REAL AND PERSONAL PROPERTY CLASSIFICATION AND TREATMENT

1.
2.
3.
4.
5.
6.

PLDT V ALVAREZ
LAUREL V ABROGAR
SERGS V PCILEASING
PRUDENTIAL V PANIS
CALTEX PHIL, INC V CBAA
MERALCO V CBAA

G.R. No. 179408, March 05, 2014

PHILIPPINE

LONG

DISTANCE

TELEPHONE

COMPANY, Petitioner, v. ABIGAIL R. RAZON ALVAREZ AND VERNON R.

RAZON, Respondents.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari1 assailing the
decision2 dated August 11, 2006 and the resolution 3 dated August 22, 2007
of the Court of Appeals (CA) in CAG.R. SP No. 89213 on the validity of the
four search warrants issued by the Regional Trial Court (RTC) of Pasay City,
Branch

115.

The CA rulings (i) quashed the first two search warrants, similarly docketed
as Search Warrant No. 03063, issued for violation of Article 308, in relation
to Article 309, of the Revised Penal Code (RPC), and (ii) declared void
paragraphs 7, 8 and 9 of the other two search warrants, also similarly
docketed as Search Warrant No. 03064, issued for violation of Presidential
Decree (PD) No. 401.4
FACTUAL ANTECEDENTS
Philippine Long Distance Telephone Company (PLDT) is the grantee of a
legislative franchise5 which authorizes it to carry on the business of providing
basic and enhanced telecommunications services in and between areas in
the Philippines and between the Philippines and other countries and
territories,6and, accordingly, to establish, operate, manage, lease, maintain
and

purchase

telecommunications

system

for

both

domestic

and

international calls.7 Pursuant to its franchise, PLDT offers to the public wide
range of services duly authorized by the National Telecommunications
Commission

(NTC).

PLDTs network is principally composed of the Public Switch Telephone

Network, telephone handsets and/or telecommunications equipment used by
its subscribers, the wires and cables linking these handsets and/or
equipment, antennae, transmission facilities, the international gateway
facility

(IGF)

and

other

telecommunications

equipment

providing

interconnections.8 To safeguard the integrity of its network, PLDT regularly

conducts investigations on various prepaid cards marketed and sold abroad
to determine alternative calling patterns (ACP) and network fraud that are
being

perpetrated

against

it.

To prevent or stop network fraud, PLDTs ACP Detection Division (ACPDD)

regularly visits foreign countries to conduct market research on various
prepaid phone cards offered abroad that allow their users to make overseas
calls

to

PLDT

subscribers

in

the

Philippines

at

cheaper

rate.

The ACPDD bought The Number One prepaid card a card principally
marketed to Filipinos residing in the United Kingdom for calls to the
Philippines to make test calls using two telephone lines: the dialing
phone an IDDcapable9 telephone line which makes the call and through
which the access number and the PIN number printed at the back of the card
are entered; and the receiving phone a caller identification (caller id)
unitequipped telephone line which would receive the call and reflect the
incoming

callers

telephone

number.

During a test call placed at the PLDTACPDD office, the receiving phone
reflected a PLDT telephone number (28243285) as the calling number
used, as if the call was originating from a local telephone in Metro Manila.
Upon verification with the PLDTs Integrated Customer Management (billing)
System, the ACPDD learned that the subscriber of the reflected telephone
number is Abigail R. Razon Alvarez, with address at 17 Dominic Savio St.,

Savio Compound, Barangay Don Bosco, Paraaque City. It further learned

that several lines are installed at this address with Abigail and Vernon R.
Razon

(respondents),

among

others,

as

subscribers. 10

To validate its findings, the ACPDD conducted the same test calls on
November 5, 2003 at the premises of the NTC in Quezon City (and in the
presence of an NTC representative11) using the same prepaid card (validation
test). The receiving phone at the NTC premises reflected the telephone
numbers registered in the name of Abigail as the calling number from the
United

Kingdom.12

Similar test calls subsequently conducted using the prepaid cards Unity
Card and IDT Supercalling Card revealed the same results. The callerid
equipped receiving phone reflected telephone numbers 13 that are in the
names of Experto Enterprises and Experto Phils, as subscribers, with a
common address at No. 38 Indonesia St., Better Living Subdivision, Barangay
Don Bosco, Paraaque City. It turned out that the actual occupant of these
premises is also Abigail. Subsequently, a validation test was also conducted,
yielding several telephone numbers registered in the name of Experto
Phils./Experto Enterprises as the calling numbers supposedly from the United
Kingdom.14
According to PLDT, had an ordinary and legitimate call been made, the
screen of the calleridequipped receiving phone would not reflect a local
number or any number at all. In the cards they tested, however, once the
caller enters the access and pin numbers, the respondents would route the
call via the internet to a local telephone number (in this case, a PLDT
telephone number) which would connect the call to the receiving phone.
Since calls through the internet never pass the toll center of the PLDTs IGF,
users of these prepaid cards can place a call to any point in the Philippines
(provided the local line is NDDcapable) without the call appearing as coming

abroad.15

from

On November 6, 2003 and November 19, 2003, Mr. Lawrence Narciso of the
PLDTs Quality Control Division, together with the operatives of the Philippine
National Police (PNP), conducted an ocular inspection at 17 Dominic Savio
St., Savio Compound and at No. 38 Indonesia St., Better Living Subdivision
both in Barangay Don Bosco, Paranaque City and discovered that PLDT
telephone lines were connected to several pieces of equipment. 16 Mr. Narciso
narrated the results of the inspection, thus
10. During [the] ocular inspection [at 17 Dominic Savio St., Savio
Compound], Ms. Abigail Razon Alvarez allowed us to gain entry and check
the telephone installations within their premises. First, we checked the
location of the telephone protectors that are commonly installed at a
concrete wall boundary inside the compound. Some of these protectors are
covered with a fabricated wooden cabinet. Other protectors are installed
beside the said wooden cabinet, xxx. The inside wiring installations from
telephone protectors to connecting block were routed to the said adjacent
room

passing

through

the

house

ceiling.

11. xxx. Upon entering the socalled adjacent room, we immediately noticed
that the PLDT telephone lines were connected to the equipment situated at
multilayered rack. The equipment room contains the following:
a.

b.

13

c.
d.
e.

Quintum

1
1
1

Com
Cisco

Nokia

router;

Modem
Meridian

router;
800

for
Subscribers

router;
PLDT

DSL;
Unit[;]

f.
g.

5
1

Personal
Computer

Computers[;]
Printer[;

and]

h. 1 Flatbed Scanner[.]
12. We also noticed that these routers are connected to the Meridians
subscriber unit ("SU ) that has an outdoor antenna installed on the top of
the roof. Meridians SU and outdoor antenna are service components used to
connect with wireless broadband internet access service of Meridian
Telekoms.
xxxx
18. During the site inspection [at No. 38 Indonesia St., Better Living
Subdivision], we noticed that the protector of each telephone line/number
xxx were enclosed in a fabricated wooden cabinet with safety padlock. Said
wooden cabinet was situated on the concrete wall inside the compound near
the garage entrance gate. The telephone inside the wiring installations from
the protector to the connecting blocks were placed in a plastic electrical
conduit routed to the adjacent room at the second floor.17
On December 3, 2003, Police Superintendent Gilbert C. Cruz filed a
consolidated application for a search warrant18 before Judge Francisco G.
Mendiola of the RTC, for the crimes of theft and violation of PD No. 401.
According to PLDT, the respondents are engaged in a form of network fraud
known as International Simple Resale (ISR) which amounts to theft under the
RPC.
ISR is a method of routing and completing international long distance calls
using lines, cables, antennae and/or wave frequencies which are connected
directly to the domestic exchange facilities of the country where the call is

destined (terminating country); and, in the process, bypassing the IGF at the
country.19

terminating

Judge Mendiola found probable cause for the issuance of the search warrants
applied for. Accordingly, four search warrants 20 were issued for violations of
Article 308, in relation to Article 309, of the RPC (SW A1 and SW A2) and of
PD No. 401, as amended (SW B1 and SW B2) for the ISR activities being
conducted at 17 Dominic Savio St., Savio Compound and at No. 38 Indonesia
St., Better Living Subdivision, both in Barangay Don Bosco, Paranaque City.
The four search warrants enumerated the objects to be searched and seized
as follows:
1. MERIDIAN SUBSCRIBERS UNIT AND PLDT DSL LINES and/or CABLES AND
ANTENNAS and/or similar equipment or device capable of transmitting air
waves or frequency, such as a Meridian Subscribers Unit, Broadband DSL
and

telephone

lines;

2. PERSONAL COMPUTERS or any similar equipment or device capable of

accepting information applying the prescribed process of the information and
supplying

the

result

of

this

process;

3. NOKIA MODEM or any similar equipment or device that enables data

terminal equipment such as computers to communicate with other data
terminal

equipment

via

telephone

line;

4. QUINTUM Equipment or any similar equipment capable of receiving digital

signals

from

the

internet

and

converting

those

signals

to

voice;

5. QUINTUM, 3COM AND CISCO Routers or any similar equipment capable of

switching packets of data to their assigned destination or addresses;
6. LINKS DSL SWITCH or any similar equipment capable of switching data;

7. COMPUTER PRINTERS AND SCANNERS or any similar equipment or device

used

for

copying

and/or

printing

data

and/or

information;

8. SOFTWARE, DISKETTES, TAPES or any similar equipment or device used for

recording

or

storing

information;

and

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

contracts, checks, orders, communications and documents, lease and/or
subscription agreements or contracts, communications and documents
relating to securing and using telephone lines and/or equipment[.]21
On the same date, the PNP searched the premises indicated in the warrants.
On December 10, 2003, a return was made with a complete inventory of the
items seized.22 On January 14, 2004, the PLDT and the PNP filed with the
Department of Justice a joint complaintaffidavit for theft and for violation of
PD

No.

401

against

the

respondents. 23

On February 18, 2004, the respondents filed with the RTC a motion to
quash24 the search warrants essentially on the following grounds: first, the
RTC had no authority to issue search warrants which were enforced in
Paraaque City; second, the enumeration of the items to be searched and
seized lacked particularity; and third, there was no probable cause for the
crime
On

March

of
12,

2004,

PLDT

theft.

opposed

the

respondents'

motion. 25

In a July 6, 2004 order,26 the RTC denied the respondents' motion to quash.
Having been rebuffed27in their motion for reconsideration,28 the respondents
filed a petition for certiorari with the CA.
RULING OF THE CA

29

On August 11, 2006, the CA rendered the assailed decision and resolution,
granting the respondents' petition for certiorari. The CA quashed SW Al
and SW A2 (for theft) on the ground that they were issued for non
existent crimes.

30

According to the CA, inherent in the determination of

probable cause for the issuance of search warrant is the accompanying

determination that an offense has been committed. Relying on this Courts
decision in Laurel v. Judge Abrogar,31 the CA ruled that the respondents could
not have possibly committed the crime of theft because PLDTs business of
providing telecommunication services and these services themselves are not
personal

properties

contemplated

under

Article

308

of

the

RPC.

With respect to SW Bl and SW B2 (for violation of PD No. 401), the CA

upheld paragraphs one to six of the enumeration of items subject of the
search. The CA held that the stock phrase or similar equipment or device
found in paragraphs one to six of the search warrants did not make it suffer
from generality since each paragraphs enumeration of items was sufficiently
qualified by the citation of the specific objects to be seized and by its
functions

which

are

inherently

connected

with

the

crime

allegedly

committed.
The CA, however, nullified the ensuing paragraphs, 7, 8 and 9, for lack of
particularity and ordered the return of the items seized under these
provisions. While the same stock phrase appears in paragraphs 7 and 8, the
properties described therein i.e., printer and scanner, software, diskette
and tapes include even those for the respondents' personal use, making
the description of the things to be seized too general in nature.
With the denial of its motion for reconsideration, 32 PLDT went to this
Court via this Rule 45 petition.

THE PETITIONER'S ARGUMENTS

PLDT faults the CA for relying on Laurel on three grounds: first, Laurel cannot
be

cited

yet

as

an

authority

under

the

principle

of stare

decisis because Laurel is not yet final and executory; in fact, it is the subject
of a pending motion for reconsideration filed by PLDT itself; second, even
assuming that Laurel is already final, the facts in Laurel vary from the
present case. Laurel involves the quashalof an information on the ground
that the information does not charge any offense; hence, the determination
of the existence of the elements of the crime of theft is indispensable in
resolving the motion to quash. In contrast, the present case involves the
quashal of a search warrant. Third, accordingly, in resolving the motion, the
issuing court only has to be convinced that there is probable cause to hold
that: (i) the items to be seized are connected to a criminal activity; and (ii)
these items are found in the place to be searched. Since the matter of
quashing a search warrant may be rooted on matters extrinsic of the search
warrant,

33

the issuing court does not need to look into the elements of the

crime allegedly committed in the same manner that the CA did in Laurel.
PLDT adds that a finding of grave abuse of discretion in the issuance of
search warrant may be justified only when there is disregard of the
requirements for the issuance of a search warrant[.]

34

In the present case,

the CA did not find (and could not have found) any grave abuse of discretion
on the part of the RTC because at the time the RTC issued the search
warrants

in

2003, Laurel had

not

yet

been

promulgated.

In defending the validity of the nullified provisions of SW Bl and SW B2,

PLDT argues that PD No. 401 also punishes unauthorized installation of
telephone connections. Since the enumerated items are connected to the
computers that are illegally connected to PLDT telephone lines, then these
items bear a direct relation to the offense of violation of PD No. 401,

justifying

their

seizure.

The enumeration in paragraph 8 is likewise a proper subject of seizure

because they are the fruits of the offense as they contain information on
PLDTs business profit and other information relating to the commission of
violation of PD No. 401. Similarly, paragraph 9 specifies the fruits and
evidence of violation of PD No. 401 since it supports PLDTs claim that the
respondents have made a business out of their illegal connections to PLDT
lines.
THE RESPONDENTS' ARGUMENTS
The respondents counter that while Laurel may not yet be final, at least it
has a persuasive effect as the current jurisprudence on the matter. Even
without Laurel, the CAs nullification of SW Al and SW A2 can withstand
scrutiny because of the novelty of the issue presented before it. The
nullification of paragraphs 7, 8 and 9 of SW Bl and SW B2 must be upheld
not only on the ground of broadness but for lack of any relation whatsoever
with PD No. 401 which punishes the theft of electricity.
OUR RULING
We partially
Laurel

and

grant the
its

reversal

by

petition.
the

Court En

Banc

Before proceeding with the case, a review of Laurel is in order as it involves

substantially

similar

facts

as

in

the

present

case.

Baynet Co., Ltd. (Baynet) sells prepaid cards, Bay Super Orient Card, that
allow their users to place a call to the Philippines from Japan. PLDT asserted
that Baynet is engaged in ISR activities by using an international private

leased line (IPL) to course Baynets incoming international long distance

calls. The IPL is linked to a switching equipment, which is then connected to
PLDT telephone lines/numbers and equipment, with Baynet as subscriber.
To establish its case, PLDT obtained a search warrant. On the strength of the
items seized during the search of Baynets premises, the prosecutor found
probable cause for theft against Luis Marcos Laurel (Laurel) and other Baynet
officials. Accordingly, an information was filed, alleging that the Baynet
officials take, steal and use the international long distance calls belonging to
PLDT by [ISR activities] xxx effectively 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[.]

35

Laurel moved to quash the information on the bold assertion that ISR
activities do not constitute a crime under Philippine law. Laurel argued that
an ISR activity cannot entail taking of personal property because the
international long distance telephone calls using PLDT telephone lines belong
to the caller himself; the amount stated in the information, if at all,
represents the rentals due PLDT for the callers usage of its facilities. Laurel
argued that the business of providing international long distance calls, i.e.,
PLDTs service, and the revenue derived therefrom are not personal property
that

can

be

appropriated.

Laurel went to the Court after failing to secure the desired relief from the trial
and appellate courts,36raising the core issue of whether PLDTs business of
providing telecommunication services for international long distance calls is
a proper subject of theft under Article 308 of the RPC. The Courts First
Division granted Laurels petition and ordered the quashal of the information.
Taking off from the basic rule that penal laws are construed strictly against
the State, the Court ruled that international long distance calls and the

business of providing telecommunication or telephone services by PLDT are

not personal properties that can be the subject of theft.
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, xxx.
xxxx
xxx. 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, xxx there would be no
juridical difference between the taking of the business of a person or the
services provided by him for gain, visavis, the taking of goods, wares or
merchandise, or equipment comprising his business. If it was its intention to
include business as personal property under Article 308 of the 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.

xxxx
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. xxx. Even at

common law, neither time nor services may be taken and occupied or
appropriated. 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. Neither is the unauthorized use of the equipment and facilities
of

PLDT

by

[Laurel]

theft

under

[Article

308].

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.37
PLDT38 moved for reconsideration and referral of the case to the Court En
Banc.

The

Courts

First

Division

granted

the

referral.

On January 13, 2009 (or while the present petition was pending in court),
the

Court En

Bancunanimously

granted

PLDTs

motion

for

reconsideration.39 The Court ruled that even prior to the passage of the RPC,
jurisprudence is settled that any personal property, tangible or intangible,
corporeal or incorporeal, capable of appropriation can be the object of
theft.

40

This jurisprudence, in turn, applied the prevailing legal meaning of

the term personal property under the old Civil Code as anything
susceptible of appropriation and not included in the foregoing chapter (not
real property).

41

PLDTs telephone service or its business of providing this

was appropriable personal property and was, in fact, the subject of

appropriation in an ISR operation, facilitated by means of the unlawful use of
PLDTs facilities.
In this regard, the Amended Information inaccurately describes the offense
by making it appear that what [Laurel] took were the international long
distance
xxxx

telephone

calls,

rather

than

respondent

PLDTs

business.

Indeed, while it may be conceded that international long distance calls, the
matter alleged to be stolen xxx, take the form of electrical energy, it cannot
be said that such international long distance calls were personal properties
belonging to PLDT since the latter could not have acquired ownership over
such calls. PLDT merely encodes, augments, enhances, decodes and
transmits said calls using its complex communications infrastructure and
facilities. PLDT not being the owner of said telephone calls, then it could not
validly claim that such telephone calls were taken without its consent. It is
the use of these communications facilities without the consent of PLDT that
constitutes the crime of theft, which is the unlawful taking of the telephone
services

and

business.

Therefore, the business of providing telecommunication and the telephone

service are personal property under Article 308 of the Revised Penal Code,
and the act of engaging in ISR is an act of subtraction penalized under said
article.42
The Court En Bancs reversal of its Laurel Division ruling during the pendency
of this petition significantly impacts on how the Court should resolve the
present

case

for

two

reasons:chanRoblesvirtualLawlibrary

First, the Laurel En Banc ruling categorically equated an ISR activity to theft
under the RPC. In so doing, whatever alleged factual variance there may be
between Laurel and the present case cannot render Laurel inapplicable.
Second, and more importantly, in a Rule 45 petition, the Court basically
determines whether the CA was legally correct in determining whether the
RTC committed grave abuse of discretion. Under this premise, the CA
ordinarily gauges the grave abuse of discretion at the time the RTC rendered
its assailed resolution. In quashing SW Al and SW A2, note that the CA
relied on the Laurel Division ruling at the time when it was still subject of a
pending motion for reconsideration. The CA, in fact, did not expressly impute

grave abuse of discretion on the RTC when the RTC issued the search
warrants and later refused to quash these. Understandably, the CA could not
have really found the presence of grave abuse of discretion for there was
no Laurel ruling to speak of at the time the RTC issued the search warrants.
These peculiar facts require us to more carefully analyze our prism of review
under

Rule

45.

Requisites for the issuance of search warrant; probable cause

requires

the

probable

existence

of

an

offense

Section 2, Article III of the 1987 Constitution guarantees the right of persons
to be free from unreasonable searches and seizures.
Section 2. The right of the people to be secure in their persons, houses,
papers, and effects against unreasonable searches and seizures of whatever
nature and for any purpose shall be inviolable, and no search warrant or
warrant of arrest shall issue except upon probable cause to be
determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the persons or things to
be seized.
The purposes of the constitutional provision against unlawful searches and
seizures are to: (i) prevent the officers of the law from violating private
security in person and property and illegally invading the sanctity of the
home; and (ii) give remedy against such usurpations when attempted or
committed.43
The constitutional requirement for the issuance of a search warrant is
reiterated under Sections 4 and 5, Rule 126 of the Revised Rules of Criminal
Procedure. These sections lay down the following requirements for the
issuance of a search warrant: (1) the existence of probable cause; (2) the

probable cause must be determined personally by the judge; (3) the judge
must examine, in writing and under oath or affirmation, the complainant and
the witnesses he or she may produce; (4) the applicant and the witnesses
testify on the facts personally known to them; and (5) the warrant
specifically describes the place to be searched and the things to be
seized.44 Should any of these requisites be absent, the party aggrieved by
the issuance and enforcement of the search warrant may file a motion to
quash the search warrant with the issuing court or with the court where the
action

is

subsequently

instituted.45

A search warrant proceeding is a special criminal and judicial process akin to

a writ of discovery. It is designed by the Rules of Criminal Procedure to
respond only to an incident in the main case, if one has already been
instituted, or in anticipation thereof. Since it is at most incidental to the main
criminal case, an order granting or denying a motion to quash a search
warrant may be questioned only via a petition for certiorari under Rule 65.46
When confronted with this petition, the higher court must necessarily
determine the validity of the lower courts action from the prism of whether it
was tainted with grave abuse of discretion. By grave abuse of discretion,
jurisprudence refers to the capricious and whimsical exercise of judgment
equivalent to lack of jurisdiction, or to the exercise of power in an arbitrary or
despotic manner by reason of passion or personal hostility or in a manner so
patent and gross as to amount to an invasion of positive duty or to the
virtual refusal to perform the duty enjoined or to act at all in contemplation
of

the

law.47

In a certiorari proceeding, the determination translates to an inquiry on

whether the requirements and limitations provided under the Constitution
and the Rules of Court were properly complied with, from the issuance of the
warrant up to its implementation. In view of the constitutional objective of

preventing stealthy encroachment upon or the gradual depreciation of the

rights secured by the Constitution, strict compliance with the constitutional
and procedural requirements is required. A judge who issues a search
warrant without complying with these requirements commits grave abuse of
discretion.48
One of the constitutional requirements for the validity of a search warrant is
that it must be issued based on probable cause which, under the Rules, must
be in connection with one specific offense. In search warrant proceedings,
probable cause is defined as such facts and circumstances that would lead a
reasonably discreet and prudent man to believe that an offense has been
committed and that the objects sought in connection with the offense are in
the

place

sought

to

searched.49

be

In the determination of probable cause, the court must necessarily determine

whether an offense exists to justify the issuance or quashal of the search
warrant50 because the personal properties that may be subject of the search
warrant are very much intertwined with the one specific offense
requirement of probable cause.51 Contrary to PLDTs claim, the only way to
determine whether a warrant should issue in connection with one specific
offense is to juxtapose the facts and circumstances presented by the
applicant with the elements of the offense that are alleged to support the
search

warrant.

Reviewing the RTCs denial of the motion to quash SWAl and SW A

2
a.

From

the

prism

of

Rule

65

The facts of the present case easily call to mind the case of Columbia
Pictures, Inc. v. CA52 involving copyright infringement. In that case, the CA

likewise voided the search warrant issued by the trial court by applying a
doctrine that added a new requirement (i.e., the production of the master
tape for comparison with the allegedly pirate copies) in determining the
existence of probable cause for the issuance of search warrant in copyright
infringement cases. The doctrine referred to was laid down in 20th Century
Fox Film Corporation v. Court of Appeals. 20 th Century Fox, however, was
promulgated more than eight months after the search warrants were issued
by the RTC. In reversing the CA, the Court ruled:chanRoblesvirtualLawlibrary
Mindful as we are of the ramifications of the doctrine of stare decisis and the
rudiments of fair play, it is our considered view that the 20th Century
Fox ruling cannot be retroactively applied to the instant case to justify the
quashal of Search Warrant No. 87053. [The] petitioners' consistent position
that the order of the lower court[,] xxx [which denied the respondents']
motion to lift the order of search warrant^] was properly issued, [because
there was] satisfactory compliance with the then prevailing standards under
the law for determination of probable cause, is indeed well taken. The lower
court could not possibly have expected more evidence from petitioners in
their application for a search warrant other than what the law and
jurisprudence, then existing and judicially accepted, required with respect to
the

finding

of

probable

cause.53

Columbia could easily be cited in favor of PLDT to sustain the RTCs refusal to
quash the search warrant. Indeed, in quashing SW Al and SW A2, the CA
never intimated that the RTC disregarded any of the requisites for the
issuance of a search warrant as these requirements were interpreted and
observed under the then prevailing jurisprudence. The CA could not have
done so because precisely the issue of whether telephone services or the
business of providing these services could be the subject of theft under the
RPC had not yet reached the Court when the search warrants were applied
for

and

issued.

However, what distinguishes Columbia from the present case is the focus
of Columbias legal rationale. Columbias focus was not on whether the facts
and circumstances would reasonably lead to the conclusion that an offense
has been or is being committed and that the objects sought in connection
with the offense were in the place to be searched the primary points of
focus

of

the

present

case. Columbias focus

was

on whether

the evidence presented at the time the search warrant was applied
for was sufficient to establish the facts and circumstances required for
establishing

probable

cause

to

issue

search

warrant.

Nonetheless, Columbia serves as a neat guide for the CA to decide the

respondents' certioraripetition. In Columbia, the Court applied the principle
of nonretroactivity of its ruling in 20th Century Fox, whose finality was not an
issue, in reversing a CA ruling. The Courts attitude in that case should have
been adopted by the CA in the present case a fortiori since the ruling that
the CA relied upon was not yet final at the time the CA resolved to quash the
search

warrants.

b. Supervening events justifying a broader review under Rule 65

Ordinarily, the CAs determination under Rule 65 is limited to whether the
RTC gravely abused its discretion in granting or denying the motion to
quash based on facts then existing. Nonetheless, the Court recognizes that
supervening facts may transpire after the issuance and implementation of
the search warrant that may provide justification for the quashal of the
search

warrant

via

petition

forcertiorari.

For one, if the offense for which the warrant is issued is subsequently
decriminalized during the pendency of the petition for certiorari, then the
warrant may be quashed.54 For another, a subsequent ruling from the Court

that a similar set of facts and circumstances does not constitute an offense,
as alleged in the search warrant application, may be used as a ground to
quash a warrant.55In both instances, the underlying reason for quashing the
search warrant is the absence of probable cause which can only possibly
exist when the combination of facts and circumstances points to the possible
commission of an offense that may be evidenced by the personal properties
sought to be seized. To the CA, the second instance mentioned justified the
quashal

of

the

search

warrants.

We would have readily agreed with the CA if the Laurel Division ruling had
not been subsequently reversed. As things turned out, however, the Court
granted PLDTs motion for reconsideration of the Court First Divisions ruling
in Laurel and ruled that the act of engaging in ISR is xxx penalized under
xxx article [308 of the RPC].

56

As the RTC itself found, PLDT successfully

established in its application for a search warrant a probable cause for theft
by evidence that Laurels ISR activities deprived PLDT of its telephone
services and of its business of providing these services without its consent.
b1.

the

stare

decisis

aspect

With the Court En Bancs reversal of the earlier Laurel ruling, then the CAs
quashal of these warrants would have no leg to stand on. This is the dire
consequence of failing to appreciate the full import of the doctrine of stare
decisis

that

the

CA

ignored.

Under Article 8 of the Civil Code, the decisions of this Court form part of the
countrys legal system. While these decisions are not laws pursuant to the
doctrine of separation of powers, they evidence the laws' meaning, breadth,
and scope and, therefore, have the same binding force as the laws
themselves.57 Hence, the Courts interpretation of a statute forms part of the
law as of the date it was originally passed because the Courts construction

merely

establishes

interpreted

the
law

contemporaneous
carries

legislative
into

intent

that

the

effect. 58

Article 8 of the Civil Code embodies the basic principle of stare decisis et non
quieta movere (to adhere to precedents and not to unsettle established
matters) that enjoins adherence to judicial precedents embodied in the
decision of the Supreme Court. That decision becomes a judicial precedent to
be followed in subsequent cases by all courts in the land. The doctrine
of stare decisis, in turn, is based on the principle that once a question of law
has been examined and decided, it should be deemed settled and closed to
further argument.59 The doctrine of (horizontal) stare decisisis one of policy,
grounded on the necessity of securing certainty and stability of judicial
decisions.60
In the field of adjudication, a case cannot yet acquire the status of a
decided case that is deemedsettled and closed to further argument if the
Courts decision is still the subject of a motion for reconsideration seasonably
filed by the moving party. Under the Rules of Court, a party is expressly
allowed to file a motion for reconsideration of the Courts decision within 15
days from notice.61 Since the doctrine of stare decisis is founded on the
necessity of securing certainty and stability in law, then these attributes will
spring only once the Courts ruling has lapsed to finality in accordance with
law. In Ting v. VelezTing,62 we ruled that:
The principle of stare decisis enjoins adherence by lower courts to doctrinal
rules established by this Court in its final decisions. It is based on the
principle that once a question of law has been examined and decided, it
should be deemed settled and closed to further argument.
In applying Laurel despite PLDTs statement that the case is still subject of a
pending motion for reconsideration, 63 the CA legally erred in refusing to
reconsider its ruling that largely relied on a nonfmal ruling of the Court.
While the CAs dutiful desire to apply the latest pronouncement of the Court

in Laurel is expected, it should have acted with caution, instead of

excitement, on being informed by PLDT of its pending motion for
reconsideration; it should have then followed the principle of stare decisis.
The appellate courts application of an exceptional circumstance when it may
order the quashal of the search warrant on grounds not existing at the time
the warrant was issued or implemented must still rest on prudential grounds
if only to maintain the limitation of the scope of the remedy of certiorari as a
writ to correct errors of jurisdiction and not mere errors of judgment.
Still, the respondents attempt to justify the CAs action by arguing that the
CA would still rule in the way it did 64 even without Laurel. As PLDT correctly
pointed out, there is simply nothing in the CAs decision that would support
its quashal of the search warrant independently of Laurel. We must bear in
mind that the CAs quashal of SW Al and SW A2 operated under the
strictures of a certioraripetition, where the presence of grave abuse of
discretion is necessary for the corrective writ to issue since the appellate
court exercises its supervisory jurisdiction in this case. We simply cannot
secondguess

what

the

CAs

action

could

have

been.

Lastly, the CAs reliance on Savage v. Judge Taypin65 can neither sustain the
quashal

of

SW

Al

and

SW

A2.

In Savage,

the

Court

granted

the certiorari petition and quashed the search warrant because the alleged
crime (unfair competition involving design patents) that supported the
search warrant had already been repealed, and the act complained of, if at
all, gave rise only to civil liability (for patent infringement). Having been
decriminalized, probable cause for the crime alleged could not possibly exist.
In the present case, the issue is whether the commission of an ISR activity, in
the manner that PLDTs evidence shows, sufficiently establishes probable
cause for the issuance of search warrantsfor the crime of theft. Unlike
in Savage, the Court in Laurel was not confronted with the issue of

decriminalization (which is a legislative prerogative) but whether the

commission of an ISR activity meets the elements of the offense of theft for
purposes of quashing an information. Since the Court, in Laurel, ultimately
ruled then an ISR activity justifies the elements of theft that must necessarily
be alleged in the information a fortiori, the RTCs determination should be
sustained
The

on certiorari.

requirement

of

particularity

in

SWB1

and

SWB2

On the issue of particularity in SW Bl and SW B2, we note that the

respondents have not appealed to us the CA ruling that sustained
paragraphs 1 to 6 of the search warrants. Hence, we shall limit our
discussion to the question of whether the CA correctly ruled that the RTC
gravely abused its discretion insofar as it refused to quash paragraphs 7 to 9
of

SW

Bl

and

SWB2.

Aside from the requirement of probable cause, the Constitution also requires
that the search warrant must particularly describe the place to be searched
and the things to be seized. This requirement of particularity in the
description, especially of the things to be seized, is meant to enable the law
enforcers to readily identify the properties to be seized and, thus, prevent
the seizure of the wrong items. It seeks to leave the law enforcers with no
discretion at all regarding these articles and to give life to the constitutional
provision against unreasonable searches and seizures. 66 In other words, the
requisite sufficient particularity is aimed at preventing the law enforcer from
exercising unlimited discretion as to what things are to be taken under the
warrant and ensure that only those connected with the offense for which the
warrant

was

issued

shall

be

seized.67

The requirement of specificity, however, does not require technical accuracy

in the description of the property to be seized. Specificity is satisfied if the

personal properties' description is as far as the circumstances will ordinarily

allow it to be so described. The nature of the description should vary
according to whether the identity of the property or its character is a matter
of concern.68 One of the tests to determine the particularity in the description
of objects to be seized under a search warrant is when the things described
are limited to those which bear direct relation to the offense for which the
warrant

is

being

issued.69

Additionally, the Rules require that a search warrant should be issued in

connection with one specific offense to prevent the issuance of a scatter
shot

warrant.70 The

onespecificoffense

requirement

reinforces

the

constitutional requirement that a search warrant should issue only on the

basis of probable cause.71 Since the primary objective of applying for a
search warrant is to obtain evidence to be used in a subsequent prosecution
for an offense for which the search warrant was applied, a judge issuing a
particular warrant must satisfy himself that the evidence presented by the
applicant establishes the facts and circumstances relating to this specific
offense for which the warrant is sought and issued. 72 Accordingly, in a
subsequent challenge against the validity of the warrant, the applicant
cannot be allowed to maintain its validity based on facts and circumstances
that may be related to other search warrants but are extrinsic to the warrant
in

question.

Under the Rules, the following personal property may be subject of search
warrant: (i) the subject of the offense; (ii) fruits of the offense; or (iii) those
used or intended to be used as the means of committing an offense. In the
present case, we sustain the CAs ruling nullifying paragraphs 7, 8 and 9 of
SW Bl and SW B2 for failing the test of particularity. More specifically, these
provisions do not show how the enumerated items could have possibly been
connected with the crime for which the warrant was issued, i.e., P.D. No. 401.
For clarity, PD No. 401 punishes:

Section 1. Any person who installs any water, electrical, telephone or

piped

gasconnection

without

previous

authority

from xxx the

Philippine Long Distance Telephone Company, xxx, tampers and/or

uses tampered water, electrical or gas meters, jumpers or other devices
whereby water, electricity or piped gas is stolen; steals or pilfers water,
electric or piped gas meters, or water, electric and/or telephone wires, or
piped gas pipes or conduits; knowingly possesses stolen or pilfered water,
electrical or gas meters as well as stolen or pilfered water, electrical and/or
telephone wires, or piped gas pipes and conduits, shall, upon conviction, be
punished with prision correccional in its minimum period or a fine ranging
from two thousand to six thousand pesos, or both.73
Paragraphs 7 to 8 of SW Bl and SW B2 read as follows:
7. COMPUTER PRINTERS AND SCANNERS or any similar equipment or device
used

for

copying

and/or

printing

data

and/or

information;

8. SOFTWARE, DISKETTES, TAPES or any similar equipment or device used for

recording

or

storing

information;

and

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

contracts, checks, orders, communications and documents, lease and/or
subscription agreements or contracts, communications and documents
relating to securing and using telephone lines and/or equipment[.]74
According to PLDT, the items in paragraph 7 have a direct relation to
violation of PD No. 401 because the items are connected to computers that,
in turn, are linked to the unauthorized connections to PLDT telephone lines.
With regard to the software, diskette and tapes in paragraph 8, and the items
in paragraph 9, PLDT argues that these items are fruits of the offense and
that the information it contains constitutes the business profit of PLDT.
According to PLDT, it corroborates the fact that the respondents have made a
business

out

of

their

illegal

connections

to

its

telephone

lines.

We disagree with PLDT. The fact that the printers and scanners are or may be
connected to the other illegal connections to the PLDT telephone lines does
not make them the subject of the offense or fruits of the offense, much less
could

they

become

means

of

committing

an

offense.

It is clear from PLDTs submission that it confuses the crime for which SW B
l and SW B2 were issued with the crime for which SW Al and SWA
2 were issued: SW Bl and SW B2 were issued for violation of PD No. 401, to
be enforced in two different places as identified in the warrants. The crime
for which these search warrants were issued does not pertain to the crime of
theft where matters of personal property and the taking thereof with intent
to

gain

become

significant

but

to

PD

No.

401.

These items could not be the subject of a violation of PD No. 401 since PLDT
itself does not claim that these items themselves comprise the unauthorized
installations. For emphasis, what PD No. 401 punishes is the unauthorized
installation of telephone connection without the previous consent of PLDT. In
the present case, PLDT has not shown that connecting printers, scanners,
diskettes or tapes to a computer, even if connected to a PLDT telephone line,
would

or

should

require

its

prior

authorization.

Neither could these items be a means of committing a violation of PD No.

401 since these copying, printing and storage devices in no way aided the
respondents in making the unauthorized connections. While these items may
be accessory to the computers and other equipment linked to telephone
lines, PD No. 401 does not cover this kind of items within the scope of the
prohibition. To allow the seizure of items under the PLDTs interpretation
would, as the CA correctly observed, allow the seizure under the warrant of
properties

for

personal

use

of

the

respondents.

If PLDT seeks the seizure of these items to prove that these installations

contain the respondents' financial gain and the corresponding business loss
to PLDT, then that purpose is served by SW Al and SW A2 since this is what
PLDT essentially complained of in charging the respondents with theft.
However, the same reasoning does not justify its seizure under a warrant for
violation of PD No. 401 since these items are not directly connected to the
PLDT telephone lines and PLDT has not even claimed that the installation of
these

items

requires

prior

authorization

from

it.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED.

The decision and the resolution of the Court of Appeals in CAG.R. SP No.
89213 are hereby MODIFIED in that SW Al and SW A2 are hereby declared
valid

and

constitutional.

SO ORDERED.

Republic

of

the

SUPREME

Philippines
COURT

Manila
FIRST DIVISION
G.R. No. 155076
LUIS

February 27, 2006

MARCOS

P.

LAUREL, Petitioner,

vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati
City, Branch 150, PEOPLE OF THE PHILIPPINES& PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY, Respondents.
DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals
(CA) in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar,
Regional Trial Court (RTC), 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. 401 12against 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
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.
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 coaccused 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 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.
On September 14, 2001, the RTC issued an Order 16 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,20where 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 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 AntiTelecommunications 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 one-half 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 co-accused 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
committed grave abuse of discretion amounting to excess or lack of jurisdiction in
denying the motion of the petitioner to quash the amended information.
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
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.
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 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
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.
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
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:
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).
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
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
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 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
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
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.

Carlos 61 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.
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 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

telephone

but

telephone

inexplicably

linked

to

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 statute 79 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.

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,80declaring 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.

Republic

of

the

Philippines

SUPREME

COURT

Manila
THIRD DIVISION
G.R. No. 137705

August 22, 2000

SERG'S

INC.,

PRODUCTS,

and

SERGIO

T.

GOQUIOLAY, petitioners,

vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or immovable property be considered
as personal or movable, a party is estopped from subsequently claiming otherwise.
Hence, such property is a proper subject of a writ of replevin obtained by the other
contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision 1 of
the Court of Appeals (CA)2 in CA-GR SP No. 47332 and its February 26, 1999

Resolution3 denying reconsideration. The decretal portion of the CA Decision reads as

follows:
"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED.
The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED."4
In its February 18, 1998 Order, 5 the Regional Trial Court (RTC) of Quezon City (Branch
218)6 issued a Writ of Seizure.7 The March 18, 1998 Resolution8 denied petitioners
Motion for Special Protective Order, praying that the deputy sheriff be enjoined "from
seizing immobilized or other real properties in (petitioners) factory in Cainta, Rizal and
to return to their original place whatever immobilized machineries or equipments he
may have removed."9
The Facts
The undisputed facts are summarized by the Court of Appeals as follows: 10
"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex E), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex B) directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of the
necessary expenses.
"On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners
factory, seized one machinery with [the] word that he [would] return for the other
machineries.
"On March 25, 1998, petitioners filed a motion for special protective order (Annex C),
invoking the power of the court to control the conduct of its officers and amend and
control its processes, praying for a directive for the sheriff to defer enforcement of the
writ of replevin.

"This motion was opposed by PCI Leasing (Annex F), on the ground that the properties
[were] still personal and therefore still subject to seizure and a writ of replevin.
"In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would be
prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped
from treating these machineries as personal because the contracts in which the alleged
agreement [were] embodied [were] totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.
"On April 7, 1998, they went to [the CA] via an original action for certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject machines
were personal property, and that they had only been leased, not owned, by petitioners.
It also ruled that the "words of the contract are clear and leave no doubt upon the true
intention of the contracting parties." Observing that Petitioner Goquiolay was an
experienced businessman who was "not unfamiliar with the ways of the trade," it ruled
that he "should have realized the import of the document he signed." The CA further
held:
"Furthermore, to accord merit to this petition would be to preempt the trial court in
ruling upon the case below, since the merits of the whole matter are laid down before
us via a petition whose sole purpose is to inquire upon the existence of a grave abuse of
discretion on the part of the [RTC] in issuing the assailed Order and Resolution. The
issues raised herein are proper subjects of a full-blown trial, necessitating presentation
of evidence by both parties. The contract is being enforced by one, and [its] validity is
attacked by the other a matter x x x which respondent court is in the best position to
determine."
Hence, this Petition.11

The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
"A. Whether or not the machineries purchased and imported by SERGS became real
property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease."12
In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly the procedural points raised by
respondent.
The Courts Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was being
filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition
erroneously impleaded Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion finds
support in the very title of the Petition, which is "Petition for Review on Certiorari." 13
While Judge Laqui should not have been impleaded as a respondent, 14 substantial justice
requires that such lapse by itself should not warrant the dismissal of the present
Petition. In this light, the Court deems it proper to remove,motu proprio, the name of
Judge Laqui from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not proper
subjects of the Writ issued by the RTC, because they were in fact real property. Serious
policy considerations, they argue, militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery
of personal property only.15Section 3 thereof reads:
"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court
shall issue an order and the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the sheriff forthwith to take
such property into his custody."
On the other hand, Article 415 of the Civil Code enumerates immovable or real property
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;
xxx

xxx

x x x"

In the present case, the machines that were the subjects of the Writ of Seizure were
placed by petitioners in the factory built on their own land. Indisputably, they were
essential and principal elements of their chocolate-making industry. Hence, although
each of them was movable or personal property on its own, all of them have become
"immobilized by destination because they are essential and principal elements in the
industry."16 In that sense, petitioners are correct in arguing that the said machines are
real, not personal, property pursuant to Article 415 (5) of the Civil Code.17
Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be
considered as personal.18After agreeing to such stipulation, they are consequently
estopped from claiming otherwise. Under the principle of estoppel, a party to a contract
is ordinarily precluded from denying the truth of any material fact found therein.

Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat
a house as a personal property because it had been made the subject of a chattel
mortgage. The Court ruled:
"x x x. 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."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills20 also held that the machinery used in a factory and essential to the industry, as in
the present case, was a proper subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of the Courts ruling are reproduced
hereunder:
"x x x. 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 the present case, the Lease Agreement clearly provides that the machines in question
are to be considered as personal property. Specifically, Section 12.1 of the Agreement
reads as follows:21
"12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or embedded in, or permanently resting
upon, real property or any building thereon, or attached in any manner to what is
permanent."
Clearly then, petitioners are estopped from denying the characterization of the subject
machines as personal property. Under the circumstances, they are proper subjects of
the Writ of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed
personal property pursuant to the Lease Agreement is good only insofar as the
contracting parties are concerned.22 Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not affected by its stipulation
characterizing the subject machinery as personal.23 In any event, there is no showing
that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.24 Submitting documents supposedly showing that they own the subject machines,
petitioners also argue in their Petition that the Agreement suffers from "intrinsic
ambiguity which places in serious doubt the intention of the parties and the validity of
the lease agreement itself." 25 In their Reply to respondents Comment, they further
allege that the Agreement is invalid.26
These arguments are unconvincing. The validity and the nature of the contract are
the lis mota of the civil action pending before the RTC. A resolution of these questions,
therefore, is effectively a resolution of the merits of the case. Hence, they should be
threshed out in the trial, not in the proceedings involving the issuance of the Writ of
Seizure.
Indeed, in La Tondea Distillers v. CA,27 the Court explained that the policy under Rule
60 was that questions involving title to the subject property questions which
petitioners are now raising -- should be determined in the trial. In that case, the Court
noted that the remedy of defendants under Rule 60 was either to post a counter-bond or
to question the sufficiency of the plaintiffs bond. They were not allowed, however, to
invoke the title to the subject property. The Court ruled:
"In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or
of the grounds relied upon therefor, as in proceedings on preliminary attachment or
injunction, and thereby put at issue the matter of the title or right of possession over
the specific chattel being replevied, the policy apparently being that said matter should
be ventilated and determined only at the trial on the merits."28

Besides, these questions require a determination of facts and a presentation of

evidence, both of which have no place in a petition for certiorari in the CA under Rule 65
or in a petition for review in this Court under Rule 45. 29
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease Agreement,
for nothing on record shows that it has been nullified or annulled. In fact, petitioners
assailed it first only in the RTC proceedings, which had ironically been instituted by
respondent. Accordingly, it must be presumed valid and binding as the law between the
parties.
Makati Leasing and Finance Corporation 30 is also instructive on this point. In that case,
the Deed of Chattel Mortgage, which characterized the subject machinery as personal
property, was also assailed because respondent had allegedly been required "to sign a
printed form of chattel mortgage which was in a blank form at the time of signing." The
Court rejected the argument and relied on the Deed, ruling as follows:
"x x x. Moreover, even granting that the charge is true, such fact alone does not render
a contract void ab initio, but can only be a ground for rendering said contract voidable,
or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court.
There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. x x x"
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that "if the Court allows these machineries to be seized, then its
workers would be out of work and thrown into the streets."31 They also allege that the
seizure would nullify all efforts to rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the Writ. As earlier
1wphi1

discussed, law and jurisprudence support its propriety. Verily, the above-mentioned
consequences, if they come true, should not be blamed on this Court, but on the
petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60,
which allows the filing of a counter-bond. The provision states:

"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicants bond, or of the surety or sureties thereon, he cannot immediately require the
return of the property, but if he does not so object, he may, at any time before the
delivery of the property to the applicant, require the return thereof, by filing with the
court where the action is pending a bond executed to the applicant, in double the value
of the property as stated in the applicants affidavit for the delivery thereof to the
applicant, if such delivery be adjudged, and for the payment of such sum to him as may
be recovered against the adverse party, and by serving a copy bond on the applicant."
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.
Republic

of

the

Philippines

SUPREME

COURT

Manila
FIRST DIVISION
G.R. No. L-50008 August 31, 1987
PRUDENTIAL

BANK, petitioner,

vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First
Instance of Zambales and Olongapo City; FERNANDO MAGCALE & TEODULA
BALUYUT-MAGCALE, respondents.

PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978 Decision

* of the then

Court of First Instance of Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and
Teodula Baluyut-Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real estate mortgage
executed by respondent spouses in favor of petitioner bank are null and void.

The undisputed facts of this case by stipulation of the parties are as follows:

... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and

Teodula Baluyut Magcale secured a loan in the sum of P70,000.00 from the
defendant Prudential Bank. To secure payment of this loan, plaintiffs
executed in favor of defendant on the aforesaid date a deed of Real Estate
Mortgage over the following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse
spaces containing a total floor area of 263 sq. meters, more or less,
generally constructed of mixed hard wood and concrete materials, under a
roofing of cor. g. i. sheets; declared and assessed in the name of
FERNANDO MAGCALE under Tax Declaration No. 21109, issued by the
Assessor of Olongapo City with an assessed value of P35,290.00. This
building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the
right of occupancy on the lot where the above property is erected, and
more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts308, Olongapo Townsite Subdivision) Ardoin Street, East
Bajac-Bajac, Olongapo City, containing an area of 465 sq. m.
more or less, declared and assessed in the name of
FERNANDO MAGCALE under Tax Duration No. 19595 issued
by the Assessor of Olongapo City with an assessed value of
P1,860.00; bounded on the
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
All

corners

of

the

lot

marked

by

conc.

cylindrical monuments of the Bureau of Lands

as visible limits. ( Exhibit "A, " also Exhibit "1"

for defendant).
Apart from the stipulations in the printed portion of the
aforestated deed of mortgage, there appears a rider typed at
the bottom of the reverse side of the document under the
lists of the properties mortgaged which reads, as follows:
AND IT IS FURTHER AGREED that in the event
the Sales Patent on the lot applied for by the
Mortgagors as herein stated is released or
issued by the Bureau of Lands, the Mortgagors
hereby authorize the Register of Deeds to hold
the Registration of same until this Mortgage is
cancelled, or to annotate this encumbrance on
the Title upon authority from the Secretary of
Agriculture and Natural Resources, which title
with annotation, shall be released in favor of
the herein Mortgage.
From the aforequoted stipulation, it is obvious that the
mortgagee (defendant Prudential Bank) was at the outset
aware of the fact that the mortgagors (plaintiffs) have
already filed a Miscellaneous Sales Application over the lot,
possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under the
Provisions of Act 3344 with the Registry of Deeds of
Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from
defendant Prudential Bank in the sum of P20,000.00. To
secure payment of this additional loan, plaintiffs executed in
favor of the said defendant another deed of Real Estate
Mortgage over the same properties previously mortgaged in
Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This

second deed of Real Estate Mortgage was likewise registered

with the Registry of Deeds, this time in Olongapo City, on
May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales
Patent No. 4776 over the parcel of land, possessory rights over which were
mortgaged to defendant Prudential Bank, in favor of plaintiffs. On the
basis of the aforesaid Patent, and upon its transcription in the Registration
Book of the Province of Zambales, Original Certificate of Title No. P-2554
was issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio
Register of Deeds of Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it
became due, and upon application of said defendant, the deeds of Real
Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed.
Consequent to the foreclosure was the sale of the properties therein
mortgaged to defendant as the highest bidder in a public auction sale
conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E").
The auction sale aforesaid was held despite written request from plaintiffs
through counsel dated March 29, 1978, for the defendant City Sheriff to
desist from going with the scheduled public auction sale (Exhibit "D")."
(Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real
Estate Mortgage as null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53),
opposed by private respondents on January 5, 1979 (Ibid., pp. 54-62), and in an Order
dated January 10, 1979 (Ibid., p. 63), the Motion for Reconsideration was denied for lack
of merit. Hence, the instant petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require
the respondents to comment (Ibid., p. 65), which order was complied with the
Resolution dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply on June 2,1979
(Ibid., pp. 101-112).

Thereafter, in the Resolution dated June 13, 1979, the petition was given due course
and the parties were required to submit simultaneously their respective memoranda.
(Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private
respondents filed their Memorandum on August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered submitted for decision
(Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS
OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730
AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY 15,1972 HAVE
THE EFFECT OF INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE. (Memorandum
for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can be
constituted on the building erected on the land belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the Philippines,
this Court ruled that, "it is obvious that the inclusion of "building" separate and distinct
from the land, in said provision of law can only mean that a building is by itself an
immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated
Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence of
stipulation of the improvements thereon, buildings, still a building by itself may be
mortgaged apart from the land on which it has been built. Such a mortgage would be
still a real estate mortgage for the building would still be considered immovable
property even if dealt with separately and apart from the land (Leung Yee vs. Strong

Machinery Co., 37 Phil. 644). In the same manner, this Court has also established that
possessory rights over said properties before title is vested on the grantee, may be
validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3
SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the original
mortgage deed on the 2-storey semi-concrete residential building with warehouse and
on the right of occupancy on the lot where the building was erected, was executed on
November 19, 1971 and registered under the provisions of Act 3344 with the Register of
Deeds of Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the
land was issued on April 24, 1972, on the basis of which OCT No. 2554 was issued in the
name of private respondent Fernando Magcale on May 15, 1972. It is therefore without
question that the original mortgage was executed before the issuance of the final patent
and before the government was divested of its title to the land, an event which takes
effect only on the issuance of the sales patent and its subsequent registration in the
Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of
Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961;
Pena "Law on Natural Resources", p. 49). Under the foregoing considerations, it is
evident that the mortgage executed by private respondent on his own building which
was erected on the land belonging to the government is to all intents and purposes a
valid mortgage.
As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it
will be noted that Sections 121, 122 and 124 of the Public Land Act, refer to land
already acquired under the Public Land Act, or any improvement thereon and therefore
have no application to the assailed mortgage in the case at bar which was executed
before such eventuality. Likewise, Section 2 of Republic Act No. 730, also a restriction
appearing on the face of private respondent's title has likewise no application in the
instant case, despite its reference to encumbrance or alienation before the patent is
issued because it refers specifically to encumbrance or alienation on the land itself and
does not mention anything regarding the improvements existing thereon.
But it is a different matter, as regards the second mortgage executed over the same
properties on May 2, 1973 for an additional loan of P20,000.00 which was registered
with the Registry of Deeds of Olongapo City on the same date. Relative thereto, it is
evident that such mortgage executed after the issuance of the sales patent and of the

Original Certificate of Title, falls squarely under the prohibitions stated in Sections 121,
122 and 124 of the Public Land Act and Section 2 of Republic Act 730, and is therefore
null and void.
Petitioner points out that private respondents, after physically possessing the title for
five years, voluntarily surrendered the same to the bank in 1977 in order that the
mortgaged may be annotated, without requiring the bank to get the prior approval of
the Ministry of Natural Resources beforehand, thereby implicitly authorizing Prudential
Bank to cause the annotation of said mortgage on their title.
However, the Court, in recently ruling on violations of Section 124 which refers to
Sections 118, 120, 122 and 123 of Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings because we believe that as
in pari delicto may not be invoked to defeat the policy of the State neither
may the doctrine of estoppel give a validating effect to a void contract.
Indeed, it is generally considered that as between parties to a contract,
validity cannot be given to it by estoppel if it is prohibited by law or is
against public policy (19 Am. Jur. 802). It is not within the competence of
any citizen to barter away what public policy by law was to preserve
(Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal
vs. IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded to and does
not pass upon any new contract between the parties (Ibid), as in the case at bar. It
should not preclude new contracts that may be entered into between petitioner bank
and private respondents that are in accordance with the requirements of the law. After
all, private respondents themselves declare that they are not denying the legitimacy of
their debts and appear to be open to new negotiations under the law (Comment; Rollo,
pp. 95-96). Any new transaction, however, would be subject to whatever steps the
Government may take for the reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales &
Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate Mortgage for
P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional

loan of P20,000.00 is null and void, without prejudice to any appropriate action the
Government may take against private respondents.
SO ORDERED.
Republic

of

the

Philippines

SUPREME

COURT

Manila
SECOND DIVISION
G.R. No. L-50466 May 31, 1982
CALTEX

(PHILIPPINES)

INC., petitioner,

vs.
CENTRAL

BOARD

OF

ASSESSMENT

APPEALS

and

CITY

ASSESSOR

OF

PASAY, respondents.

AQUINO, J.:
This case is about the realty tax on machinery and equipment installed by Caltex
(Philippines) Inc. in its gas stations located on leased land.
The machines and equipment consists of underground tanks, elevated tank, elevated
water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer,
car hoists, truck hoists, air compressors and tireflators. The city assessor described the
said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is
erected, a water tank if there is any is placed in one corner of the lot, car
hoists are placed in an adjacent shed, an air compressor is attached in the
wall of the shed or at the concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is
dug deep about six feet more or less, a few meters away from the shed.

This is done to prevent conflagration because gasoline and other

combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline pump
and the gasoline pump is commonly placed or constructed under the shed.
The footing of the pump is a cement pad and this cement pad is imbedded
in the pavement under the shed, and evidence that the gasoline
underground tank is attached and connected to the shed or building
through the pipe to the pump and the pump is attached and affixed to the
cement pad and pavement covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist under a
separate shed, the air compressor, the underground gasoline tank, neon
lights signboard, concrete fence and pavement and the lot where they are
all placed or erected, all of them used in the pursuance of the gasoline
service station business formed the entire gasoline service-station.
As to whether the subject properties are attached and affixed to the
tenement, it is clear they are, for the tenement we consider in this
particular case are (is) the pavement covering the entire lot which was
constructed by the owner of the gasoline station and the improvement
which holds all the properties under question, they are attached and
affixed to the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as
well as all the improvements, machines, equipments and apparatus are
allowed by Caltex (Philippines) Inc. ...
The underground gasoline tank is attached to the shed by the steel pipe to
the pump, so with the water tank it is connected also by a steel pipe to the
pavement, then to the electric motor which electric motor is placed under
the shed. So to say that the gasoline pumps, water pumps and
underground tanks are outside of the service station, and to consider only
the building as the service station is grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station operators under
an appropriate lease agreement or receipt. It is stipulated in the lease contract that the

operators, upon demand, shall return to Caltex the machines and equipment in good
condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of
the machines and equipment installed therein. Caltex retains the ownership thereof
during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station equipment
and machinery as taxable realty. The realty tax on said equipment amounts to
P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are
personalty. The assessor appealed to the Central Board of Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata as chairman,
Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of Local Government and
Community Development Jose Roo, held in its decision of June 3, 1977 that the said
machines and equipment are real property within the meaning of sections 3(k) & (m)
and 38 of the Real Property Tax Code, Presidential Decree No. 464, which took effect on
June 1, 1974, and that the definitions of real property and personal property in articles
415 and 416 of the Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's
place) in its resolution of January 12, 1978, denying Caltex's motion for reconsideration,
a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting
aside of the Board's decision and for a declaration that t he said machines and
equipment are personal property not subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate
jurisdiction over this case is not correct. When Republic act No. 1125 created the Tax
Court in 1954, there was as yet no Central Board of Assessment Appeals. Section 7(3) of
that law in providing that the Tax Court had jurisdiction to review by appeal decisions of
provincial or city boards of assessment appeals had in mind the local boards of
assessment appeals but not the Central Board of Assessment Appeals which under the
Real Property Tax Code has appellate jurisdiction over decisions of the said local boards
of assessment appeals and is, therefore, in the same category as the Tax Court.

Section 36 of the Real Property Tax Code provides that the decision of the Central Board
of Assessment Appeals shall become final and executory after the lapse of fifteen days
from the receipt of its decision by the appellant. Within that fifteen-day period, a
petition for reconsideration may be filed. The Code does not provide for the review of
the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this Court of the
decision of the Central Board of Assessment Appeals is the special civil action of
certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and machinery already
enumerated are subject to realty tax. This issue has to be resolved primarily under the
provisions of the Assessment Law and the Real Property Tax 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:
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.
The Code contains the following definitions in its section 3:
k) Improvements is a valuable addition made to property or an
amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance its
value, beauty or utility or to adapt it for new or further purposes.
m) Machinery shall embrace machines, mechanical contrivances,
instruments, appliances and apparatus attached to the real estate. It
includes the physical facilities available for production, as well as the
installations and appurtenant service facilities, together with all other

equipment designed for or essential to its manufacturing, industrial or

agricultural purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which
fixtures are necessary to the operation of the gas station, for without them the gas
station would be useless, and which have been attached or affixed permanently to the
gas station site or embedded therein, are taxable improvements and machinery within
the meaning of the Assessment Law and the Real Property Tax Code.
Caltex invokes the rule that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant but not when
so placed by a tenant, a usufructuary, or any person having only a temporary right,
unless such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61
Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding
machinery that becomes real property by destination. In the Davao Saw Mills case the
question was whether the machinery mounted on foundations of cement and installed
by the lessee on leased land should be regarded as real property for purposes of
execution of a judgment against the lessee. The sheriff treated the machinery as
personal property. This Court sustained the sheriff's action. (Compare with Machinery &
Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case
machinery was treated as realty).
Here, the question is whether the gas station equipment and machinery permanently
affixed by Caltex to its gas station and pavement (which are indubitably taxable realty)
should be subject to the realty tax. This question is different from the issue raised in
the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes
they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar
phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property" (Standard Oil Co. of New York
vs. Jaramillo, 44 Phil. 630, 633).

This case is also easily distinguishable from Board of Assessment Appeals vs. Manila
Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles within
the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The
steel towers were considered personalty because they were attached to square metal
frames by means of bolts and could be moved from place to place when unscrewed and
dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and equipment
in the repair shop of a bus company which were held to be personal property not
subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretion in
upholding the city assessor's is imposition of the realty tax on Caltex's gas station and
equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of Assessment
Appeals are affirmed. The petition for certiorari is dismissed for lack of merit. No costs.
SO ORDERED.
Republic

of

the

Philippines

SUPREME

COURT

Manila
SECOND DIVISION
G.R. No. L-47943 May 31, 1982
MANILA

ELECTRIC

COMPANY, petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS
OF BATANGAS and PROVINCIAL ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:

This case is about the imposition of the realty tax on two oil storage tanks installed in
1969 by Manila Electric Company on a lot in San Pascual, Batangas which it leased in
1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery compound. They
have a total capacity of 566,000 barrels. They are used for storing fuel oil for Meralco's
power plants.
According to Meralco, the storage tanks are made of steel plates welded and assembled
on the spot. Their bottoms rest on a foundation consisting of compacted earth as the
outermost layer, a sand pad as the intermediate layer and a two-inch thick bituminous
asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt
layer,
The steel sides of the tank are directly supported underneath by a circular wall made of
concrete, eighteen inches thick, to prevent the tank from sliding. Hence, according to
Meralco, the tank is not attached to its foundation. It is not anchored or welded to the
concrete circular wall. Its bottom plate is not attached to any part of the foundation by
bolts, screws or similar devices. The tank merely sits on its foundation. Each empty tank
can be floated by flooding its dike-inclosed location with water four feet deep. (pp. 2930, Rollo.)
On the other hand, according to the hearing commissioners of the Central Board of
Assessment Appeals, the area where the two tanks are located is enclosed with earthen
dikes with electric steel poles on top thereof and is divided into two parts as the site of
each tank. The foundation of the tanks is elevated from the remaining area. On both
sides of the earthen dikes are two separate concrete steps leading to the foundation of
each tank.
Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch
thick. Pipelines were installed on the sides of each tank and are connected to the
pipelines of the Manila Enterprises Industrial Corporation whose buildings and pumping
station are near Tank No. 2.
The Board concludes that while the tanks rest or sit on their foundation, the foundation
itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to
the land while the pipelines are attached to the tanks. (pp. 60-61, Rollo.) In 1970, the
municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the

provincial assessor, required Meralco to pay realty taxes on the two tanks. For the fiveyear period from 1970 to 1974, the tax and penalties amounted to P431,703.96 (p. 27,
Rollo). The Board required Meralco to pay the tax and penalties as a condition for
entertaining its appeal from the adverse decision of the Batangas board of assessment
appeals.
The Central Board of Assessment Appeals (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) in
its decision dated November 5, 1976 ruled that the tanks together with the foundation,
walls, dikes, steps, pipelines and other appurtenances constitute taxable improvements.
Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it
filed a motion for reconsideration which the Board denied in its resolution of November
25, 1977, a copy of which was received by Meralco on February 28, 1978.
On March 15, 1978, Meralco filed this special civil action of certiorari to annul the
Board's decision and resolution. It contends that the Board acted without jurisdiction
and committed a grave error of law in holding that its storage tanks are taxable real
property.
Meralco contends that the said oil storage tanks do not fall within any of the kinds of
real property enumerated in article 415 of the Civil Code and, therefore, they cannot be
categorized as realty by nature, by incorporation, by destination nor by analogy. Stress
is laid on the fact that the tanks are not attached to the land and that they were placed
on leased land, not on the land owned by Meralco.
This is one of those highly controversial, borderline or penumbral cases on the
classification of property where strong divergent opinions are inevitable. The issue
raised by Meralco has to be resolved in the light of the provisions of the Assessment
Law, Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree
No. 464 which took effect on June 1, 1974.
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:

Sec. 38. Incidence of Real Property Tax. They 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.
The Code contains the following definition in its section 3:
k) Improvements is a valuable addition made to property or an
amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance its
value, beauty or utility or to adapt it for new or further purposes.
We hold that while the two storage tanks are not embedded in the land, they may,
nevertheless, be considered as improvements on the land, enhancing its utility and
rendering it useful to the oil industry. It is undeniable that the two tanks have been
installed with some degree of permanence as receptacles for the considerable
quantities of oil needed by Meralco for its operations.
Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs.
Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may include things which should
generally be regarded as personal property(84 C.J.S. 171, Note 8). It is a familiar
phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property (Standard Oil Co. of New York
vs. Jaramillo, 44 Phil. 630, 633).
The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328,
wherein Meralco's steel towers were held not to be subject to realty tax, is not in point
because in that case the steel towers were regarded as poles and under its franchise
Meralco's poles are exempt from taxation. Moreover, the steel towers were not attached
to any land or building. They were removable from their metal frames.
Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor,
116 Phil. 501, where the tools and equipment in the repair, carpentry and blacksmith

shops of a transportation company were held not subject to realty tax because they
were personal property.
WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution
are affirmed. No costs.
SO ORDERED.