PROPERTY CASES ARTS 415 418 UNDER ATTY.

IGNACIO
(FAVORITE CASES)
Punsalan, Jr. v. vda. de Lacsamana
The sole issue presented by petitioner for resolution is whether or not respondent Court erred in denying the
Motion to Set Case for Pre-trial with respect to respondent Remedios Vda. de Lacsamana as the case had been
dismissed on the ground of improper venue upon motion of co-respondent Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of
340 square meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land to respondent PNB
(Tarlac Branch) in the amount of P10,000.00, but for failure to pay said amount, the property was foreclosed on
December 16, 1970. Respondent PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings.
However, the bank secured title thereto only on December 14, 1977.
In the meantime, in 1974, while the properly was still in the alleged possession of petitioner and with the alleged
acquiescence of respondent PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor,
petitioner constructed a warehouse on said property. Petitioner declared said warehouse for tax purposes for
which he was issued Tax Declaration No. 5619. Petitioner then leased the warehouse to one Hermogenes Sibal
for a period of 10 years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) and respondent
Lacsamana over the property. This contract was amended on July 31, 1978, particularly to include in the sale,
the building and improvement thereon. By virtue of said instruments, respondent - Lacsamana secured title over
the property in her name (TCT No. 173744) as well as separate tax declarations for the land and building. 1
On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages" against
herein respondents PNB and Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI,
Quezon City, essentially impugning the validity of the sale of the building as embodied in the Amended Deed of
Sale. In this connection, petitioner alleged:
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22. That defendant, Philippine National Bank, through its Branch Manager ... by virtue of the request of
defendant ... executed a document dated July 31, 1978, entitled Amendment to Deed of Absolute Sale ... wherein
said defendant bank as Vendor sold to defendant Lacsamana the building owned by the plaintiff under Tax
Declaration No. 5619, notwithstanding the fact that said building is not owned by the bank either by virtue of the
public auction sale conducted by the Sheriff and sold to the Philippine National Bank or by virtue of the Deed of
Sale executed by the bank itself in its favor on September 21, 1977 ...;

23. That said defendant bank fraudulently mentioned ... that the sale in its favor should likewise have included
the building, notwithstanding no legal basis for the same and despite full knowledge that the Certificate of Sale
executed by the sheriff in its favor ... only limited the sale to the land, hence, by selling the building which never
became the property of defendant, they have violated the principle against 'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana be declared null and
void and that damages in the total sum of P230,000.00, more or less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative defense of lack of cause of
action in that she was a purchaser for value and invoked the principle in Civil Law that the "accessory follows the
principal". 3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue was improperly laid
considering that the building was real property under article 415 (1) of the New Civil Code and therefore section
2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of sale with
damages is in the nature of a personal action, which seeks to recover not the title nor possession of the property
but to compel payment of damages, which is not an action affecting title to real property.
On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as follows:
Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank dated March 13, 1980, considered
against the plaintiff's opposition thereto dated April 1, 1980, including the reply therewith of said defendant, this
Court resolves to DISMISS the plaintiff's complaint for improper venue considering that the plaintiff's complaint
which seeks for the declaration as null and void, the amendment to Deed of Absolute Sale executed by the
defendant Philippine National Bank in favor of the defendant Remedios T. Vda. de Lacsamana, on July 31, 1978,
involves a warehouse allegedly owned and constructed by the plaintiff on the land of the defendant Philippine
National Bank situated in the Municipality of Bamban, Province of Tarlac, which warehouse is an immovable
property pursuant to Article 415, No. 1 of the New Civil Code; and, as such the action of the plaintiff is a real
action affecting title to real property which, under Section 2, Rule 4 of the New Rules of Court, must be tried in
the province where the property or any part thereof lies. 5
In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the argument that the action to
annul does not involve ownership or title to property but is limited to the validity of the deed of sale and
emphasized that the case should proceed with or without respondent PNB as respondent Lacsamana had
already filed her Answer to the Complaint and no issue on venue had been raised by the latter.

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On September 1, 1980,.respondent Court denied reconsideration for lack of merit.

Leung Yee v. Strong Machinery Co.,

Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent Lacsamana was concerned, as the
issues had already been joined with the filing of respondent Lacsamana's Answer.

The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the
defendant machinery company, and executed a chattel mortgage thereon to secure payment of the purchase
price. It included in the mortgage deed the building of strong materials in which the machinery was installed,
without any reference to the land on which it stood. The indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the
mortgage instrument, and was bought in by the machinery company. The mortgage was registered in the chattel
mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was
annotated in the same registry on December 29, 1913.

In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for Pre-trial as the case
was already dismissed in the previous Orders of April 25, 1980 and September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due course.
We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable or real property as provided in article 415(l)
of the Civil Code. 6 Buildings are always immovable under the Code. 7 A building treated separately from the land
on which it stood is immovable property and the mere fact that the parties to a contract seem to have dealt with it
separate and apart from the land on which it stood in no wise changed its character as immovable property. 8
While it is true that petitioner does not directly seek the recovery of title or possession of the property in question,
his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of
the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary
objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does
not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real
property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Section 2, Rule
4) 10, which was timely raised (Section 1, Rule 16) 11.
Petitioner's other contention that the case should proceed in so far as respondent Lacsamana is concerned as
she had already filed an Answer, which did not allege improper venue and, therefore, issues had already been
joined, is likewise untenable. Respondent PNB is an indispensable party as the validity of the Amended Contract
of Sale between the former and respondent Lacsamana is in issue. It would, indeed, be futile to proceed with the
case against respondent Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case by petitioner Antonio
Punsalan, Jr. in the proper forum.
Costs against petitioner.

A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina" executed a deed
of sale of the land upon which the building stood to the machinery company, but this deed of sale, although
executed in a public document, was not registered. This deed makes no reference to the building erected on the
land and would appear to have been executed for the purpose of curing any defects which might be found to
exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery
company went into possession of the building at or about the time when this sale took place, that is to say, the
month of December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor,
the "Compaia Agricola Filipina" executed another mortgage to the plaintiff upon the building, separate and apart
from the land on which it stood, to secure payment of the balance of its indebtedness to the plaintiff under a
contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the
indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the
building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's certificate
of the sale duly registered in the land registry of the Province of Cavite.
At the time when the execution was levied upon the building, the defendant machinery company, which was in
possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the
property from the levy. Thereafter, upon demand of the sheriff, the plaintiff executed an indemnity bond in favor of
the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the
plaintiff, who was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery
company, on the ground that the company had its title to the building registered prior to the date of registry of the
plaintiff's certificate.
Article 1473 of the Civil Code is as follows:

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If the same thing should have been sold to different vendees, the ownership shall be transfer to the
person who may have the first taken possession thereof in good faith, if it should be personal property.

Construing the second paragraph of this article of the code, the supreme court of Spain held in its sentencia of
the 13th of May, 1908, that:

Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.

This rule is always to be understood on the basis of the good faith mentioned in the first paragraph;
therefore, it having been found that the second purchasers who record their purchase had knowledge of
the previous sale, the question is to be decided in accordance with the following paragraph. (Note 2, art.
1473, Civ. Code, Medina and Maranon [1911] edition.)

Should there be no entry, the property shall belong to the person who first took possession of it in good
faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith.
The registry her referred to is of course the registry of real property, and it must be apparent that the annotation
or inscription of a deed of sale of real property in a chattel mortgage registry cannot be given the legal effect of
an inscription in the registry of real property. By its express terms, the Chattel Mortgage Law contemplates and
makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage
registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property
executed in the manner and form prescribed in the statute. The building of strong materials in which the ricecleaning machinery was installed by the "Compaia Agricola Filipina" was real property, and the mere fact that
the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its
character as real property. It follows that neither the original registry in the chattel mortgage of the building and
the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any
effect whatever so far as the building was concerned.
We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by
the trial judge. We are of opinion, however, that the judgment must be sustained on the ground that the agreed
statement of facts in the court below discloses that neither the purchase of the building by the plaintiff nor his
inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the machinery company
must be held to be the owner of the property under the third paragraph of the above cited article of the code, it
appearing that the company first took possession of the property; and further, that the building and the land were
sold to the machinery company long prior to the date of the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express
terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to
the "inscription" of the property on the registry, it must be presumed that good faith is not an essential requisite of
registration in order that it may have the effect contemplated in this article. We cannot agree with this contention.
It could not have been the intention of the legislator to base the preferential right secured under this article of the
code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this section
would open wide the door to fraud and collusion. The public records cannot be converted into instruments of
fraud and oppression by one who secures an inscription therein in bad faith. The force and effect given by law to
an inscription in a public record presupposes the good faith of him who enters such inscription; and rights
created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under
an inscription "in bad faith," to the benefit of the person who thus makes the inscription.

Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of the
real property that is first recorded in the registry shall have preference, this provision must always be
understood on the basis of the good faith mentioned in the first paragraph; the legislator could not have
wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in given
cases, does not obtain even in real disputes between third persons. (Note 2, art. 1473, Civ. Code,
issued by the publishers of the La Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale
and inscribed his title in the land registry, was duly notified that the machinery company had bought the building
from plaintiff's judgment debtor; that it had gone into possession long prior to the sheriff's sale; and that it was in
possession at the time when the sheriff executed his levy. The execution of an indemnity bond by the plaintiff in
favor of the sheriff, after the machinery company had filed its sworn claim of ownership, leaves no room for doubt
in this regard. Having bought in the building at the sheriff's sale with full knowledge that at the time of the levy
and sale the building had already been sold to the machinery company by the judgment debtor, the plaintiff
cannot be said to have been a purchaser in good faith; and of course, the subsequent inscription of the sheriff's
certificate of title must be held to have been tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff
was not made in good faith, we should not be understood as questioning, in any way, the good faith and
genuineness of the plaintiff's claim against the "Compaia Agricola Filipina." The truth is that both the plaintiff and
the defendant company appear to have had just and righteous claims against their common debtor. No criticism
can properly be made of the exercise of the utmost diligence by the plaintiff in asserting and exercising his right
to recover the amount of his claim from the estate of the common debtor. We are strongly inclined to believe that
in procuring the levy of execution upon the factory building and in buying it at the sheriff's sale, he considered
that he was doing no more than he had a right to do under all the circumstances, and it is highly possible and
even probable that he thought at that time that he would be able to maintain his position in a contest with the
machinery company. There was no collusion on his part with the common debtor, and no thought of the
perpetration of a fraud upon the rights of another, in the ordinary sense of the word. He may have hoped, and
doubtless he did hope, that the title of the machinery company would not stand the test of an action in a court of
law; and if later developments had confirmed his unfounded hopes, no one could question the legality of the
propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed
the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery

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company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for
value. He took the risk and must stand by the consequences; and it is in this sense that we find that he was not a
purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has
acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same
rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot
close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good
faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such
defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will
not make him an innocent purchaser for value, if afterwards develops that the title was in fact defective, and it
appears that he had such notice of the defects as would have led to its discovery had he acted with that measure
of precaution which may reasonably be acquired of a prudent man in a like situation. Good faith, or lack of it, is in
its analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion,
we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward
motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which
constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on
inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts
always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact
that can be seen or touched, but rather a state or condition of mind which can only be judged of by actual or
fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann.,
2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in
the court below should be affirmed with costs of this instance against the appellant. So ordered.
Davao Sawmill v. Castillo
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by
counsel for the parties on appeal, involves the determination of the nature of the properties described in the
complaint. The trial judge found that those properties were personal in nature, and as a consequence absolved
the defendants from the complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine
Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao.
However, the land upon which the business was conducted belonged to another person. On the land the sawmill
company erected a building which housed the machinery used by it. Some of the implements thus used were
clearly personal property, the conflict concerning machines which were placed and mounted on foundations of
cement. In the contract of lease between the sawmill company and the owner of the land there appeared the
following provision:

That on the expiration of the period agreed upon, all the improvements and buildings introduced and
erected by the party of the second part shall pass to the exclusive ownership of the party of the first part
without any obligation on its part to pay any amount for said improvements and buildings; also, in the
event the party of the second part should leave or abandon the land leased before the time herein
stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first
part as though the time agreed upon had expired: Provided, however, That the machineries and
accessories are not included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc.,
was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that
action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by
the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the
record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the defendant
herein having consummated the sale, proceeded to take possession of the machinery and other properties
described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a
number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third
persons. One of such persons is the appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
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xxx

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5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land
for use in connection with any industry or trade being carried on therein and which are expressly
adapted to meet the requirements of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt
that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest before or at the
time of the sale of this property. It must further be pointed out that while not conclusive, the characterization of
the property as chattels by the appellant is indicative of intention and impresses upon the property the character
determined by the parties. In this connection the decision of this court in the case of Standard Oil Co. of New
York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a situation.

It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is
machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in
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connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be
returned to the lessee on the expiration or abandonment of the lease.

xxx

xxx

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.)

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was
held 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. In the opinion written by Chief Justice
White, whose knowledge of the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and character of the property from the point of view
of the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as a
judgment creditor of the Altagracia Company and the rights derived by them from the execution levied
on the machinery placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican
Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in
some cases to property of a movable nature, that is, personal property, because of the destination to
which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable either by
their own nature or by their destination or the object to which they are applicable." Numerous
illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels,
instruments or implements intended by the owner of the tenements for the industrial or works that they
may carry on in any building or upon any land and which tend directly to meet the needs of the said
industry or works." (See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable, may be immobilized.) So far as the
subject-matter with which we are dealing 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.

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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.
Mindanao Bus v. City Assessor

This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that
the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair
equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment.
Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not
realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court
of Tax Appeals a petition for the review of the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:

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Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor
trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public
Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices
and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon
Province;
3. That the machineries sought to be assessed by the respondent as real properties are the following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";

(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";

4. The Tax Court erred in denying petitioner's motion for reconsideration.

(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";

Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with
paragraph 5 of Article 415 of the New Civil Code which provides:

(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";
Art. 415. The following are immovable properties:
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";
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(f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked
Annex "F"; and

Note that the stipulation expressly states that the equipment 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 Supreme Court said:

5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor
trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed
therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be
serviceable in the TPU land transportation business it operates;

Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to
"machinery, liquid containers, instruments or implements intended by the owner of any building or land
for use in connection with any industry or trade being carried on therein and which are expressly
adapted to meet the requirements of such trade or industry."

6. That these machineries have never been or were never used as industrial equipments to produce
finished products for sale, nor to repair machineries, parts and the like offered to the general public
indiscriminately for business or commercial purposes for which petitioner has never engaged in, to
date.1awphl.nt

If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co.,
Inc., in lieu of the other of less capacity existing therein, for its sugar and industry, converted them into
real property by reason of their purpose, it cannot be said that their incorporation therewith was not
permanent in character because, as essential and principle elements of a sugar central, without them
the sugar central would be unable to function or carry on the industrial purpose for which it was
established. Inasmuch as the central is permanent in character, the necessary machinery and
equipment installed for carrying on the sugar industry for which it has been established must
necessarily be permanent. (Emphasis ours.)

The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion for
reconsideration, petitioner brought the case to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the questioned
assessments are valid; and that said tools, equipments or machineries are immovable taxable real
properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and
holding that pursuant thereto the movable equipments are taxable realties, by reason of their being
intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City Assessor's
power to assess and levy real estate taxes on machineries is further restricted by section 31, paragraph
(c) of Republic Act No. 521; and

xxx

(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. (Emphasis ours.)

(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G".
4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached
photographs which form part of this agreed stipulation of facts;

xxx

So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal
elements" of an industry or works without which such industry or works would be "unable to function or carry on
the industrial purpose for which it was established." We may here distinguish, therefore, those movable which
become immobilized by destination because they are essential and principal elements in the industry for those
which may not be so considered immobilized because they are merely incidental, not essential and principal.
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

Page 6 of 19

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:
xxx

xxx

xxx

(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 installed in a building on land more or less permanently, and the sawing is conducted in
the land or building.
But in the case at bar the equipments in question are destined only to repair or service the transportation
business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said
equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to
the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a
specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the
Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question
declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs.
So ordered.

Makati Leasing & Finance Corp. v. Wearever Textile Mills

Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court)
promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of
Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI, issued in Civil
Case No. 36040, as wen as the resolution dated September 22, 1981 of the said appellate court, denying
petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance
Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables
with the former under a Receivable Purchase Agreement. To secure the collection of the receivables assigned,
private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a machinery
described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private
respondent's premises and was not able to effect the seizure of the aforedescribed machinery. Petitioner
thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal, Branch VI, docketed
as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which
was however subsequently restrained upon private respondent's filing of a motion for reconsideration. After
several incidents, the lower court finally issued on February 11, 1981, an order lifting the restraining order for the
enforcement of the writ of seizure and an order to break open the premises of private respondent to enforce said
writ. The lower court reaffirmed its stand upon private respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and
removed the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent,
set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to
said Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel
mortgage, because it is a real property pursuant to Article 415 of the new Civil Code, the same being attached to
the ground by means of bolts and the only way to remove it from respondent's plant would be to drill out or
destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ was to take the main
drive motor of said machinery. The appellate court rejected petitioner's argument that private respondent is
estopped from claiming that the machine is real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought
the case to this Court for review by writ of certiorari. It is contended by private respondent, however, that the
instant petition was rendered moot and academic by petitioner's act of returning the subject motor drive of
respondent's machinery after the Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made
itself unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of
Appeals decision, as shown by the receipt duly signed by respondent's representative. 1 Considering that
petitioner has reserved its right to question the propriety of the Court of Appeals' decision, the contention of
private respondent that this petition has been mooted by such return may not be sustained.

Page 7 of 19

The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or
personal property from the point of view of the parties, with petitioner arguing that it is a personality, while the
respondent claiming the contrary, and was sustained by the appellate court, which accordingly held that the
chattel mortgage constituted thereon is null and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking
through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling
or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make
an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone determine
the status of the property, it does so when combined with other factors to sustain the interpretation that the
parties, particularly the mortgagors, intended to treat the house as personality. Finally, unlike in the Iya cases,
Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third
persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtorsmortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore
applies to the herein defendants-appellants, having treated the subject house as personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate
court did, the present case from the application of the abovequoted pronouncement. If a house of strong
materials, like what was involved in the above Tumalad case, may be considered as personal property for
purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent
third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its
nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is
really because one who has so agreed is estopped from denying the existence of the chattel mortgage.
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.

Calltex vs. BAA

FACTS:
The City Assessor characterized the items in gas stations of petitioner as taxable realty.
These
items included underground tanks, elevated tank, elevated water tanks, water tanks, gasoline
pumps, computing pumps, etc. These items are not owned by the lessor of the land
wherein the
equipment are installed. Upon expiration of the lease agreement, the equipment should be
returned in good condition.
HELD:
The equipment and machinery as appurtenances to the gas station building or shed owned by
Caltex 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 and fixed 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.
Meralco v. CBAA
In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the decision
of the Central Board of Assessment Appeals (composed of the Secretary of Finance as chairman
and the Secretaries of Justice and Local Government and Community Development as members)
dated May 6, 1976, holding that Meralco Securities' oil pipeline is subject to realty tax.
The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of 1949,
Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system
consisting of cylindrical steel pipes joined together and buried not less than one meter below the
surface along the shoulder of the public highway. The portion passing through Laguna is about
thirty kilometers long.

Page 8 of 19

The pipes for white oil products measure fourteen inches in diameter by thirty-six feet with a
maximum capacity of 75,000 barrels daily. The pipes for fuel and black oil measure sixteen inches
by forty-eight feet with a maximum capacity of 100,000 barrels daily.

The Solicitor General contends that certiorari is not proper in this case because the Board acted
within its jurisdiction and did not gravely abuse its discretion and Meralco Securities was not
denied due process of law.

The pipes are embedded in the soil and are firmly and solidly welded together so as to preclude
breakage or damage thereto and prevent leakage or seepage of the oil. The valves are welded to
the pipes so as to make the pipeline system one single piece of property from end to end.

Meralco Securities explains that because the Court of Tax Appeals has no jurisdiction to review the
decision of the Central Board of Assessment Appeals and because no judicial review of the Board's
decision is provided for in the Real 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 coldcut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of the ground
where they are buried. In points where the pipeline traversed rivers or creeks, the pipes were laid
beneath the bed thereof. Hence, the pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can be moved from one place to
another as shown in the permit issued by the Secretary of Public Works and Communications which
permit provides that the government reserves the right to require the removal or transfer of the
pipes by and at the concessionaire's expense should they be affected by any road repair or
improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna
treated the pipeline as real property and issued Tax Declarations Nos. 6535-6537, San Pedro; 74737478, Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Bian and 15806-15810, Calamba, containing
the assessed values of portions of the pipeline.
Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna
composed of the register of deeds as chairman and the provincial auditor as member. That board
in its decision of June 18, 1975 upheld the assessments (pp. 47-49, Rollo).
Meralco Securities brought the case to the Central Board of Assessment Appeals. As already
stated, that Board, composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and
Secretary of Justice Vicente Abad Santos and Secretary of Local Government and Community
Development Jose Roo as members, ruled that the pipeline is subject to realty tax (p. 40, Rollo).
A copy of that decision was served on Meralco Securities' counsel on August 27, 1976. Section 36
of the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974,
provides that the Board's decision becomes final and executory after the lapse of fifteen days from
the date of receipt of a copy of the decision by the appellant.
Under Rule III of the amended rules of procedure of the Central Board of Assessment Appeals (70
O.G. 10085), a party may ask for the reconsideration of the Board's decision within fifteen days
after receipt. On September 7, 1976 (the eleventh day), Meralco Securities filed its motion for
reconsideration.
Secretary of Finance Cesar Virata and Secretary Roo (Secretary Abad Santos abstained) denied
the motion in a resolution dated December 2, 1976, a copy of which was received by appellant's
counsel on May 24, 1977 (p. 4, Rollo). On June 6, 1977, Meralco Securities filed the instant petition
for certiorari.

We hold that certiorari was properly availed of in this case. It is a writ issued by a superior court to
an inferior court, board or officer exercising judicial or quasi-judicial functions whereby the record
of a particular case is ordered to be elevated for review and correction in matters of law (14 C.J.S.
121-122; 14 Am Jur. 2nd 777).
The rule is that as to administrative agencies exercising quasi-judicial power there is an underlying
power in the courts to scrutinize the acts of such agencies on questions of law and jurisdiction
even though no right of review is given by the statute (73 C.J.S. 506, note 56).
"The purpose of judicial review is to keep the administrative agency within its jurisdiction and
protect substantial rights of parties affected by its decisions" (73 C.J.S. 507, See. 165). The review
is a part of the system of checks and balances which is a limitation on the separation of powers
and which forestalls arbitrary and unjust adjudications.
Judicial review of the decision of an official or administrative agency exercising quasi-judicial
functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or
collusion or in case the administrative decision is corrupt, arbitrary or capricious (Mafinco Trading
Corporation vs. Ople, L-37790, March 25, 1976, 70 SCRA 139, 158; San Miguel Corporation vs.
Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56, 60, Mun. Council of Lemery vs. Prov. Board
of Batangas, 56 Phil. 260, 268).
The Central Board of Assessment Appeals, in confirming the ruling of the provincial assessor and
the provincial board of assessment appeals that Meralco Securities' pipeline is subject to realty tax,
reasoned out that the pipes are machinery or improvements, as contemplated in the Assessment
Law and the Real Property Tax Code; that they do not fall within the category of property exempt
from realty tax under those laws; that articles 415 and 416 of the Civil Code, defining real and
personal property, have no application to this case; that even under article 415, the steel pipes
can be regarded as realty because they are constructions adhered to the soil and things attached
to the land in a fixed manner and that Meralco Securities is not exempt from realty tax under the
Petroleum Law (pp. 36-40).
Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property
within the meaning of article 415. This contention is not sustainable under the provisions of the
Assessment Law, the Real Property Tax Code and the Civil Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including
land, buildings, machinery, and other improvements" not specifically exempted in section 3
thereof. This provision is reproduced with some modification in the Real Property Tax Code which
provides:

Page 9 of 19

SEC. 38.
Incidence of Real Property Tax. There shall be levied, assessed and collected in
all provinces, cities and municipalities an annual ad valorem tax on real property, such as land,
buildings, machinery and other improvements affixed or attached to real property not hereinafter
specifically exempted. *
It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of
exempt real property enumerated in section 3 of the Assessment Law and section 40 of the Real
Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids,
gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying with it the
right to the use of the soil in which it is placed (Note 21[10],54 C.J.S. 561).
Article 415[l] and [3] provides that real property may consist of constructions of all kinds adhered
to the soil and everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deterioration of the object.
The pipeline system in question is indubitably a construction 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 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 Directors of Red
River Levee Dist. No. 1 of Lafayette County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note
86).
The other contention of Meralco Securities is that the Petroleum Law exempts it from the payment
of realty taxes. The alleged exemption is predicated on the following provisions of that law which
exempt Meralco Securities from local taxes and make it liable for taxes of general application:
ART. 102. Work obligations, taxes, royalties not to be changed. Work obligations, special taxes
and royalties which are fixed by the provisions of this Act or by the concession for any of the kinds
of concessions to which this Act relates, are considered as inherent on such concessions after they
are granted, and shall not be increased or decreased during the life of the concession to which
they apply; nor shall any other special taxes or levies be applied to such concessions, nor shall
0concessionaires under this Act be subject to any provincial, municipal or other local taxes or
levies; nor shall any sales tax be charged on any petroleum produced from the concession or
portion thereof, manufactured by the concessionaire and used in the working of his concession. All
such concessionaires, however, shall be subject to such taxes as are of general application in
addition to taxes and other levies specifically provided in this Act.

lawmaking body and later by the President of the Philippines in the exercise of his lawmaking
powers, as shown in section 342 et seq. of the Revised Administrative Code, Act No. 3995,
Commonwealth Act No. 470 and Presidential Decree No. 464.
The realty tax is enforced throughout the Philippines and not merely in a particular municipality or
city but the proceeds of the tax accrue to the province, city, municipality and barrio where the
realty taxed is situated (Sec. 86, P.D. No. 464). In contrast, a local tax is imposed by the municipal
or city council by virtue of the Local Tax Code, Presidential Decree No. 231, which took effect on
July 1, 1973 (69 O.G. 6197).
We hold that the Central Board of Assessment Appeals did not act with grave abuse of discretion,
did not commit any error of law and acted within its jurisdiction in sustaining the holding of the
provincial assessor and the local board of assessment appeals that Meralco Securities' pipeline
system in Laguna is subject to realty tax.
WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No
costs.
BAA vs. Meralco
From the stipulation of facts and evidence adduced during the hearing, the following appear:
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 electric street
railway and electric light, heat and power system in the City of Manila and its suburbs to the
person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise
on March 1903, the terms and conditions of which were embodied in Ordinance No. 44 approved
on March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the transferee and
owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna
and is transmitted to the City of Manila by means of electric transmission wires, running from the
province of Laguna to the said City. These electric transmission wires which carry high voltage
current, 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 respondent
Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it. A
photograph of one of these steel towers is attached to the petition for review, marked Annex A.
Three steel towers were inspected by the lower court and parties and the following were the
descriptions given there of by said court:

The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. The findings were
as follows: the ground around one of the four posts was excavated to a depth of about eight (8)
feet, with an opening of about one (1) meter in diameter, decreased to about a quarter of a meter
as it we deeper until it reached the bottom of the post; at the bottom of the post were two parallel
steel bars attached to the leg means of bolts; the tower proper was attached to the leg three bolts;
with two cross metals to prevent mobility; there was no concrete foundation but there was adobe
stone underneath; as the bottom of the excavation was covered with water about three inches
high, it could not be determined with certainty to whether said adobe stone was placed purposely
Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general
or not, as the place abounds with this kind of stone; and the tower carried five high voltage wires
application. This argument is untenable because the realty tax has always been imposed by the
without cover or any insulating materials.
Page 10 of 19

The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by
the petitioner approximate more than one kilometer from the first tower. As in the first tower, the
ground around one of the four legs was excavate from seven to eight (8) feet deep and one and a
half (1-) meters wide. There being very little water at the bottom, it was seen that there was no
concrete foundation, but there soft adobe beneath. The leg was likewise provided with two parallel
steel bars bolted to a square metal frame also bolted to each corner. Like the first one, the second
tower is made up of metal rods joined together by means of bolts, so that by unscrewing the bolts,
the tower could be dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the first two towers
given above, the ground around the two legs of the third tower was excavated to a depth about
two or three inches beyond the outside level of the steel bar foundation. It was found that there
was no concrete foundation. Like the two previous ones, the bottom arrangement of the legs
thereof were found to be resting on soft adobe, which, probably due to high humidity, looks like
mud or clay. It was also found that the square metal frame supporting the legs were not attached
to any material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers
for real property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's
petition to cancel these declarations, an appeal was taken by respondent to the Board of
Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86
as real property tax on the said steel towers for the years 1952 to 1956. Respondent paid 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 the said tax
declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum
of P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant
petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the
term "poles" which are declared exempt from taxes under part II paragraph 9 of respondent's
franchise; (2) the steel towers are personal properties and are not subject to real property tax; and
(3) the City Treasurer of Quezon City is held responsible for the refund of the amount paid. These
are assigned as errors by the petitioner in the brief.

top of which something is affixed or by which something is supported; as a dovecote set on a pole;
telegraph poles; a tent pole; sometimes, specifically a vessel's master (Webster's New
International Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen
cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co. which are 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 paragraph 9, above quoted, that the
concept of the "poles" for which exemption is granted, is not determined by their place or location,
nor by the character of the electric current it carries, nor the material or form of which it is made,
but the use to which they are dedicated. In accordance with the definitions, pole is not restricted to
a long cylindrical piece of wood or metal, but includes "upright standards to the top of which
something is affixed or by which something is supported. As heretofore described, respondent's
steel supports consists of a framework of four steel bars or strips which are bound by steel crossarms atop of which are cross-arms supporting five high voltage transmission wires (See Annex A)
and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is
not a novelty. Several courts of last resort in the United States have called these steel supports
"steel towers", and they denominated these supports or towers, as electric poles. In their decisions
the words "towers" and "poles" were used interchangeably, and it is well understood in that
jurisdiction that a transmission tower or pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law provided that
wires shall be constructed upon suitable poles, this term was construed to mean either wood or
metal poles and in view of the land being subject to overflow, and the necessary carrying of
numerous wires and the distance between poles, the statute was interpreted to include towers or
poles. (Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by an association
used to convey its electric power furnished to subscribers and members, constructed for the
purpose of fastening high voltage and dangerous electric wires alongside public highways. The
steel supports or towers were made of iron or other metals consisting of two pieces running from
the ground up some thirty feet high, being wider at the bottom than at the top, the said two metal
pieces being connected with criss-cross iron running from the bottom to the top, constructed like
ladders and loaded with high voltage electricity. In form and structure, they are like the steel
towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)

The tax exemption privilege of the petitioner is quoted hereunder:

PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators), machinery and personal property as other
persons are or may be hereafter required by law to pay ... Said percentage shall be due and
payable at the time stated in paragraph nineteen of Part One hereof, ... and shall be in lieu of all
taxes and assessments of whatsoever nature and by whatsoever authority upon the privileges,
earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee from
which taxes and assessments the grantee is hereby expressly exempted. (Par. 9, Part Two, Act No.
484 Respondent's Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber,
as typically the stem of a small tree stripped of its branches; also by extension, a similar typically
cylindrical piece or object of metal or the like". The term also refers to "an upright standard to the

The term "poles" was used to denote the steel towers of an electric company engaged in the
generation of hydro-electric power generated from its plant to the Tower of Oxford and City of
Waterbury. These steel towers are about 15 feet square at the base and extended to a height of
about 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top of
which extends above the surface of the soil in the tower of Oxford, and to the towers are attached
insulators, arms, and other equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met his death was
built for the purpose of supporting a transmission wire used for carrying high-tension electric
power, but claimed that the steel towers on which it is carried were so large that their wire took
their structure out of the definition of a pole line. It was held that in defining the word pole, one
should not be governed by the wire or material of the support used, but was considering the

Page 11 of 19

danger from any elevated wire carrying electric current, and that regardless of the size or material
wire of its individual members, any continuous series of structures intended and used solely or
primarily for the purpose of supporting wires carrying electric currents is a pole line (Inspiration
Consolidation Cooper Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the
petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the
very object for which the franchise was granted. The poles as contemplated thereon, should be
understood and taken as a part of the electric power system of the respondent Meralco, for the
conveyance of electric current from the source thereof to its consumers. If the respondent would
be required to employ "wooden poles", or "rounded poles" as it used to do fifty years back, then
one should admit that the Philippines is one century behind the age of space. It should also be
conceded by now that steel towers, like the ones in question, for obvious reasons, can better
effectuate the purpose for which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question are not
embraced within the term poles, the logical question posited is whether they constitute real
properties, so that they can be subject to a real property tax. The tax law does not provide for a
definition of real property; but Article 415 of the Civil Code does, by stating the following are
immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx

xxx

xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object;
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for
an industry or works which may be carried in a building or on a piece of land, and which tends
directly to meet the needs of the said industry or works;
xxx

xxx

xxx

The steel towers or supports in question, do not come within the objects mentioned in paragraph
1, because they do not constitute buildings or constructions adhered to the soil. They are not
construction analogous to buildings nor adhering to the soil. As per description, given by the lower
court, they are removable and merely attached to a square metal frame by means of bolts, which
when unscrewed could easily be dismantled and moved from place to place. They can not be
included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they
can be separated without breaking the material or causing deterioration upon the object to which
they are attached. Each of these steel towers or supports consists of steel bars or metal strips,
joined together by means of bolts, which can be disassembled by unscrewing the bolts and
reassembled by screwing the same. These steel towers or supports do not also fall under
paragraph 5, for they are not machineries, receptacles, instruments or implements, and even if
they were, they are not intended for industry or works on the land. Petitioner is not engaged in an
industry or works in the land in which the steel supports or towers are constructed.

It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the
sum of P11,651.86, despite the fact that Quezon City is not a party to the case. It is argued that as
the City Treasurer is not the real party in 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.

US v. Carlos
Facts:
Ignacio Carlos has been a consumer of electricity furnished by the Manila Electric Railroad and
Light Company for a building containing the residence of the accused and 3 other residences.
Believing that more light is consumed than what is shown in the meter installed, the company
installed an additional meter on the pole outside Carloss house to compare the actual
consumption. They found out that Carlos used a jumper. Further, a jumper was found in a drawer
of a small cabinet in the room of the defendants house where the meter was installed. In the
absence of any explanation for his
possession of said device, the presumption raised was that Carlos was the owner of the device
whose only use was to deflect the flow of electricity, causing loss to the Meralco of over 2000
kilowatts of current. Accused of theft, Carloss defense was that electricity was an unknown force,
not a fluid, and being intangible, could not be the object of theft.
ISSUE:
Whether the court erred in declaring that electricity can be the object of theft.
HELD:
While electric current is not a fluid, still, its manifestations and effects like those of gas may be
seen and felt. The true test of what may be stolen is not whether it is corporeal or incorporeal, but
whether, being possessed of value a person other
than the owner may appropriate the same. Electricity, like gas, is a valuable merchandise and may
thus be stolen. (See also U.S. v. Tambunting, 41 Phil. 364). The court further ruled that electricity,
the same as gas, is a valuable article of merchandise, bought and sold like other personal property
and is capable of appropriation by another. It is also susceptible of being severed from a mass or
larger quantity and of being transported from place to place. Hence, no error was committed by
the trial court in holding that electricity is a subject of larceny.
Laurel vs. Abrogar
Before us is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CAG.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar, Regional Trial Court (RTC),

Page 12 of 19

Makati City, Branch 150, which denied the "Motion to Quash (With Motion to Defer Arraignment)" in
Criminal Case No. 99-2425 for theft.
Philippine Long Distance Telephone Company (PLDT) is the holder of a legislative franchise to
render local and international telecommunication services under Republic Act No. 7082.2 Under
said law, PLDT is authorized to establish, operate, manage, lease, maintain and purchase
telecommunication systems, including transmitting, receiving and switching stations, for both
domestic and international calls. For this purpose, it has installed an estimated 1.7 million
telephone lines nationwide. PLDT also offers other services as authorized by Certificates of Public
Convenience and Necessity (CPCN) duly issued by the National Telecommunications Commission
(NTC), and operates and maintains an International Gateway Facility (IGF). The PLDT network is
thus principally composed of the Public Switch Telephone Network (PSTN), telephone handsets
and/or telecommunications equipment used by its subscribers, the wires and cables linking said
telephone handsets and/or telecommunications equipment, antenna, the IGF, and other
telecommunications equipment which provide interconnections.3 1avvphil.net
PLDT alleges that one of the alternative calling patterns that constitute network fraud and violate
its network integrity is that which is known as International Simple Resale (ISR). ISR is a method of
routing and completing international long distance calls using International Private Leased Lines
(IPL), cables, antenna or air wave or frequency, which connect directly to the local or domestic
exchange facilities of the terminating country (the country where the call is destined). The IPL is
linked to switching equipment which is connected to a PLDT telephone line/number. In the process,
the calls bypass the IGF found at the terminating country, or in some instances, even those from
the originating country.4
One such alternative calling service is that offered by Baynet Co., Ltd. (Baynet) which sells "Bay
Super Orient Card" phone cards to people who call their friends and relatives in the Philippines.
With said card, one is entitled to a 27-minute call to the Philippines for about 37.03 per minute.
After dialing the ISR access number indicated in the phone card, the ISR operator requests the
subscriber to give the PIN number also indicated in the phone card. Once the callers identity (as
purchaser of the phone card) is confirmed, the ISR operator will then provide a Philippine local line
to the requesting caller via the IPL. According to PLDT, calls made through the IPL never pass the
toll center of IGF operators in the Philippines. Using the local line, the Baynet card user is able to
place a call to any point in the Philippines, provided the local line is National Direct Dial (NDD)
capable.5
PLDT asserts that Baynet conducts its ISR activities by utilizing an IPL to course its incoming
international long distance calls from Japan. The IPL is linked to switching equipment, which is then
connected to PLDT telephone lines/numbers and equipment, with Baynet as subscriber. Through
the use of the telephone lines and other auxiliary equipment, Baynet is able to connect an
international long distance call from Japan to any part of the Philippines, and make it appear as a
call originating from Metro Manila. Consequently, the operator of an ISR is able to evade payment
of access, termination or bypass charges and accounting rates, as well as compliance with the
regulatory requirements of the NTC. Thus, the ISR operator offers international telecommunication
services at a lower rate, to the damage and prejudice of legitimate operators like PLDT.6
PLDT pointed out that Baynet utilized the following equipment for its ISR activities: lines, cables,
and antennas or equipment or device capable of transmitting air waves or frequency, such as an
IPL and telephone lines and equipment; computers or any equipment or device capable of

accepting information applying the prescribed process of the information and supplying the result
of this process; modems or any equipment or device that enables a data terminal equipment such
as computers to communicate with other data terminal equipment via a telephone line;
multiplexers or any equipment or device that enables two or more signals from different sources to
pass through a common cable or transmission line; switching equipment, or equipment or device
capable of connecting telephone lines; and software, diskettes, tapes or equipment or device used
for recording and storing information.7
PLDT also discovered that Baynet subscribed to a total of 123 PLDT telephone lines/numbers.8
Based on the Traffic Study conducted on the volume of calls passing through Baynets ISR network
which bypass the IGF toll center, PLDT incurred an estimated monthly loss of P10,185,325.96.9
Records at the Securities and Exchange Commission (SEC) also revealed that Baynet was not
authorized to provide international or domestic long distance telephone service in the country. The
following are its officers: Yuji Hijioka, a Japanese national (chairman of the board of directors); Gina
C. Mukaida, a Filipina (board member and president); Luis Marcos P. Laurel, a Filipino (board
member and corporate secretary); Ricky Chan Pe, a Filipino (board member and treasurer); and
Yasushi Ueshima, also a Japanese national (board member).
Upon complaint of PLDT against Baynet for network fraud, and on the strength of two search
warrants10 issued by the RTC of Makati, Branch 147, National Bureau of Investigation (NBI) agents
searched its office at the 7th Floor, SJG Building, Kalayaan Avenue, Makati City on November 8,
1999. Atsushi Matsuura, Nobuyoshi Miyake, Edourd D. Lacson and Rolando J. Villegas were arrested
by NBI agents while in the act of manning the operations of Baynet. Seized in the premises during
the search were numerous equipment and devices used in its ISR activities, such as multiplexers,
modems, computer monitors, CPUs, antenna, assorted computer peripheral cords and
microprocessors, cables/wires, assorted PLDT statement of accounts, parabolic antennae and
voltage regulators.
State Prosecutor Ofelia L. Calo conducted an inquest investigation and issued a Resolution11 on
January 28, 2000, finding probable cause for theft under Article 308 of the Revised Penal Code and
Presidential Decree No. 40112 against the respondents therein, including Laurel.
On February 8, 2000, State Prosecutor Calo filed an Information with the RTC of Makati City
charging Matsuura, Miyake, Lacson and Villegas with theft under Article 308 of the Revised Penal
Code. After conducting the requisite preliminary investigation, the State Prosecutor filed an
Amended Information impleading Laurel (a partner in the law firm of Ingles, Laurel, Salinas, and,
until November 19, 1999, a member of the board of directors and corporate secretary of Baynet),
and the other members of the board of directors of said corporation, namely, Yuji Hijioka, Yasushi
Ueshima, Mukaida, Lacson and Villegas, as accused for theft under Article 308 of the Revised Penal
Code. The inculpatory portion of the Amended Information reads:
On or about September 10-19, 1999, or prior thereto, in Makati City, and within the jurisdiction of
this Honorable Court, the accused, conspiring and confederating together and all of them mutually
helping and aiding one another, with intent to gain and without the knowledge and consent of the
Philippine Long Distance Telephone (PLDT), did then and there willfully, unlawfully and feloniously
take, steal and use the international long distance calls belonging to PLDT by conducting
International Simple Resale (ISR), which is a method of routing and completing international long
distance calls using lines, cables, antennae, and/or air wave frequency which connect directly to
the local or domestic exchange facilities of the country where the call is destined, effectively

Page 13 of 19

stealing this business from PLDT while using its facilities in the estimated amount of
P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.

position is fortified by the Resolutions of the Department of Justice in 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 issued
on August 14, 2000 finding probable cause for theft against the respondents therein.

CONTRARY TO LAW.13
Accused Laurel filed a "Motion to Quash (with Motion to Defer Arraignment)" on the ground that
the factual allegations in the Amended Information do not constitute the felony of theft under
Article 308 of the Revised Penal Code. He averred that the Revised Penal Code, or any other
special penal law for that matter, does not prohibit ISR operations. He claimed that telephone calls
with the use of PLDT telephone lines, whether domestic or international, belong to the persons
making the call, not to PLDT. He argued that the caller merely uses the facilities of PLDT, and what
the latter owns are the telecommunication infrastructures or facilities through which the call is
made. He also asserted that PLDT is compensated for the callers use of its facilities by way of
rental; for an outgoing overseas call, PLDT charges the caller per minute, based on the duration of
the call. Thus, no personal property was stolen from PLDT. According to Laurel, the P20,370,651.92
stated in the Information, if anything, represents the rental for the use of PLDT facilities, and not
the value of anything owned by it. Finally, he averred that the allegations in the Amended
Information are already subsumed under the Information for violation of Presidential Decree (P.D.)
No. 401 filed and pending in the Metropolitan Trial Court of Makati City, docketed as Criminal Case
No. 276766.
The prosecution, through private complainant PLDT, opposed the motion,14 contending that the
movant unlawfully took personal property belonging to it, as follows: 1) intangible telephone
services that are being offered by PLDT and other telecommunication companies, i.e., the
connection and interconnection to their telephone lines/facilities; 2) the use of those facilities over
a period of time; and 3) the revenues derived in connection with the rendition of such services and
the use of such facilities.15
The prosecution asserted that the use of PLDTs intangible telephone services/facilities allows
electronic voice signals to pass through the same, and ultimately to the called partys number. It
averred that such service/facility is akin to electricity which, although an intangible property, may,
nevertheless, be appropriated and be the subject of theft. Such service over a period of time for a
consideration is the business that PLDT provides to its customers, which enables the latter to send
various messages to installed recipients. The service rendered by PLDT is akin to merchandise
which has specific value, and therefore, capable of appropriation by another, as in this case,
through the ISR operations conducted by the movant and his co-accused.
The prosecution further alleged that "international business calls and revenues constitute personal
property envisaged in Article 308 of the Revised Penal Code." Moreover, the intangible telephone
services/facilities belong to PLDT and not to the movant and the other accused, because they have
no telephone services and facilities of their own duly authorized by the NTC; thus, the taking by the
movant and his co-accused of PLDT services was with intent to gain and without the latters
consent.
The prosecution pointed out that the accused, as well as the movant, were paid in exchange for
their illegal appropriation and use of PLDTs telephone services and facilities; on the other hand,
the accused did not pay a single centavo for their illegal ISR operations. Thus, the acts of the
accused were akin to the use of a "jumper" by a consumer to deflect the current from the house
electric meter, thereby enabling one to steal electricity. The prosecution emphasized that its

On September 14, 2001, the RTC issued an Order16 denying the Motion to Quash the Amended
Information. The court declared that, although there is no law that expressly prohibits the use of
ISR, the facts alleged in the Amended Information "will show how the alleged crime was committed
by conducting ISR," to the damage and prejudice of PLDT.
Laurel filed a Motion for Reconsideration17 of the Order, alleging that international long distance
calls are not personal property, and are not capable of appropriation. He maintained that business
or revenue is not considered personal property, and that the prosecution failed to adduce proof of
its existence and the subsequent loss of personal property belonging to another. Citing the ruling
of the Court in United States v. De Guzman,18 Laurel averred that the case is not one with
telephone calls which originate with a particular caller and terminates with the called party. He
insisted that telephone calls are considered privileged communications under the Constitution and
cannot be considered as "the property of PLDT." He further argued that there is no kinship between
telephone calls and electricity or gas, as the latter are forms of energy which are generated and
consumable, and may be considered as personal property because of such characteristic. On the
other hand, the movant argued, the telephone business is not a form of energy but is an activity.
In its Order19 dated December 11, 2001, the RTC denied the movants Motion for Reconsideration.
This time, it ruled that what was stolen from PLDT was its "business" because, as alleged in the
Amended Information, the international long distance calls made through the facilities of PLDT
formed part of its business. The RTC noted that the movant was charged with stealing the business
of PLDT. To support its ruling, it cited Strochecker v. Ramirez,20 where the Court ruled that interest
in business is personal property capable of appropriation. It further declared that, through their ISR
operations, the movant and his co-accused deprived PLDT of fees for international long distance
calls, and that the ISR used by the movant and his co-accused was no different from the "jumper"
used for stealing electricity.
Laurel then filed a Petition for Certiorari with the CA, assailing the Order of the RTC. He alleged that
the respondent judge gravely abused his discretion in denying his Motion to Quash the Amended
Information.21 As gleaned from the material averments of the amended information, he was
charged with stealing the international long distance calls belonging to PLDT, not its business.
Moreover, the RTC failed to distinguish between the business of PLDT (providing services for
international long distance calls) and the revenues derived therefrom. He opined that a "business"
or its revenues cannot be considered as personal property under Article 308 of the Revised Penal
Code, since a "business" is "(1) a commercial or mercantile activity customarily engaged in as a
means of livelihood and typically involving some independence of judgment and power of decision;
(2) a commercial or industrial enterprise; and (3) refers to transactions, dealings or intercourse of
any nature." On the other hand, the term "revenue" is defined as "the income that comes back
from an investment (as in real or personal property); the annual or periodical rents, profits,
interests, or issues of any species of real or personal property."22
Laurel further posited that an electric companys business is the production and distribution of
electricity; a gas companys business is the production and/or distribution of gas (as fuel); while a
water companys business is the production and distribution of potable water. He argued that the
"business" in all these cases is the commercial activity, while the goods and merchandise are the

Page 14 of 19

products of such activity. Thus, in prosecutions for theft of certain forms of energy, it is the
electricity or gas which is alleged to be stolen and not the "business" of providing electricity or gas.
However, since a telephone company does not produce any energy, goods or merchandise and
merely renders a service or, in the words of PLDT, "the connection and interconnection to their
telephone lines/facilities," such service cannot be the subject of theft as defined in Article 308 of
the Revised Penal Code.23
He further declared that to categorize "business" as personal property under Article 308 of the
Revised Penal Code would lead to absurd consequences; in prosecutions for theft of gas, electricity
or water, it would then be permissible to allege in the Information that it is the gas business, the
electric business or the water business which has been stolen, and no longer the merchandise
produced by such enterprise.24
Laurel further cited the Resolution of the Secretary of Justice in Piltel v. Mendoza,25 where it was
ruled that the Revised Penal Code, legislated as it was before present technological advances were
even conceived, is not adequate to address the novel means of "stealing" airwaves or airtime. In
said resolution, it was noted that the inadequacy prompted the filing of Senate Bill 2379 (sic)
entitled "The Anti-Telecommunications Fraud of 1997" to deter cloning of cellular phones and other
forms of communications fraud. The said bill "aims to protect in number (ESN) (sic) or Capcode,
mobile identification number (MIN), electronic-international mobile equipment identity (EMEI/IMEI),
or subscriber identity module" and "any attempt to duplicate the data on another cellular phone
without the consent of a public telecommunications entity would be punishable by law."26 Thus,
Laurel concluded, "there is no crime if there is no law punishing the crime."
On August 30, 2002, the CA rendered judgment dismissing the petition.27 The appellate court
ruled that a petition for certiorari under Rule 65 of the Rules of Court was not the proper remedy of
the petitioner. On the merits of the petition, it held that while business is generally an activity
which is abstract and intangible in form, it is nevertheless considered "property" under Article 308
of the Revised Penal Code. The CA opined that PLDTs business of providing international calls is
personal property which may be the object of theft, and cited United States v. Carlos28 to support
such conclusion. The tribunal also cited Strochecker v. Ramirez,29 where this Court ruled that onehalf interest in a days business is personal property under Section 2 of Act No. 3952, otherwise
known as the Bulk Sales Law. The appellate court held that the operations of the ISR are not
subsumed in the charge for violation of P.D. No. 401.
Laurel, now the petitioner, assails the decision of the CA, contending that THE COURT OF APPEALS ERRED IN RULING THAT THE PERSONAL PROPERTY ALLEGEDLY STOLEN
PER THE INFORMATION IS NOT THE "INTERNATIONAL LONG DISTANCE CALLS" BUT THE "BUSINESS
OF PLDT."
THE COURT OF APPEALS ERRED IN RULING THAT THE TERM "BUSINESS" IS PERSONAL PROPERTY
WITHIN THE MEANING OF ART. 308 OF THE REVISED PENAL CODE.30
Petitioner avers that the petition for a writ of certiorari may be filed to nullify an interlocutory order
of the trial court which was issued with grave abuse of discretion amounting to excess or lack of
jurisdiction. In support of his petition before the Court, he reiterates the arguments in his pleadings
filed before the CA. He further claims that while the right to carry on a business or an interest or

participation in business is considered property under the New Civil Code, the term "business,"
however, is not. He asserts that the Philippine Legislature, which approved the Revised Penal Code
way back in January 1, 1932, could not have contemplated to include international long distance
calls and "business" as personal property under Article 308 thereof.
In its comment on the petition, the Office of the Solicitor General (OSG) maintains that the
amended information clearly states all the essential elements of the crime of theft. Petitioners
interpretation as to whether an "international long distance call" is personal property under the law
is inconsequential, as a reading of the amended information readily reveals that specific acts and
circumstances were alleged charging Baynet, through its officers, including petitioner, of
feloniously taking, stealing and illegally using international long distance calls belonging to
respondent PLDT by conducting ISR operations, thus, "routing and completing international long
distance calls using lines, cables, antenna and/or airwave frequency which connect directly to the
local or domestic exchange facilities of the country where the call is destined." The OSG maintains
that the international long distance calls alleged in the amended information should be construed
to mean "business" of PLDT, which, while abstract and intangible in form, is personal property
susceptible of appropriation.31 The OSG avers that what was stolen by petitioner and his coaccused is the business of PLDT providing international long distance calls which, though
intangible, is personal property of the PLDT.32
For its part, respondent PLDT asserts that personal property under Article 308 of the Revised Penal
Code comprehends intangible property such as electricity and gas which are valuable articles for
merchandise, brought and sold like other personal property, and are capable of appropriation. It
insists that the business of international calls and revenues constitute personal property because
the same are valuable articles of merchandise. The respondent reiterates that international calls
involve (a) the intangible telephone services that are being offered by it, that is, the connection
and interconnection to the telephone network, lines or facilities; (b) the use of its telephone
network, lines or facilities over a period of time; and (c) the income derived in connection
therewith.33
PLDT further posits that business revenues or the income derived in connection with the rendition
of such services and the use of its telephone network, lines or facilities are personal properties
under Article 308 of the Revised Penal Code; so is the use of said telephone services/telephone
network, lines or facilities which allow electronic voice signals to pass through the same and
ultimately to the called partys number. It is akin to electricity which, though intangible property,
may nevertheless be appropriated and can be the object of theft. The use of respondent PLDTs
telephone network, lines, or facilities over a period of time for consideration is the business that it
provides to its customers, which enables the latter to send various messages to intended
recipients. Such use over a period of time is akin to merchandise which has value and, therefore,
can be appropriated by another. According to respondent PLDT, this is what actually happened
when petitioner Laurel and the other accused below conducted illegal ISR operations.34
The petition is meritorious.
The issues for resolution are as follows: (a) whether or not the petition for certiorari is the proper
remedy of the petitioner in the Court of Appeals; (b) whether or not international telephone calls
using Bay Super Orient Cards through the telecommunication services provided by PLDT for such
calls, or, in short, PLDTs business of providing said telecommunication services, are proper
subjects of theft under Article 308 of the Revised Penal Code; and (c) whether or not the trial court

Page 15 of 19

committed grave abuse of discretion amounting to excess or lack of jurisdiction in denying the
motion of the petitioner to quash the amended information.

admitted or not denied by the prosecution.42 If the facts alleged in the Information do not
constitute an offense, the complaint or information should be quashed by the court.43

On the issue of whether or not the petition for certiorari instituted by the petitioner in the CA is
proper, the general rule is that a petition for certiorari under Rule 65 of the Rules of Court, as
amended, to nullify an order denying a motion to quash the Information is inappropriate because
the aggrieved party has a remedy of appeal in the ordinary course of law. Appeal and certiorari are
mutually exclusive of each other. The remedy of the aggrieved party is to continue with the case in
due course and, when an unfavorable judgment is rendered, assail the order and the decision on
appeal. However, if the trial court issues the order denying the motion to quash the Amended
Information with grave abuse of discretion amounting to excess or lack of jurisdiction, or if such
order is patently erroneous, or null and void for being contrary to the Constitution, and the remedy
of appeal would not afford adequate and expeditious relief, the accused may resort to the
extraordinary remedy of certiorari.35 A special civil action for certiorari is also available where
there are special circumstances clearly demonstrating the inadequacy of an appeal. As this Court
held in Bristol Myers Squibb (Phils.), Inc. v. Viloria:36

We have reviewed the Amended Information and find that, as mentioned by the petitioner, it does
not contain material allegations charging the petitioner of theft of personal property under Article
308 of the Revised Penal Code. It, thus, behooved the trial court to quash the Amended
Information. The Order of the trial court denying the motion of the petitioner to quash the
Amended Information is a patent nullity.

Nonetheless, the settled rule is that a writ of certiorari may be granted in cases where, despite
availability of appeal after trial, there is at least a prima facie showing on the face of the petition
and its annexes that: (a) the trial court issued the order with grave abuse of discretion amounting
to lack of or in excess of jurisdiction; (b) appeal would not prove to be a speedy and adequate
remedy; (c) where the order is a patent nullity; (d) the decision in the present case will arrest
future litigations; and (e) for certain considerations such as public welfare and public policy.37
In his petition for certiorari in the CA, petitioner averred that the trial court committed grave abuse
of its discretion amounting to excess or lack of jurisdiction when it denied his motion to quash the
Amended Information despite his claim that the material allegations in the Amended Information
do not charge theft under Article 308 of the Revised Penal Code, or any offense for that matter. By
so doing, the trial court deprived him of his constitutional right to be informed of the nature of the
charge against him. He further averred that the order of the trial court is contrary to the
constitution and is, thus, null and void. He insists that he should not be compelled to undergo the
rigors and tribulations of a protracted trial and incur expenses to defend himself against a nonexistent charge.

On the second issue, we find and so hold that the international telephone calls placed by Bay
Super Orient Card holders, the telecommunication services provided by PLDT and its business of
providing said services are not personal properties under Article 308 of the Revised Penal Code.
The construction by the respondents of Article 308 of the said Code to include, within its coverage,
the aforesaid international telephone calls, telecommunication services and business is contrary to
the letter and intent of the law.
The rule is that, penal laws are to be construed strictly. Such rule is founded on the tenderness of
the law for the rights of individuals and on the plain principle that the power of punishment is
vested in Congress, not in the judicial department. It is Congress, not the Court, which is to define
a crime, and ordain its punishment.44 Due respect for the prerogative of Congress in defining
crimes/felonies constrains the Court to refrain from a broad interpretation of penal laws where a
"narrow interpretation" is appropriate. The Court must take heed to language, legislative history
and purpose, in order to strictly determine the wrath and breath of the conduct the law forbids.45
However, when the congressional purpose is unclear, the court must apply the rule of lenity, that
is, ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity.46
Penal statutes may not be enlarged by implication or intent beyond the fair meaning of the
language used; and may not be held to include offenses other than those which are clearly
described, notwithstanding that the Court may think that Congress should have made them more
comprehensive.47 Words and phrases in a statute are to be construed according to their common
meaning and accepted usage.
As Chief Justice John Marshall declared, "it would be dangerous, indeed, to carry the principle that
a case which is within the reason or

Petitioner is correct.
An information or complaint must state explicitly and directly every act or omission constituting an
offense38 and must allege facts establishing conduct that a penal statute makes criminal;39 and
describes the property which is the subject of theft to advise the accused with reasonable certainty
of the accusation he is called upon to meet at the trial and to enable him to rely on the judgment
thereunder of a subsequent prosecution for the same offense.40 It must show, on its face, that if
the alleged facts are true, an offense has been committed. The rule is rooted on the constitutional
right of the accused to be informed of the nature of the crime or cause of the accusation against
him. He cannot be convicted of an offense even if proven unless it is alleged or necessarily
included in the Information filed against him.
As a general prerequisite, a motion to quash on the ground that the Information does not
constitute the offense charged, or any offense for that matter, should be resolved on the basis of
said allegations whose truth and veracity are hypothetically committed;41 and on additional facts

mischief of a statute is within its provision, so far as to punish a crime not enumerated in the
statute because it is of equal atrocity, or of kindred character with those which are enumerated.48
When interpreting a criminal statute that does not explicitly reach the conduct in question, the
Court should not base an expansive reading on inferences from subjective and variable
understanding.49
Article 308 of the Revised Penal Code defines theft as follows:
Art. 308. Who are liable for theft. Theft is committed by any person who, with intent to gain but
without violence, against or intimidation of persons nor force upon things, shall take personal
property of another without the latters consent.
The provision was taken from Article 530 of the Spanish Penal Code which reads:

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1. Los que con nimo de lucrarse, y sin violencia o intimidacin en las personas ni fuerza en las
cosas, toman las cosas muebles ajenas sin la voluntad de su dueo.50
For one to be guilty of theft, the accused must have an intent to steal (animus furandi) personal
property, meaning the intent to deprive another of his ownership/lawful possession of personal
property which intent is apart from and concurrently with the general criminal intent which is an
essential element of a felony of dolo (dolus malus).

the lawful possessor thereof.56 It is not necessary that the property be actually carried away out of
the physical possession of the lawful possessor or that he should have made his escape with it.57
Neither asportation nor actual manual possession of property is required. Constructive possession
of the thief of the property is enough.58
The essence of the element is the taking of a thing out of the possession of the owner without his
privity and consent and without animus revertendi.59

An information or complaint for simple theft must allege the following elements: (a) the taking of
personal property; (b) the said property belongs to another; (c) the taking be done with intent to
gain; and (d) the taking be accomplished 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 agency, animate
or inanimate, with intent to gain. Intent to gain includes the unlawful taking of personal property
for the purpose of deriving utility, satisfaction, enjoyment and pleasure.60

One is apt to conclude that "personal property" standing alone, covers both tangible and intangible
properties and are subject of theft under the Revised Penal Code. But the words "Personal
property" under the Revised Penal Code must be considered in tandem with the word "take" in the
law. The statutory definition of "taking" and movable property indicates that, clearly, not all
personal properties may be the proper subjects of theft. The general rule is that, only movable
properties which have physical or material existence and susceptible of occupation by another are
proper objects of theft.52 As explained by Cuelo Callon: "Cosa juridicamente es toda sustancia
corporal, material, susceptible de ser aprehendida que tenga un valor cualquiera."53

We agree with the contention of the respondents that intangible properties such as electrical
energy and gas are proper subjects of theft. The reason for this is that, as explained by this Court
in United States v. Carlos61 and United States v. Tambunting,62 based on decisions of the
Supreme Court of Spain and of the courts in England and the United States of America, gas or
electricity are capable of appropriation by another other than the owner. Gas and electrical energy
may be taken, carried away and appropriated. In People v. Menagas,63 the Illinois State Supreme
Court declared that electricity, like gas, may be seen and felt. Electricity, the same as gas, is a
valuable article of merchandise, bought and sold like other personal property and is capable of
appropriation by another. It is a valuable article of merchandise, bought and sold like other
personal property, susceptible of being severed from a mass or larger quantity and of being
transported from place to place. Electrical energy may, likewise, be taken and carried away. It is a
valuable commodity, bought and sold like other personal property. It may be transported from
place to place. There is nothing in the nature of gas used for illuminating purposes which renders it
incapable of being feloniously taken and carried away.

According to Cuello Callon, in the context of the Penal Code, only those movable properties which
can be taken and carried from the place they are found are proper subjects of theft. Intangible
properties such as rights and ideas are not subject of theft because the same cannot be "taken"
from the place it is found and is occupied or appropriated.
Solamente las cosas muebles y corporales pueden ser objeto de hurto. La sustraccin de cosas
inmuebles y la cosas incorporales (v. gr., los derechos, las ideas) no puede integrar este delito,
pues no es posible asirlas, tomarlas, para conseguir su apropiacin. El Codigo emplea la expresin
"cosas mueble" en el sentido de cosa que es susceptible de ser llevada del lugar donde se
encuentra, como dinero, joyas, ropas, etctera, asi que su concepto no coincide por completo con
el formulado por el Codigo civil (arts. 335 y 336).54
Thus, movable properties under Article 308 of the Revised Penal Code should be distinguished from
the rights or interests to which they relate. A naked right existing merely in contemplation of law,
although it may be very valuable to the person who is entitled to exercise it, is not the subject of
theft or larceny.55 Such rights or interests are intangible and cannot be "taken" by another. Thus,
right to produce oil, good will or an interest in business, or the right to engage in 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 form or substance, the mere "breath"
of the Congress. On the other hand, goods, wares and merchandise of businessmen and credit
cards issued to them are movable properties with physical and material existence and may be
taken by another; hence, proper subjects of theft.
There is "taking" of personal property, and theft is consummated when the offender unlawfully
acquires possession of personal property even if for a short time; or if such property is under the
dominion and control of the thief. The taker, at some particular amount, must have obtained
complete and absolute possession and control of the property adverse to the rights of the owner or

In People ex rel Brush Electric Illuminating Co. v. Wemple,64 the Court of Appeals of New York held
that electric energy is manufactured and sold in determinate quantities at a fixed price, precisely
as are coal, kerosene oil, and gas. It may be conveyed to the premises of the consumer, stored in
cells of different capacity known as an accumulator; or it may be sent through a wire, just as gas or
oil may be transported either in a close tank or forced through a pipe. Having reached the
premises of the consumer, it may be used in any way he may desire, being, like illuminating gas,
capable of being transformed either into heat, light, or power, at the option of the purchaser. In
Woods v. People,65 the Supreme Court of Illinois declared that there is nothing in the nature of gas
used for illuminating purposes which renders it incapable of being feloniously taken and carried
away. It is a valuable article of merchandise, bought and sold like other personal property,
susceptible of being severed from a mass or larger quantity and of being transported from place to
place.
Gas and electrical energy should not be equated with business or services provided by business
entrepreneurs to the public. Business does not have an exact definition. Business is referred as
that which occupies the time, attention and labor of men for the purpose of livelihood or profit. It
embraces everything that which a person can be employed.66 Business may also mean
employment, occupation or profession. Business is also defined as a commercial activity for gain
benefit or advantage.67 Business, like services in business, although are properties, are not proper
subjects of theft under the Revised Penal Code because the same cannot be "taken" or "occupied."
If it were otherwise, as claimed by the respondents, there would be no juridical difference between

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the taking of the business of a person or the services provided by him for gain, vis--vis, the taking
of goods, wares or merchandise, or equipment comprising his business.68 If it was its intention to
include "business" as personal property under Article 308 of the Revised Penal Code, the Philippine
Legislature should have spoken in language that is clear and definite: that business is personal
property under Article 308 of the Revised Penal Code.69
We agree with the contention of the petitioner that, as gleaned from the material averments of the
Amended Information, he is charged of "stealing the international long distance calls belonging to
PLDT" and the use thereof, through the ISR. Contrary to the claims of the OSG and respondent
PLDT, the petitioner is not charged of stealing P20,370,651.95 from said respondent. Said amount
of P20,370,651.95 alleged in the Amended Information is the aggregate amount of access,
transmission or termination charges which the PLDT expected from the international long distance
calls of the callers with the use of Baynet Super Orient Cards sold by Baynet Co. Ltd.
In defining theft, under Article 308 of the Revised Penal Code, as the taking of personal property
without the consent of the owner thereof, the Philippine legislature could not have contemplated
the human voice which is converted into electronic impulses or electrical current which are
transmitted to the party called through the PSTN of respondent PLDT and the ISR of Baynet Card
Ltd. within its coverage. When the Revised Penal Code was approved, on December 8, 1930,
international telephone calls and the transmission and routing of electronic voice signals or
impulses emanating from said calls, through the PSTN, IPL and ISR, were still non-existent. Case
law is that, where a legislative history fails to evidence congressional awareness of the scope of
the statute claimed by the respondents, a narrow interpretation of the law is more consistent with
the usual approach to the construction of the statute. Penal responsibility cannot be extended
beyond the fair scope of the statutory mandate.70
Respondent PLDT does not acquire possession, much less, ownership of the voices of the
telephone callers or of the electronic voice signals or current emanating from said calls. The
human voice and the electronic voice signals or current caused thereby are intangible and not
susceptible of possession, occupation or appropriation by the respondent PLDT or even the
petitioner, for that matter. PLDT merely transmits the electronic voice signals through its facilities
and equipment. Baynet Card Ltd., through its operator, merely intercepts, reroutes the calls and
passes them to its toll center. Indeed, the parties called receive the telephone calls from Japan.
In this modern age of technology, telecommunications systems have become so tightly merged
with computer systems that it is difficult to know where one starts and the other finishes. The
telephone set is highly computerized and allows computers to communicate across long
distances.71 The instrumentality at issue in this case is not merely a telephone but a telephone
inexplicably linked to a computerized communications system with the use of Baynet Cards sold by
the Baynet Card Ltd. The corporation uses computers, modems and software, among others, for its
ISR.72
The conduct complained of by respondent PLDT is reminiscent of "phreaking" (a slang term for the
action of making a telephone system to do something that it normally should not allow by "making
the phone company bend over and grab its ankles"). A "phreaker" is one who engages in the act of
manipulating phones and illegally markets telephone services.73 Unless the phone company
replaces all its hardware, phreaking would be impossible to stop. The phone companies in North
America were impelled to replace all their hardware and adopted full digital switching system

known as the Common Channel Inter Office Signaling. Phreaking occurred only during the 1960s
and 1970s, decades after the Revised Penal Code took effect.
The petitioner is not charged, under the Amended Information, for theft of telecommunication or
telephone services offered by PLDT. Even if he is, the term "personal property" under Article 308 of
the Revised Penal Code cannot be interpreted beyond its seams so as to include
"telecommunication or telephone services" or computer services for that matter. The word
"service" has a variety of meanings dependent upon the context, or the sense in which it is used;
and, in some instances, it may include a sale. For instance, the sale of food by restaurants is
usually referred to as "service," although an actual sale is involved.74 It may also mean the duty or
labor to be rendered by one person to another; performance of labor for the benefit of another.75
In the case of PLDT, it is to render local and international telecommunications services and such
other services as authorized by the CPCA issued by the NTC. Even at common law, neither time nor
services may be taken and occupied or appropriated.76 A service is generally not considered
property and a theft of service would not, therefore, constitute theft since there can be no caption
or asportation.77 Neither is the unauthorized use of the equipment and facilities of PLDT by the
petitioner theft under the aforequoted provision of the Revised Penal Code.78
If it was the intent of the Philippine Legislature, in 1930, to include services to be the subject of
theft, it should have incorporated the same in Article 308 of the Revised Penal Code. The
Legislature did not. In fact, the Revised Penal Code does not even contain a definition of services.
If taking of telecommunication services or the business of a person, is to be proscribed, it must be
by special statute79 or an amendment of the Revised Penal Code. Several states in the United
States, such as New York, New Jersey, California and Virginia, realized that their criminal statutes
did not contain any provisions penalizing the theft of services and passed laws defining and
penalizing theft of telephone and computer services. The Pennsylvania Criminal Statute now
penalizes theft of services, thus:
(a) Acquisition of services. -(1) A person is guilty of theft if he intentionally obtains services for himself or for another which he
knows are available only for compensation, by deception or threat, by altering or tampering with
the public utility meter or measuring device by which such services are delivered or by causing or
permitting such altering or tampering, by making or maintaining any unauthorized connection,
whether physically, electrically or inductively, to a distribution or transmission line, by attaching or
maintaining the attachment of any unauthorized device to any cable, wire or other component of
an electric, telephone or cable television system or to a television receiving set connected to a
cable television system, by making or maintaining any unauthorized modification or alteration to
any device installed by a cable television system, or by false token or other trick or artifice to avoid
payment for the service.
In the State of Illinois in the United States of America, theft of labor or services or use of property is
penalized:
(a) A person commits theft when he obtains the temporary use of property, labor or services of
another which are available only for hire, by means of threat or deception or knowing that such
use is without the consent of the person providing the property, labor or services.

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In 1980, the drafters of the Model Penal Code in the United States of America arrived at the
conclusion that labor and services, including professional services, have not been included within
the traditional scope of the term "property" in ordinary theft statutes. Hence, they decided to
incorporate in the Code Section 223.7, which defines and penalizes theft of services, thus:
(1) A person is guilty of theft if he purposely obtains services which he knows are available only for
compensation, by deception or threat, or by false token or other means to avoid payment for the
service. "Services" include labor, professional service, transportation, telephone or other public
service, accommodation in hotels, restaurants or elsewhere, admission to exhibitions, use of
vehicles or other movable property. Where compensation for service is ordinarily paid immediately
upon the rendering of such service, as in the case of hotels and restaurants, refusal to pay or
absconding without payment or offer to pay gives rise to a presumption that the service was
obtained by deception as to intention to pay; (2) A person commits theft if, having control over the
disposition of services of others, to which he is not entitled, he knowingly diverts such services to
his own benefit or to the benefit of another not entitled thereto.
Interestingly, after the State Supreme Court of Virginia promulgated its decision in Lund v.
Commonwealth,80 declaring that neither time nor services may be taken and carried away and are
not proper subjects of larceny, the General Assembly of Virginia enacted Code No. 18-2-98 which
reads:
Computer time or services or data processing services or information or data stored in connection
therewith is hereby defined to be property which may be the subject of larceny under 18.2-95
or 18.2-96, or embezzlement under 18.2-111, or false pretenses under 18.2-178.
In the State of Alabama, Section 13A-8-10(a)(1) of the Penal Code of Alabama of 1975 penalizes
theft of services:
"A person commits the crime of theft of services if: (a) He intentionally obtains services known by
him to be available only for compensation by deception, threat, false token or other means to
avoid payment for the services "
In the Philippines, Congress has not amended the Revised Penal Code to include theft of services
or theft of business as felonies. Instead, it approved a law, Republic Act No. 8484, otherwise known
as the Access Devices Regulation Act of 1998, on February 11, 1998. Under the law, an access
device means any card, plate, code, account number, electronic serial number, personal
identification number and other telecommunication services, equipment or instrumentalities-

identifier or other means of account access that can be used to obtain money, goods, services or
any other thing of value or to initiate a transfer of funds other than a transfer originated solely by
paper instrument. Among the prohibited acts enumerated in Section 9 of the law are the acts of
obtaining money or anything of value through the use of an access device, with intent to defraud
or intent to gain and fleeing thereafter; and of effecting transactions with one or more access
devices issued to another person or persons to receive payment or any other thing of value. Under
Section 11 of the law, conspiracy to commit access devices fraud is a 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.

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