes but the pipeline
system as a whole. Meralco Securities has apparently two
pipeline systems.

A pipeline for conveying petroleum has been regarded as

real property for tax purposes (Miller County Highway, etc.,
Dist. vs. Standard Pipe Line Co., 19 Fed. 2nd 3; Board of
G.R. No. 168557 February 16, 2007 Provincial Assessor advised NPC to pay the assessment. 8 This
FELS ENERGY, INC., Petitioner, prompted NPC to file a petition with the Local Board of
vs. Assessment Appeals (LBAA) for the setting aside of the
THE PROVINCE OF BATANGAS and assessment and the declaration of the barges as non-taxable
THE OFFICE OF THE PROVINCIAL ASSESSOR OF items; it also prayed that should LBAA find the barges to be
BATANGAS, Respondents. taxable, the Provincial Assessor be directed to make the
x----------------------------------------------------x necessary corrections.9

G.R. No. 170628 February 16, 2007 In its Answer to the petition, the Provincial Assessor averred
that the barges were real property for purposes of taxation
NATIONAL POWER CORPORATION, Petitioner, under Section 199(c) of Republic Act (R.A.) No. 7160.
vs.
LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, Before the case was decided by the LBAA, NPC filed a
LAURO C. ANDAYA, in his capacity as the Assessor of the Manifestation, informing the LBAA that the Department of
Province of Batangas, and the PROVINCE OF BATANGAS Finance (DOF) had rendered an opinion 10 dated May 20, 1996,
represented by its Provincial Assessor, Respondents. where it is clearly stated that power barges are not real
property subject to real property assessment.
Before us are two consolidated cases docketed as G.R. No.
168557 and G.R. No. 170628, which were filed by petitioners On August 26, 1996, the LBAA rendered a
FELS Energy, Inc. (FELS) and National Power Corporation Resolution11 denying the petition. The fallo reads:
(NPC), respectively. The first is a petition for review on
certiorari assailing the August 25, 2004 Decision 1 of the Court WHEREFORE, the Petition is DENIED. FELS is hereby ordered
of Appeals (CA) in CA-G.R. SP No. 67490 and its to pay the real estate tax in the amount of 56,184,088.40,
Resolution2 dated June 20, 2005; the second, also a petition for the year 1994.
for review on certiorari, challenges the February 9, 2005
Decision3 and November 23, 2005 Resolution 4 of the CA in CA- SO ORDERED.12
G.R. SP No. 67491. Both petitions were dismissed on the
ground of prescription.
The LBAA ruled that the power plant facilities, while they
may be classified as movable or personal property, are
The pertinent facts are as follows: nevertheless considered real property for taxation purposes
because they are installed at a specific location with a
On January 18, 1993, NPC entered into a lease contract with character of permanency. The LBAA also pointed out that
Polar Energy, Inc. over 3x30 MW diesel engine power barges the owner of the bargesFELS, a private corporationis the
moored at Balayan Bay in Calaca, Batangas. The contract, one being taxed, not NPC. A mere agreement making NPC
denominated as an Energy Conversion responsible for the payment of all real estate taxes and
Agreement5 (Agreement), was for a period of five years. assessments will not justify the exemption of FELS; such a
Article 10 reads: privilege can only be granted to NPC and cannot be
extended to FELS. Finally, the LBAA also ruled that the
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the petition was filed out of time.
payment of (a) all taxes, import duties, fees, charges and
other levies imposed by the National Government of the Aggrieved, FELS appealed the LBAAs ruling to the Central
Republic of the Philippines or any agency or instrumentality Board of Assessment Appeals (CBAA).
thereof to which POLAR may be or become subject to or in
relation to the performance of their obligations under this On August 28, 1996, the Provincial Treasurer of Batangas City
agreement (other than (i) taxes imposed or calculated on the issued a Notice of Levy and Warrant by Distraint 13over the
basis of the net income of POLAR and Personal Income Taxes power barges, seeking to collect real property taxes
of its employees and (ii) construction permit fees, amounting to 232,602,125.91 as of July 31, 1996. The notice
environmental permit fees and other similar fees and charges) and warrant was officially served to FELS on November 8,
and (b) all real estate taxes and assessments, rates and other 1996. It then filed a Motion to Lift Levy dated November 14,
charges in respect of the Power Barges.6 1996, praying that the Provincial Assessor be further
restrained by the CBAA from enforcing the disputed
Subsequently, Polar Energy, Inc. assigned its rights under the assessment during the pendency of the appeal.
Agreement to FELS. The NPC initially opposed the assignment
of rights, citing paragraph 17.2 of Article 17 of the Agreement. On November 15, 1996, the CBAA issued an Order14 lifting the
levy and distraint on the properties of FELS in order not to
On August 7, 1995, FELS received an assessment of real preempt and render ineffectual, nugatory and illusory any
property taxes on the power barges from Provincial Assessor resolution or judgment which the Board would issue.
Lauro C. Andaya of Batangas City. The assessed tax, which
likewise covered those due for 1994, amounted to Meantime, the NPC filed a Motion for Intervention 15 dated
56,184,088.40 per annum. FELS referred the matter to NPC, August 7, 1998 in the proceedings before the CBAA. This was
reminding it of its obligation under the Agreement to pay all approved by the CBAA in an Order 16 dated September 22,
real estate taxes. It then gave NPC the full power and 1998.
authority to represent it in any conference regarding the real
property assessment of the Provincial Assessor.
During the pendency of the case, both FELS and NPC filed
several motions to admit bond to guarantee the payment of
In a letter7 dated September 7, 1995, NPC sought real property taxes assessed by the Provincial Assessor (in the
reconsideration of the Provincial Assessors decision to assess event that the judgment be unfavorable to them). The bonds
real property taxes on the power barges. However, the were duly approved by the CBAA.
motion was denied on September 22, 1995, and the
On April 6, 2000, the CBAA rendered a Decision 17 finding the WHEREFORE, the petition for review is DENIED for lack of
power barges exempt from real property tax. The dispositive merit and the assailed Resolutions dated July 31, 2001 and
portion reads: October 19, 2001 of the Central Board of Assessment Appeals
are AFFIRMED.
WHEREFORE, the Resolution of the Local Board of Assessment
Appeals of the Province of Batangas is hereby reversed. SO ORDERED.24
Respondent-appellee Provincial Assessor of the Province of
Batangas is hereby ordered to drop subject property under On September 20, 2004, FELS timely filed a motion for
ARP/Tax Declaration No. 018-00958 from the List of Taxable reconsideration seeking the reversal of the appellate courts
Properties in the Assessment Roll. The Provincial Treasurer of decision in CA-G.R. SP No. 67490.
Batangas is hereby directed to act accordingly.
Thereafter, NPC filed a petition for review dated October 19,
SO ORDERED.18 2004 before this Court, docketed as G.R. No. 165113, assailing
the appellate courts decision in CA-G.R. SP No. 67490. The
Ruling in favor of FELS and NPC, the CBAA reasoned that the petition was, however, denied in this Courts Resolution 25 of
power barges belong to NPC; since they are actually, directly November 8, 2004, for NPCs failure to sufficiently show that
and exclusively used by it, the power barges are covered by the CA committed any reversible error in the challenged
the exemptions under Section 234(c) of R.A. No. 7160. 19 As to decision. NPC filed a motion for reconsideration, which the
the other jurisdictional issue, the CBAA ruled that prescription Court denied with finality in a Resolution 26 dated January 19,
did not preclude the NPC from pursuing its claim for tax 2005.
exemption in accordance with Section 206 of R.A. No. 7160.
The Provincial Assessor filed a motion for reconsideration, Meantime, the appellate court dismissed the petition in CA-
which was opposed by FELS and NPC. G.R. SP No. 67491. It held that the right to question the
assessment of the Provincial Assessor had already prescribed
In a complete volte face, the CBAA issued a Resolution 20 on upon the failure of FELS to appeal the disputed assessment to
July 31, 2001 reversing its earlier decision. The fallo of the the LBAA within the period prescribed by law. Since FELS had
resolution reads: lost the right to question the assessment, the right of the
Provincial Government to collect the tax was already
WHEREFORE, premises considered, it is the resolution of this absolute.
Board that:
NPC filed a motion for reconsideration dated March 8, 2005,
(a) The decision of the Board dated 6 April 2000 is hereby seeking reconsideration of the February 5, 2005 ruling of the
reversed. CA in CA-G.R. SP No. 67491. The motion was denied in a
Resolution27 dated November 23, 2005.
(b) The petition of FELS, as well as the intervention of NPC, is
dismissed. The motion for reconsideration filed by FELS in CA-G.R. SP No.
67490 had been earlier denied for lack of merit in a
(c) The resolution of the Local Board of Assessment Appeals Resolution28 dated June 20, 2005.
of Batangas is hereby affirmed,
On August 3, 2005, FELS filed the petition docketed as G.R.
(d) The real property tax assessment on FELS by the Provincial No. 168557 before this Court, raising the following issues:
Assessor of Batangas is likewise hereby affirmed.
A. Whether power barges, which are floating and movable,
SO ORDERED. 21 are personal properties and therefore, not subject to real
property tax.
FELS and NPC filed separate motions for reconsideration,
which were timely opposed by the Provincial Assessor. The B. Assuming that the subject power barges are real
CBAA denied the said motions in a Resolution 22 dated October properties, whether they are exempt from real estate tax
19, 2001. under Section 234 of the Local Government Code ("LGC").

Dissatisfied, FELS filed a petition for review before the CA C. Assuming arguendo that the subject power barges are
docketed as CA-G.R. SP No. 67490. Meanwhile, NPC filed a subject to real estate tax, whether or not it should be NPC
separate petition, docketed as CA-G.R. SP No. 67491. which should be made to pay the same under the law.

On January 17, 2002, NPC filed a Manifestation/Motion for D. Assuming arguendo that the subject power barges are real
Consolidation in CA-G.R. SP No. 67490 praying for the properties, whether or not the same is subject to
consolidation of its petition with CA-G.R. SP No. 67491. In a depreciation just like any other personal properties.
Resolution23 dated February 12, 2002, the appellate court
directed NPC to re-file its motion for consolidation with CA- E. Whether the right of the petitioner to question the patently
G.R. SP No. 67491, since it is the ponente of the latter petition null and void real property tax assessment on the petitioners
who should resolve the request for reconsideration. personal properties is imprescriptible.29

NPC failed to comply with the aforesaid resolution. On August On January 13, 2006, NPC filed its own petition for review
25, 2004, the Twelfth Division of the appellate court rendered before this Court (G.R. No. 170628), indicating the following
judgment in CA-G.R. SP No. 67490 denying the petition on the errors committed by the CA:
ground of prescription. The decretal portion of the decision
reads: I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE APPEAL TO THE LBAA WAS FILED OUT OF TIME.
II THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING We fully agree with the rationalization of the CA in both CA-
THAT THE POWER BARGES ARE NOT SUBJECT TO REAL G.R. SP No. 67490 and CA-G.R. SP No. 67491. The two
PROPERTY TAXES. divisions of the appellate court cited the case of Callanta v.
Office of the Ombudsman,34 where we ruled that under
III THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING Section 226 of R.A. No 7160, 35 the last action of the local
THAT THE ASSESSMENT ON THE POWER BARGES WAS NOT assessor on a particular assessment shall be the notice of
MADE IN ACCORDANCE WITH LAW.30 assessment; it is this last action which gives the owner of the
property the right to appeal to the LBAA. The procedure
Considering that the factual antecedents of both cases are likewise does not permit the property owner the remedy of
similar, the Court ordered the consolidation of the two cases filing a motion for reconsideration before the local assessor.
in a Resolution31 dated March 8, 2006.1awphi1.net The pertinent holding of the Court in Callanta is as follows:

In an earlier Resolution dated February 1, 2006, the Court had x x x [T]he same Code is equally clear that the aggrieved
required the parties to submit their respective Memoranda owners should have brought their appeals before the LBAA.
within 30 days from notice. Almost a year passed but the Unfortunately, despite the advice to this effect contained in
parties had not submitted their respective memoranda. their respective notices of assessment, the owners chose to
Considering that taxesthe lifeblood of our economyare bring their requests for a review/readjustment before the city
involved in the present controversy, the Court was prompted assessor, a remedy not sanctioned by the law. To allow this
to dispense with the said pleadings, with the end view of procedure would indeed invite corruption in the system of
advancing the interests of justice and avoiding further delay. appraisal and assessment. It conveniently courts a graft-prone
situation where values of real property may be initially set
unreasonably high, and then subsequently reduced upon the
In both petitions, FELS and NPC maintain that the appeal
request of a property owner. In the latter instance, allusions
before the LBAA was not time-barred. FELS argues that when
of a possible covert, illicit trade-off cannot be avoided, and in
NPC moved to have the assessment reconsidered on
fact can conveniently take place. Such occasion for mischief
September 7, 1995, the running of the period to file an appeal
must be prevented and excised from our system. 36
with the LBAA was tolled. For its part, NPC posits that the 60-
day period for appealing to the LBAA should be reckoned
from its receipt of the denial of its motion for reconsideration. For its part, the appellate court declared in CA-G.R. SP No.
67491:
Petitioners contentions are bereft of merit.
x x x. The Court announces: Henceforth, whenever the local
assessor sends a notice to the owner or lawful possessor of
Section 226 of R.A. No. 7160, otherwise known as the Local
real property of its revised assessed value, the former shall no
Government Code of 1991, provides:
longer have any jurisdiction to entertain any request for a
review or readjustment. The appropriate forum where the
SECTION 226. Local Board of Assessment Appeals. Any aggrieved party may bring his appeal is the LBAA as provided
owner or person having legal interest in the property who is by law. It follows ineluctably that the 60-day period for
not satisfied with the action of the provincial, city or making the appeal to the LBAA runs without interruption. This
municipal assessor in the assessment of his property may,
is what We held in SP 67490 and reaffirm today in SP 67491. 37
within sixty (60) days from the date of receipt of the written
notice of assessment, appeal to the Board of Assessment
To reiterate, if the taxpayer fails to appeal in due course, the
Appeals of the province or city by filing a petition under oath
right of the local government to collect the taxes due with
in the form prescribed for the purpose, together with copies
respect to the taxpayers property becomes absolute upon
of the tax declarations and such affidavits or documents
the expiration of the period to appeal.38 It also bears stressing
submitted in support of the appeal.
that the taxpayers failure to question the assessment in the
LBAA renders the assessment of the local assessor final,
We note that the notice of assessment which the Provincial executory and demandable, thus, precluding the taxpayer
Assessor sent to FELS on August 7, 1995, contained the from questioning the correctness of the assessment, or from
following statement: invoking any defense that would reopen the question of its
liability on the merits.39
If you are not satisfied with this assessment, you may, within
sixty (60) days from the date of receipt hereof, appeal to the In fine, the LBAA acted correctly when it dismissed the
Board of Assessment Appeals of the province by filing a petitioners appeal for having been filed out of time; the
petition under oath on the form prescribed for the purpose, CBAA and the appellate court were likewise correct in
together with copies of ARP/Tax Declaration and such affirming the dismissal. Elementary is the rule that the
affidavits or documents submitted in support of the appeal. 32 perfection of an appeal within the period therefor is both
mandatory and jurisdictional, and failure in this regard
Instead of appealing to the Board of Assessment Appeals (as renders the decision final and executory.40
stated in the notice), NPC opted to file a motion for
reconsideration of the Provincial Assessors decision, a In the Comment filed by the Provincial Assessor, it is asserted
remedy not sanctioned by law. that the instant petition is barred by res judicata; that the
final and executory judgment in G.R. No. 165113 (where there
The remedy of appeal to the LBAA is available from an was a final determination on the issue of prescription),
adverse ruling or action of the provincial, city or municipal effectively precludes the claims herein; and that the filing of
assessor in the assessment of the property. It follows then the instant petition after an adverse judgment in G.R. No.
that the determination made by the respondent Provincial 165113 constitutes forum shopping.
Assessor with regard to the taxability of the subject real
properties falls within its power to assess properties for FELS maintains that the argument of the Provincial Assessor is
taxation purposes subject to appeal before the LBAA. 33 completely misplaced since it was not a party to the
erroneous petition which the NPC filed in G.R. No. 165113. It On the issue of forum shopping, we rule for the Provincial
avers that it did not participate in the aforesaid proceeding, Assessor. Forum shopping exists when, as a result of an
and the Supreme Court never acquired jurisdiction over it. As adverse judgment in one forum, a party seeks another and
to the issue of forum shopping, petitioner claims that no possibly favorable judgment in another forum other than by
forum shopping could have been committed since the appeal or special civil action or certiorari. There is also forum
elements of litis pendentia or res judicata are not present. shopping when a party institutes two or more actions or
proceedings grounded on the same cause, on the gamble that
We do not agree. one or the other court would make a favorable disposition. 44

Res judicata pervades every organized system of Petitioner FELS alleges that there is no forum shopping since
jurisprudence and is founded upon two grounds embodied in the elements of res judicata are not present in the cases at
various maxims of common law, namely: (1) public policy and bar; however, as already discussed, res judicata may be
necessity, which makes it to the interest of the properly applied herein. Petitioners engaged in forum
shopping when they filed G.R. Nos. 168557 and 170628 after
State that there should be an end to litigation republicae ut the petition for review in G.R. No. 165116. Indeed, petitioners
sit litium; and (2) the hardship on the individual of being went from one court to another trying to get a favorable
vexed twice for the same cause nemo debet bis vexari et decision from one of the tribunals which allowed them to
eadem causa. A conflicting doctrine would subject the public pursue their cases.
peace and quiet to the will and dereliction of individuals and
prefer the regalement of the litigious disposition on the part It must be stressed that an important factor in determining
of suitors to the preservation of the public tranquility and the existence of forum shopping is the vexation caused to the
happiness.41 As we ruled in Heirs of Trinidad De Leon Vda. de courts and the parties-litigants by the filing of similar cases to
Roxas v. Court of Appeals:42 claim substantially the same reliefs. 45 The rationale against
forum shopping is that a party should not be allowed to
x x x An existing final judgment or decree rendered upon pursue simultaneous remedies in two different fora. Filing
the merits, without fraud or collusion, by a court of multiple petitions or complaints constitutes abuse of court
competent jurisdiction acting upon a matter within its processes, which tends to degrade the administration of
authority is conclusive on the rights of the parties and their justice, wreaks havoc upon orderly judicial procedure, and
privies. This ruling holds in all other actions or suits, in the adds to the congestion of the heavily burdened dockets of the
same or any other judicial tribunal of concurrent jurisdiction, courts.46
touching on the points or matters in issue in the first suit.
Thus, there is forum shopping when there exist: (a) identity of
Courts will simply refuse to reopen what has been decided. parties, or at least such parties as represent the same
They will not allow the same parties or their privies to litigate interests in both actions, (b) identity of rights asserted and
anew a question once it has been considered and decided relief prayed for, the relief being founded on the same facts,
with finality. Litigations must end and terminate sometime and (c) the identity of the two preceding particulars is such
and somewhere. The effective and efficient administration of that any judgment rendered in the pending case, regardless of
justice requires that once a judgment has become final, the which party is successful, would amount to res judicata in the
prevailing party should not be deprived of the fruits of the other.47
verdict by subsequent suits on the same issues filed by the
same parties. Having found that the elements of res judicata and forum
shopping are present in the consolidated cases, a discussion
This is in accordance with the doctrine of res judicata which of the other issues is no longer necessary. Nevertheless, for
has the following elements: (1) the former judgment must be the peace and contentment of petitioners, we shall shed light
final; (2) the court which rendered it had jurisdiction over the on the merits of the case.
subject matter and the parties; (3) the judgment must be on
the merits; and (4) there must be between the first and the As found by the appellate court, the CBAA and LBAA power
second actions, identity of parties, subject matter and causes barges are real property and are thus subject to real property
of action. The application of the doctrine of res judicata does tax. This is also the inevitable conclusion, considering that
not require absolute identity of parties but merely substantial G.R. No. 165113 was dismissed for failure to sufficiently show
identity of parties. There is substantial identity of parties any reversible error. Tax assessments by tax examiners are
when there is community of interest or privity of interest presumed correct and made in good faith, with the taxpayer
between a party in the first and a party in the second case having the burden of proving otherwise.48 Besides, factual
even if the first case did not implead the latter. 43 findings of administrative bodies, which have acquired
expertise in their field, are generally binding and conclusive
To recall, FELS gave NPC the full power and authority to upon the Court; we will not assume to interfere with the
represent it in any proceeding regarding real property sensible exercise of the judgment of men especially trained in
assessment. Therefore, when petitioner NPC filed its appraising property. Where the judicial mind is left in doubt,
petition for review docketed as G.R. No. 165113, it did so it is a sound policy to leave the assessment undisturbed. 49 We
not only on its behalf but also on behalf of FELS. Moreover, find no reason to depart from this rule in this case.
the assailed decision in the earlier petition for review filed in
this Court was the decision of the appellate court in CA-G.R. In Consolidated Edison Company of New York, Inc., et al. v.
SP No. 67490, in which FELS was the petitioner. Thus, the The City of New York, et al., 50 a power company brought an
decision in G.R. No. 165116 is binding on petitioner FELS action to review property tax assessment. On the citys
under the principle of privity of interest. In fine, FELS and NPC motion to dismiss, the Supreme Court of New York held that
are substantially "identical parties" as to warrant the the barges on which were mounted gas turbine power plants
application of res judicata. FELSs argument that it is not designated to generate electrical power, the fuel oil barges
bound by the erroneous petition filed by NPC is thus which supplied fuel oil to the power plant barges, and the
unavailing.
accessory equipment mounted on the barges were subject to seek to be thus privileged must justify it by words too plain to
real property taxation. be mistaken and too categorical to be misinterpreted. 56 Thus,
applying the rule of strict construction of laws granting tax
Moreover, Article 415 (9) of the New Civil Code provides that exemptions, and the rule that doubts should be resolved in
"[d]ocks and structures which, though floating, are intended favor of provincial corporations, we hold that FELS is
by their nature and object to remain at a fixed place on a considered a taxable entity.
river, lake, or coast" are considered immovable property.
Thus, power barges are categorized as immovable property The mere undertaking of petitioner NPC under Section 10.1 of
by destination, being in the nature of machinery and other the Agreement, that it shall be responsible for the payment of
implements intended by the owner for an industry or work all real estate taxes and assessments, does not justify the
which may be carried on in a building or on a piece of land exemption. The privilege granted to petitioner NPC cannot
and which tend directly to meet the needs of said industry be extended to FELS. The covenant is between FELS and NPC
or work.51 and does not bind a third person not privy thereto, in this
case, the Province of Batangas.
Petitioners maintain nevertheless that the power barges are
exempt from real estate tax under Section 234 (c) of R.A. No. It must be pointed out that the protracted and circuitous
7160 because they are actually, directly and exclusively used litigation has seriously resulted in the local governments
by petitioner NPC, a government- owned and controlled deprivation of revenues. The power to tax is an incident of
corporation engaged in the supply, generation, and sovereignty and is unlimited in its magnitude, acknowledging
transmission of electric power. in its very nature no perimeter so that security against its
abuse is to be found only in the responsibility of the
We affirm the findings of the LBAA and CBAA that the owner legislature which imposes the tax on the constituency who
of the taxable properties is petitioner FELS, which in fine, is are to pay for it.57 The right of local government units to
the entity being taxed by the local government. As stipulated collect taxes due must always be upheld to avoid severe tax
under Section 2.11, Article 2 of the Agreement: erosion. This consideration is consistent with the State policy
to guarantee the autonomy of local governments58 and the
OWNERSHIP OF POWER BARGES. POLAR shall own the objective of the Local Government Code that they enjoy
Power Barges and all the fixtures, fittings, machinery and genuine and meaningful local autonomy to empower them to
equipment on the Site used in connection with the Power achieve their fullest development as self-reliant communities
Barges which have been supplied by it at its own cost. and make them effective partners in the attainment of
POLAR shall operate, manage and maintain the Power national goals.59
Barges for the purpose of converting Fuel of NAPOCOR into
electricity.52 In conclusion, we reiterate that the power to tax is the most
potent instrument to raise the needed revenues to finance
It follows then that FELS cannot escape liability from the and support myriad activities of the local government units
payment of realty taxes by invoking its exemption in Section for the delivery of basic services essential to the promotion of
234 (c) of R.A. No. 7160, which reads: the general welfare and the enhancement of peace, progress,
and prosperity of the people.60
SECTION 234. Exemptions from Real Property Tax. The
following are exempted from payment of the real property WHEREFORE, the Petitions are DENIED and the assailed
tax: Decisions and Resolutions AFFIRMED.

(c) All machineries and equipment that are actually, directly SO ORDERED.
and exclusively used by local water districts and
government-owned or controlled corporations engaged in
the supply and distribution of water and/or generation and
transmission of electric power; x x x

Indeed, the law states that the machinery must be actually,

directly and exclusively used by the government owned or
controlled corporation; nevertheless, petitioner FELS still
cannot find solace in this provision because Section 5.5,
Article 5 of the Agreement provides:

OPERATION. POLAR undertakes that until the end of the Lease

Period, subject to the supply of the necessary Fuel pursuant
to Article 6 and to the other provisions hereof, it will operate
the Power Barges to convert such Fuel into electricity in
accordance with Part A of Article 7.53

It is a basic rule that obligations arising from a contract have

the force of law between the parties. Not being contrary to
law, morals, good customs, public order or public policy, the
parties to the contract are bound by its terms and
conditions.54

Time and again, the Supreme Court has stated that taxation is
the rule and exemption is the exception.55 The law does not
look with favor on tax exemptions and the entity that would
G.R. No. L-15334 January 31, 1964 The third tower examined is located along Kamias Road,
Quezon City. As in the first two towers given above, the
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY ground around the two legs of the third tower was excavated
TREASURER OF QUEZON CITY, petitioners, to a depth about two or three inches beyond the outside level
vs. of the steel bar foundation. It was found that there was no
MANILA ELECTRIC COMPANY, respondent. concrete foundation. Like the two previous ones, the bottom
arrangement of the legs thereof were found to be resting on
From the stipulation of facts and evidence adduced during the soft adobe, which, probably due to high humidity, looks like
hearing, the following appear: mud or clay. It was also found that the square metal frame
supporting the legs were not attached to any material or
foundation.
On October 20, 1902, the Philippine Commission enacted Act
No. 484 which authorized the Municipal Board of Manila to
grant a franchise to construct, maintain and operate an On November 15, 1955, petitioner City Assessor of Quezon
electric street railway and electric light, heat and power City declared the aforesaid steel towers for real property tax
system in the City of Manila and its suburbs to the person or under Tax declaration Nos. 31992 and 15549. After denying
persons making the most favorable bid. Charles M. Swift was respondent's petition to cancel these declarations, an
awarded the said franchise on March 1903, the terms and appeal was taken by respondent to the Board of Assessment
conditions of which were embodied in Ordinance No. 44 Appeals of Quezon City, which required respondent to pay
approved on March 24, 1903. Respondent Manila Electric Co. the amount of P11,651.86 as real property tax on the said
(Meralco for short), became the transferee and owner of the steel towers for the years 1952 to 1956. Respondent paid
franchise. the amount under protest, and filed a petition for review in
the Court of Tax Appeals (CTA for short) which rendered a
decision on December 29, 1958, ordering the cancellation of
Meralco's electric power is generated by its hydro-electric
the said tax declarations and the petitioner City Treasurer of
plant located at Botocan Falls, Laguna and is transmitted to
Quezon City to refund to the respondent the sum of
the City of Manila by means of electric transmission wires,
P11,651.86. The motion for reconsideration having been
running from the province of Laguna to the said City. These
denied, on April 22, 1959, the instant petition for review was
electric transmission wires which carry high voltage current,
filed.
are fastened to insulators attached on steel towers
constructed by respondent at intervals, from its hydro-electric
plant in the province of Laguna to the City of Manila. The In upholding the cause of respondents, the CTA held that: (1)
respondent Meralco has constructed 40 of these steel towers the steel towers come within the term "poles" which are
within Quezon City, on land belonging to it. A photograph of declared exempt from taxes under part II paragraph 9 of
one of these steel towers is attached to the petition for respondent's franchise; (2) the steel towers are personal
review, marked Annex A. Three steel towers were inspected properties and are not subject to real property tax; and (3)
by the lower court and parties and the following were the the City Treasurer of Quezon City is held responsible for the
descriptions given there of by said court: refund of the amount paid. These are assigned as errors by
the petitioner in the brief.
The first steel tower is located in South Tatalon, Espaa
Extension, Quezon City. The findings were as follows: the The tax exemption privilege of the petitioner is quoted
ground around one of the four posts was excavated to a hereunder:
depth of about eight (8) feet, with an opening of about one
(1) meter in diameter, decreased to about a quarter of a PAR 9. The grantee shall be liable to pay the same taxes upon
meter as it we deeper until it reached the bottom of the post; its real estate, buildings, plant (not including poles, wires,
at the bottom of the post were two parallel steel bars transformers, and insulators), machinery and personal
attached to the leg means of bolts; the tower proper was property as other persons are or may be hereafter required
attached to the leg three bolts; with two cross metals to by law to pay ... Said percentage shall be due and payable at
prevent mobility; there was no concrete foundation but there the time stated in paragraph nineteen of Part One
was adobe stone underneath; as the bottom of the excavation hereof, ... and shall be in lieu of all taxes and assessments of
was covered with water about three inches high, it could not whatsoever nature and by whatsoever authority upon the
be determined with certainty to whether said adobe stone privileges, earnings, income, franchise, and poles, wires,
was placed purposely or not, as the place abounds with this transformers, and insulators of the grantee from which taxes
kind of stone; and the tower carried five high voltage wires and assessments the grantee is hereby expressly exempted.
without cover or any insulating materials. (Par. 9, Part Two, Act No. 484 Respondent's Franchise;
emphasis supplied.)
The second tower inspected was located in Kamuning Road,
K-F, Quezon City, on land owned by the petitioner The word "pole" means "a long, comparatively slender usually
approximate more than one kilometer from the first tower. As cylindrical piece of wood or timber, as typically the stem of a
in the first tower, the ground around one of the four legs was small tree stripped of its branches; also by extension, a similar
excavate from seven to eight (8) feet deep and one and a half typically cylindrical piece or object of metal or the like". The
(1-) meters wide. There being very little water at the term also refers to "an upright standard to the top of which
bottom, it was seen that there was no concrete foundation, something is affixed or by which something is supported; as a
but there soft adobe beneath. The leg was likewise provided dovecote set on a pole; telegraph poles; a tent pole;
with two parallel steel bars bolted to a square metal frame sometimes, specifically a vessel's master (Webster's New
also bolted to each corner. Like the first one, the second International Dictionary 2nd Ed., p. 1907.) Along the streets,
tower is made up of metal rods joined together by means of in the City of Manila, may be seen cylindrical metal poles,
bolts, so that by unscrewing the bolts, the tower could be cubical concrete poles, and poles of the PLDT Co. which are
dismantled and reassembled. made of two steel bars joined together by an interlacing
metal rod. They are called "poles" notwithstanding the fact
that they are no made of wood. It must be noted from regardless of the size or material wire of its individual
paragraph 9, above quoted, that the concept of the "poles" members, any continuous series of structures intended and
for which exemption is granted, is not determined by their used solely or primarily for the purpose of supporting wires
place or location, nor by the character of the electric current carrying electric currents is a pole line (Inspiration
it carries, nor the material or form of which it is made, but the Consolidation Cooper Co. v. Bryan 252 P. 1016).
use to which they are dedicated. In accordance with the
definitions, pole is not restricted to a long cylindrical piece of It is evident, therefore, that the word "poles", as used in Act
wood or metal, but includes "upright standards to the top of No. 484 and incorporated in the petitioner's franchise, should
which something is affixed or by which something is not be given a restrictive and narrow interpretation, as to
supported. As heretofore described, respondent's steel defeat the very object for which the franchise was granted.
supports consists of a framework of four steel bars or strips The poles as contemplated thereon, should be understood
which are bound by steel cross-arms atop of which are cross- and taken as a part of the electric power system of the
arms supporting five high voltage transmission wires (See respondent Meralco, for the conveyance of electric current
Annex A) and their sole function is to support or carry such from the source thereof to its consumers. If the respondent
wires. would be required to employ "wooden poles", or "rounded
poles" as it used to do fifty years back, then one should admit
The conclusion of the CTA that the steel supports in question that the Philippines is one century behind the age of space. It
are embraced in the term "poles" is not a novelty. Several should also be conceded by now that steel towers, like the
courts of last resort in the United States have called these ones in question, for obvious reasons, can better effectuate
steel supports "steel towers", and they denominated these the purpose for which the respondent's franchise was
supports or towers, as electric poles. In their decisions the granted.
words "towers" and "poles" were used interchangeably, and it
is well understood in that jurisdiction that a transmission Granting for the purpose of argument that the steel
tower or pole means the same thing. supports or towers in question are not embraced within the
termpoles, the logical question posited is whether they
In a proceeding to condemn land for the use of electric power constitute real properties, so that they can be subject to a
wires, in which the law provided that wires shall be real property tax. The tax law does not provide for a
constructed upon suitable poles, this term was construed to definition of real property; but Article 415 of the Civil Code
mean either wood or metal poles and in view of the land does, by stating the following are immovable property:
being subject to overflow, and the necessary carrying of
numerous wires and the distance between poles, the statute (1) Land, buildings, roads, and constructions of all
was interpreted to include towers or poles. (Stemmons and kinds adhered to the soil;
Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and
Phrases, p. 365.) (3) Everything attached to an immovable in a fixed manner, in
such a way that it cannot be separated therefrom without
The term "poles" was also used to denominate the steel breaking the material or deterioration of the object;
supports or towers used by an association used to convey its
electric power furnished to subscribers and members, (5) Machinery, receptacles, instruments or implements
constructed for the purpose of fastening high voltage and intended by the owner of the tenement for an industry or
dangerous electric wires alongside public highways. The steel works which may be carried in a building or on a piece of
supports or towers were made of iron or other metals land, and which tends directly to meet the needs of the said
consisting of two pieces running from the ground up some industry or works;
thirty feet high, being wider at the bottom than at the top,
the said two metal pieces being connected with criss-cross
The steel towers or supports in question, do not come
iron running from the bottom to the top, constructed like
within the objects mentioned in paragraph 1, because they
ladders and loaded with high voltage electricity. In form and
do not constitute buildings or constructions adhered to the
structure, they are like the steel towers in question. (Salt River
soil. They are not construction analogous to buildings nor
Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
adhering to the soil. As per description, given by the lower
court, they are removable and merely attached to a square
The term "poles" was used to denote the steel towers of an metal frame by means of bolts, which when unscrewed
electric company engaged in the generation of hydro-electric could easily be dismantled and moved from place to place.
power generated from its plant to the Tower of Oxford and They can not be included under paragraph 3, as they are not
City of Waterbury. These steel towers are about 15 feet attached to an immovable in a fixed manner, and they can
square at the base and extended to a height of about 35 feet be separated without breaking the material or causing
to a point, and are embedded in the cement foundations sunk deterioration upon the object to which they are attached.
in the earth, the top of which extends above the surface of Each of these steel towers or supports consists of steel bars
the soil in the tower of Oxford, and to the towers are attached or metal strips, joined together by means of bolts, which can
insulators, arms, and other equipment capable of carrying be disassembled by unscrewing the bolts and reassembled
wires for the transmission of electric power (Connecticut Light by screwing the same. These steel towers or supports do not
and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1). also fall under paragraph 5, for they are not machineries,
receptacles, instruments or implements, and even if they
In a case, the defendant admitted that the structure on which were, they are not intended for industry or works on the
a certain person met his death was built for the purpose of land. Petitioner is not engaged in an industry or works in the
supporting a transmission wire used for carrying high-tension land in which the steel supports or towers are constructed.
electric power, but claimed that the steel towers on which it is
carried were so large that their wire took their structure out It is finally contended that the CTA erred in ordering the City
of the definition of a pole line. It was held that in defining the Treasurer of Quezon City to refund the sum of P11,651.86,
word pole, one should not be governed by the wire or despite the fact that Quezon City is not a party to the case. It
material of the support used, but was considering the danger is argued that as the City Treasurer is not the real party in
from any elevated wire carrying electric current, and that
interest, but Quezon City, which was not a party to the suit,
notwithstanding its capacity to sue and be sued, he should
not be ordered to effect the refund. This question has not
been raised in the court below, and, therefore, it cannot be
properly raised for the first time on appeal. The herein
petitioner is indulging in legal technicalities and niceties
which do not help him any; for factually, it was he (City
Treasurer) whom had insisted that respondent herein pay the
real estate taxes, which respondent paid under protest.
Having acted in his official capacity as City Treasurer of
Quezon City, he would surely know what to do, under the
circumstances.

IN VIEW HEREOF, the decision appealed from is hereby

affirmed, with costs against the petitioners.
G.R. No. 6295 September 1, 1911 1 That the court has no jurisdiction over the person of the
accused nor of the offense charged because the accused has
THE UNITED STATES, plaintiff-appellee, not been accorded a preliminary investigation or examination
vs. as required by law and no court, magistrate, or other
IGNACIO CARLOS, defendant-appellant. competent authority has determined from a sworn complaint
or evidence adduced that there is probable cause to believe
PER CURIAM: that a crime has been committed, or that this defendant has
committed any crime.
The information filed in this case is as follows:
2 That the facts charged do not constitute a public offense.
The undersigned accuses Ignacio Carlos of the crime of theft,
committed as follows: The demurrer was overruled on the same day and the
defendant having refused to plead, a plea of not guilty was
entered by direction of the court for him and the trial
That on, during, and between the 13th day of February, 1909,
proceeded.
and the 3d day of March, 1910, in the city of Manila,
Philippine Islands, the said Ignacio Carlos, with intent of gain
and without violence or intimidation against the person or After due consideration of all the proofs presented and the
force against the thing, did then and there, willfully, arguments of counsel the trial court found the defendant
unlawfully, and feloniously, take, steal , and carry away two guilty of the crime charged and sentenced him to one year
thousand two hundred and seventy-three (2,273) kilowatts of eight months and twenty-one days' presidio correccional, to
electric current, of the value of nine hundred and nine (909) indemnify the offended party, The Manila Electric Railroad
pesos and twenty (20) cents Philippine currency, the property and Light Company, in the sum of P865.26, to the
of the Manila Electric Railroad and Light Company, a corresponding subsidiary imprisonment in case of insolvency
corporation doing business in the Philippine Islands, without and to the payment of the costs. From this judgment the
the consent of the owner thereof; to the damage and defendant appealed and makes the following assignments of
prejudice of the said Manila Electric Railroad and Light error:
Company in the said sum of nine hundred and nine (909)
pesos and twenty (20) cents Philippine currency, equal to and I.
equivalent of 4,546 pesetas Philippine currency. All contrary
to law. The court erred in overruling the objection of the accused to
the jurisdiction of the court, because he was not given a
(Sgd.) L. M. SOUTWORTH, preliminary investigation as required by law, and in overruling
Prosecuting Attorney. his demurrer for the same reason.

Subscribed and sworn to before me this 4th day of March, II.The court erred in declaring the accused to be guilty, in view
1910, in the city of Manila, Philippine Islands, by L. M. of the evidence submitted.
Southworth, prosecuting attorney for the city of Manila.
III. The court erred in declaring that electrical energy may be
(Sgd.) CHARLES S. LOBINGIER, stolen.
Judge, First Instance.
IV. The court erred in not declaring that the plaintiff
A preliminary investigation has heretofore been conducted in consented to the taking of the current.
this case, under my direction, having examined the witness
under oath, in accordance with the provisions of section 39 of V. The court erred in finding the accused guilty of more than
Act No. 183 of the Philippine Commission, as amended by one offense.
section 2 of Act No. 612 of the Philippine Commission.
VI. The court erred in condemning the accused to pay P865.26
(Sgd) L. M. SOUTHWORTH, to the electric company as damages.
Prosecuting Attorney.
Exactly the same question as that raised in the first
Subscribed and sworn to before me this 4th day of March, assignment of error, was after a through examination and due
1910, in the city of Manila, Philippine Islands, by L. M. consideration, decided adversely to appellant's contention in
Southworth, prosecuting attorney for the city of Manila. the case of U. S. vs. Grant and Kennedy (18 Phil. Rep., 122).
No sufficient reason is presented why we should not follow
(Sgd.) CHARLES LOBINGIER, the doctrine enunciated in that case.
Judge, First Instance.
The question raised in the second assignment of error is
A warrant for the arrest of the defendant was issued by the purely one fact. Upon this point the trial court said:
Honorable J. C. Jenkins on the 4th of March and placed in the
hands of the sheriff. The sheriff's return shows that the For considerably more than a year previous to the filing of this
defendant gave bond for his appearance. On the 14th of the complaint the accused had been a consumer of electricity
same month counsel for the defendant demurrer to the furnished by the Manila Electric Railroad and Light Company
complaint on the following grounds: for a building containing the residence of the accused and
three other residences, and which was equipped, according to
the defendant's testimony, with thirty electric lights. On
March 15, 1909, the representatives of the company, There is, however, one witness whom so far as appears, has
believing that more light was being used than their meter no interest in the matter whatsoever. This is officer
showed, installed an additional meter (Exhibit A) on a pole Hartpence, who executed the search warrant. He testifies that
outside of defendant's house, and both it and the meter after inspecting other articles and places in the building as he
(Exhibit B) which had been previously installed in the house and the other spectators, including the accused, approached
were read on said date. Exhibit A read 218 kilowatt hours; the cabinet in which the "jumper" was found, the officer's
Exhibit B, 745 kilowatt hours. On March 3, 1910 each was attention was called to the defendant's appearance and the
read again, Exhibit A showing 2,718 kilowatt hours and Exhibit former noticed that the latter was becoming nervous. Where
B, 968. It is undisputed that the current which supplied the the only two witnesses who are supposed to know anything
house passed through both meters and the city electrician of the matter thus contradict each other this item of
testifies that each meter was tested on the date of the last testimony by the officer is of more than ordinary significance;
reading and was "in good condition." The result of this for if, as the accused claims, the "jumper" was placed in the
registration therefore is that while the outsider meter (Exhibit cabinet for the first time by Porter there would be no
A) showed a consumption in defendant's building of 2,500 occasion for any change of demeanor on the part of the
kilowatt hours of electricity, this inside meter (Exhibit B) accused. We do not think that the officer's declination to wait
showed but 223 kilowatt hours. In other words the actual until defendant should secure a notary public shows bias. The
consumption, according to the outside meter, was more than presence of such an official was neither required nor
ten times as great as that registered by the one inside. authorized by law and the very efficacy of a search depends
Obviously this difference could not be due to normal causes, upon its swiftness.
for while the electrician called by the defense (Lanusa)
testifies to the possibility of a difference between two such We must also agree with the prosecuting attorney that the
meters, he places the extreme limit of such difference attending circumstances do not strengthen the story told by
between them 5 per cent. Here, as we have seen, the the boy; that the latter would have been likely to call out at
difference is more than 900 per cent. Besides, according to the time he saw the "jumper" being placed in the drawer, or
the defendant's electrician, the outside meter should at least directed his father's attention to it immediately
normally run faster, while according to the test made in this instead of waiting, as he says, until the latter was called by the
case the inside meter (Exhibit B) ran the faster. The city officer. Finally, to accept the boy's story we must believe that
electrician also testifies that the electric current could have this company or its representatives deliberately conspired not
been deflected from the inside meter by placing thereon a merely to lure the defendant into the commission of a crime
device known as a "jumper" connecting the two outside but to fasten upon him a crime which he did not commit and
wires, and there is other testimony that there were marks on thus convict an innocent man by perjured evidence. This is a
the insulation of the meter Exhibit B which showed the use of much more serious charge than that contained in the
such a device. There is a further evidence that the complaint and should be supported by very strong
consumption of 223 kilowatt hours, registered by the inside corroborating circumstances which we do not find here. We
meter would not be a reasonable amount for the number of are, accordingly, unable to consider as satisfactory
lights installed in defendant's building during the period in defendant's explanation of the "jumper's" presence.
question, and the accused fails to explain why he should have
had thirty lights installed if he needed but four or five. The only alternative is the conclusion that the "jumper" was
placed there by the accused or by some one acting for him
On the strength of this showing a search warrant was issued and that it was the instrument by which the current was
for the examination of defendant's premises and was duly deflected from the matter Exhibit B and the Light Company
served by a police officer (Hartpence). He was accompanied deprived of its lawful compensation.
at the time by three employees of the Manila Electric Railroad
and Light Company, and he found there the accused, his wife After a careful examination of the entire record we are
and son, and perhaps one or two others. There is a sharp satisfied beyond peradventure of a doubt that the proofs
conflict between the several spectators on some points but presented fully support the facts as set forth in the foregoing
on one there is no dispute. All agree that the "jumper" finding.
(Exhibit C) was found in a drawer of a small cabinet in the
room of defendant's house where the meter was installed
Counsel for the appellant insists that the only corporeal
and not more than 20 feet therefrom. In the absence of a
property can be the subject of the crime of larceny, and in
satisfactory explanation this constituted possession on
the support of this proposition cites several authorities for
defendant's part, and such possession, under the Code of Civil
the purpose of showing that the only subjects of larceny are
Procedure, section 334 (10), raises the presumption that the
tangible, movable, chattels, something which could be taken
accused was the owner of a device whose only use was to
in possession and carried away, and which had some,
deflect the current from the meter.
although trifling, intrinsic value, and also to show that
electricity is an unknown force and can not be a subject of
Is there any other "satisfactory explanation" of the "jumper's" larceny.
presence? The only one sought to be offered is the statement
by the son of the accused, a boy of twelve years, that he saw
In the U. S. vs. Genato (15 Phi. Rep., 170) the defendant, the
the "jumper" placed there by the witness Porter, an employee
owner of the store situated at No. 154 Escolta, Manila, was
of the Light Company. The boy is the only witness who so
using a contrivance known as a "jumper" on the electric
testifies and Porter himself squarely denies it. We can not
meter installed by the Manila Electric Railroad and the Light
agree with counsel for the defense that the boy's interest in
Company. As a result of the use of this "jumper" the meter,
the outcome of this case is less than that of the witness for
instead of making one revolution in every four seconds,
the prosecution. It seems to us that his natural desire to
registered one in seventy-seven seconds, thereby reducing
shield his father would far outweight any interest such an
the current approximately 95 per cent. Genato was charged in
employee like Porter would have and which, at most, would
the municipal court with a violation of a certain ordinance of
be merely pecuniary.
the city of Manila, and was sentenced to pay a fine of P200.
He appealed to the Court of First Instance, was again tried
and sentenced to pay the same fine. An appeal was taken
from the judgment of the Court of First Instance to the committed by the trial court in holding that electricity is a
Supreme Court on the ground that the ordinance in question subject of larceny.
was null and void. It is true that the only question directly
presented was of the validity of the city ordinance. The court, It is urged in support of the fourth assignment of error that if
after holding that said ordinance was valid, said: it be true that the appellant did appropriate to his own use
the electricity as charged he can not be held guilty of larceny
Even without them (ordinances), the right of ownership of for any part of the electricity thus appropriated, after the first
electric current is secured by articles 517 and 518 of the month, for the reason that the complaining party, the Manila
Penal Code; the application of these articles in case of Electric Road and Light Company, knew of this
subtraction of gas, a fluid used for lighting, and in some misappropriation and consented thereto.
respects resembling electricity, is confirmed by the rule laid
down in the decisions of the supreme court of Spain January The outside meter was installed on March 15, 1909, and read
20, 1887, and April 1, 1897, construing and enforcing the 218 kilowatt hours. On the same day the inside meter was
provisions of articles 530 and 531 of the penal code of that read and showed 745 kilowatt hours. Both meters were again
country, articles identical with articles 517 and 518 of the read on March 3, 1910, and the outside one showed 2,718
code in force in these Islands. kilowatt hours while the one on the inside only showed 968,
the difference in consumption during this time being 2,277
Article 517 of the Penal Code above referred to reads as kilowatt hours. The taking of this current continued over a
follows: period of one year, less twelve days. Assuming that the
company read both meters at the end of each month; that it
The following are guilty of larceny: knew the defendant was misappropriating the current to that
extent; and that t continued to furnish the current, thereby
(1) Those who with intent of gain and without violence or giving the defendant an opportunity to continue the
intimidation against the person, or force against things, shall misppropriation, still, we think, that the defendant is
take another's personal property without the owner's criminally responsible for the taking of the whole amount,
consent. 2,277 kilowatt hours. The company had a contract with the
defendant to furnish him with current for lighting purposes. It
could not stop the misappropriation without cutting off the
And article 518 fixes the penalty for larceny in proportion to
current entirely. It could not reduce the current so as to just
the value of the personal property stolen.
furnish sufficient for the lighting of two, three, or five lights,
as claimed by the defendant that he used during the most of
It is true that electricity is no longer, as formerly, regarded this time, but the current must always be sufficiently strong to
by electricians as a fluid, but its manifestation and effects, furnish current for the thirty lights, at any time the defendant
like those of gas, may be seen and felt. The true test of what desired to use them.
is a proper subject of larceny seems to be not whether the
subject is corporeal, but whether it is capable of
There is no pretense that the accused was solicited by the
appropriation by another than the owner.
company or any one else to commit the acts charged. At most
there was a mere passive submission on the part of the
It is well-settled that illuminating gas may be the subject of
company that the current should be taken and no indication
larceny, even in the absence of a statute so providing. that it wished it to be taken, and no knowledge by the
(Decisions of supreme court of Spain, January 20, 1887, and defendant that the company wished him to take the current,
April 1, 1897, supra; also (England) Queen vs. Firth, L. R. 1 C. and no mutual understanding between the company and the
C., 172, 11 Cox C. C., 234; Queen vs. White, 3 C. & K., 363, 6 defendant, and no measures of inducement of any kind were
Cox C. C., 213; Woods vs. People, 222 III., 293, 7 L. R. A., 520; employed by the company for the purpose of leading the
Commonwealth vs. Shaw, 4 Allen (Mass), 308; defendant into temptation, and no preconcert whatever
State vs. Wellman, 34 Minn., 221, N. W. Rep., 385, and 25 between him and company. The original design to
Cyc., p. 12, note 10.) misappropriate this current was formed by the defendant
absolutely independent of any acts on the part of the
In the case of Commonwealth vs. Shaw, supra, the court, company or its agents. It is true, no doubt, as a general
speaking through Chief Justice Bigelow, said: proposition, that larceny is not committed when the property
is taken with the consent of its owner. It may be difficult in
There is nothing in the nature of gas used for illuminating some instances to determine whether certain acts constitute,
purposes which renders it incapable of being feloniously in law, such "consent." But under the facts in the case at bar it
taken and carried away. It is a valuable article of is not difficult to reach a conclusion that the acts performed
merchandise, bought and sold like other personal property, by the plaintiff company did not constitute a consent on its
susceptible of being severed from a mass or larger quantity, part the defendant take its property. We have been unable to
and of being transported from place to place. In the present find a well considered case holding contrary opinion under
case it appears that it was the property of the Boston Gas similar facts, but, there are numerous cases holding that such
Light Company; that it was in their possession by being acts do not constitute such consent as would relieve the taker
confined in conduits and tubes which belonged to them, and of criminal responsibility. The fourth assignment of error is,
that the defendant severed a portion of that which was in therefore, not well founded.
the pipes of the company by taking it into her house and
there consuming it. All this being proved to have been done It is also contended that since the "jumper" was not used
by her secretly and with intent to deprive the company of continuously, the defendant committed not a single offense
their property and to appropriate it to her own use, clearly but a series of offenses. It is, no doubt, true that the
constitutes the crime of larceny. defendant did not allow the "jumper" to remain in place
continuously for any number of days as the company
Electricity, the same as gas, is a valuable article of inspected monthly the inside meter. So the "jumper" was put
merchandise, bought and sold like other personal property on and taken off at least monthly, if not daily, in order to avoid
and is capable of appropriation by another. So no error was detection, and while the "jumper" was off the defendant was
not misappropriating the current. The complaint alleged that total of the penalties imposed might have been very much
the defendant did on, during, and between the 13th day of greater than that imposed by the court in this case. The
February, 1909, and the 3d of March, 1910. willfully, covering of the entire period by one charge has been
unlawfully, and feloniously take, steal, and carry away 2,277 beneficial, if anything, and not prejudicial to the rights of the
kilowatts of electric current of the value of P909. No defendant. The prosecuting attorney elected to cover the
demurrer was presented against this complaint on the ground entire period with one charge and the accused having been
that more than one crime was charged. The Government had convicted for this offense, he can not again be prosecuted for
no opportunity to amend or correct this error, if error at all. In the stealing of the current at any time within that period.
the case of U. S. vs. Macaspac (12 Phil. Rep., 26), the Then, again, we are of the opinion that the charge was
defendant received from one Joquina Punu the sum of properly laid. The electricity was stolen from the same
P31.50, with the request to deliver it to Marcelina Dy-Oco. person, in the same manner, and in the same place. It was
The defendant called upon Marcelina, but instead of substantially one continuous act, although the "jumper"
delivering the said amount she asked Marcelina for P30 in the might have been removed and replaced daily or monthly. The
name of Joaquina who had in no way authorized her to do so. defendant was moved by one impulse to appropriate to his
Marcelina gave her P30, believing that Joaquina had sent for own use the current, and the means adopted by him for the
it. Counsel for the defendant insisted that the complaint taking of the current were in the execution of a general
charged his client with two different crimes of estafa in fraudulent plan.
violation of section 11 of General Orders, No. 58. In disposing
of this question this court said: A person stole gas for the use of a manufactory by means of
pipe, which drew off the gas from the main without allowing
The said defect constitutes one of the dilatory pleas indicated it to pass through the meter. The gas from this pipe was burnt
by section 21, and the accused ought to have raised the point every day, and turned off at night. The pipe was never closed
before the trial began. Had this been done, the complaint at this junction with the main, and consequently always
might have been amended in time, because it is merely a remained full of gas. It was held, that if the pipe always
defect of form easily remedied. . . . Inasmuch as in the first remained full, there was, in fact, a continuous taking of the
instance the accused did not make the corresponding dilatory gas and not a series of separate talkings. It was held also that
plea to the irregularity of the complaint, it must be even if the pipe had not been kept full, the taking would have
understood that has waived such objection, and is not now been continuous, as it was substantially all one transaction.
entitled to raise for the first time any question in reference (Regina vs. Firth, L. R., 1 C. C., 172; 11 Cox C. C., 234. Cited on
thereto when submitting to this court her assignment of p. 758 of Wharton's Criminal Law, vol. 1, 10th ed.)
errors. Apart from the fact that the defense does not pretend
that any of the essential rights of the accused have been The value of the electricity taken by the defendant was found
injured, the allegation of the defect above alluded to, which in by the trial court to be P865.26. This finding is fully in
any case would only affect form of the complaint, can not accordance with the evidence presented. So no error was
justify a reversal of the judgment appealed from, according to committed in sentencing the defendant to indemnify the
the provisions of section 10 of General Orders, No. 58. company in this amount, or to suffer the corresponding
subsidiary imprisonment in case of insolvency.
In the case at bar it is not pointed out wherein any of the
essential rights of the defendant have been prejudiced by The judgment being strictly in accordance with the law and
reason of the fact that the complaint covered the entire the merits of the case, same is hereby affirmed, with costs
period. If twelve distinct and separate complaints had been against the appellant.
filed against the defendant, one for each month, the sum
G.R. No. 155076 February 27, 2006 PLDT asserts that Baynet conducts its ISR activities by utilizing
an IPL to course its incoming international long distance calls
LUIS MARCOS P. LAUREL, Petitioner, from Japan. The IPL is linked to switching equipment, which is
vs. then connected to PLDT telephone lines/numbers and
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional equipment, with Baynet as subscriber. Through the use of the
Trial Court, Makati City, Branch 150, PEOPLE OF THE telephone lines and other auxiliary equipment, Baynet is able
PHILIPPINES& PHILIPPINE LONG DISTANCE TELEPHONE to connect an international long distance call from Japan to
COMPANY, Respondents. any part of the Philippines, and make it appear as a call
originating from Metro Manila. Consequently, the operator of
Before us is a Petition for Review on Certiorari of the an ISR is able to evade payment of access, termination or
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. bypass charges and accounting rates, as well as compliance
68841 affirming the Order issued by Judge Zeus C. Abrogar, with the regulatory requirements of the NTC. Thus, the ISR
Regional Trial Court (RTC), Makati City, Branch 150, which operator offers international telecommunication services at a
denied the "Motion to Quash (With Motion to Defer lower rate, to the damage and prejudice of legitimate
Arraignment)" in Criminal Case No. 99-2425 for theft. operators like PLDT.6

Philippine Long Distance Telephone Company (PLDT) is the PLDT pointed out that Baynet utilized the following
holder of a legislative franchise to render local and equipment for its ISR activities: lines, cables, and antennas or
international telecommunication services under Republic Act equipment or device capable of transmitting air waves or
No. 7082.2 Under said law, PLDT is authorized to establish, frequency, such as an IPL and telephone lines and equipment;
operate, manage, lease, maintain and purchase computers or any equipment or device capable of accepting
telecommunication systems, including transmitting, receiving information applying the prescribed process of the
and switching stations, for both domestic and international information and supplying the result of this process; modems
calls. For this purpose, it has installed an estimated 1.7 million or any equipment or device that enables a data terminal
telephone lines nationwide. PLDT also offers other services as equipment such as computers to communicate with other
authorized by Certificates of Public Convenience and data terminal equipment via a telephone line; multiplexers or
Necessity (CPCN) duly issued by the National any equipment or device that enables two or more signals
Telecommunications Commission (NTC), and operates and from different sources to pass through a common cable or
maintains an International Gateway Facility (IGF). The PLDT transmission line; switching equipment, or equipment or
network is thus principally composed of the Public Switch device capable of connecting telephone lines; and software,
Telephone Network (PSTN), telephone handsets and/or diskettes, tapes or equipment or device used for recording
telecommunications equipment used by its subscribers, the and storing information.7
wires and cables linking said telephone handsets and/or
telecommunications equipment, antenna, the IGF, and other PLDT also discovered that Baynet subscribed to a total of 123
telecommunications equipment which provide PLDT telephone lines/numbers.8 Based on the Traffic Study
interconnections.3 1avvphil.net conducted on the volume of calls passing through Baynets
ISR network which bypass the IGF toll center, PLDT incurred
PLDT alleges that one of the alternative calling patterns that an estimated monthly loss of P10,185,325.96. 9 Records at the
constitute network fraud and violate its network integrity is Securities and Exchange Commission (SEC) also revealed that
that which is known as International Simple Resale (ISR). ISR is Baynet was not authorized to provide international or
a method of routing and completing international long domestic long distance telephone service in the country. The
distance calls using International Private Leased Lines (IPL), following are its officers: Yuji Hijioka, a Japanese national
cables, antenna or air wave or frequency, which connect (chairman of the board of directors); Gina C. Mukaida, a
directly to the local or domestic exchange facilities of the Filipina (board member and president); Luis Marcos P. Laurel,
terminating country (the country where the call is destined). a Filipino (board member and corporate secretary); Ricky
The IPL is linked to switching equipment which is connected Chan Pe, a Filipino (board member and treasurer); and
to a PLDT telephone line/number. In the process, the calls Yasushi Ueshima, also a Japanese national (board member).
bypass the IGF found at the terminating country, or in some
instances, even those from the originating country. 4 Upon complaint of PLDT against Baynet for network fraud,
and on the strength of two search warrants 10 issued by the
One such alternative calling service is that offered by Baynet RTC of Makati, Branch 147, National Bureau of Investigation
Co., Ltd. (Baynet) which sells "Bay Super Orient Card" phone (NBI) agents searched its office at the 7th Floor, SJG Building,
cards to people who call their friends and relatives in the Kalayaan Avenue, Makati City on November 8, 1999. Atsushi
Philippines. With said card, one is entitled to a 27-minute call Matsuura, Nobuyoshi Miyake, Edourd D. Lacson and Rolando
to the Philippines for about 37.03 per minute. After dialing J. Villegas were arrested by NBI agents while in the act of
the ISR access number indicated in the phone card, the ISR manning the operations of Baynet. Seized in the premises
operator requests the subscriber to give the PIN number also during the search were numerous equipment and devices
indicated in the phone card. Once the callers identity (as used in its ISR activities, such as multiplexers, modems,
purchaser of the phone card) is confirmed, the ISR operator computer monitors, CPUs, antenna, assorted computer
will then provide a Philippine local line to the requesting peripheral cords and microprocessors, cables/wires, assorted
caller via the IPL. According to PLDT, calls made through the PLDT statement of accounts, parabolic antennae and voltage
IPL never pass the toll center of IGF operators in the regulators.
Philippines. Using the local line, the Baynet card user is able
to place a call to any point in the Philippines, provided the State Prosecutor Ofelia L. Calo conducted an inquest
local line is National Direct Dial (NDD) capable.5 investigation and issued a Resolution 11 on January 28, 2000,
finding probable cause for theft under Article 308 of the
Revised Penal Code and Presidential Decree No. 401 12against
the respondents therein, including Laurel.
On February 8, 2000, State Prosecutor Calo filed an pass through the same, and ultimately to the called partys
Information with the RTC of Makati City charging Matsuura, number. It averred that such service/facility is akin to
Miyake, Lacson and Villegas with theft under Article 308 of electricity which, although an intangible property, may,
the Revised Penal Code. After conducting the requisite nevertheless, be appropriated and be the subject of theft.
preliminary investigation, the State Prosecutor filed an Such service over a period of time for a consideration is the
Amended Information impleading Laurel (a partner in the law business that PLDT provides to its customers, which enables
firm of Ingles, Laurel, Salinas, and, until November 19, 1999, a the latter to send various messages to installed recipients.
member of the board of directors and corporate secretary of The service rendered by PLDT is akin to merchandise which
Baynet), and the other members of the board of directors of has specific value, and therefore, capable of appropriation by
said corporation, namely, Yuji Hijioka, Yasushi Ueshima, another, as in this case, through the ISR operations conducted
Mukaida, Lacson and Villegas, as accused for theft under by the movant and his co-accused.
Article 308 of the Revised Penal Code. The inculpatory portion
of the Amended Information reads: The prosecution further alleged that "international business
calls and revenues constitute personal property envisaged in
On or about September 10-19, 1999, or prior thereto, in Article 308 of the Revised Penal Code." Moreover, the
Makati City, and within the jurisdiction of this Honorable intangible telephone services/facilities belong to PLDT and
Court, the accused, conspiring and confederating together not to the movant and the other accused, because they have
and all of them mutually helping and aiding one another, with no telephone services and facilities of their own duly
intent to gain and without the knowledge and consent of the authorized by the NTC; thus, the taking by the movant and his
Philippine Long Distance Telephone (PLDT), did then and co-accused of PLDT services was with intent to gain and
there willfully, unlawfully and feloniously take, steal and use without the latters consent.
the international long distance calls belonging to PLDT by
conducting International Simple Resale (ISR), which is a The prosecution pointed out that the accused, as well as the
method of routing and completing international long distance movant, were paid in exchange for their illegal appropriation
calls using lines, cables, antennae, and/or air wave frequency and use of PLDTs telephone services and facilities; on the
which connect directly to the local or domestic exchange other hand, the accused did not pay a single centavo for their
facilities of the country where the call is destined, effectively illegal ISR operations. Thus, the acts of the accused were akin
stealing this business from PLDT while using its facilities in the to the use of a "jumper" by a consumer to deflect the current
estimated amount of P20,370,651.92 to the damage and from the house electric meter, thereby enabling one to steal
prejudice of PLDT, in the said amount. electricity. The prosecution emphasized that its position is
fortified by the Resolutions of the Department of Justice in
CONTRARY TO LAW.13 PLDT v. Tiongson, et al. (I.S. No. 97-0925) and in PAOCTF-PLDT
v. Elton John Tuason, et al. (I.S. No. 2000-370) which were
Accused Laurel filed a "Motion to Quash (with Motion to issued on August 14, 2000 finding probable cause for theft
Defer Arraignment)" on the ground that the factual against the respondents therein.
allegations in the Amended Information do not constitute the
felony of theft under Article 308 of the Revised Penal Code. On September 14, 2001, the RTC issued an Order16 denying
He averred that the Revised Penal Code, or any other special the Motion to Quash the Amended Information. The court
penal law for that matter, does not prohibit ISR operations. He declared that, although there is no law that expressly
claimed that telephone calls with the use of PLDT telephone prohibits the use of ISR, the facts alleged in the Amended
lines, whether domestic or international, belong to the Information "will show how the alleged crime was committed
persons making the call, not to PLDT. He argued that the caller by conducting ISR," to the damage and prejudice of PLDT.
merely uses the facilities of PLDT, and what the latter owns
are the telecommunication infrastructures or facilities Laurel filed a Motion for Reconsideration 17 of the Order,
through which the call is made. He also asserted that PLDT is alleging that international long distance calls are not personal
compensated for the callers use of its facilities by way of property, and are not capable of appropriation. He
rental; for an outgoing overseas call, PLDT charges the caller maintained that business or revenue is not considered
per minute, based on the duration of the call. Thus, no personal property, and that the prosecution failed to adduce
personal property was stolen from PLDT. According to Laurel, proof of its existence and the subsequent loss of personal
the P20,370,651.92 stated in the Information, if anything, property belonging to another. Citing the ruling of the Court
represents the rental for the use of PLDT facilities, and not the in United States v. De Guzman, 18 Laurel averred that the case
value of anything owned by it. Finally, he averred that the is not one with telephone calls which originate with a
allegations in the Amended Information are already particular caller and terminates with the called party. He
subsumed under the Information for violation of Presidential insisted that telephone calls are considered privileged
Decree (P.D.) No. 401 filed and pending in the Metropolitan communications under the Constitution and cannot be
Trial Court of Makati City, docketed as Criminal Case No. considered as "the property of PLDT." He further argued that
276766. there is no kinship between telephone calls and electricity or
gas, as the latter are forms of energy which are generated and
The prosecution, through private complainant PLDT, opposed consumable, and may be considered as personal property
the motion,14 contending that the movant unlawfully took because of such characteristic. On the other hand, the
personal property belonging to it, as follows: 1) intangible movant argued, the telephone business is not a form of
telephone services that are being offered by PLDT and other energy but is an activity.
telecommunication companies, i.e., the connection and
interconnection to their telephone lines/facilities; 2) the use In its Order19 dated December 11, 2001, the RTC denied the
of those facilities over a period of time; and 3) the revenues movants Motion for Reconsideration. This time, it ruled that
derived in connection with the rendition of such services and what was stolen from PLDT was its "business" because, as
the use of such facilities.15 alleged in the Amended Information, the international long
distance calls made through the facilities of PLDT formed part
The prosecution asserted that the use of PLDTs intangible of its business. The RTC noted that the movant was charged
telephone services/facilities allows electronic voice signals to with stealing the business of PLDT. To support its ruling, it
cited Strochecker v. Ramirez,20where the Court ruled that law."26 Thus, Laurel concluded, "there is no crime if there is no
interest in business is personal property capable of law punishing the crime."
appropriation. It further declared that, through their ISR
operations, the movant and his co-accused deprived PLDT of On August 30, 2002, the CA rendered judgment dismissing
fees for international long distance calls, and that the ISR the petition.27 The appellate court ruled that a petition for
used by the movant and his co-accused was no different from certiorari under Rule 65 of the Rules of Court was not the
the "jumper" used for stealing electricity. proper remedy of the petitioner. On the merits of the
petition, it held that while business is generally an activity
Laurel then filed a Petition for Certiorari with the CA, assailing which is abstract and intangible in form, it is nevertheless
the Order of the RTC. He alleged that the respondent judge considered "property" under Article 308 of the Revised Penal
gravely abused his discretion in denying his Motion to Quash Code. The CA opined that PLDTs business of providing
the Amended Information.21 As gleaned from the material international calls is personal property which may be the
averments of the amended information, he was charged with object of theft, and cited United States v. Carlos 28 to support
stealing the international long distance calls belonging to such conclusion. The tribunal also cited Strochecker v.
PLDT, not its business. Moreover, the RTC failed to distinguish Ramirez,29 where this Court ruled that one-half interest in a
between the business of PLDT (providing services for days business is personal property under Section 2 of Act No.
international long distance calls) and the revenues derived 3952, otherwise known as the Bulk Sales Law. The appellate
therefrom. He opined that a "business" or its revenues cannot court held that the operations of the ISR are not subsumed in
be considered as personal property under Article 308 of the the charge for violation of P.D. No. 401.
Revised Penal Code, since a "business" is "(1) a commercial or
mercantile activity customarily engaged in as a means of Laurel, now the petitioner, assails the decision of the CA,
livelihood and typically involving some independence of contending that -
judgment and power of decision; (2) a commercial or
industrial enterprise; and (3) refers to transactions, dealings THE COURT OF APPEALS ERRED IN RULING THAT THE
or intercourse of any nature." On the other hand, the term PERSONAL PROPERTY ALLEGEDLY STOLEN PER THE
"revenue" is defined as "the income that comes back from an INFORMATION IS NOT THE "INTERNATIONAL LONG DISTANCE
investment (as in real or personal property); the annual or CALLS" BUT THE "BUSINESS OF PLDT."
periodical rents, profits, interests, or issues of any species of
real or personal property."22
THE COURT OF APPEALS ERRED IN RULING THAT THE TERM
"BUSINESS" IS PERSONAL PROPERTY WITHIN THE MEANING
Laurel further posited that an electric companys business is OF ART. 308 OF THE REVISED PENAL CODE.30
the production and distribution of electricity; a gas companys
business is the production and/or distribution of gas (as fuel);
Petitioner avers that the petition for a writ of certiorari may
while a water companys business is the production and
be filed to nullify an interlocutory order of the trial court
distribution of potable water. He argued that the "business" in
which was issued with grave abuse of discretion amounting to
all these cases is the commercial activity, while the goods and
excess or lack of jurisdiction. In support of his petition before
merchandise are the products of such activity. Thus, in
the Court, he reiterates the arguments in his pleadings filed
prosecutions for theft of certain forms of energy, it is the
before the CA. He further claims that while the right to carry
electricity or gas which is alleged to be stolen and not the
on a business or an interest or participation in business is
"business" of providing electricity or gas. However, since a
considered property under the New Civil Code, the term
telephone company does not produce any energy, goods or
"business," however, is not. He asserts that the Philippine
merchandise and merely renders a service or, in the words of
Legislature, which approved the Revised Penal Code way back
PLDT, "the connection and interconnection to their telephone
in January 1, 1932, could not have contemplated to include
lines/facilities," such service cannot be the subject of theft as
international long distance calls and "business" as personal
defined in Article 308 of the Revised Penal Code.23
property under Article 308 thereof.

He further declared that to categorize "business" as personal

In its comment on the petition, the Office of the Solicitor
property under Article 308 of the Revised Penal Code would
General (OSG) maintains that the amended information
lead to absurd consequences; in prosecutions for theft of gas,
clearly states all the essential elements of the crime of theft.
electricity or water, it would then be permissible to allege in
Petitioners interpretation as to whether an "international
the Information that it is the gas business, the electric
long distance call" is personal property under the law is
business or the water business which has been stolen, and no
inconsequential, as a reading of the amended information
longer the merchandise produced by such enterprise.24
readily reveals that specific acts and circumstances were
alleged charging Baynet, through its officers, including
Laurel further cited the Resolution of the Secretary of Justice petitioner, of feloniously taking, stealing and illegally using
in Piltel v. Mendoza,25 where it was ruled that the Revised international long distance calls belonging to respondent
Penal Code, legislated as it was before present technological PLDT by conducting ISR operations, thus, "routing and
advances were even conceived, is not adequate to address completing international long distance calls using lines,
the novel means of "stealing" airwaves or airtime. In said cables, antenna and/or airwave frequency which connect
resolution, it was noted that the inadequacy prompted the directly to the local or domestic exchange facilities of the
filing of Senate Bill 2379 (sic) entitled "The Anti- country where the call is destined." The OSG maintains that
Telecommunications Fraud of 1997" to deter cloning of the international long distance calls alleged in the amended
cellular phones and other forms of communications fraud. information should be construed to mean "business" of PLDT,
The said bill "aims to protect in number (ESN) (sic) or which, while abstract and intangible in form, is personal
Capcode, mobile identification number (MIN), electronic- property susceptible of appropriation.31 The OSG avers that
international mobile equipment identity (EMEI/IMEI), or what was stolen by petitioner and his co-accused is the
subscriber identity module" and "any attempt to duplicate the business of PLDT providing international long distance calls
data on another cellular phone without the consent of a which, though intangible, is personal property of the PLDT.32
public telecommunications entity would be punishable by
For its part, respondent PLDT asserts that personal property Nonetheless, the settled rule is that a writ of certiorari may
under Article 308 of the Revised Penal Code comprehends be granted in cases where, despite availability of appeal after
intangible property such as electricity and gas which are trial, there is at least a prima facie showing on the face of the
valuable articles for merchandise, brought and sold like other petition and its annexes that: (a) the trial court issued the
personal property, and are capable of appropriation. It insists order with grave abuse of discretion amounting to lack of or
that the business of international calls and revenues in excess of jurisdiction; (b) appeal would not prove to be a
constitute personal property because the same are valuable speedy and adequate remedy; (c) where the order is a patent
articles of merchandise. The respondent reiterates that nullity; (d) the decision in the present case will arrest future
international calls involve (a) the intangible telephone litigations; and (e) for certain considerations such as public
services that are being offered by it, that is, the connection welfare and public policy.37
and interconnection to the telephone network, lines or
facilities; (b) the use of its telephone network, lines or In his petition for certiorari in the CA, petitioner averred that
facilities over a period of time; and (c) the income derived in the trial court committed grave abuse of its discretion
connection therewith.33 amounting to excess or lack of jurisdiction when it denied his
motion to quash the Amended Information despite his claim
PLDT further posits that business revenues or the income that the material allegations in the Amended Information do
derived in connection with the rendition of such services and not charge theft under Article 308 of the Revised Penal Code,
the use of its telephone network, lines or facilities are or any offense for that matter. By so doing, the trial court
personal properties under Article 308 of the Revised Penal deprived him of his constitutional right to be informed of the
Code; so is the use of said telephone services/telephone nature of the charge against him. He further averred that the
network, lines or facilities which allow electronic voice signals order of the trial court is contrary to the constitution and is,
to pass through the same and ultimately to the called partys thus, null and void. He insists that he should not be compelled
number. It is akin to electricity which, though intangible to undergo the rigors and tribulations of a protracted trial and
property, may nevertheless be appropriated and can be the incur expenses to defend himself against a non-existent
object of theft. The use of respondent PLDTs telephone charge.
network, lines, or facilities over a period of time for
consideration is the business that it provides to its customers, Petitioner is correct.
which enables the latter to send various messages to
intended recipients. Such use over a period of time is akin to An information or complaint must state explicitly and directly
merchandise which has value and, therefore, can be every act or omission constituting an offense 38 and must
appropriated by another. According to respondent PLDT, this allege facts establishing conduct that a penal statute makes
is what actually happened when petitioner Laurel and the criminal;39 and describes the property which is the subject of
other accused below conducted illegal ISR operations.34 theft to advise the accused with reasonable certainty of the
accusation he is called upon to meet at the trial and to enable
The petition is meritorious. him to rely on the judgment thereunder of a subsequent
prosecution for the same offense.40 It must show, on its face,
The issues for resolution are as follows: (a) whether or not the that if the alleged facts are true, an offense has been
petition for certiorari is the proper remedy of the petitioner in committed. The rule is rooted on the constitutional right of
the Court of Appeals; (b) whether or not international the accused to be informed of the nature of the crime or
telephone calls using Bay Super Orient Cards through the cause of the accusation against him. He cannot be convicted
telecommunication services provided by PLDT for such calls, of an offense even if proven unless it is alleged or necessarily
or, in short, PLDTs business of providing said included in the Information filed against him.
telecommunication services, are proper subjects of theft
under Article 308 of the Revised Penal Code; and (c) whether As a general prerequisite, a motion to quash on the ground
or not the trial court committed grave abuse of discretion that the Information does not constitute the offense charged,
amounting to excess or lack of jurisdiction in denying the or any offense for that matter, should be resolved on the basis
motion of the petitioner to quash the amended information. of said allegations whose truth and veracity are hypothetically
committed;41 and on additional facts admitted or not denied
On the issue of whether or not the petition for certiorari by the prosecution.42 If the facts alleged in the Information do
instituted by the petitioner in the CA is proper, the general not constitute an offense, the complaint or information
rule is that a petition for certiorari under Rule 65 of the Rules should be quashed by the court.43
of Court, as amended, to nullify an order denying a motion to
quash the Information is inappropriate because the aggrieved We have reviewed the Amended Information and find that, as
party has a remedy of appeal in the ordinary course of law. mentioned by the petitioner, it does not contain material
Appeal and certiorari are mutually exclusive of each other. allegations charging the petitioner of theft of personal
The remedy of the aggrieved party is to continue with the property under Article 308 of the Revised Penal Code. It, thus,
case in due course and, when an unfavorable judgment is behooved the trial court to quash the Amended Information.
rendered, assail the order and the decision on appeal. The Order of the trial court denying the motion of the
However, if the trial court issues the order denying the petitioner to quash the Amended Information is a patent
motion to quash the Amended Information with grave abuse nullity.
of discretion amounting to excess or lack of jurisdiction, or if
such order is patently erroneous, or null and void for being On the second issue, we find and so hold that the
contrary to the Constitution, and the remedy of appeal would international telephone calls placed by Bay Super Orient
not afford adequate and expeditious relief, the accused may Card holders, the telecommunication services provided by
resort to the extraordinary remedy of certiorari. 35 A special PLDT and its business of providing said services are not
civil action for certiorari is also available where there are personal properties under Article 308 of the Revised Penal
special circumstances clearly demonstrating the inadequacy Code. The construction by the respondents of Article 308 of
of an appeal. As this Court held in Bristol Myers Squibb the said Code to include, within its coverage, the aforesaid
(Phils.), Inc. v. Viloria:36
international telephone calls, telecommunication services One is apt to conclude that "personal property" standing
and business is contrary to the letter and intent of the law. alone, covers both tangible and intangible properties and
are subject of theft under the Revised Penal Code. But the
The rule is that, penal laws are to be construed strictly. Such words "Personal property" under the Revised Penal Code
rule is founded on the tenderness of the law for the rights of must be considered in tandem with the word "take" in the
individuals and on the plain principle that the power of law. The statutory definition of "taking" and movable
punishment is vested in Congress, not in the judicial property indicates that, clearly, not all personal properties
department. It is Congress, not the Court, which is to define a may be the proper subjects of theft. The general rule is that,
crime, and ordain its punishment.44 Due respect for the only movable properties which have physical or material
prerogative of Congress in defining crimes/felonies constrains existence and susceptible of occupation by another are
the Court to refrain from a broad interpretation of penal laws proper objects of theft.52 As explained by Cuelo Callon: "Cosa
where a "narrow interpretation" is appropriate. The Court juridicamente es toda sustancia corporal, material,
must take heed to language, legislative history and purpose, susceptible de ser aprehendida que tenga un valor
in order to strictly determine the wrath and breath of the cualquiera."53
conduct the law forbids.45 However, when the congressional
purpose is unclear, the court must apply the rule of lenity, According to Cuello Callon, in the context of the Penal Code,
that is, ambiguity concerning the ambit of criminal statutes only those movable properties which can be taken and
should be resolved in favor of lenity.46 carried from the place they are found are proper subjects of
theft. Intangible properties such as rights and ideas are not
Penal statutes may not be enlarged by implication or intent subject of theft because the same cannot be "taken" from the
beyond the fair meaning of the language used; and may not place it is found and is occupied or appropriated.
be held to include offenses other than those which are clearly
described, notwithstanding that the Court may think that Solamente las cosas muebles y corporales pueden ser objeto
Congress should have made them more de hurto. La sustraccin de cosas inmuebles y la cosas
comprehensive.47 Words and phrases in a statute are to be incorporales (v. gr., los derechos, las ideas) no puede integrar
construed according to their common meaning and accepted este delito, pues no es posible asirlas, tomarlas, para
usage. conseguir su apropiacin. El Codigo emplea la expresin
"cosas mueble" en el sentido de cosa que es susceptible de
As Chief Justice John Marshall declared, "it would be ser llevada del lugar donde se encuentra, como dinero, joyas,
dangerous, indeed, to carry the principle that a case which is ropas, etctera, asi que su concepto no coincide por completo
within the reason or con el formulado por el Codigo civil (arts. 335 y 336). 54

mischief of a statute is within its provision, so far as to punish Thus, movable properties under Article 308 of the Revised
a crime not enumerated in the statute because it is of equal Penal Code should be distinguished from the rights or
atrocity, or of kindred character with those which are interests to which they relate. A naked right existing merely
enumerated.48 When interpreting a criminal statute that does in contemplation of law, although it may be very valuable to
not explicitly reach the conduct in question, the Court should the person who is entitled to exercise it, is not the subject of
not base an expansive reading on inferences from subjective theft or larceny. 55 Such rights or interests are intangible and
and variable understanding.49 cannot be "taken" by another. Thus, right to produce oil,
good will or an interest in business, or the right to engage in
Article 308 of the Revised Penal Code defines theft as follows: business, credit or franchise are properties. So is the credit
line represented by a credit card. However, they are not
proper subjects of theft or larceny because they are without
Art. 308. Who are liable for theft. Theft is committed by any
form or substance, the mere "breath" of the Congress. On
person who, with intent to gain but without violence, against
the other hand, goods, wares and merchandise of
or intimidation of persons nor force upon things, shall take
businessmen and credit cards issued to them are movable
personal property of another without the latters consent.
properties with physical and material existence and may be
taken by another; hence, proper subjects of theft.
The provision was taken from Article 530 of the Spanish Penal
Code which reads:
There is "taking" of personal property, and theft is
consummated when the offender unlawfully acquires
1. Los que con nimo de lucrarse, y sin violencia o possession of personal property even if for a short time; or if
intimidacin en las personas ni fuerza en las cosas, toman las such property is under the dominion and control of the thief.
cosas muebles ajenas sin la voluntad de su dueo. 50 The taker, at some particular amount, must have obtained
complete and absolute possession and control of the property
For one to be guilty of theft, the accused must have an intent adverse to the rights of the owner or the lawful possessor
to steal (animus furandi) personal property, meaning the thereof.56 It is not necessary that the property be actually
intent to deprive another of his ownership/lawful possession carried away out of the physical possession of the lawful
of personal property which intent is apart from and possessor or that he should have made his escape with
concurrently with the general criminal intent which is an it.57 Neither asportation nor actual manual possession of
essential element of a felony of dolo (dolus malus). property is required. Constructive possession of the thief of
the property is enough.58
An information or complaint for simple theft must allege the
following elements: (a) the taking of personal property; (b) The essence of the element is the taking of a thing out of the
the said property belongs to another; (c) the taking be done possession of the owner without his privity and consent and
with intent to gain; and (d) the taking be accomplished without animus revertendi.59
without the use of violence or intimidation of person/s or
force upon things.51 Taking may be by the offenders own hands, by his use of
innocent persons without any felonious intent, as well as any
mechanical device, such as an access device or card, or any definite: that business is personal property under Article 308
agency, animate or inanimate, with intent to gain. Intent to of the Revised Penal Code.69
gain includes the unlawful taking of personal property for the
purpose of deriving utility, satisfaction, enjoyment and We agree with the contention of the petitioner that, as
pleasure.60 gleaned from the material averments of the Amended
Information, he is charged of "stealing the international long
We agree with the contention of the respondents that distance calls belonging to PLDT" and the use thereof, through
intangible properties such as electrical energy and gas are the ISR. Contrary to the claims of the OSG and respondent
proper subjects of theft. The reason for this is that, as PLDT, the petitioner is not charged of stealing P20,370,651.95
explained by this Court in United States v. Carlos 61 and United from said respondent. Said amount of P20,370,651.95 alleged
States v. Tambunting,62 based on decisions of the Supreme in the Amended Information is the aggregate amount of
Court of Spain and of the courts in England and the United access, transmission or termination charges which the PLDT
States of America, gas or electricity are capable of expected from the international long distance calls of the
appropriation by another other than the owner. Gas and callers with the use of Baynet Super Orient Cards sold by
electrical energy may be taken, carried away and Baynet Co. Ltd.
appropriated. In People v. Menagas,63 the Illinois State
Supreme Court declared that electricity, like gas, may be seen In defining theft, under Article 308 of the Revised Penal Code,
and felt. Electricity, the same as gas, is a valuable article of as the taking of personal property without the consent of the
merchandise, bought and sold like other personal property owner thereof, the Philippine legislature could not have
and is capable of appropriation by another. It is a valuable contemplated the human voice which is converted into
article of merchandise, bought and sold like other personal electronic impulses or electrical current which are transmitted
property, susceptible of being severed from a mass or larger to the party called through the PSTN of respondent PLDT and
quantity and of being transported from place to place. the ISR of Baynet Card Ltd. within its coverage. When the
Electrical energy may, likewise, be taken and carried away. It is Revised Penal Code was approved, on December 8, 1930,
a valuable commodity, bought and sold like other personal international telephone calls and the transmission and
property. It may be transported from place to place. There is routing of electronic voice signals or impulses emanating from
nothing in the nature of gas used for illuminating purposes said calls, through the PSTN, IPL and ISR, were still non-
which renders it incapable of being feloniously taken and existent. Case law is that, where a legislative history fails to
carried away. evidence congressional awareness of the scope of the statute
claimed by the respondents, a narrow interpretation of the
In People ex rel Brush Electric Illuminating Co. v. law is more consistent with the usual approach to the
Wemple,64 the Court of Appeals of New York held that electric construction of the statute. Penal responsibility cannot be
energy is manufactured and sold in determinate quantities at extended beyond the fair scope of the statutory mandate. 70
a fixed price, precisely as are coal, kerosene oil, and gas. It
may be conveyed to the premises of the consumer, stored in Respondent PLDT does not acquire possession, much less,
cells of different capacity known as an accumulator; or it may ownership of the voices of the telephone callers or of the
be sent through a wire, just as gas or oil may be transported electronic voice signals or current emanating from said calls.
either in a close tank or forced through a pipe. Having The human voice and the electronic voice signals or current
reached the premises of the consumer, it may be used in any caused thereby are intangible and not susceptible of
way he may desire, being, like illuminating gas, capable of possession, occupation or appropriation by the respondent
being transformed either into heat, light, or power, at the PLDT or even the petitioner, for that matter. PLDT merely
option of the purchaser. In Woods v. People, 65 the Supreme transmits the electronic voice signals through its facilities
Court of Illinois declared that there is nothing in the nature of and equipment. Baynet Card Ltd., through its operator,
gas used for illuminating purposes which renders it incapable merely intercepts, reroutes the calls and passes them to its
of being feloniously taken and carried away. It is a valuable toll center. Indeed, the parties called receive the telephone
article of merchandise, bought and sold like other personal calls from Japan.
property, susceptible of being severed from a mass or larger
quantity and of being transported from place to place. In this modern age of technology, telecommunications
systems have become so tightly merged with computer
Gas and electrical energy should not be equated with systems that it is difficult to know where one starts and the
business or services provided by business entrepreneurs to other finishes. The telephone set is highly computerized and
the public. Business does not have an exact definition. allows computers to communicate across long
Business is referred as that which occupies the time, attention distances.71 The instrumentality at issue in this case is not
and labor of men for the purpose of livelihood or profit. It merely a telephone but a telephone inexplicably linked to a
embraces everything that which a person can be computerized communications system with the use of Baynet
employed.66 Business may also mean employment, Cards sold by the Baynet Card Ltd. The corporation uses
occupation or profession. Business is also defined as a computers, modems and software, among others, for its ISR. 72
commercial activity for gain benefit or
advantage.67 Business, like services in business, although are The conduct complained of by respondent PLDT is
properties, are not proper subjects of theft under the reminiscent of "phreaking" (a slang term for the action of
Revised Penal Code because the same cannot be "taken" or making a telephone system to do something that it normally
"occupied." If it were otherwise, as claimed by the should not allow by "making the phone company bend over
respondents, there would be no juridical difference between and grab its ankles"). A "phreaker" is one who engages in the
the taking of the business of a person or the services provided act of manipulating phones and illegally markets telephone
by him for gain, vis--vis, the taking of goods, wares or services.73 Unless the phone company replaces all its
merchandise, or equipment comprising his business. 68 If it hardware, phreaking would be impossible to stop. The phone
was its intention to include "business" as personal property companies in North America were impelled to replace all their
under Article 308 of the Revised Penal Code, the Philippine hardware and adopted full digital switching system known as
Legislature should have spoken in language that is clear and the Common Channel Inter Office Signaling. Phreaking
occurred only during the 1960s and 1970s, decades after the knowing that such use is without the consent of the person
Revised Penal Code took effect. providing the property, labor or services.

The petitioner is not charged, under the Amended In 1980, the drafters of the Model Penal Code in the United
Information, for theft of telecommunication or telephone States of America arrived at the conclusion that labor and
services offered by PLDT. Even if he is, the term "personal services, including professional services, have not been
property" under Article 308 of the Revised Penal Code included within the traditional scope of the term "property"
cannot be interpreted beyond its seams so as to include in ordinary theft statutes. Hence, they decided to incorporate
"telecommunication or telephone services" or computer in the Code Section 223.7, which defines and penalizes theft
services for that matter. The word "service" has a variety of of services, thus:
meanings dependent upon the context, or the sense in
which it is used; and, in some instances, it may include a (1) A person is guilty of theft if he purposely obtains services
sale. For instance, the sale of food by restaurants is usually which he knows are available only for compensation, by
referred to as "service," although an actual sale is deception or threat, or by false token or other means to avoid
involved.74 It may also mean the duty or labor to be rendered payment for the service. "Services" include labor, professional
by one person to another; performance of labor for the service, transportation, telephone or other public service,
benefit of another.75 In the case of PLDT, it is to render local accommodation in hotels, restaurants or elsewhere,
and international telecommunications services and such admission to exhibitions, use of vehicles or other movable
other services as authorized by the CPCA issued by the NTC. property. Where compensation for service is ordinarily paid
Even at common law, neither time nor services may be taken immediately upon the rendering of such service, as in the
and occupied or appropriated.76 A service is generally not case of hotels and restaurants, refusal to pay or absconding
considered property and a theft of service would not, without payment or offer to pay gives rise to a presumption
therefore, constitute theft since there can be no caption or that the service was obtained by deception as to intention to
asportation.77 Neither is the unauthorized use of the pay; (2) A person commits theft if, having control over the
equipment and facilities of PLDT by the petitioner theft disposition of services of others, to which he is not entitled,
under the aforequoted provision of the Revised Penal he knowingly diverts such services to his own benefit or to
Code.78 the benefit of another not entitled thereto.

If it was the intent of the Philippine Legislature, in 1930, to Interestingly, after the State Supreme Court of Virginia
include services to be the subject of theft, it should have promulgated its decision in Lund v.
incorporated the same in Article 308 of the Revised Penal Commonwealth,80declaring that neither time nor services
Code. The Legislature did not. In fact, the Revised Penal Code may be taken and carried away and are not proper subjects of
does not even contain a definition of services. larceny, the General Assembly of Virginia enacted Code No.
18-2-98 which reads:
If taking of telecommunication services or the business of a
person, is to be proscribed, it must be by special statute 79 or Computer time or services or data processing services or
an amendment of the Revised Penal Code. Several states in information or data stored in connection therewith is hereby
the United States, such as New York, New Jersey, California defined to be property which may be the subject of larceny
and Virginia, realized that their criminal statutes did not under 18.2-95 or 18.2-96, or embezzlement under 18.2-
contain any provisions penalizing the theft of services and 111, or false pretenses under 18.2-178.
passed laws defining and penalizing theft of telephone and
computer services. The Pennsylvania Criminal Statute now In the State of Alabama, Section 13A-8-10(a)(1) of the Penal
penalizes theft of services, thus: Code of Alabama of 1975 penalizes theft of services:

(a) Acquisition of services. -- "A person commits the crime of theft of services if: (a) He
intentionally obtains services known by him to be available
(1) A person is guilty of theft if he intentionally obtains only for compensation by deception, threat, false token or
services for himself or for another which he knows are other means to avoid payment for the services "
available only for compensation, by deception or threat, by
altering or tampering with the public utility meter or In the Philippines, Congress has not amended the Revised
measuring device by which such services are delivered or by Penal Code to include theft of services or theft of business as
causing or permitting such altering or tampering, by making felonies. Instead, it approved a law, Republic Act No. 8484,
or maintaining any unauthorized connection, whether otherwise known as the Access Devices Regulation Act of
physically, electrically or inductively, to a distribution or 1998, on February 11, 1998. Under the law, an access device
transmission line, by attaching or maintaining the attachment means any card, plate, code, account number, electronic
of any unauthorized device to any cable, wire or other serial number, personal identification number and other
component of an electric, telephone or cable television telecommunication services, equipment or instrumentalities-
system or to a television receiving set connected to a cable identifier or other means of account access that can be used
television system, by making or maintaining any unauthorized to obtain money, goods, services or any other thing of value
modification or alteration to any device installed by a cable or to initiate a transfer of funds other than a transfer
television system, or by false token or other trick or artifice to originated solely by paper instrument. Among the prohibited
avoid payment for the service. acts enumerated in Section 9 of the law are the acts of
obtaining money or anything of value through the use of an
In the State of Illinois in the United States of America, theft of access device, with intent to defraud or intent to gain and
labor or services or use of property is penalized: fleeing thereafter; and of effecting transactions with one or
more access devices issued to another person or persons to
(a) A person commits theft when he obtains the temporary receive payment or any other thing of value. Under Section 11
use of property, labor or services of another which are of the law, conspiracy to commit access devices fraud is a
available only for hire, by means of threat or deception or
crime. However, the petitioner is not charged of violation of
R.A. 8484.

Significantly, a prosecution under the law shall be without

prejudice to any liability for violation of any provisions of the
Revised Penal Code inclusive of theft under Rule 308 of the
Revised Penal Code and estafa under Article 315 of the
Revised Penal Code. Thus, if an individual steals a credit card
and uses the same to obtain services, he is liable of the
following: theft of the credit card under Article 308 of the
Revised Penal Code; violation of Republic Act No. 8484; and
estafa under Article 315(2)(a) of the Revised Penal Code with
the service provider as the private complainant. The
petitioner is not charged of estafa before the RTC in the
Amended Information.

Section 33 of Republic Act No. 8792, Electronic Commerce Act

of 2000 provides:

Sec. 33. Penalties. The following Acts shall be penalized by

fine and/or imprisonment, as follows:

a) Hacking or cracking which refers to unauthorized access

into or interference in a computer system/server or
information and communication system; or any access in
order to corrupt, alter, steal, or destroy using a computer or
other similar information and communication devices,
without the knowledge and consent of the owner of the
computer or information and communications system,
including the introduction of computer viruses and the like,
resulting on the corruption, destruction, alteration, theft or
loss of electronic data messages or electronic documents shall
be punished by a minimum fine of One hundred thousand
pesos (P100,000.00) and a maximum commensurate to the
damage incurred and a mandatory imprisonment of six (6)
months to three (3) years.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED.

The assailed Orders of the Regional Trial Court and the
Decision of the Court of Appeals are REVERSED and SET
ASIDE. The Regional Trial Court is directed to issue an order
granting the motion of the petitioner to quash the Amended
Information.

SO ORDERED.
G.R. No. 179408, March 05, 2014 Management (billing) System, the ACPDD learned that the
subscriber of the reflected telephone number is Abigail R.
PHILIPPINE LONG DISTANCE TELEPHONE Razon Alvarez, with address at 17 Dominic Savio St., Savio
COMPANY, Petitioner, v. ABIGAIL R. RAZON ALVAREZ AND Compound, Barangay Don Bosco, Paraaque City. It further
VERNON R. RAZON, Respondents. learned that several lines are installed at this address with
Abigail and Vernon R. Razon (respondents), among others, as
Before the Court is a petition for review subscribers.10
on certiorari1 assailing the decision2 dated August 11, 2006
and the resolution3 dated August 22, 2007 of the Court of To validate its findings, the ACPDD conducted the same test
Appeals (CA) in CAG.R. SP No. 89213 on the validity of the calls on November 5, 2003 at the premises of the NTC in
four search warrants issued by the Regional Trial Court ( RTC) Quezon City (and in the presence of an NTC representative 11)
of Pasay City, Branch 115. using the same prepaid card (validation test). The receiving
phone at the NTC premises reflected the telephone numbers
The CA rulings (i) quashed the first two search warrants, registered in the name of Abigail as the calling number from
similarly docketed as Search Warrant No. 03063, issued for the United Kingdom.12
violation of Article 308, in relation to Article 309, of the
Revised Penal Code (RPC), and (ii) declared void paragraphs 7, Similar test calls subsequently conducted using the prepaid
8 and 9 of the other two search warrants, also similarly cards Unity Card and IDT Supercalling Cardrevealed the same
docketed as Search Warrant No. 03064, issued for violation results. The calleridequipped receiving phone reflected
of Presidential Decree (PD) No. 401.4 telephone numbers13 that are in the names of Experto
Enterprises and Experto Phils, as subscribers, with a common
FACTUAL ANTECEDENTS address at No. 38 Indonesia St., Better Living Subdivision,
Barangay Don Bosco, Paraaque City. It turned out that the
Philippine Long Distance Telephone Company ( PLDT) is the actual occupant of these premises is also Abigail.
grantee of a legislative franchise 5 which authorizes it to carry Subsequently, a validation test was also conducted, yielding
on the business of providing basic and enhanced several telephone numbers registered in the name of Experto
telecommunications services in and between areas in the Phils./Experto Enterprises as the calling numbers supposedly
Philippines and between the Philippines and other countries from the United Kingdom.14
and territories,6and, accordingly, to establish, operate,
manage, lease, maintain and purchase telecommunications According to PLDT, had an ordinary and legitimate call been
system for both domestic and international calls. 7 Pursuant to made, the screen of the calleridequipped receiving phone
its franchise, PLDT offers to the public wide range of services would not reflect a local number or any number at all. In the
duly authorized by the National Telecommunications cards they tested, however, once the caller enters the access
Commission (NTC). and pin numbers, the respondents would route the call viathe
internet to a local telephone number (in this case, a PLDT
PLDTs network is principally composed of the Public Switch telephone number) which would connect the call to the
Telephone Network, telephone handsets and/or receiving phone. Since calls through the internet never pass
telecommunications equipment used by its subscribers, the the toll center of the PLDTs IGF, users of these prepaid cards
wires and cables linking these handsets and/or equipment, can place a call to any point in the Philippines (provided the
antennae, transmission facilities, the international gateway local line is NDDcapable) without the call appearing as
facility (IGF) and other telecommunications equipment coming from abroad.15
providing interconnections.8 To safeguard the integrity of its
network, PLDT regularly conducts investigations on various On November 6, 2003 and November 19, 2003, Mr. Lawrence
prepaid cards marketed and sold abroad to determine Narciso of the PLDTs Quality Control Division, together with
alternative calling patterns (ACP) and network fraud that are the operatives of the Philippine National Police ( PNP),
being perpetrated against it. conducted an ocular inspection at 17 Dominic Savio St., Savio
Compound and at No. 38 Indonesia St., Better Living
To prevent or stop network fraud, PLDTs ACP Detection Subdivision both in Barangay Don Bosco, Paranaque City
Division (ACPDD) regularly visits foreign countries to conduct and discovered that PLDT telephone lines were connected to
market research on various prepaid phone cards offered several pieces of equipment.16 Mr. Narciso narrated the
abroad that allow their users to make overseas calls to PLDT results of the inspection, thus
subscribers in the Philippines at a cheaper rate. 10. During [the] ocular inspection [at 17 Dominic Savio St.,
Savio Compound], Ms. Abigail Razon Alvarez allowed us to
The ACPDD bought The Number One prepaid card a card gain entry and check the telephone installations within their
principally marketed to Filipinos residing in the United premises. First, we checked the location of the telephone
Kingdom for calls to the Philippines to make test calls using protectors that are commonly installed at a concrete wall
two telephone lines: the dialing phone an IDD boundary inside the compound. Some of these protectors are
capable9 telephone line which makes the call and through covered with a fabricated wooden cabinet. Other protectors
which the access number and the PIN number printed at the are installed beside the said wooden cabinet, xxx. The inside
back of the card are entered; and the receiving phone a wiring installations from telephone protectors to connecting
caller identification (caller id) unitequipped telephone line block were routed to the said adjacent room passing through
which would receive the call and reflect the incoming callers the house ceiling.
telephone number.
11. xxx. Upon entering the socalled adjacent room, we
During a test call placed at the PLDTACPDD office, the immediately noticed that the PLDT telephone lines were
receiving phone reflected a PLDT telephone number (2 connected to the equipment situated at multilayered rack.
8243285) as the calling number used, as if the call was The equipment room contains the following:
originating from a local telephone in Metro Manila. Upon a. 6 Quintum router; b. 13 Com router; c. 1 Cisco 800 router;
verification with the PLDTs Integrated Customer d. 1 Nokia Modem for PLDT DSL;e. 1 Meridian Subscribers
Unit[;] f. 5 Personal Computers[;] g. 1 Computer Printer[; and]
h. 1 Flatbed Scanner[.] 7. COMPUTER PRINTERS AND SCANNERS or any similar
equipment or device used for copying and/or printing data
12. We also noticed that these routers are connected to the and/or information;
Meridians subscriber unit ("SU ) that has an outdoor
antenna installed on the top of the roof. Meridians SU and 8. SOFTWARE, DISKETTES, TAPES or any similar equipment or
outdoor antenna are service components used to connect device used for recording or storing information; and
with wireless broadband internet access service of Meridian
Telekoms. 9. Manuals, phone cards, access codes, billing statements,
receipts, contracts, checks, orders, communications and
18. During the site inspection [at No. 38 Indonesia St., Better documents, lease and/or subscription agreements or
Living Subdivision], we noticed that the protector of each contracts, communications and documents relating to
telephone line/number xxx were enclosed in a fabricated securing and using telephone lines and/or equipment[.] 21
wooden cabinet with safety padlock. Said wooden cabinet On the same date, the PNP searched the premises indicated
was situated on the concrete wall inside the compound near in the warrants. On December 10, 2003, a return was made
the garage entrance gate. The telephone inside the wiring with a complete inventory of the items seized.22 On January
installations from the protector to the connecting blocks were 14, 2004, the PLDT and the PNP filed with the Department of
placed in a plastic electrical conduit routed to the adjacent Justice a joint complaintaffidavit for theft and for violation of
room at the second floor. PD No. 401 against the respondents. 23
On December 3, 2003, Police Superintendent Gilbert C. Cruz
filed a consolidated application for a search warrant 18 before On February 18, 2004, the respondents filed with the RTC a
Judge Francisco G. Mendiola of the RTC, for the crimes of motion to quash24 the search warrants essentially on the
theft and violation of PD No. 401. According to PLDT, the following grounds: first, the RTC had no authority to issue
respondents are engaged in a form of network fraud known search warrants which were enforced in Paraaque
as International Simple Resale ( ISR) which amounts to theft City; second, the enumeration of the items to be searched and
under the RPC. seized lacked particularity; and third, there was no probable
cause for the crime of theft.
ISR is a method of routing and completing international long
distance calls using lines, cables, antennae and/or wave On March 12, 2004, PLDT opposed the respondents' motion. 25
frequencies which are connected directly to the domestic
exchange facilities of the country where the call is destined In a July 6, 2004 order, 26 the RTC denied the respondents'
(terminating country); and, in the process, bypassing the IGF motion to quash. Having been rebuffed27 in their motion for
at the terminating country.19 reconsideration,28 the respondents filed a petition
for certiorari with the CA. 29
Judge Mendiola found probable cause for the issuance of the
search warrants applied for. Accordingly, four search RULING OF THE CA
warrants20 were issued for violations of Article 308, in relation
to Article 309, of the RPC (SW A1 and SW A2) and of PD No. On August 11, 2006, the CA rendered the assailed decision
401, as amended (SW B1 and SW B2) for the ISR activities and resolution, granting the respondents' petition
being conducted at 17 Dominic Savio St., Savio Compound for certiorari. The CA quashed SW Al and SW A2 (for theft)
and at No. 38 Indonesia St., Better Living Subdivision, both in on the ground that they were issued for nonexistent
Barangay Don Bosco, Paranaque City. The four search crimes. 30 According to the CA, inherent in the determination
warrants enumerated the objects to be searched and seized of probable cause for the issuance of search warrant is the
as follows: accompanying determination that an offense has been
1. MERIDIAN SUBSCRIBERS UNIT AND PLDT DSL LINES and/or committed. Relying on this Courts decision in Laurel v. Judge
CABLES AND ANTENNAS and/or similar equipment or device Abrogar,31 the CA ruled that the respondents could not have
capable of transmitting air waves or frequency, such as a possibly committed the crime of theft because PLDTs
Meridian Subscribers Unit, Broadband DSL and telephone business of providing telecommunication services and these
lines; services themselves are not personal properties
contemplated under Article 308 of the RPC.
2. PERSONAL COMPUTERS or any similar equipment or device
capable of accepting information applying the prescribed With respect to SW Bl and SW B2 (for violation of PD No.
process of the information and supplying the result of this 401), the CA upheld paragraphs one to six of the
process; enumeration of items subject of the search. The CA held that
the stock phrase or similar equipment or device found in
3. NOKIA MODEM or any similar equipment or device that paragraphs one to six of the search warrants did not make it
enables data terminal equipment such as computers to suffer from generality since each paragraphs enumeration of
communicate with other data terminal equipment via a items was sufficiently qualified by the citation of the specific
telephone line; objects to be seized and by its functions which are inherently
connected with the crime allegedly committed.
4. QUINTUM Equipment or any similar equipment capable of
receiving digital signals from the internet and converting The CA, however, nullified the ensuing paragraphs, 7, 8 and 9,
those signals to voice; for lack of particularity and ordered the return of the items
seized under these provisions. While the same stock phrase
5. QUINTUM, 3COM AND CISCO Routers or any similar appears in paragraphs 7 and 8, the properties described
equipment capable of switching packets of data to their therein i.e., printer and scanner, software, diskette and
assigned destination or addresses; tapes include even those for the respondents' personal use,
making the description of the things to be seized too general
6. LINKS DSL SWITCH or any similar equipment capable of in nature.
switching data;
With the denial of its motion for reconsideration, 32 PLDT went Before proceeding with the case, a review of Laurel is in order
to this Court via this Rule 45 petition. as it involves substantially similar facts as in the present case.

THE PETITIONER'S ARGUMENTS Baynet Co., Ltd. (Baynet) sells prepaid cards, Bay Super
Orient Card, that allow their users to place a call to the
PLDT faults the CA for relying on Laurel on three Philippines from Japan. PLDT asserted that Baynet is engaged
grounds: first, Laurel cannot be cited yet as an authority in ISR activities by using an international private leased line
under the principle of stare decisis because Laurel is not yet (IPL) to course Baynets incoming international long distance
final and executory; in fact, it is the subject of a pending calls. The IPL is linked to a switching equipment, which is then
motion for reconsideration filed by PLDT itself; second, even connected to PLDT telephone lines/numbers and equipment,
assuming that Laurel is already final, the facts in Laurel vary with Baynet as subscriber.
from the present case. Laurel involves the quashal of an
information on the ground that the information does not To establish its case, PLDT obtained a search warrant. On the
charge any offense; hence, the determination of the existence strength of the items seized during the search of Baynets
of the elements of the crime of theft is indispensable in premises, the prosecutor found probable cause for theft
resolving the motion to quash. In contrast, the present case against Luis Marcos Laurel (Laurel) and other Baynet officials.
involves the quashal of a search warrant. Third, accordingly, in Accordingly, an information was filed, alleging that the Baynet
resolving the motion, the issuing court only has to be officials take, steal and use the international long distance
convinced that there is probable cause to hold that: (i) the calls belonging to PLDT by [ISR activities] xxx effectively
items to be seized are connected to a criminal activity; and (ii) stealing this business from PLDT while using its facilities in the
these items are found in the place to be searched. Since the estimated amount of P20,370,651.92 to the damage and
matter of quashing a search warrant may be rooted on prejudice of PLDT[.] 35
matters extrinsic of the search warrant, 33 the issuing court
does not need to look into the elements of the crime Laurel moved to quash the information on the bold assertion
allegedly committed in the same manner that the CA did that ISR activities do not constitute a crime under Philippine
in Laurel. law. Laurel argued that an ISR activity cannot entail taking of
personal property because the international long distance
PLDT adds that a finding of grave abuse of discretion in the telephone calls using PLDT telephone lines belong to the
issuance of search warrant may be justified only when there is caller himself; the amount stated in the information, if at all,
disregard of the requirements for the issuance of a search represents the rentals due PLDT for the callers usage of its
warrant[.] 34 In the present case, the CA did not find (and facilities. Laurel argued that the business of providing
could not have found) any grave abuse of discretion on the international long distance calls, i.e., PLDTs service, and the
part of the RTC because at the time the RTC issued the search revenue derived therefrom are not personal property that can
warrants in 2003, Laurel had not yet been promulgated. be appropriated.

In defending the validity of the nullified provisions of SW Bl Laurel went to the Court after failing to secure the desired
and SW B2, PLDT argues that PD No. 401 also punishes relief from the trial and appellate courts, 36raising the core
unauthorized installation of telephone connections. Since the issue of whether PLDTs business of providing
enumerated items are connected to the computers that are telecommunication services for international long distance
illegally connected to PLDT telephone lines, then these items calls is a proper subject of theft under Article 308 of the RPC.
bear a direct relation to the offense of violation of PD No. The Courts First Division granted Laurels petition and
401, justifying their seizure. ordered the quashal of the information.

The enumeration in paragraph 8 is likewise a proper subject Taking off from the basic rule that penal laws are construed
of seizure because they are the fruits of the offense as they strictly against the State, the Court ruled that international
contain information on PLDTs business profit and other long distance calls and the business of providing
information relating to the commission of violation of PD No. telecommunication or telephone services by PLDT are not
401. Similarly, paragraph 9 specifies the fruits and evidence of personal properties that can be the subject of theft.
violation of PD No. 401 since it supports PLDTs claim that the One is apt to conclude that personal property standing
respondents have made a business out of their illegal alone, covers both tangible and intangible properties and are
connections to PLDT lines. subject of theft under the Revised Penal Code. But the words
Personal property under the Revised Penal Code must be
THE RESPONDENTS' ARGUMENTS considered in tandem with the word take in the law. The
statutory definition of taking and movable property
The respondents counter that while Laurel may not yet be indicates that, clearly, not all personal properties may be the
final, at least it has a persuasive effect as the current proper subjects of theft. The general rule is that, only
jurisprudence on the matter. Even without Laurel, the CAs movable properties which have physical or material existence
nullification of SW Al and SW A2 can withstand scrutiny and susceptible of occupation by another are proper objects
because of the novelty of the issue presented before it. The of theft, xxx.
nullification of paragraphs 7, 8 and 9 of SW Bl and SW B2
must be upheld not only on the ground of broadness but for xxxx
lack of any relation whatsoever with PD No. 401 which
punishes the theft of electricity. xxx. Business, like services in business, although are
properties, are not proper subjects of theft under the Revised
OUR RULING Penal Code because the same cannot be taken or
occupied. If it were otherwise, xxx there would be no
We partially grant the petition. juridical difference between the taking of the business of a
person or the services provided by him for gain, visavis, the
Laurel and its reversal by the Court En Banc taking of goods, wares or merchandise, or equipment
comprising his business. If it was its intention to include
business as personal property under Article 308 of the of the Revised Penal Code, and the act of engaging in ISR is an
Revised Penal Code, the Philippine Legislature should have act of subtraction penalized under said article.42
spoken in language that is clear and definite: that business is The Court En Bancs reversal of its Laurel Division ruling
personal property under Article 308 of the Revised Penal during the pendency of this petition significantly impacts on
Code. how the Court should resolve the present case for two
reasons:chanRoblesvirtualLawlibrary
xxxx
First, the Laurel En Banc ruling categorically equated an ISR
The petitioner is not charged, under the Amended activity to theft under the RPC. In so doing, whatever alleged
Information, for theft of telecommunication or telephone factual variance there may be between Laurel and the present
services offered by PLDT. Even if he is, the term personal case cannot render Laurel inapplicable.
property under Article 308 of the Revised Penal Code cannot
be interpreted beyond its seams so as to include Second, and more importantly, in a Rule 45 petition, the Court
telecommunication or telephone services or computer basically determines whether the CA was legally correct in
services for that matter. xxx. Even at common law, neither determining whether the RTC committed grave abuse of
time nor services may be taken and occupied or appropriated. discretion. Under this premise, the CA ordinarily gauges the
A service is generally not considered property and a theft of grave abuse of discretion at the time the RTC rendered its
service would not, therefore, constitute theft since there can assailed resolution. In quashing SW Al and SW A2, note that
be no caption or asportation. Neither is the unauthorized use the CA relied on the Laurel Division ruling at the time when it
of the equipment and facilities of PLDT by [Laurel] theft under was still subject of a pending motion for reconsideration. The
[Article 308]. CA, in fact, did not expressly impute grave abuse of discretion
on the RTC when the RTC issued the search warrants and later
If it was the intent of the Philippine Legislature, in 1930, to refused to quash these. Understandably, the CA could not
include services to be the subject of theft, it should have have really found the presence of grave abuse of discretion
incorporated the same in Article 308 of the Revised Penal for there was no Laurel ruling to speak of at the time the RTC
Code. The Legislature did not. In fact, the Revised Penal Code issued the search warrants.
does not even contain a definition of services. 37
PLDT38 moved for reconsideration and referral of the case to These peculiar facts require us to more carefully analyze our
the Court En Banc. The Courts First Division granted the prism of review under Rule 45.
referral.
Requisites for the issuance of search warrant; probable
On January 13, 2009 (or while the present petition was cause requires the probable existence of an offense
pending in court), the Court En Bancunanimously granted
PLDTs motion for reconsideration.39 The Court ruled that Section 2, Article III of the 1987 Constitution guarantees the
even prior to the passage of the RPC, jurisprudence is settled right of persons to be free from unreasonable searches and
that any personal property, tangible or intangible, seizures.
corporeal or incorporeal, capable of appropriation can be Section 2. The right of the people to be secure in their
the object of theft. 40 This jurisprudence, in turn, applied the persons, houses, papers, and effects against unreasonable
prevailing legal meaning of the term personal property searches and seizures of whatever nature and for any purpose
under the old Civil Code as anything susceptible of shall be inviolable, and no search warrant or warrant of
appropriation and not included in the foregoing chapter arrest shall issue except upon probable cause to be
(not real property). 41PLDTs telephone service or its determined personally by the judge after examination under
business of providing this was appropriable personal oath or affirmation of the complainant and the witnesses he
property and was, in fact, the subject of appropriation in an may produce, and particularly describing the place to be
ISR operation, facilitated by means of the unlawful use of searched and the persons or things to be seized.
PLDTs facilities. The purposes of the constitutional provision against unlawful
In this regard, the Amended Information inaccurately searches and seizures are to: (i) prevent the officers of the law
describes the offense by making it appear that what [Laurel] from violating private security in person and property and
took were the international long distance telephone calls, illegally invading the sanctity of the home; and (ii) give
rather than respondent PLDTs business. remedy against such usurpations when attempted or
committed.43
xxxx
The constitutional requirement for the issuance of a search
Indeed, while it may be conceded that international long warrant is reiterated under Sections 4 and 5, Rule 126 of the
distance calls, the matter alleged to be stolen xxx, take the Revised Rules of Criminal Procedure. These sections lay down
form of electrical energy, it cannot be said that such the following requirements for the issuance of a search
international long distance calls were personal properties warrant: (1) the existence of probable cause; (2) the probable
belonging to PLDT since the latter could not have acquired cause must be determined personally by the judge; (3) the
ownership over such calls. PLDT merely encodes, augments, judge must examine, in writing and under oath or affirmation,
enhances, decodes and transmits said calls using its complex the complainant and the witnesses he or she may produce;
communications infrastructure and facilities. PLDT not being (4) the applicant and the witnesses testify on the facts
the owner of said telephone calls, then it could not validly personally known to them; and (5) the warrant specifically
claim that such telephone calls were taken without its describes the place to be searched and the things to be
consent. It is the use of these communications facilities seized.44 Should any of these requisites be absent, the party
without the consent of PLDT that constitutes the crime of aggrieved by the issuance and enforcement of the search
theft, which is the unlawful taking of the telephone services warrant may file a motion to quash the search warrant with
and business. the issuing court or with the court where the action is
subsequently instituted.45
Therefore, the business of providing telecommunication and
the telephone service are personal property under Article 308 A search warrant proceeding is a special criminal and judicial
process akin to a writ of discovery. It is designed by the Rules warrants were issued by the RTC. In reversing the CA, the
of Criminal Procedure to respond only to an incident in the Court ruled:chanRoblesvirtualLawlibrary
main case, if one has already been instituted, or in
anticipation thereof. Since it is at most incidental to the main Mindful as we are of the ramifications of the doctrine of stare
criminal case, an order granting or denying a motion to quash decisis and the rudiments of fair play, it is our considered view
a search warrant may be questioned only via a petition that the 20th Century Fox ruling cannot be retroactively
for certiorari under Rule 65.46 applied to the instant case to justify the quashal of Search
Warrant No. 87053. [The] petitioners' consistent position
When confronted with this petition, the higher court must that the order of the lower court[,] xxx [which denied the
necessarily determine the validity of the lower courts action respondents'] motion to lift the order of search warrant^] was
from the prism of whether it was tainted with grave abuse of properly issued, [because there was] satisfactory compliance
discretion. By grave abuse of discretion, jurisprudence refers with the then prevailing standards under the law for
to the capricious and whimsical exercise of judgment determination of probable cause, is indeed well taken. The
equivalent to lack of jurisdiction, or to the exercise of power lower court could not possibly have expected more evidence
in an arbitrary or despotic manner by reason of passion or from petitioners in their application for a search warrant
personal hostility or in a manner so patent and gross as to other than what the law and jurisprudence, then existing and
amount to an invasion of positive duty or to the virtual refusal judicially accepted, required with respect to the finding of
to perform the duty enjoined or to act at all in contemplation probable cause.53
of the law.47
Columbia could easily be cited in favor of PLDT to sustain the
In a certiorari proceeding, the determination translates to an RTCs refusal to quash the search warrant. Indeed, in quashing
inquiry on whether the requirements and limitations provided SW Al and SW A2, the CA never intimated that the RTC
under the Constitution and the Rules of Court were properly disregarded any of the requisites for the issuance of a search
complied with, from the issuance of the warrant up to its warrant as these requirements were interpreted and
implementation. In view of the constitutional objective of observed under the then prevailing jurisprudence. The CA
preventing stealthy encroachment upon or the gradual could not have done so because precisely the issue of
depreciation of the rights secured by the Constitution, strict whether telephone services or the business of providing
compliance with the constitutional and procedural these services could be the subject of theft under the RPC
requirements is required. A judge who issues a search warrant had not yet reached the Court when the search warrants
without complying with these requirements commits grave were applied for and issued.
abuse of discretion.48
However, what distinguishes Columbia from the present case
One of the constitutional requirements for the validity of a is the focus of Columbias legal
search warrant is that it must be issued based on probable rationale. Columbias focus was not on whether the facts and
cause which, under the Rules, must be in connection with one circumstances would reasonably lead to the conclusion that
specific offense. In search warrant proceedings, probable an offense has been or is being committed and that the
cause is defined as such facts and circumstances that would objects sought in connection with the offense were in the
lead a reasonably discreet and prudent man to believe place to be searched the primary points of focus of the
that an offense has been committed and that the objects present case. Columbias focus was on whether
sought in connection with the offense are in the place sought the evidence presented at the time the search warrant was
to be searched.49 applied for was sufficient to establish the facts and
circumstances required for establishing probable cause to
In the determination of probable cause, the court must issue a search warrant.
necessarily determine whether an offense exists to justify the
issuance or quashal of the search warrant 50 because the Nonetheless, Columbia serves as a neat guide for the CA to
personal properties that may be subject of the search warrant decide the respondents' certiorari petition. In Columbia, the
are very much intertwined with the one specific offense Court applied the principle of nonretroactivity of its ruling
requirement of probable cause.51 Contrary to PLDTs claim, in 20th Century Fox, whose finality was not an issue, in
the only way to determine whether a warrant should issue in reversing a CA ruling. The Courts attitude in that case should
connection with one specific offense is to juxtapose the facts have been adopted by the CA in the present case
and circumstances presented by the applicant with the a fortiori since the ruling that the CA relied upon was not yet
elements of the offense that are alleged to support the search final at the time the CA resolved to quash the search
warrant. warrants.

Reviewing the RTCs denial of the motion to quash SWAl b. Supervening events justifying a broader review under
and SW A2 Rule 65

a. From the prism of Rule 65 Ordinarily, the CAs determination under Rule 65 is limited to
whether the RTC gravely abused its discretion in granting or
The facts of the present case easily call to mind the case denying the motion to quash based on facts then existing.
of Columbia Pictures, Inc. v. CA52 involving copyright Nonetheless, the Court recognizes that supervening facts may
infringement. In that case, the CA likewise voided the search transpire after the issuance and implementation of the search
warrant issued by the trial court by applying a doctrine that warrant that may provide justification for the quashal of the
added a new requirement (i.e., the production of the master search warrant via a petition for certiorari.
tape for comparison with the allegedly pirate copies) in
determining the existence of probable cause for the issuance For one, if the offense for which the warrant is issued is
of search warrant in copyright infringement cases. The subsequently decriminalized during the pendency of the
doctrine referred to was laid down in 20th Century Fox Film petition for certiorari, then the warrant may be quashed. 54 For
Corporation v. Court of Appeals. 20 th Century Fox, however, another, a subsequent ruling from the Court that a similar set
was promulgated more than eight months after the search of facts and circumstances does not constitute an offense, as
alleged in the search warrant application, may be used as a In applying Laurel despite PLDTs statement that the case is
ground to quash a warrant. 55 In both instances, the underlying still subject of a pending motion for reconsideration, 63 the CA
reason for quashing the search warrant is the absence of legally erred in refusing to reconsider its ruling that largely
probable cause which can only possibly exist when the relied on a nonfmal ruling of the Court. While the CAs
combination of facts and circumstances points to the possible dutiful desire to apply the latest pronouncement of the Court
commission of an offense that may be evidenced by the in Laurel is expected, it should have acted with caution,
personal properties sought to be seized. To the CA, the instead of excitement, on being informed by PLDT of its
second instance mentioned justified the quashal of the search pending motion for reconsideration; it should have then
warrants. followed the principle of stare decisis. The appellate courts
application of an exceptional circumstance when it may order
We would have readily agreed with the the quashal of the search warrant on grounds not existing at
CA if the Laurel Division ruling had not been subsequently the time the warrant was issued or implemented must still
reversed. As things turned out, however, the Court granted rest on prudential grounds if only to maintain the limitation of
PLDTs motion for reconsideration of the Court First Divisions the scope of the remedy of certiorari as a writ to correct
ruling in Laurel and ruled that the act of engaging in ISR is errors of jurisdiction and not mere errors of judgment.
xxx penalized under xxx article [308 of the RPC]. 56 As the RTC
itself found, PLDT successfully established in its application for Still, the respondents attempt to justify the CAs action by
a search warrant a probable cause for theft by evidence that arguing that the CA would still rule in the way it did 64 even
Laurels ISR activities deprived PLDT of its telephone services without Laurel. As PLDT correctly pointed out, there is simply
and of its business of providing these services without its nothing in the CAs decision that would support its quashal of
consent. the search warrant independently of Laurel. We must bear in
mind that the CAs quashal of SW Al and SW A2 operated
b1. the stare decisis aspect under the strictures of a certiorari petition, where the
presence of grave abuse of discretion is necessary for the
With the Court En Bancs reversal of the earlier Laurel ruling, corrective writ to issue since the appellate court exercises its
then the CAs quashal of these warrants would have no leg to supervisory jurisdiction in this case. We simply cannot
stand on. This is the dire consequence of failing to appreciate secondguess what the CAs action could have been.
the full import of the doctrine of stare decisis that the CA
ignored. Lastly, the CAs reliance on Savage v. Judge Taypin65 can
neither sustain the quashal of SW Al and SW A2. In Savage,
Under Article 8 of the Civil Code, the decisions of this Court the Court granted the certiorari petition and quashed the
form part of the countrys legal system. While these decisions search warrant because the alleged crime (unfair competition
are not laws pursuant to the doctrine of separation of powers, involving design patents) that supported the search warrant
they evidence the laws' meaning, breadth, and scope and, had already been repealed, and the act complained of, if at
therefore, have the same binding force as the laws all, gave rise only to civil liability (for patent infringement).
themselves.57 Hence, the Courts interpretation of a statute Having been decriminalized, probable cause for the crime
forms part of the law as of the date it was originally passed alleged could not possibly exist.
because the Courts construction merely establishes the
contemporaneous legislative intent that the interpreted law In the present case, the issue is whether the commission of
carries into effect.58 an ISR activity, in the manner that PLDTs evidence shows,
sufficiently establishes probable cause for the issuance of
Article 8 of the Civil Code embodies the basic principle search warrants for the crime of theft. Unlike in Savage, the
of stare decisis et non quieta movere (to adhere to precedents Court in Laurel was not confronted with the issue of
and not to unsettle established matters) that enjoins decriminalization (which is a legislative prerogative) but
adherence to judicial precedents embodied in the decision of whether the commission of an ISR activity meets the
the Supreme Court. That decision becomes a judicial elements of the offense of theft for purposes of quashing an
precedent to be followed in subsequent cases by all courts in information. Since the Court, in Laurel, ultimately ruled then
the land. The doctrine of stare decisis, in turn, is based on the an ISR activity justifies the elements of theft that must
principle that once a question of law has been examined and necessarily be alleged in the information a fortiori, the RTCs
decided, it should be deemed settled and closed to further determination should be sustained on certiorari.
argument.59 The doctrine of (horizontal) stare decisis is one of
policy, grounded on the necessity of securing certainty and The requirement of particularity in SWB1 and SWB2
stability of judicial decisions.60
On the issue of particularity in SW Bl and SW B2, we note
In the field of adjudication, a case cannot yet acquire the that the respondents have not appealed to us the CA ruling
status of a decided case that is deemed settled and closed that sustained paragraphs 1 to 6 of the search warrants.
to further argument if the Courts decision is still the subject Hence, we shall limit our discussion to the question of
of a motion for reconsideration seasonably filed by the whether the CA correctly ruled that the RTC gravely abused its
moving party. Under the Rules of Court, a party is expressly discretion insofar as it refused to quash paragraphs 7 to 9 of
allowed to file a motion for reconsideration of the Courts SW Bl and SWB2.
decision within 15 days from notice.61 Since the doctrine of
stare decisis is founded on the necessity of securing certainty Aside from the requirement of probable cause, the
and stability in law, then these attributes will spring only once Constitution also requires that the search warrant must
the Courts ruling has lapsed to finality in accordance with particularly describe the place to be searched and the things
law. In Ting v. VelezTing,62 we ruled that: to be seized. This requirement of particularity in the
The principle of stare decisis enjoins adherence by lower description, especially of the things to be seized, is meant to
courts to doctrinal rules established by this Court in enable the law enforcers to readily identify the properties to
its final decisions. It is based on the principle that once a be seized and, thus, prevent the seizure of the wrong items. It
question of law has been examined and decided, it should be seeks to leave the law enforcers with no discretion at all
deemed settled and closed to further argument. regarding these articles and to give life to the constitutional
provision against unreasonable searches and seizures. 66 In receipts, contracts, checks, orders, communications and
other words, the requisite sufficient particularity is aimed at documents, lease and/or subscription agreements or
preventing the law enforcer from exercising unlimited contracts, communications and documents relating to
discretion as to what things are to be taken under the warrant securing and using telephone lines and/or equipment[.] 74
and ensure that only those connected with the offense for According to PLDT, the items in paragraph 7 have a direct
which the warrant was issued shall be seized.67 relation to violation of PD No. 401 because the items are
connected to computers that, in turn, are linked to the
The requirement of specificity, however, does not require unauthorized connections to PLDT telephone lines. With
technical accuracy in the description of the property to be regard to the software, diskette and tapes in paragraph 8, and
seized. Specificity is satisfied if the personal properties' the items in paragraph 9, PLDT argues that these items are
description is as far as the circumstances will ordinarily allow fruits of the offense and that the information it contains
it to be so described. The nature of the description should constitutes the business profit of PLDT. According to PLDT, it
vary according to whether the identity of the property or its corroborates the fact that the respondents have made a
character is a matter of concern.68 One of the tests to business out of their illegal connections to its telephone lines.
determine the particularity in the description of objects to be
seized under a search warrant is when the things described We disagree with PLDT. The fact that the printers and
are limited to those which bear direct relation to the scanners are or may be connected to the other illegal
offense for which the warrant is being issued. 69 connections to the PLDT telephone lines does not make them
the subject of the offense or fruits of the offense, much less
Additionally, the Rules require that a search warrant should could they become a means of committing an offense.
be issued in connection with one specific offense to prevent
the issuance of a scattershot warrant. 70 The onespecific It is clear from PLDTs submission that it confuses the crime
offense requirement reinforces the constitutional for which SW Bl and SW B2 were issued with the crime for
requirement that a search warrant should issue only on the which SW Al and SWA2 were issued: SW Bl and SW B2
basis of probable cause. 71 Since the primary objective of were issued for violation of PD No. 401, to be enforced in two
applying for a search warrant is to obtain evidence to be used different places as identified in the warrants. The crime for
in a subsequent prosecution for an offense for which the which these search warrants were issued does not pertain to
search warrant was applied, a judge issuing a particular the crime of theft where matters of personal property and
warrant must satisfy himself that the evidence presented by the taking thereof with intent to gain become significant but
the applicant establishes the facts and circumstances relating to PD No. 401.
to this specific offense for which the warrant is sought and
issued.72 Accordingly, in a subsequent challenge against the These items could not be the subject of a violation of PD No.
validity of the warrant, the applicant cannot be allowed to 401 since PLDT itself does not claim that these items
maintain its validity based on facts and circumstances that themselves comprise the unauthorized installations. For
may be related to other search warrants but are extrinsic to emphasis, what PD No. 401 punishes is the unauthorized
the warrant in question. installation of telephone connection without the previous
consent of PLDT. In the present case, PLDT has not shown that
Under the Rules, the following personal property may be connecting printers, scanners, diskettes or tapes to a
subject of search warrant: (i) the subject of the offense; (ii) computer, even if connected to a PLDT telephone line, would
fruits of the offense; or (iii) those used or intended to be used or should require its prior authorization.
as the means of committing an offense. In the present case,
we sustain the CAs ruling nullifying paragraphs 7, 8 and 9 of Neither could these items be a means of committing a
SW Bl and SW B2 for failing the test of particularity. More violation of PD No. 401 since these copying, printing and
specifically, these provisions do not show how the storage devices in no way aided the respondents in making
enumerated items could have possibly been connected with the unauthorized connections. While these items may be
the crime for which the warrant was issued, i.e., P.D. No. 401. accessory to the computers and other equipment linked to
For clarity, PD No. 401 punishes: telephone lines, PD No. 401 does not cover this kind of items
Section 1. Any person who installs any water, within the scope of the prohibition. To allow the seizure of
electrical, telephone or piped gas connection without items under the PLDTs interpretation would, as the CA
previous authority from xxx the Philippine Long Distance correctly observed, allow the seizure under the warrant of
Telephone Company, xxx, tampers and/or uses tampered properties for personal use of the respondents.
water, electrical or gas meters, jumpers or other devices
whereby water, electricity or piped gas is stolen; steals or If PLDT seeks the seizure of these items to prove that these
pilfers water, electric or piped gas meters, or water, electric installations contain the respondents' financial gain and the
and/or telephone wires, or piped gas pipes or conduits; corresponding business loss to PLDT, then that purpose is
knowingly possesses stolen or pilfered water, electrical or gas served by SW Al and SW A2 since this is what PLDT
meters as well as stolen or pilfered water, electrical and/or essentially complained of in charging the respondents with
telephone wires, or piped gas pipes and conduits, shall, upon theft. However, the same reasoning does not justify its seizure
conviction, be punished with prision correccional in its under a warrant for violation of PD No. 401 since these items
minimum period or a fine ranging from two thousand to six are not directly connected to the PLDT telephone lines and
thousand pesos, or both.73 PLDT has not even claimed that the installation of these items
Paragraphs 7 to 8 of SW Bl and SW B2 read as follows: requires prior authorization from it.
7. COMPUTER PRINTERS AND SCANNERS or any similar
equipment or device used for copying and/or printing data WHEREFORE, premises considered, the petition is PARTIALLY
and/or information; GRANTED. The decision and the resolution of the Court of
Appeals in CAG.R. SP No. 89213 are hereby MODIFIED in
8. SOFTWARE, DISKETTES, TAPES or any similar equipment or that SW Al and SW A2 are hereby declared valid and
device used for recording or storing information; and constitutional. SO ORDERED.

9. Manuals, phone cards, access codes, billing statements,