Santos vs. Pryce Gases, Inc.

A person named as respondent in a search warrant and against whom a criminal complaint is subsequently filed has legal personality to seek the quashal of the warrant, and probable cause for a search warrant exists when facts and circumstances would lead a reasonably discreet and prudent person to believe an offense has been committed and the objects sought are in the place to be searched — a standard lower than that required to hold an accused for trial.

Respondent Pryce Gases, Inc. is a domestic corporation engaged in the manufacture of industrial gases and the distribution of LPG products in the Visayas and Mindanao regions. Its LPG cylinders are exclusively manufactured for its use and are embossed with the Pryce marking and logo. Petitioner Rowland Kim Santos is the manager of Sun Gas, Inc., a competitor of respondent. In early 2002, respondent noticed a decline in the return of its LPG cylinders for refilling and suspected that competitors, including Sun Gas, Inc., were refilling them. The dispute centers on whether the search warrant issued against petitioner's warehouse was valid and who has proper custody of the seized cylinders.

Respondent Pryce Gases, Inc. is a domestic corporation engaged in the manufacture of oxygen, acetylene, and other industrial gases, as well as in the distribution of LPG products in the Visayas and Mindanao regions. Its Iloilo City branch sells LPG products directly or through various dealers to hospitals, restaurants, and other business establishments. The LPG products are contained in 11-kg, 22-kg, or 50-kg steel cylinders exclusively manufactured for respondent's use, embossed with the Pryce marking and logo. Petitioner Rowland Kim Santos is the manager of Sun Gas, Inc., one of respondent's competitors.

In early 2002, respondent noticed a decline in the return of its LPG cylinders for refilling. Respondent's employees suspected that the cylinders had been removed from market circulation and refilled by competitors, including Sun Gas, Inc. Arnold T. Figueroa, respondent's sales manager for Panay, sought the assistance of the Criminal Investigation and Detection Group (CIDG) to recover the cylinders allegedly in the possession of Sun Gas, Inc. Acting on Figueroa's complaint, CIDG operatives conducted surveillance on the warehouse of Sun Gas, Inc. at 130 Timawa Avenue, Molo, Iloilo. The CIDG requested the Bureau of Fire Protection (BFP) to conduct a routine fire inspection at the warehouse, with some CIDG operatives led by PO2 Vicente D. Demandara, Jr. posing as BFP inspectors. The operatives entered the warehouse and took photographs of the LPG cylinders.

On 4 June 2002, PO2 Demandara, Jr. applied before the RTC of Iloilo City, Branch 29, for a search warrant, alleging that petitioner was in possession of Pryce LPG tanks, some with logos scraped off and replaced with Sun Gas, Inc. markings, and other materials used in tampering Pryce gas tanks. The application averred that petitioner was illegally distributing Pryce LPG products without respondent's consent, in violation of Section 2 of Republic Act No. 623, as amended by R.A. No. 5700. After conducting searching questions on witnesses PO1 Aldrin Ligan, a CIDG operative, and Richard Oliveros, an employee of Pryce Gases, Inc., Judge Rene B. Honrado issued Search Warrant No. 02-16 authorizing the seizure of assorted Pryce LPG gas tank cylinders, suspected LPG tanks with Sun Gas Inc. markings and scraped-off Pryce trademarks, and other materials used in tampering. On the same day, CIDG agents served the warrant and recovered 544 empty 11-kg Pryce cylinders, 2 filled 11-kg cylinders with seal, 7 filled 11-kg cylinders without seal, 44 empty 22-kg cylinders, 10 empty 50-kg cylinders, and 1 filled 6-kg cylinder without seal.

On 7 June 2002, petitioner filed a Motion to Quash the search warrant on grounds of lack of probable cause and fraud in obtaining evidence, citing Article III, Section 2 of the Constitution and Rule 126, Sections 4 and 5 of the Rules of Court. On the same day, the CIDG filed a criminal complaint against petitioner before the Office of the City Prosecutor of Iloilo for violation of R.A. No. 623, as amended. After hearing, the trial court issued an Order on 16 July 2002 granting the motion to quash. Although the trial court initially upheld the validity of the surveillance and found probable cause that petitioner was tampering with Pryce LPG cylinders, it reversed itself, concluding that the probable cause at the time of application fell short of that required to sustain the warrant's validity, reasoning that the failure to seize tampering tools meant there was insufficient evidence to prove the offense. The trial court directed the return of the seized items to petitioner. Respondent's motion for reconsideration was denied on 9 August 2002.

Respondent elevated the matter to the Court of Appeals via a special civil action for certiorari, arguing that the trial court committed grave abuse of discretion in quashing the search warrant despite a prior finding of probable cause, challenging petitioner's personality to file the motion to quash, and asserting that petitioner failed to prove he bought the seized items from respondent. On 16 January 2004, the Court of Appeals set aside the trial court's orders and ordered the return of the seized items to respondent, ruling solely that petitioner, as a mere manager, lacked legal personality to question the warrant. Petitioner's motion for reconsideration was denied on 26 July 2004.

• Legal Personality to Assail Search Warrant: Petitioner contended that he had authority to seek the quashal of the search warrant because he was named as respondent in the application for the warrant and in the criminal complaint subsequently filed before the Office of the City Prosecutor of Iloilo.
• Ownership of Seized Items: Petitioner argued that the seized Pryce LPG cylinders should not be returned to respondent because there was uncontroverted evidence that the same were sold by respondent to its customers, and respondent had thus parted with ownership.
• Propriety of Certiorari: Petitioner maintained that the special civil action for certiorari filed by respondent with the Court of Appeals was not the proper remedy to assail the orders of the trial court.

• Lack of Legal Personality: Respondent argued that petitioner, being a mere manager of Sun Gas, Inc., failed to show his authority to act on behalf of the corporation and therefore had no legal personality to question the validity of the search warrant.
• Grave Abuse of Discretion: Respondent contended that the trial court committed grave abuse of discretion in quashing the search warrant despite a prior finding of probable cause.
• Failure to Prove Purchase: Respondent asserted that petitioner failed to prove that he bought the seized items from respondent.

• Legal Personality: Whether petitioner Rowland Kim Santos has the legal personality to assail the search warrant, he being named respondent therein and subsequently charged with violation of R.A. No. 623, as amended.
• Custody of Seized Items: Whether petitioner should return the subject Pryce LPG cylinders to respondent despite uncontroverted evidence that the same were sold by respondent to its customers.
• Propriety of Certiorari: Whether the petition for certiorari filed by respondent with the Court of Appeals should be dismissed for not being the proper remedy to assail the orders of the trial court.

• Legal Personality: Yes. Petitioner, as the person named in the search warrant and against whom the warrant was directed, is the real party-in-interest to seek its quashal. The objection to an unlawful search and seizure is purely personal and cannot be availed of by third parties, but petitioner was directly prejudiced by the seizure.
• Custody of Seized Items: No. The seized items should not be returned to respondent but must remain in custodia legis with the trial court that issued the search warrant, pending criminal proceedings against petitioner, pursuant to Section 4, Rule 126 of the Revised Rules of Criminal Procedure.
• Propriety of Certiorari: No, the petition should not be dismissed. The special civil action for certiorari was the proper recourse, the trial court's unwarranted reversal of its earlier finding of probable cause constituting grave abuse of discretion.

• Legal Personality: The rule is settled that the legality of a seizure can be contested only by the party whose rights have been impaired thereby, and the objection to an unlawful search and seizure is purely personal. Petitioner was the real party-in-interest because the search warrant, in which he was solely named as respondent, was directed against the premises and articles over which he had control and supervision. He was directly prejudiced by the seizure because he was directly accountable as manager to the purported owner of the seized items. Notably, respondent itself recognized petitioner's authority as manager at the time of the application, averring that petitioner had possession and control of the items. Respondent should not be allowed to belatedly question petitioner's authority. The Court of Appeals misapplied Stonehill vs. Diokno, which held that only a corporation has the exclusive right to question the seizure of corporate items. Assuming arguendo that Sun Gas, Inc. owned the seized items, petitioner as manager had authority to question the seizure, corporations acting only through properly delegated officers and agents.

• Custody of Seized Items: The resolution of this issue depends on the existence of probable cause for the issuance of the search warrant. The trial court retracted its earlier finding of probable cause because the seized items were incomplete to charge petitioner, reasoning that mere possession of Pryce LPG cylinders was not illegal per se absent showing of unauthorized use. This was error. The trial court raised the standard of probable cause to whether there was sufficient cause to hold petitioner for trial. Probable cause for a search warrant requires only such facts and circumstances as would lead a reasonably discreet and prudent man to believe an offense has been committed and the objects sought are in the place to be searched — more than bare suspicion but less than evidence justifying conviction. Section 3 of R.A. No. 623, as amended, creates a prima facie presumption of unlawful use or possession based on unauthorized use by a person other than the registered manufacturer and possession by a dealer. Petitioner was not only in possession but also distributing the cylinders, and respondent claimed it did not authorize such distribution. The failure to confiscate tampering tools did not negate probable cause. However, the Court of Appeals erred in ordering the return of the seized items to respondent. Section 4, Rule 126 mandates delivery of seized items to the judge who issued the warrant to be kept in custodia legis in anticipation of criminal proceedings. Ordering return to respondent would suggest it instituted certiorari merely to regain possession, which cannot be countenanced.

• Propriety of Certiorari: The trial court's unwarranted reversal of its earlier finding of probable cause constituted grave abuse of discretion, making certiorari the proper remedy. Jurisprudence has allowed recourse to the Supreme Court or the Court of Appeals via a special civil action for certiorari from a trial court's quashal of a search warrant.

• Standing to Contest Search and Seizure — The legality of a seizure can be contested only by the party whose rights have been impaired thereby; the objection to an unlawful search and seizure is purely personal and cannot be availed of by third parties. Applied: Petitioner, named as respondent in the warrant and in control of the premises searched, had standing to seek quashal.

• Corporate Officers' Authority to Act for the Corporation — Corporations perform physical actions only through properly delegated individuals, namely their officers and agents. Applied: Even if Sun Gas, Inc. owned the seized items, petitioner as manager had authority to question the seizure on the corporation's behalf.

• Probable Cause for Search Warrant — Probable cause for a search warrant consists of such facts and circumstances which 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 be searched. It demands more than bare suspicion but requires less than evidence which would justify conviction. Applied: The trial court erred in equating probable cause with sufficient evidence to hold petitioner for trial.

• Requisites of a Valid Search Warrant — (1) It must be issued upon probable cause; (2) the probable cause must be determined by the judge himself and not by the applicant or any other person; (3) in the determination of probable cause, the judge must examine, under oath or affirmation, the complainant and such witnesses as the latter may produce; and (4) the warrant must particularly describe the place to be searched and persons or things to be seized. The absence of even one requisite causes its downright nullification. Applied: Only the existence of probable cause was at issue; the other requisites were not disputed.

• Custodia Legis of Seized Items — Under Section 4, Rule 126 of the Revised Rules of Criminal Procedure, seized items must be delivered to the judge who issued the search warrant to be kept in custodia legis in anticipation of criminal proceedings, with a true and accurate inventory duly verified under oath. Applied: The Court of Appeals erred in ordering return of seized items to respondent; they should remain with the issuing court.

• "Probable cause for a search warrant is defined as such facts and circumstances which would lead a reasonably discrete 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 be searched." — This is the canonical definition of probable cause for search warrants applied in the decision, distinguishing it from the standard for holding an accused for trial.

• "The legality of a seizure can be contested only by the party whose rights have been impaired thereby, and the objection to an unlawful search and seizure is purely personal and cannot be availed of by third parties." — This states the standing doctrine on locus standi in search and seizure cases, applied to uphold petitioner's personality to challenge the warrant.

• "In quashing the search warrant, it would appear that the trial court had raised the standard of probable cause to whether there was sufficient cause to hold petitioner for trial. In so doing, the trial court committed grave abuse of discretion." — This passage articulates the ratio decidendi for sustaining the existence of probable cause and reversing the trial court's quashal.

• Stonehill vs. Diokno, 126 Phil. 738 (1967) — Held that only a corporation has the exclusive right to question seizure of corporate items due to its personality distinct from officers and shareholders. Distinguished: The Court found the Court of Appeals misapplied this ruling; assuming Sun Gas, Inc. owned the items, petitioner as manager had authority to question the seizure.

• La Chemise Lacoste, S.A. vs. Fernandez, 214 Phil. 332 (1984) — Cited for the proposition that a trial court's about-face in quashing a search warrant must be based on sound and valid grounds, and that applications for search warrants are heard ex parte, requiring great reliance on testimonies under oath. Followed.

• Columbia Pictures, Inc. vs. Court of Appeals, 329 Phil. 875 (1996) — Cited for the definition of probable cause for a search warrant. Followed.

• Del Rosario vs. People, 410 Phil. 642 (2001) — Cited for the four requisites of a valid search warrant. Followed.

• Uy vs. Bureau of Internal Revenue, 397 Phil. 892 (2000) — Cited for the doctrine that the objection to unlawful search and seizure is purely personal. Followed.

• Expertravel & Tours, Inc. vs. Court of Appeals, G.R. No. 152392, 26 May 2005 — Cited for the principle that corporations act only through properly delegated officers and agents. Followed.

• Article III, Section 2, 1987 Constitution — Protects against unreasonable searches and seizures and requires that no search warrant shall issue except upon probable cause to be determined personally by the judge after examination under oath. Invoked by petitioner in his motion to quash.

• Section 2, Republic Act No. 623, as amended by R.A. No. 5700 — Makes it unlawful for any person, without the written consent of the manufacturer, to fill marked containers for sale, or to sell, dispose of, buy, traffic in, or destroy the same. Applied as the substantive offense alleged in the search warrant application.

• Section 3, Republic Act No. 623, as amended by R.A. No. 5700 — Creates a prima facie presumption of unlawful use or possession of duly marked containers by any person other than the registered manufacturer without written permission. Applied to establish that petitioner's possession and distribution of Pryce LPG cylinders gave rise to probable cause.

• Section 4, Rule 126, Revised Rules of Criminal Procedure — Mandates that the officer must forthwith deliver the property seized to the judge who issued the warrant, together with a true inventory thereof duly verified under oath. Applied to hold that seized items must remain in custodia legis with the issuing court, not returned to respondent.

Leonardo A. Quisumbing (Chairperson), Antonio T. Carpio, Conchita Carpio Morales, and Presbitero J. Velasco, Jr. concurred in the decision.