Case Digest: Capitol Wireless v. City of Batangas, G.R. No. 180110, May 30, 2016

Property | Immovable Property, Communication Cables

Art. 415. The following are immovable property:

1. Land, buildings, roads and constructions of all kinds adhered to the soil;
2. Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;
3. Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;
4. Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements;
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;
6. Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included;
7. Fertilizer actually used on a piece of land;
8. Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant;
9. Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast;
10.  Contracts for public works, and servitudes and other real rights over immovable property. 

Facts: 

• Capitol Wireless Inc. (Capwire) provides international telecommunications services, with agreements covering international network of submarine cable systems such as the Asia Pacific Cable Network System (APCN).
• Capwire claims co-ownership of the "Wet Segment" of APCN but alleges that landing stations and Segment E in Nasugbu, Batangas belong to PLDT, and the Wet Segment lies in international waters.
• Capwire claims that as co-owner, it does not own any particular physical part of the cable system but, consistent with its financial contributions, it owns the right to use a certain capacity of the said system. 
• However, for loan restructuring purposes, Capwire claims that "it was required to register the value of its right," hence, it engaged an appraiser to "assess the market value of the international submarine cable system and the cost to Capwire.
• As a result, the Provincial Assessor issued Assessments of Real Property (ARP) against Capwire, considering the cable systems taxable real property.

Issue: 

• Whether the submarine communications cables be classified as taxable real property by the local governments. YES

Held:

Submarine or undersea communications cables are akin to electric transmission lines which this Court has recently declared in Manila Electric Company v. City Assessor and City Treasurer of Lucena City, as "no longer exempted from real property tax" and may qualify as "machinery" subject to real property tax under the Local Government Code.

To the extent that the equipment's location is determinable to be within the taxing authority's jurisdiction, the Court sees no reason to distinguish between submarine cables used for communications and aerial or underground wires or lines used for electric transmission, so that both pieces of property do not merit a different treatment in the aspect of real property taxation. 

Both electric lines and communications cables, in the strictest sense, are not directly adhered to the soil but pass through posts, relays or landing stations, but both may be classified under the term "machinery" as real property under Article 415(5)  of the Civil Code for the simple reason that such pieces of equipment serve the owner's business or tend to meet the needs of his industry or works that are on real estate. Even objects in or on a body of water may be classified as such, as "waters" is classified as an immovable under Article 415(8) of the Code. 

A classic example is a boathouse which, by its nature, is a vessel and, therefore, a personal property but, if it is tied to the shore and used as a residence, and since it floats on waters which is immovable, is considered real property.  Besides, the Court has already held that "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." 

Thus, absent any showing from Capwire of any 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.