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validity or authority of the assessment itself is in question.

Stated differently, the general rule of a prerequisite recourse to
administrative remedies applies when questions of fact are
raised, but the exception of direct court action is allowed when
purely questions of law are involved.
Remedial Law; Civil Procedure; Questions of Fact; It has
been held that “a bare characterization in a petition of
unlawfulness, is merely a legal conclusion and a wish of the
pleader, and such a legal conclusion unsubstantiated by facts
which could give it life, has no standing in any court where
issues must be presented and determined by facts in ordinary
and concise language.”—Capwire argues and makes claims
on mere assumptions of certain facts as if they have been
G.R. No. 180110. May 30, 2016.* already admitted or established, when they have not, since no
evidence of such have yet been presented in the proper
CAPITOL WIRELESS, INC., petitioner, vs. THE agencies and even in the current petition. As such, it remains
PROVINCIAL TREASURER OF BATANGAS, THE unsettled whether
PROVINCIAL ASSESSOR OF BATANGAS, THE
MUNICIPAL TREASURER and ASSESSOR OF _______________
NASUGBU, BATANGAS, respondents.
* THIRD DIVISION.

Taxation; Real Property Taxation; In disputes involving

real property taxation, the general rule is to require the
taxpayer to first avail of administrative remedies and pay the
tax under protest before allowing any resort to a judicial 273
action, except when the assessment itself is alleged to be
illegal or is made without legal authority.—In disputes
VOL. 791, MAY 30, 2016 273
involving real property taxation, the general rule is to require
the taxpayer to first avail of administrative remedies and pay Capitol Wireless, Inc. vs. Provincial Treasurer of
the tax under protest before allowing any resort to a judicial Batangas
action, except when the assessment itself is alleged to be
illegal or is made without legal authority. For example, prior Capwire is a mere co-owner, not full owner, of the
resort to administrative action is required when among the subject submarine cable and, if the former, as to what extent;
issues raised is an allegedly erroneous assessment, like when whether all or certain portions of the cable are indeed
the reasonableness of the amount is challenged, while direct submerged in water; and whether the waters wherein the
court action is permitted when only the legality, power, cable/s is/are laid are entirely outside of Philippine territorial

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or inland waters, i.e., in international waters. More simply, longer exempted from real property tax” and may qualify as
Capwire argues based on mere legal conclusions, culminating “machinery” subject to real property tax under the Local
on its claim of illegality of respondents’ acts, but the Government Code. To the extent that the equipment’s location
conclusions are yet unsupported by facts that should have been is determinable to be within the taxing author-
threshed out quasi-judicially before the administrative
agencies. It has been held that “a bare characterization in a
petition of unlawfulness, is merely a legal conclusion and a
wish of the pleader, and such a legal conclusion 275
unsubstantiated by facts which could give it life, has no
standing in any court where issues must be presented and
determined by facts in ordinary and concise language.” VOL. 791, MAY 30, 2016 275
Therefore, Capwire’s resort to judicial action, premised on its Capitol Wireless, Inc. vs. Provincial Treasurer of
legal conclusion that its cables (the equipment being taxed) lie Batangas
entirely on international waters, without first administratively
substantiating such a factual premise, is improper and was
rightly denied. Its proposition that the cables lie entirely ity’s jurisdiction, the Court sees no reason to distinguish
beyond Philippine territory, and therefore, outside of between submarine cables used for communications and aerial
Philippine sovereignty, is a fact that is not subject to judicial or underground wires or lines used for electric transmission, so
notice since, on the contrary, and as will be explained later, it that both pieces of property do not merit a different treatment
is in fact certain that portions of the cable would definitely lie in the aspect of real property taxation. Both electric lines and
within Philippine waters. Jurisprudence on the Local communications cables, in the strictest sense, are not directly
Government Code is clear that facts such as these must be adhered to the soil but pass through posts, relays or landing
threshed out administratively, as the courts in these types of stations, but both may be classified under the term
cases step in at the first instance only when pure questions of “machinery” as real property under Article 415(5) of the Civil
law are involved. Code for the simple reason that such pieces of equipment
serve the owner’s business or tend to meet the needs of his
Civil Law; Property; Real Properties; Machineries; Both
industry or works that are on real estate. Even objects in or on
electric lines and communications cables, in the strictest
a body of water may be classified as such, as “waters” is
sense, are not directly adhered to the soil but pass through
classified as an immovable under Article 415(8) of the Code.
posts, relays or landing stations, but both may be classified
A classic example is a boathouse which, by its nature, is a
under the term “machinery” as real property under Article
vessel and, therefore, a personal property but, if it is tied to the
415(5) of the Civil Code for the simple reason that such pieces
shore and used as a residence, and since it floats on waters
of equipment serve the owner’s business or tend to meet the
which is immovable, is considered real property. Besides, the
needs of his industry or works that are on real estate.—
Court has already held that “it is a familiar phenomenon to see
Submarine or undersea communications cables are akin to
things classed as real property for purposes of taxation which
electric transmission lines which this Court has recently
on general principle might be considered personal property.”
declared in Manila Electric Company v. City Assessor and
City Treasurer of Lucena City, 765 SCRA 52 (2015), as “no
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Same; Same; Same; Absent any showing from Capwire of United Nations Convention on the Law of the Sea (UNCLOS)
any express grant of an exemption for its lines and cables from would define as the country’s territorial sea (to the extent of 12
real property taxation, then this interpretation applies and nautical miles outward from the nearest baseline, under Part II,
Capwire’s submarine cable may be held subject to real Sections 1 and 2) over which the country has sovereignty,
property tax.—Thus, absent any showing from Capwire of any including the seabed and subsoil, it follows that indeed a
express grant of an exemption for its lines and cables from real portion of the submarine cable system lies within Philippine
property taxation, then this interpretation applies and territory and thus falls within the jurisdiction of the said local
Capwire’s submarine cable may be held subject to real taxing authorities. It easily belies Capwire’s contention that
property tax. Having determined that Capwire is liable, and the cable system is entirely in international waters. And even
public respondents have the right to impose a real property tax if such portion does not lie in the 12-nautical-mile vicinity of
on its submarine cable, the issue that is unresolved is how the territorial sea but further inward, in Prof. Magallona v.
much of such cable is taxable based on the extent of Capwire’s Hon. Ermita, et al., 655 SCRA 476 (2011), this Court held that
ownership or co-ownership of it and the length that is laid “whether referred to as Philippine ‘internal waters’ under
within respondents’ taxing jurisdiction. The matter, however, Article I of the Constitution or as ‘archipelagic waters’ under
requires a factual determination that is best performed by the UNCLOS Part III, Article 49(1, 2, 4), the Philippines exercises
Local and Central Boards of Assessment Appeals, a remedy sovereignty over the body of water lying landward of (its)
which the petitioner did not avail of. baselines, including the air space over it and the submarine
areas underneath.” Further, under Part VI, Article 79 of the
Taxation; Property; Real Properties; Constitutional Law; UNCLOS, the Philippines clearly has jurisdiction with respect
National Territory; United Nations Convention on the Law of to cables laid in its territory that are utilized in support of other
the Sea; Under Part VI, Article 79 of the United Nations installations and structures under its jurisdiction.
Convention on the Law of the Sea (UNCLOS), the Philippines
clearly has jurisdiction Same; Same; Same; The jurisdiction or authority over
such part of the subject submarine cable system lying within
Philippine jurisdiction includes the authority to tax the same,
for taxation is one (1) of the three (3) basic and necessary
attributes of sovereignty, and such authority has been
275 delegated by the national legislature to the local governments
with respect to real property taxation.—As far as local
VOL. 791, MAY 30, 2016 275 government units are concerned, the areas described above are
to be considered subsumed under the term “municipal waters”
Capitol Wireless, Inc. vs. Provincial Treasurer of
which, under the Local Government Code, includes “not only
Batangas
streams, lakes, and tidal waters within the municipality, not
being the subject of private ownership and not comprised
with respect to cables laid in its territory that are utilized within the national parks, public forest, timber lands, forest
in support of other installations and structures under its reserves or fishery reserves, but also marine waters included
jurisdiction.—As the Court takes judicial notice that Nasugbu between two lines drawn perpendicularly to the general
is a coastal town and the surrounding sea falls within what the coastline from points where the boundary lines of the
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municipality or city touch the sea at low tide and a third line taxation. It failed to do so, however, despite the fact that the
parallel with the general coastline and fifteen (15) kilometers burden of proving exemption from local taxation is upon
from it.” Although the term “municipal waters” appears in the whom the subject real property is declared. Under the Local
Code in the Government Code, every person by or for whom real property
is declared, who shall claim tax exemption for such property
from real property taxation “shall file with the provincial, city
or municipal assessor within thirty (30) days from the date of
276
the declaration of real property sufficient documentary
evidence in support of such claim.” Capwire omitted to do so.
And even under Capwire’s legislative franchise, R.A. No.
276 SUPREME COURT REPORTS ANNOTATED 4387, which amended R.A. No. 2037, where it may be derived
Capitol Wireless, Inc. vs. Provincial Treasurer of that there was a grant of real property tax exemption for
Batangas properties that are part of its franchise, or directly meet the
needs of its business, such had been expressly withdrawn by
the Local Government Code, which took effect on January 1,
context of the grant of quarrying and fisheries privileges 1992, Sections 193 and 234.
for a fee by local governments, its inclusion in the Code’s
Book II which covers local taxation means that it may also PETITION for review on certiorari of the decision and
apply as guide in determining the territorial extent of the local resolution of the Court of Appeals.
authorities’ power to levy real property taxation. Thus, the The facts are stated in the opinion of the Court.
jurisdiction or authority over such part of the subject
submarine cable system lying within Philippine jurisdiction
includes the authority to tax the same, for taxation is one of
the three basic and necessary attributes of sovereignty, and
277
such authority has been delegated by the national legislature to
the local governments with respect to real property taxation.
Same; Local Taxation; Real Property Taxation; Tax VOL. 791, MAY 30, 2016 277
Exemptions; Under the Local Government Code (LGC), every Capitol Wireless, Inc. vs. Provincial Treasurer of
person by whom or for whom real property is declared, who Batangas
shall claim tax exemption for such property from real property
taxation “shall file with the provincial, city or municipal De La Cuesta, De Las Alas & Tantuico for petitioner.
assessor within thirty (30) days from the date of the Dennis C. Macatangay for respondents.
declaration of real property sufficient documentary evidence
in support of such claim.”—A way for Capwire to claim that PERALTA, J.:
its cable system is not covered by such authority is by showing
a domestic enactment or even contract, or an international Before the Court is a petition for review on
agreement or treaty exempting the same from real property certiorari under Rule 45 of the Rules of Court seeking
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to annul and set aside the Court of Appeals’ Decision1 278 SUPREME COURT REPORTS ANNOTATED
dated May 30, 2007 and Resolution2 dated October 8, Capitol Wireless, Inc. vs. Provincial Treasurer of
2007 in C.A.-G.R. S.P. No. 82264, which both denied Batangas
the appeal of petitioner against the decision of the
Regional Trial Court.
The agreements provide for co-ownership and other
Below are the facts of the case.
rights among the parties over the network.5
Petitioner Capitol Wireless, Inc. (Capwire) is a
Petitioner Capwire claims that it is co-owner only of
Philippine corporation in the business of providing
the so-called “Wet Segment” of the APCN, while the
international telecommunications services.3 As such
landing stations or terminals and Segment E of APCN
provider, Capwire has signed agreements with other
located in Nasugbu, Batangas are allegedly owned by
local and foreign telecommunications companies
the Philippine Long Distance Telephone Corporation
covering an international network of submarine cable
(PLDT).6 Moreover, it alleges that the Wet Segment is
systems such as the Asia Pacific Cable Network System
laid in international, and not Philippine, waters.7
(APCN) (which connects Australia, Thailand, Malaysia,
Capwire claims that as co-owner, it does not own
Singapore, Hong Kong, Taiwan, Korea, Japan,
any particular physical part of the cable system but,
Indonesia and the Philippines); the Brunei-Malaysia-
consistent with its financial contributions, it owns the
Philippines Cable Network System (BMP-CNS), the
right to use a certain capacity of the said system.8 This
Philippines-Italy (SEA-ME-WE-3-CNS), and the Guam
property right is allegedly reported in its financial books
Philippines (GP-CNS) systems.4
as “Indefeasible Rights in Cable Systems.”9
However, for loan restructuring purposes, Capwire
_______________ claims that “it was required to register the value of its
1 Penned by Associate Justice Aurora Santiago-Lagman, with right,” hence, it engaged an appraiser to “assess the
Associate Justices Bienvenido L. Reyes (now a member of this Court) market value of the international submarine cable
and Apolinario D. Bruselas, Jr., concurring; Rollo, pp. 9-16. system and the cost to Capwire.”10 On May 15, 2000,
Despite being impleaded in the petition, the Court of Appeals is Capwire submitted a Sworn Statement of True Value of
now being excluded as respondent by this Court per Section 4(a), Rule Real Properties at the Provincial Treasurer’s Office,
45 of the 1997 Rules of Civil Procedure. Batangas City, Batangas Province, for the Wet Segment
2 Penned by Associate Justice Aurora Santiago-Lagman, with of the system, stating:
Associate Justices Bienvenido L. Reyes and Apolinario D. Bruselas,
Jr., concurring; id., at pp. 18-19.
3 Id., at p. 27.
4 Id., at pp. 27-30.

    

278
_______________
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5 Id. by Capwire is that the cable system lies outside of

6 Id., at p. 30. Philippine territory, i.e., on international waters.13
7 Id. On February 7, 2003 and March 4, 2003, Capwire
8 Id. received a Warrant of Levy and a Notice of Auction
9 Id., at pp. 30-31. Sale, respectively, from the respondent Provincial
10 Id., at p. 31. Treasurer of Batangas (Provincial Treasurer).14
On March 10, 2003, Capwire filed a Petition for
Prohibition and Declaration of Nullity of Warrant of
Levy, Notice of Auc-
279
_______________

VOL. 791, MAY 30, 2016 279 11 Id., at pp. 31-32.

Capitol Wireless, Inc. vs. Provincial Treasurer of 12 Id., at pp. 32, 181-192.
Batangas 13 Id., at pp. 32, 182.
14 Id., at pp. 32, 78-81.

Capwire claims that it also reported that the system

“interconnects at the PLDT Landing Station in
Nasugbu, Batangas,” which is covered by a transfer
certificate of title and tax declarations in the name of 280
PLDT.11
As a result, the respondent Provincial Assessor of
280 SUPREME COURT REPORTS ANNOTATED
Batangas (Provincial Assessor) issued the following
Assessments of Real Property (ARP) against Capwire: Capitol Wireless, Inc. vs. Provincial Treasurer of
Batangas

tion Sale and/or Auction Sale with the Regional Trial

Court (RTC) of Batangas City.15
Alter the filing of the public respondents’
Comment,16 on May 5, 2003, the RTC issued an Order
In essence, the Provincial Assessor had determined dismissing the petition for failure of the petitioner
that the submarine cable systems described in Capwire’s Capwire to follow the requisite of payment under
Sworn Statement of True Value of Real Properties are protest as well as failure to appeal to the Local Board of
taxable real property, a determination that was contested Assessment Appeals (LBAA), as provided for in
by Capwire in an exchange of letters between the Sections 206 and 226 of Republic Act (R.A.) No. 7160,
company and the public respondent.12 The reason cited or the Local Government Code.17

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Capwire filed a Motion for Reconsideration,18 but VOL. 791, MAY 30, 2016 281
the same was likewise dismissed by the RTC in an Capitol Wireless, Inc. vs. Provincial Treasurer of
Order19 dated August 26, 2003. It then filed an appeal to Batangas
the Court of Appeals.20
On May 30, 2007, the Court of Appeals promulgated
tral Board of Assessment Appeals (CBAA).22
its Decision dismissing the appeal filed by Capwire and
Although Capwire claims that it saw no need to undergo
affirming the order of the trial court. The dispositive
administrative proceedings because its petition raises
portion of the CA’s decision states:
purely legal questions, the appellate court did not share
this view and noted that the case raises questions of fact,
WHEREFORE, premises considered, the
such as the extent to which parts of the submarine cable
assailed Orders dated May 5, 2003 and August
system lie within the territorial jurisdiction of the taxing
26, 2003 of the Regional Trial Court, Branch II of
authorities, the public respondents.23 Further, the CA
Batangas City, are AFFIRMED.
noted that Capwire failed to pay the tax assessed against
SO ORDERED.21
it under protest, another strict requirement under Section
252 of the Local Government Code.24
The appellate court held that the trial court correctly
Hence, the instant petition for review of Capwire.
dismissed Capwire’s petition because of the latter’s
Petitioner Capwire asserts that recourse to the Local
failure to comply with the requirements set in Sections
Board of Assessment Appeals, or payment of the tax
226 and 229 of the Local Government Code, that is, by
under protest, is inapplicable to the case at bar since
not availing of remedies before administrative bodies
there is no question of fact involved, or that the question
like the LBAA and the Cen-
involved is not the reasonableness of the amount
assessed but, rather, the authority and power of the
_______________ assessor to impose the tax and of the treasurer to collect
15 Id., at pp. 32, 64-77. it.25 It contends that there is only a pure question of law
16 Id., at pp. 33, 193-199. since the issue is whether its submarine cable system,
17 Id., at pp. 33, 200-203. which it claims lies in international waters, is taxable.26
18 Id., at pp. 204-212. Capwire holds the position that the cable system is not
19 Id., at pp. 223-228. subject to tax.27
20 Id., at pp. 229-255. Respondents assessors and treasurers of the Province
21 Id., at p. 34. of Batangas and Municipality of Nasugbu, Batangas
disagree with Capwire and insist that the case presents
questions of fact such as the extent and portion of the
submarine cable system that lies within the jurisdiction
of the said local governments, as well as the nature of
281
the so-called indefeasible

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_______________ made without legal authority.30 For example, prior resort

to administrative action is required when among the
22 Id., at pp. 13-14.
issues raised is an allegedly erroneous assessment, like
23 Id., at p. 14.
when the reasonableness of the amount is challenged,
24 Id., at p. 15.
while direct court action is permitted when only the
25 Id., at pp. 35-36.
legality, power, validity or authority of the assessment
26 Id., at pp. 37-38.
itself is in question.31 Stated differently, the general rule
27 Id.
of a prerequisite recourse to administrative remedies
applies when questions of fact are raised, but the
exception of direct

282
_______________

28 Id., at pp. 277-278.

282 SUPREME COURT REPORTS ANNOTATED
29 Id., at p. 278.
Capitol Wireless, Inc. vs. Provincial Treasurer of 30 City of Lapu-Lapu v. Philippine Economic Zone Authority,
Batangas G.R. No. 184203, November 26, 2014, 742 SCRA 524; Camp John
Hay Development Corporation v. Central Board of Assessment
28
rights as property of Capwire. Such questions are Appeals, G.R. No. 169234, October 2, 2013, 706 SCRA 547; National
allegedly resolvable only before administrative agencies Power Corporation v. Province of Quezon and Municipality of
like the Local Board of Assessment Appeals.29 Pagbilao, 624 Phil. 738; 611 SCRA 71 (2010).
The Court confronts the following issues: Is the case 31 Id.
cognizable by the administrative agencies and covered
by the requirements in Sections 226 and 229 of the
Local Government Code which makes the dismissal of
Capwire’s petition by the RTC proper? May submarine 283
communications cables be classified as taxable real
property by the local governments?
The petition is denied. No error attended the ruling VOL. 791, MAY 30, 2016 283
of the appellate court that the case involves factual Capitol Wireless, Inc. vs. Provincial Treasurer of
questions that should have been resolved before the Batangas
appropriate administrative bodies.
In disputes involving real property taxation, the court action is allowed when purely questions of law
general rule is to require the taxpayer to first avail of are involved.32
administrative remedies and pay the tax under protest This Court has previously and rather succinctly
before allowing any resort to a judicial action, except discussed the difference between a question of fact and
when the assessment itself is alleged to be illegal or is
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a question of law. In Cosmos Bottling Corporation v. 33 571 Phil. 281; 547 SCRA 571 (2008).
Nagrama, Jr.,33 it held:

The Court has made numerous dichotomies

between questions of law and fact. A reading of 284
these dichotomies shows that labels attached to
law and fact are descriptive rather than definitive.
We are not alone in Our difficult task of clearly 284 SUPREME COURT REPORTS ANNOTATED
distinguishing questions of feet from questions of Capitol Wireless, Inc. vs. Provincial Treasurer of
law. The United States Supreme Court has ruled Batangas
that: “we [do not] yet know of any other rule or
principle that will unerringly distinguish a factual admitted. In contrast, a question of fact
finding from a legal conclusion.” exists when the doubt or difference arises as
In Ramos v. Pepsi-Cola Bottling Co. of the P.I., to the truth or falsehood of facts or when
the Court ruled: the query invites calibration of the whole
There is a question of law in a given evidence considering mainly the credibility
case when the doubt or difference arises as of the witnesses, the existence and
to what the law is on a certain state of facts; relevancy of specific surrounding
there is a question of fact when the doubt or circumstances as well as their relation to
difference arises as to the truth or the each other and to the whole, and the
falsehood of alleged facts. probability of the situation.
We shall label this the doubt dichotomy. For the sake of brevity, We shall label this the
In Republic v. Sandiganbayan, the Court law application and calibration dichotomy.
ruled: In contrast, the dynamic legal scholarship in
x x x A question of law exists when the the United States has birthed many commentaries
doubt or controversy concerns the correct on the question of law and question of fact
application of law or jurisprudence to a dichotomy. As early as 1944, the law was
certain set of facts; or when the issue does described as growing downward toward “roots of
not call for an examination of the probative fact” which grew upward to meet it. In 1950, the
value of the evidence presented, the truth or late Professor Louis Jaffe saw fact and law as a
falsehood of facts being spectrum, with one shade blending imperceptibly
into the other. Others have defined questions of
_______________ law as those that deal with the general body of
legal principles; questions of fact deal with “all
32 National Power Corporation v. Municipal Government of
other phenomena x x x.” Kenneth Gulp Davis
Navotas, G.R. No. 192300, November 24, 2014, 741 SCRA 505,
also weighed in and noted that the difference
quoting Ty v. Trampe, 321 Phil. 81, 88; 250 SCRA 500, 505 (1995).
between fact and law has been characterized as
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that between “ought” questions and “is” territory, and the corresponding assessment and taxes
questions.34 due on the same, because the public respondents
imposed and collected the assailed real property tax on
Guided by the quoted pronouncement, the Court the finding that at least a portion or some portions of the
sustains the CA’s finding that petitioner’s case is one submarine cable system that Capwire owns or co-owns
replete with questions of fact instead of pure questions lies inside Philippine territory. Capwire’s disagreement
of law, which renders its filing in a judicial forum with such findings of the administrative bodies presents
improper because it is instead cognizable by local little to no legal question that only the courts may
administrative bodies like the Board of Assessment directly resolve.
Appeals, which are the proper venues for trying these Instead, Capwire argues and makes claims on mere
factual issues. Verily, what is alleged by Capwire in its assumptions of certain facts as if they have been already
petition as “the crux of the controversy,” that is, admitted or established, when they have not, since no
“whether or not an indefeasible right over a submarine evidence of such have yet been presented in the proper
cable system that lies in international waters can be agencies and even in the current petition. As such, it
subject to real property tax remains unsettled whether Capwire is a mere co-owner,
not full owner, of the subject submarine cable and, if the
_______________ former, as to what extent; whether all or certain portions
of the cable are indeed submerged in water; and whether
34 Id., at pp. 295-297; pp. 582-583. (Citations omitted) the waters wherein the cable/s is/are laid are entirely
outside of Philippine territorial or inland waters, i.e., in
international waters. More simply, Capwire argues
based on mere legal conclusions, culminating on its
285 claim of illegality of respondents’ acts, but the
conclusions are yet unsupported by facts that should
have been threshed out quasi-judicially before the
VOL. 791, MAY 30, 2016 285 administrative agencies. It has been held that “a bare
Capitol Wireless, Inc. vs. Provincial Treasurer of characterization in a petition of unlawfulness, is merely
Batangas a legal conclusion and a wish of the pleader, and such a
legal conclusion unsubstantiated by facts which could
in the Philippines,”35 is not the genuine issue that the give it life, has no standing in any court where issues
case presents — as it is already obvious and
fundamental that real property that lies outside of _______________
Philippine territorial jurisdiction cannot be subjected to
35 Rollo, p. 37.
its domestic and sovereign power of real property
taxation — but, rather, such factual issues as the extent
and status of Capwire’s ownership of the system, the
actual length of the cable/s that lie in Philippine
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286 reason to distinguish between submarine cables used for

communications and aerial or underground wires or
lines used for electric transmission, so that both pieces
286 SUPREME COURT REPORTS ANNOTATED
of property do not merit a different treatment in the
Capitol Wireless, Inc. vs. Provincial Treasurer of aspect of real property taxation.
Batangas
_______________
must be presented and determined by facts in
ordinary and concise language.”36 Therefore, Capwire’s 36 Petty v. Dayton Musicians’ Association, 153 NE2d 218,
resort to judicial action, premised on its legal conclusion affirmed 153 NE2d 223, quoted in De Dios v. Bristol Laboratories
that its cables (the equipment being taxed) lie entirely (Phils.), Inc., 154 Phil. 311, 317-322; 55 SCRA 349, 355 (1974).
on international waters, without first administratively 37 G.R. No. 166102, August 5, 2015, 765 SCRA 52.
substantiating such a factual premise, is improper and
was rightly denied. Its proposition that the cables lie
entirely beyond Philippine territory, and therefore,
outside of Philippine sovereignty, is a fact that is not 287
subject to judicial notice since, on the contrary, and as
will be explained later, it is in fact certain that portions
of the cable would definitely lie within Philippine VOL. 791, MAY 30, 2016 287
waters. Jurisprudence on the Local Government Code is Capitol Wireless, Inc. vs. Provincial Treasurer of
clear that facts such as these must be threshed out Batangas
administratively, as the courts in these types of cases
step in at the first instance only when pure questions of Both electric lines and communications cables, in the
law are involved. strictest sense, are not directly adhered to the soil but
Nonetheless, We proceed to decide on whether pass through posts, relays or landing stations, but both
submarine wires or cables used for communications may be classified under the term “machinery” as real
may be taxed like other real estate. property under Article 415(5)38 of the Civil Code for the
We hold in the affirmative. simple reason that such pieces of equipment serve the
Submarine or undersea communications cables are owner’s business or tend to meet the needs of his
akin to electric transmission lines which this Court has industry or works that are on real estate. Even objects in
recently declared in Manila Electric Company v. City or on a body of water may be classified as such, as
Assessor and City Treasurer of Lucena City,37 as “no “waters” is classified as an immovable under Article
longer exempted from real property tax” and may 415(8)39 of the Code. A classic example is a boathouse
qualify as “machinery” subject to real property tax which, by its nature, is a vessel and, therefore, a
under the Local Government Code. To the extent that personal property but, if it is tied to the shore and used
the equipment’s location is determinable to be within as a residence, and since it floats on waters which is
the taxing authority’s jurisdiction, the Court sees no immovable, is considered real property.40 Besides, the
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Court has already held that “it is a familiar phenomenon Thus, absent any showing from Capwire of any
to see things classed as real property for express grant of an exemption for its lines and cables
from real property taxation, then this interpretation
_______________ applies and Capwire’s submarine cable may be held
subject to real property tax.
38 Civil Code, Art. 415. The following are immovable property: Having determined that Capwire is liable, and public
xxxx respondents have the right to impose a real property tax
(5) Machinery, receptacles, instruments or implements intended on its submarine cable, the issue that is unresolved is
by the owner of the tenement for an industry or works which may be how much of such cable is taxable based on the extent
carried on in a building or on a piece of land, and which tend directly of Capwire’s ownership or co-ownership of it and the
to meet the needs of the said industry or works. length that is laid within respondents’ taxing
According to Manila Electric Company v. City Assessor and City jurisdiction. The matter, however, requires a factual
Treasurer of Lucena City, supra note 37, the requirements for the determination that is best performed by the Local and
machinery to 1) be placed in the tenement by the owner of the Central Boards of Assessment Appeals, a remedy which
tenement; and 2) that they be destined for use in the industry or work the petitioner did not avail of.
of the tenement are not required by the Local Government Code for At any rate, given the importance of the issue, it is
the machinery to be classified as real property for purposes of taxation proper to lay down the other legal bases for the local
as such real property. All that is needed is for the machinery to tend to taxing authorities’ power to tax portions of the
directly meet the needs of the owner’s industry or works. submarine cables of petitioner. It is not in dispute that
39 Civil Code, Art. 415. The following are immovable property: the submarine cable system’s Landing Station in
xxxx Nasugbu, Batangas is owned by PLDT and not by
(8) Mines, quarries, and slag dumps, while the matter thereof Capwire. Obviously, Capwire is not liable for the real
forms part of the bed, and waters either running or stagnant. property tax on this Landing Station. Nonetheless,
40 Paras, Edgardo L., Civil Code of the Philippines Annotated Capwire admits that it co-owns the submarine cable
(16th ed., 2008), Vol. II, pp. 28-29. system that is subject of the tax assessed and being
collected by public respondents. As the Court takes
judicial notice that Nasugbu is a coastal town and the
surrounding sea falls within what the United Nations
288 Convention on the Law of the Sea (UNCLOS) would
define as the country’s territorial sea (to the extent of 12
nautical miles outward from the nearest baseline, under
288 SUPREME COURT REPORTS ANNOTATED Part II, Sections 1 and 2) over which the country has
Capitol Wireless, Inc. vs. Provincial Treasurer of
Batangas _______________

41 Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, 633

purposes of taxation which on general principle
(1923), cited in Caltex (Phil.), Inc. v. Central Board of Assessment
might be considered personal property.”41
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Appeals, 199 Phil. 487, 492; 114 SCRA 296, 302 (1982) and Manila 2. This sovereignty extends to the air space over
Electric Company v. City Assessor and City Treasurer of Lucena City, the territorial sea as well as to its bed and subsoil.
supra note 37. 3. The sovereignty over the territorial sea is
exercised subject to this Convention and to other rules
of international law.
Section 2. Limits of the Territorial Sea
Article 3. Breadth of the territorial sea.
289
Every State has the right to establish the
breadth of its territorial sea up to a limit not
VOL. 791, MAY 30, 2016 289 exceeding 12 nautical miles, measured from
Capitol Wireless, Inc. vs. Provincial Treasurer of baselines determined in accordance with this
Batangas Convention.
43 671 Phil. 244, 266-267; 655 SCRA 476, 498 (2011).
44 Constitution, Art. I. National Territory.—The national
sovereignty, including the seabed and subsoil, it follows
territory comprises the Philippine archipelago, with all the islands and
that indeed a portion of the submarine cable system lies
waters embraced therein, and all other territories over which the
within Philippine territory and thus falls within the
Philippines has sovereignty or jurisdiction, consisting of its terrestrial,
jurisdiction of the said local taxing authorities.42 It
fluvial, and aerial domains, including its territorial sea, the seabed, the
easily belies Capwire’s contention that the cable system
subsoil, the insular shelves, and other submarine areas. The waters
is entirely in international waters. And even if such
around, between, and connecting the islands of
portion does not lie in the 12-nautical-mile vicinity of
the territorial sea but further inward, in Prof. Magallona
v. Hon. Ermita, et al.,43 this Court held that “whether
referred to as Philippine ‘internal waters’ under Article I
of the Constitution44 or as ‘archipelagic waters’ 290

_______________ 290 SUPREME COURT REPORTS ANNOTATED

42 United Nations Convention on the Law of the Sea (UNCLOS), Capitol Wireless, Inc. vs. Provincial Treasurer of
PART II. Territorial Sea and Contiguous Zone Batangas
Section 1. General Provisions
Article 2. Legal status of the territorial sea, of the air under UNCLOS Part III, Article 49(1, 2, 4),45 the
space over the territorial sea and of its bed and subsoil: Philippines exercises sovereignty over the body of water
1. The sovereignty of a coastal State extends, lying landward of (its) baselines, including the air space
beyond its land territory and internal waters and, in the over it and the submarine areas underneath.” Further,
case of an archipelagic State, its archipelagic waters, to under Part VI, Article 7946 of the UNCLOS, the
an adjacent belt of sea, described as the territorial sea. Philippines clearly has jurisdiction with respect to

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cables laid in its territory that are utilized in support of VOL. 791, MAY 30, 2016 291
other installations and structures under its jurisdiction.
Capitol Wireless, Inc. vs. Provincial Treasurer of
Batangas
_______________

the archipelago, regardless of their breadth and dimensions, form And as far as local government units are concerned,
part of the internal waters of the Philippines. the areas described above are to be considered
45 Article 49. Legal status of archipelagic waters, of the air subsumed under the term “municipal waters” which,
space over archipelagic waters and of their bed and subsoil.— under the Local Government Code, includes “not only
1. The sovereignty of an archipelagic State extends to the streams, lakes, and tidal waters within the municipality,
waters enclosed by the archipelagic baselines drawn in not being the subject of private ownership and not
accordance with Article 47, described as archipelagic waters, comprised within the national parks, public forest,
regardless of their depth or distance from the coast. timber lands, forest reserves or fishery reserves, but also
2. This sovereignty extends to the air space over the marine waters included between two lines drawn
archipelagic waters, as well as to their bed and subsoil, and the perpendicularly to the general coastline from points
resources contained therein. where the boundary lines of the municipality or city
xxxx touch the sea at low tide and a third line parallel with
4. The regime of archipelagic sea lanes passage the general coastline and fifteen (15) kilometers from
established in this Part shall not in other respects affect the it.”47 Although the term “municipal waters” appears in
status of the archipelagic waters, including the sea lanes, or the the Code in the context of the grant of quarrying and
exercise by the archipelagic state of its sovereignty over such fisheries privileges for a fee by local governments,48 its
waters and their air space, bed and subsoil, and the resources inclusion in the Code’s Book II which covers local
contained therein.
46 Article 79. Submarine cables and pipelines on the _______________
continental shelf.—
47 Local Government Code, Book II, Chapter 1, Sec. 131(r)
xxxx
“Municipal Waters” includes not only streams, lakes, and tidal waters
4. Nothing in this Part (i.e., Part VI, Continental Shell)
within the municipality, not being the subject of private ownership and
affects the right of the coastal State to establish conditions for
not comprised within the national parks, public forest, timber lands,
cables or pipelines entering its territory or territorial sea, or its
forest reserves or fishery reserves, but also marine waters included
jurisdiction over cables and pipelines constructed or used in
between two lines drawn perpendicularly to the general coastline from
connection with the exploration of its continental shelf or
points where the boundary lines of the municipality or city touch the
exploitation of its resources or the operations of artificial
sea at low tide and a third line parallel with the general coastline and
islands, installations and structures under its jurisdiction.
fifteen (15) kilometers from it. Where two (2) municipalities are so
situated on the opposite shores that there is less than fifteen (15)
kilometers of marine waters between them, the third line shall be
equally distant from opposite shores of their respective municipalities.
291

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48 Id., Sec. 138. Tax on Sand, Gravel and Other Quarry Code, every person by or for whom real property is
Resources.—The province may levy and collect not more than ten declared, who shall claim tax exemption for such
percent (10%) of fair market value in the locality per cubic meter of property
ordinary stones, sand, gravel, earth, and other quarry resources, as
defined under the National Internal Revenue Code, as amended, _______________
extracted from public lands or from the beds of seas, lakes, rivers,
streams, creeks, and other public waters within its territorial The permit to extract sand, gravel and other quarry resources shall
jurisdiction. be issued exclusively by the provincial governor, pursuant to the
ordinance of the Sangguniang Panlalawigan.
xxxx
Sec. 149. Fishery Rentals, Fees and Charges.—(a) 
Municipalities shall have the exclusive authority to grant fishery
292
privileges in the municipal waters and impose rentals, fees or charges
therefor in accordance with the provisions of this Section. x x x
292 SUPREME COURT REPORTS ANNOTATED 49 Compagnie Financiere Sucres et Denrees v. Commissioner of

Capitol Wireless, Inc. vs. Provincial Treasurer of Internal Revenue, 531 Phil. 264, 267; 499 SCRA 664, 667 (2006);
Batangas Commissioner of Internal Revenue v. Solidbank Corp., 462 Phil. 96,
127; 416 SCRA 436, 457 (2003).
50 Local Government Code, Title II; The City Government of
taxation means that it may also apply as guide in
Quezon City v. Bayan Telecommunications, Inc., 519 Phil. 159, 174;
determining the territorial extent of the local authorities’
484 SCRA 169, 184 (2006).
power to levy real property taxation.
51 Camp John Hay Development Corporation v. Central Board of
Thus, the jurisdiction or authority over such part of
Assessment Appeals, supra note 30, citing the Local Government
the subject submarine cable system lying within
Code, Section 206.
Philippine jurisdiction includes the authority to tax the
same, for taxation is one of the three basic and
necessary attributes of sovereignty,49 and such authority
has been delegated by the national legislature to the
local governments with respect to real property 293
taxation.50
As earlier stated, a way for Capwire to claim that its VOL. 791, MAY 30, 2016 293
cable system is not covered by such authority is by
showing a domestic enactment or even contract, or an Capitol Wireless, Inc. vs. Provincial Treasurer of
international agreement or treaty exempting the same Batangas
from real property taxation. It failed to do so, however,
despite the fact that the burden of proving exemption from real property taxation “shall file with the
from local taxation is upon whom the subject real provincial, city or municipal assessor within thirty (30)
property is declared.51 Under the Local Government days from the date of the declaration of real property
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sufficient documentary evidence in support of such franchise, as other persons or corporations are now or hereinafter may
claim.”52 Capwire omitted to do so. And even under be required by law to pay.
Capwire’s legislative franchise, R.A. No. 4387, which 54 See Manila Electric Company v. City Assessor and City
amended R.A. No. 2037, where it may be derived that Treasurer of Lucena City, supra note 37.
there was a grant of real property tax exemption for
properties that are part of its franchise, or directly meet
the needs of its business,53 such had been expressly
withdrawn by the Local Government Code, which took 294
effect on January 1, 1992, Sections 193 and 234 of
which provide:54
294 SUPREME COURT REPORTS ANNOTATED
Section 193. Withdrawal of Tax Exemption Capitol Wireless, Inc. vs. Provincial Treasurer of
Privileges.—Unless otherwise provided in this Batangas
Code, tax exemptions or incentives granted to,
or presently enjoyed by all persons, whether nonprofit hospitals and educational
natural or juridical, including government- institutions, are hereby withdrawn upon the
owned or -controlled corporations, except local effectivity of this Code.
water districts, cooperatives duly registered xxxx
under R.A. No. 6938, non-stock and Section 234. Exemptions from Real Property
Tax.—
_______________ The following are exempted from payment of the
real property tax:
52 Local Government Code, Sec. 206. Proof of Exemption of
(a) Real property owned by the
Real Properly from Taxation.—Every person by or for whom real
Republic of the Philippines or any of its
property is declared, who shall claim tax exemption for such property
political subdivisions except when the
under this Title shall file with the provincial, city or municipal
beneficial use thereof has been granted, for
assessor within thirty (30) days from the date of the declaration of real
consideration of otherwise, to a taxable
property sufficient documentary evidence in support of such claim
person;
including corporate charters, title of ownership, articles of
(b) Charitable institutions, churches,
incorporation, bylaws, contracts, affidavits, certifications and
parsonages or convents appurtenant thereto,
mortgage deeds, and similar documents.
mosques, nonprofit or religious cemeteries
53 Sec. 5. The same Act is further amended by adding between
and all lands, buildings, and improvements
Sections thirteen and fourteen thereof a new section which shall read
actually, directly, and exclusively used for
as follows:
religious, charitable or educational
Sec. 13-A. (a) The grantee shall be liable to pay the same taxes
purposes;
on its real estate, buildings, and personal property, exclusive of this
(c) All machineries and equipment that
are actually, directly and exclusively used
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by local water districts and government- any other privilege or exemption that were granted to it
owned or by the legislature after the enactment of the Local
-controlled corporations engaged in the Government Code. Therefore, the presumption stays
supply and distribution of water and/or that it enjoys no such privilege or exemption. Tax
generation and transmission of electric exemptions are strictly construed against the taxpayer
power; because taxes are considered the lifeblood of the
(d) All real property owned by duly nation.57
registered cooperatives as provided for WHEREFORE, the petition is DENIED. The Court
under R.A. No. 6938; and of Appeals’ Decision dated May 30, 2007 and
(e) Machinery and equipment used for Resolution dated October 8, 2007 are AFFIRMED.
pollution control and environmental SO ORDERED.
protection.
Except as provided herein, any exemption Velasco, Jr. (Chairperson), Perez and Mendoza,**
from payment of real property tax previously JJ., concur.
granted to, or presently enjoyed by, all Jardeleza, J., On Leave.
persons, whether natural or juridical,
including all government-owned or -controlled Petition denied, judgment and resolution affirmed.
corporations are hereby withdrawn upon the
Notes.—Section 142 of the Local Government Code
effectivity of this Code.55
grants municipalities the power to levy taxes, fees, and
charges not otherwise levied by provinces. (Smart
_______________ Communications, Inc. vs. Municipality of Malvar,
Batangas, 716 SCRA 677 [2014])
55 Emphasis supplied.
Section 252(c) of the Local Government Code of the
Philippines is very clear that “[i]n the event that the
protest is
finally decided in favor of the taxpayer, the amount or
295 portion

VOL. 791, MAY 30, 2016 295 _______________

Capitol Wireless, Inc. vs. Provincial Treasurer of 56 Manila Electric Company v. City Assessor and City Treasurer
Batangas of Lucena City, supra note 37.
57 City of Manila v. Colet, G.R. No. 120051, December 10, 2014,
Such express withdrawal had been previously held 744 SCRA 265.
effective upon exemptions bestowed by legislative ** Designated additional member, in lieu of Associate Justice
franchises granted prior to the effectivity of the Local Bienvenido L. Reyes, per Raffle dated May 23, 2016.
Government Code.56 Capwire fails to allege or provide
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296

296 SUPREME COURT REPORTS ANNOTATED

Capitol Wireless, Inc. vs. Provincial Treasurer of
Batangas

of the tax protested shall be refunded to the

protestant, or applied as tax credit against his existing or
future tax liability.” (Coca-Cola Bottlers Philippines,
Inc. vs. City of Manila, 721 SCRA 1 [2014])

——o0o——

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