PHIL HOMES V CA

GR NO. 119446| JANUARY 21, 1999

QUICK NOTE:

ISSUE (S): WON submarine cables may be classified as taxable real property by local government? - YES

FACTS:
Action: Petition for Review on Certiorari Rule 45

Capitol Wireless Inc (Capwire), a Philippine International Telecommunications services provider, entered into agreements with
BOTH local and foreign telco’s covering the Asia Pacific Cable Network System1 providing CO-OWNERSHIP over the
network.
• PET is “Wet Segment” co-owner of APCN;
• Landing stations and Segment E belong to PLDT;
• Cables are laid in INTERNATIONAL waters (NOT Philippine Waters)
• As co-owner, PET does NOT own any physical cable system. It only owns INDEFEASIBLE RIGHT to use (as
reflected in financial books)
• Claims to have been required to “register the value of its right” for LOAN restructuring purposes
o Sworn Statement of True Value of Real Properties was then submitted to Prov. Treasurer’s Office of
Batangas on May 15, 2000.
o Also reported that the Wet Segment “interconnects” at the PLDT Landing Station covered by PLDT’s
transfer certificate of title and tax declarations

Provincial Assessor issued ASSESSMENTS OF REAL PROPERTY against Capwire.

• Deemed value of right to cablewires as TAXALE REAL PROPERTY
o PET: NO! Lies OUTSIDE the Philippines (international waters)
• Warrant of Levy and Notice of Auction Sale were subsequently issued
o PET contested: Petition for Prohibition and Declaration of Nullity of Warrant of Levy and Notice of Auction
Sale (RTC Batangas)
▪ RTC Batangas: DISMISSED; did NOT FOLLOW requisites:
• Payment under protest
• Failure to appeal to the Local Board of Assessment Appeals (LBAA)
▪ MR subsequently dismissed as well
▪ Appeal to CA dismissed, RTC affirmed
• Correct dismissal due to non-compliance with Sec. 226 and Sec. 229 of LGC
• In disagreement with PET; raises questions of fact hence the need to go through the
administrative remedies
o PET: Instant Petition for Review to SC
▪ Recourse to the LBAA or payment under protest is INAPPLICABLE since NO QUESTION OF
FACT
▪ Question involved: NOT reasonableness of amount assessed BUT authority and power to even
impose tax to begin with
• Proper issue: “WON cable systems are taxable”
o Batangas Assessors and Treasurer: NO
▪ Questions of FACT (e.g. extent and portion of the submarine cable lying within jurisdiction of LGU;
nature of “indefeasible right” to use) all of which are only resolvable by going through the LBAA
o SC: petition DENIED; ruled in favor of RESP

RATIO:

1 International Network of Submarine Cable Systems connecting Australia, Thailand, Malaysia, etc
MACASPAC-ASCUE | LAW 154 | 1819
In disputes involving RPT, a taxpayer is still required to comply with the following:
- Payment under protest
- GR: Avail of ADMINISTRATIVE remedies before resort to judicial action
o EXCEPT: assessment itself is alleged to be illegal/without legal authority
Difference on Question of Fact and Question of Law (Ramos v Pepsi-Cola Bottling Co of the PI)
- Of Fact - when doubt or difference arises as to TRUTH or FALSEHOOD of alleged facts
- Of Law – when doubt arises as to what law is on a certain state of facts

CA correct in deeming said petition as riffed with QUESTIONS OF FACT

- Hence, payment under protest AND resorting to administrative remedies HOLD
- PET mistaken in deeming “WON indefeasible right over submarine cable systems lying in international waters” as the
genuine issue
- Conceded that whatever lies outside cannot be taxed BUT REAL ISSUE is concerned with the EXTENT and
STATUS of Capwire’s ownership
- But court nonetheless rules on the merit of such issue

Submarine wires or cables used for communications MAY BE TAXED like other real estate
- Submarine/Undersea communications = electric transmission lines
o Manila Electric Company v City Assessor and City Treasurer of Lucena City – no longer exempted from RPT;
qualified as MACHINERY
- As to extent of location’s determinability: no reason to distinguish between submarine cables used for
communications and aerial or underground wires for the same purpose; no difference in treatment!
o Both are not directly adhered to the soil
o Merely passing through posts/relays/“landing stations” = MACHINERY
o Guidance: Art. 415(5) (Sir Labitag says hi)
- Absent showing of any express exemption grant = NOT EXEMPTED; TAXABLE

How much of such cable is taxable based on Capwire’s ownership/co-ownership of it and the length that is laid within taxing jurisdiction of RESP?
- Landing station in Nasugbu = PLDT’s → so Capwire NOT liable for RPT on this landing station
- Capwire admits co-owning the submarine cable system established to be subject of tax assessed and collected by
RESP
o Since Nasugbu is a Coastal Town, we seek reference from UNCLOS
▪ “Territorial Sea” - to the extent of 12 NAUTICAL MILES outward from the nearest baseline over
which the country has sovereignty including the seabed and subsoil
▪ Portion of Cable Systems = COVERED! Debunks claim of Capwire that it lies COMPLETELY in
international waters
▪ Even if not in the 12 nautical mile vicinity, Prof. Magallona v Ermita stats that “whether referred to as
Philippine internal waters or as archipelagic waters, still the Philippine exercises sovereignty over
body of water lying INWARD its baselines”
• As for LGUs: areas described = “municipal waters” so TAXABLE
▪ Absent any showing of an express grant = TAXABLE

MACASPAC-ASCUE | LAW 154 | 1819