G.R. No.

L-12691 February 27, 1959

SIMEON T. DAGDAG, plaintiff-appellee,
vs.
VIENTE NE!OM"ENO, ET AL., defendants-appellants.
Jesus Paredes for appellee.
Mariano Sta. Romana for appellants.
#ENG$ON, J.%
Forwarded by the Court of Appeals, this lawsuit coming from Nueva Ecija, concern a
small parcel of land. ubmitted for decision below upon a stipulation of facts, it
raises legal !uestions only.
A portion of "ot No. #$%&, Cabanatuan Cadaster 'admittedly alienable or disposable
public land way bac( in )*)&+ is covered by ales ,atent No. -.) issued to
Mar&ar'(a )ua*+o*, and also by lease No. /* e0ecuted by the 1ureau of "ands in
favor of A*,re+ ,e Vera. 2he overlapping was recently discovered, and their
successors in interest now litigate for possession and3or ownership.
2he ales ,atent was inscribed in the office of the 4egister of 5eeds on 6uly )),
)*-$, and 7riginal Certificate of 2itle No. &% was accordingly issued in the same of
8argarita 6uanson, who later sold the land of 4emegio 6uanson 1autista ')*-%+, who
in turn sold it to 1alarian 9ncorporated ')*-*+. 9n 8ay )*.:, imeon 2. 5agdag
bought it from 1alarin, 9nc. After every sale, the corresponding 2ransfer Certificate
of 2itle was given out.
7n the other hand, the lease to 5e ;era signed in 6une )*)& covered adjoining land
of a bigger area. 9t was transferred by him to 4egino Nepomuceno. 7riginally for a
-.-years period e0piring on 6une #:, )*/), it was e0tended for another li(e period in
)*/*. 5agdag<s title, and those of his predecessors contained no annotation of such
lease, of which neither he nor they any (nowledge.
After purchasing the land, imeon 2. 5agdag had it relocated and the portion in
!uestion turned out to be in possession of the heirs of 4egino Nepomuceno,
appellants herein allegedly by virtue of the lease. 2he latter refused to surrender it,
even in the face of 5agdag<s patent and title, and despite the 5irector of "ands<
administrative determination in February )*.#, practically holding that their contract
of lease did not, could not and should not e0tend to the area granted to 5agdag<s
predecessors.
=ence, this judicial proceeding instituted by 5agdag in the Nueva Ecija court of first
instance, wherein he was declared to be the owner of the whole "ot #$%& and entitled
to the products thereof. 2he =onorable 6ose N. "eutrio, 6udge, e0plained that >the
sales patent issued in the name of 8argarita 6uanson having been registered with the
office of the 4egister of 5eeds, and title having been issued by the 4egister of 5eeds
in the name of 8argarita 6uanson, "ot #$%& was thereafter brought under the
operation of the "and 4egistration Act. 2he title issued in the name of 8argarita
6uanson, 7riginal Certificate of 2itle No. &% was free from all liens and
incumbrances. 2his land was transferred successively, until it was ac!uired by the
plaintiff herein, and the certificate of title was issued in his name free from any lien
or encumbrances, and free from the claim of 4egino Nepomuceno as losses. 2he
plaintiffs herein cannot, therefore, be bound by the fact that "ot #$%& is within the
lease of Andres de ;era which had been transferred to 4egino Nepomuceno, the
father and predecessor of the defendants herein. 2he said lease not having been
annotated on the certificate of title, and it not having been neither proved or alleged
that the plaintiff had purchased the land (nowing that "ot #$%& is a portion of the
land leased to Andres de ;era which had been ac!uired by the defendant<s
predecessors-in-interest, it cannot prejudice the plaintiff who is presumed to be an
innocent purchaser for value. 2he fact that the lease in favor of Andres de ;era had
been registered, cannot bind and prejudice the plaintiff for "ot #$%& being a
registered land, he need not go farther than the title.>
2he above observations deserve our approval. 2hey conform with our decisions on
indefeasibility of public land patents when registered in the corresponding 4egister
of 5eeds 7ffice.
)
?e regard these to be veritable 2orrens 2itle subject to no
encumbrances e0cept those stated therein, plus those specified by the status 'lease is
not one of them+.
9n addition to the above reason given by his =onor, it should be remembered
that when the lease was renewed in 1949, the portion in !uestion was no longer
public land subject to the disposition of the 5irector of "ands because it had already
been granted to 8argarita 6uanson and had become private property@ therefore, it
could not have been included in the renewal of such lease of public land.
5efendant<s position may be summed up, in their own words, as followsA
?hen the contract of lease of the predecessor of the defendants was duly
issued and registered in the office of the register of deeds of Nueva Ecija,
and when the patent for the certificate of sale in favor of the predecessor of
the plaintiff was issued and registered in the said register of deeds of Nueva
Ecija, both documents have the force and effect of registered properties
under the land 4egistration Act as provided for in . . . 'section )-- of the
"and 4egistration "aw+. . . .
As the titles of the parties have come under the operation of the "and
4egistration Act, and in case of overlapping titles, the older title should
prevail. 2he title of the defendants was issued and registered on 6une )/,
)*)&. 2he title of the plaintiff was registered on August ., )*-$. 2he title of
the defendants should, therefore prevail, and they should have been
declared the owners of the land in !uestion. 'pp. %-* Appellants 1rief+
BEmphasis 7ursC.
2he flaw in their argument lies in the assumption that their lease contract constituted
a >title>, or deed or conveyance within the meaning of section )--, which for
convenience is !uoted belowA
?henever public lands in the ,hilippine 9slands belonging to the
Dovernment of the Enited tates or the Dovernment of the ,hilippine
9slands are alienated, granted, or conveyed to persons or to public or private
corporations, the same shall be brought forthwith under the operation of this
Act and shall become registered lands. 9t shall be the duty of the officials
issuing the instrument of alienation, grant, or conveyance in behalf of the
Dovernment to cause such instrument, before its delivery to the grantee, to
be filed with the register of deeds for the province where the land lies and to
be there registered li(e other deeds and conveyance, whereupon a certificate
shall be entered as in other cases of registered land, and an owner<s
duplicate issue to the grantee. 2he deed, grant, or instrument of conveyance
from the Dovernment to the grantee shall not ta(e effect as a conveyance or
bind the land, . . . After due registration and issue of the certificate and
owner<s duplicate such shall be registered land for all purposes under this
Act.
Epon carefully reading the above, we thin( it clear that the documents mentioned,
wherein lands are >alienated, granted, or conveyed>, are documents transferring
ownership not documents of lease, transferring mere possession. 7bserve
especially that the statue directs the issuance to the grantee of >an owner<s duplicate
certificate>. Appellants may not, therefore, assert a title just as good-so they claim-as
appellee<s and older besides. o, the 2orrens 2itle of appellee must prevail.
6udgment affirmed, with costs against appellants.
G.R. No. 1--25. )u/y 9, 2..2
FRANISO I. 0AVE$, petitioner,
vs.
!"#LI ESTATES A"T0ORIT1 a*, AMARI OASTAL #A1
DEVELO!MENT OR!ORATION, respondents.
AR!IO, J.:
2his is an original ,etition for 8andamus with prayer for a writ of preliminary
injunction and a temporary restraining order. 2he petition see(s to compel the ,ublic
Estates Authority '>,EA> for brevity+ to disclose all facts on ,EA<s then on-going
renegotiations with Amari Coastal 1ay and 5evelopment Corporation '>A8A49> for
brevity+ to reclaim portions of 8anila 1ay. 2he petition further see(s to enjoin ,EA
from signing a new agreement with A8A49 involving such reclamation.
T2e Fa3(+
7n November -:, )*$#, the government, through the Commissioner of ,ublic
=ighways, signed a contract with the Construction and 5evelopment Corporation of
the ,hilippines '>C5C,> for brevity+ to reclaim certain foreshore and offshore areas
of 8anila 1ay. 2he contract also included the construction of ,hases 9 and 99 of the
8anila-Cavite Coastal 4oad. C5C, obligated itself to carry out all the wor(s in
consideration of fifty percent of the total reclaimed land.
7n February /, )*$$, then ,resident Ferdinand E. 8arcos issued ,residential 5ecree
No. ):%/ creating ,EA. ,5 No. ):%/ tas(ed ,EA >to reclaim land, including
foreshore and submerged areas,> and >to develop, improve, ac!uire, 0 0 0 lease and
sell any and all (inds of lands.>
)
7n the same date, then ,resident 8arcos issued
,residential 5ecree No. ):%. transferring to ,EA the >lands reclaimed in the
foreshore and offshore of the 8anila 1ay>
-
under the 8anila-Cavite Coastal 4oad
and 4eclamation ,roject '8CC44,+.
7n 5ecember -*, )*%), then ,resident 8arcos issued a memorandum directing ,EA
to amend its contract with C5C,, so that >BACll future wor(s in 8CC44, 0 0 0 shall
be funded and owned by ,EA.> Accordingly, ,EA and C5C, e0ecuted a
8emorandum of Agreement dated 5ecember -*, )*%), which statedA
>'i+ C5C, shall underta(e all reclamation, construction, and such other
wor(s in the 8CC44, as may be agreed upon by the parties, to be paid
according to progress of wor(s on a unit price3lump sum basis for items of
wor( to be agreed upon, subject to price escalation, retention and other
terms and conditions provided for in ,residential 5ecree No. ).*/. All the
financing re!uired for such wor(s shall be provided by ,EA.
0 0 0
'iii+ 0 0 0 C5C, shall give up all its development rights and hereby agrees
to cede and transfer in favor of ,EA, all of the rights, title, interest and
participation of C5C, in and to all the areas of land reclaimed by C5C, in
the 8CC44, as of 5ecember #:, )*%) which have not yet been sold,
transferred or otherwise disposed of by C5C, as of said date, which areas
consist of appro0imately Ninety-Nine 2housand Four =undred eventy
2hree '**,/$#+ s!uare meters in the Financial Center Area covered by land
pledge No. . and appro0imately 2hree 8illion 2hree =undred Eighty 2wo
2housand Eight =undred Eighty Eight '#,#%-,%%%+ s!uare meters of
reclaimed areas at varying elevations above 8ean "ow ?ater "evel located
outside the Financial Center Area and the First Neighborhood Enit.>
#
7n 6anuary )*, )*%%, then ,resident CoraFon C. A!uino issued pecial ,atent No.
#.)$, granting and transferring to ,EA >the parcels of land so reclaimed under the
8anila-Cavite Coastal 4oad and 4eclamation ,roject '8CC44,+ containing a total
area of one million nine hundred fifteen thousand eight hundred ninety four
'),*).,%*/+ s!uare meters.> ubse!uently, on April *, )*%%, the 4egister of 5eeds of
the 8unicipality of ,araGa!ue issued 2ransfer Certificates of 2itle Nos. $#:*, $#)),
and $#)-, in the name of ,EA, covering the three reclaimed islands (nown as the
>Freedom 9slands> located at the southern portion of the 8anila-Cavite Coastal
4oad, ,araGa!ue City. 2he Freedom 9slands have a total land area of 7ne 8illion
Five =undred eventy Eight 2housand Four =undred and Forty 7ne '),.$%,//)+
s!uare meters or ).$.%/) hectares.
7n April -., )**., ,EA entered into a 6oint ;enture Agreement '>6;A> for brevity+
with A8A49, a private corporation, to develop the Freedom 9slands. 2he 6;A also
re!uired the reclamation of an additional -.: hectares of submerged areas
surrounding these islands to complete the configuration in the 8aster 5evelopment
,lan of the outhern 4eclamation ,roject-8CC44,. ,EA and A8A49 entered into
the 6;A through negotiation without public bidding.
/
7n April -%, )**., the 1oard of
5irectors of ,EA, in its 4esolution No. )-/., confirmed the 6;A.
.
7n 6une %, )**.,
then ,resident Fidel ;. 4amos, through then E0ecutive ecretary 4uben 2orres,
approved the 6;A.
&
7n November -*, )**&, then enate ,resident Ernesto 8aceda delivered a privilege
speech in the enate and denounced the 6;A as the >grandmother of all scams.> As a
result, the enate Committee on Dovernment Corporations and ,ublic Enterprises,
and the Committee on Accountability of ,ublic 7fficers and 9nvestigations,
conducted a joint investigation. 2he enate Committees reported the results of their
investigation in enate Committee 4eport No. .&: dated eptember )&,
)**$.
$
Among the conclusions of their report areA ')+ the reclaimed lands ,EA see(s
to transfer to A8A49 under the 6;A are lands of the public domain which the
government has not classified as alienable lands and therefore ,EA cannot alienate
these lands@ '-+ the certificates of title covering the Freedom 9slands are thus void,
and '#+ the 6;A itself is illegal.
7n 5ecember ., )**$, then ,resident Fidel ;. 4amos issued ,residential
Administrative 7rder No. #&. creating a "egal 2as( Force to conduct a study on the
legality of the 6;A in view of enate Committee 4eport No. .&:. 2he members of
the "egal 2as( Force were the ecretary of 6ustice,
%
the Chief ,residential "egal
Counsel,
*
and the Dovernment Corporate Counsel.
):
2he "egal 2as( Force upheld
the legality of the 6;A, contrary to the conclusions reached by the enate
Committees.
))
7n April / and ., )**%, the Philippine ail! "n#uirer and $oda! published reports
that there were on-going renegotiations between ,EA and A8A49 under an order
issued by then ,resident Fidel ;. 4amos. According to these reports, ,EA 5irector
Nestor Halaw, ,EA Chairman Arsenio Iulo and retired Navy 7fficer ergio CruF
composed the negotiating panel of ,EA.
7n April )#, )**%, Antonio 8. Julueta filed before the Court a Petition for
Prohibition with %pplication for the "ssuance of a $emporar! Restraining &rder and
Preliminar! "n'unction doc(eted as D.4. No. )#-**/ see(ing to nullify the 6;A. 2he
Court dismissed the petition >for unwarranted disregard of judicial hierarchy, without
prejudice to the refiling of the case before the proper court.>
)-
7n April -$, )**%, petitioner Fran( 9. ChaveF '>,etitioner> for brevity+ as a ta0payer,
filed the instant Petition for Mandamus with Pra!er for the "ssuance of a (rit of
Preliminar! "n'unction and $emporar! Restraining &rder. ,etitioner contends the
government stands to lose billions of pesos in the sale by ,EA of the reclaimed lands
to A8A49. ,etitioner prays that ,EA publicly disclose the terms of any renegotiation
of the 6;A, invo(ing ection -%, Article 99, and ection $, Article 999, of the )*%$
Constitution on the right of the people to information on matters of public concern.
,etitioner assails the sale to A8A49 of lands of the public domain as a blatant
violation of ection #, Article K99 of the )*%$ Constitution prohibiting the sale of
alienable lands of the public domain to private corporations. Finally, petitioner
asserts that he see(s to enjoin the loss of billions of pesos in properties of the tate
that are of public dominion.
After several motions for e0tension of time,
)#
,EA and A8A49 filed their Comments
on 7ctober )*, )**% and 6une -., )**%, respectively. 8eanwhile, on 5ecember -%,
)**%, petitioner filed an 7mnibus 8otionA 'a+ to re!uire ,EA to submit the terms of
the renegotiated ,EA-A8A49 contract@ 'b+ for issuance of a temporary restraining
order@ and 'c+ to set the case for hearing on oral argument. ,etitioner filed a
4eiterative 8otion for 9ssuance of a 247 dated 8ay -&, )***, which the Court
denied in a 4esolution dated 6une --, )***.
9n a 4esolution dated 8arch -#, )***, the Court gave due course to the petition and
re!uired the parties to file their respective memoranda.
7n 8arch #:, )***, ,EA and A8A49 signed the Amended 6oint ;enture Agreement
'>Amended 6;A,> for brevity+. 7n 8ay -%, )***, the 7ffice of the ,resident under
the administration of then ,resident 6oseph E. Estrada approved the Amended 6;A.
5ue to the approval of the Amended 6;A by the 7ffice of the ,resident, petitioner
now prays that on >constitutional and statutory grounds the renegotiated contract be
declared null and void.>
)/
T2e I++ue+
2he issues raised by petitioner, ,EA
).
and A8A49
)&
are as followsA
9. ?=E2=E4 2=E ,49NC9,A" 4E"9EF ,4AIE5 F74 9N 2=E
,E29297N A4E 8772 AN5 ACA5E89C 1ECAEE 7F
E1ELEEN2 E;EN2@
99. ?=E2=E4 2=E ,E29297N 8E492 5989A" F74 FA9"9ND 27
71E4;E 2=E ,49NC9,"E D7;E4N9ND 2=E =9E4A4C=I 7F
C7E42@
999. ?=E2=E4 2=E ,E29297N 8E492 5989A" F74 N7N-
EK=AE297N 7F A589N924A29;E 4E8E59E@
9;. ?=E2=E4 ,E29297NE4 =A )&*+S S$%," 27 149ND 2=9
E92@
;. ?=E2=E4 2=E C7N292E297NA" 49D=2 27 9NF748A297N
9NC"E5E 7FF9C9A" 9NF748A297N 7N 7N-D79ND
NED729A297N 1EF74E A F9NA" AD4EE8EN2@
;9. ?=E2=E4 2=E 29,E"A297N 9N 2=E A8EN5E5 679N2
;EN2E4E AD4EE8EN2 F74 2=E 24ANFE4 27 A8A49 7F
CE42A9N "AN5, 4EC"A98E5 AN5 29"" 27 1E 4EC"A98E5,
;97"A2E 2=E )*%$ C7N292E297N@ AN5
;99. ?=E2=E4 2=E C7E42 9 2=E ,47,E4 F74E8 F74 4A99ND
2=E 9EE 7F ?=E2=E4 2=E A8EN5E5 679N2 ;EN2E4E
AD4EE8EN2 9 D47"I 59A5;AN2ADE7E 27 2=E
D7;E4N8EN2.
T2e our(4+ Ru/'*&
First issue: whether the principal reliefs prayed for in the petition are moot and
academic because of subsequent events.
2he petition prays that ,EA publicly disclose the >terms and conditions of the on-
going negotiations for a new agreement.> 2he petition also prays that the Court
enjoin ,EA from >privately entering into, perfecting and3or e0ecuting any new
agreement with A8A49.>
,EA and A8A49 claim the petition is now moot and academic because A8A49
furnished petitioner on 6une -), )*** a copy of the signed Amended 6;A containing
the terms and conditions agreed upon in the renegotiations. 2hus, ,EA has satisfied
petitioner<s prayer for a public disclosure of the renegotiations. "i(ewise, petitioner<s
prayer to enjoin the signing of the Amended 6;A is now moot because ,EA and
A8A49 have already signed the Amended 6;A on 8arch #:, )***. 8oreover, the
7ffice of the ,resident has approved the Amended 6;A on 8ay -%, )***.
,etitioner counters that ,EA and A8A49 cannot avoid the constitutional issue by
simply fast-trac(ing the signing and approval of the Amended 6;A before the Court
could act on the issue. ,residential approval does not resolve the constitutional issue
or remove it from the ambit of judicial review.
?e rule that the signing of the Amended 6;A by ,EA and A8A49 and its approval
by the ,resident cannot operate to moot the petition and divest the Court of its
jurisdiction. ,EA and A8A49 have still to implement the Amended 6;A. 2he prayer
to enjoin the signing of the Amended 6;A on constitutional grounds necessarily
includes preventing its implementation if in the meantime ,EA and A8A49 have
signed one in violation of the Constitution. ,etitioner<s principal basis in assailing the
renegotiation of the 6;A is its violation of ection #, Article K99 of the Constitution,
which prohibits the government from alienating lands of the public domain to private
corporations. 9f the Amended 6;A indeed violates the Constitution, it is the duty of
the Court to enjoin its implementation, and if already implemented, to annul the
effects of such unconstitutional contract.
2he Amended 6;A is not an ordinary commercial contract but one which see(s
to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged
areas of anila !ay to a single private corporation. 9t now becomes more
compelling for the Court to resolve the issue to insure the government itself does not
violate a provision of the Constitution intended to safeguard the national patrimony.
upervening events, whether intended or accidental, cannot prevent the Court from
rendering a decision if there is a grave violation of the Constitution. 9n the instant
case, if the Amended 6;A runs counter to the Constitution, the Court can still prevent
the transfer of title and ownership of alienable lands of the public domain in the
name of A8A49. Even in cases where supervening events had made the cases moot,
the Court did not hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar, and the public.
)$
Also, the instant petition is a case of first impression. All previous decisions of the
Court involving ection #, Article K99 of the )*%$ Constitution, or its counterpart
provision in the )*$# Constitution,
)%
covered agricultural landssold to private
corporations which ac!uired the lands from private parties. 2he transferors of the
private corporations claimed or could claim the right to "udicial confirmation of
their imperfect titles
)*
under #itle $$ of Commonwealth Act. )/) '>CA No. )/)> for
brevity+. 9n the instant case, A8A49 see(s to ac!uire from ,EA, a public
corporation, reclaimed lands and submerged areas for non%agricultural purposes
by purchase under ,5 No. ):%/ 'charter of ,EA+ and #itle $$$ of CA No. )/).
Certain underta(ings by A8A49 under the Amended 6;A constitute the
consideration for the purchase. Neither A8A49 nor ,EA can claim judicial
confirmation of their titles because the lands covered by the Amended 6;A are newly
reclaimed or still to be reclaimed. 6udicial confirmation of imperfect title re!uires
open, continuous, e0clusive and notorious occupation of agricultural lands of the
public domain for at least thirty years since 6une )-, )*/. or earlier. 1esides, the
deadline for filing applications for judicial confirmation of imperfect title e0pired on
5ecember #), )*%$.
-:
"astly, there is a need to resolve immediately the constitutional issue raised in this
petition because of the possible transfer at any time by ,EA to A8A49 of title and
ownership to portions of the reclaimed lands. Ender the Amended 6;A, ,EA is
obligated to transfer to A8A49 the latter<s seventy percent proportionate share in the
reclaimed areas as the reclamation progresses. 2he Amended 6;A even allows
A8A49 to mortgage at any time the entirereclaimed area to raise financing for the
reclamation project.
-)
&econd issue: whether the petition merits dismissal for failing to observe the
principle governing the hierarchy of courts.
,EA and A8A49 claim petitioner ignored the judicial hierarchy by see(ing relief
directly from the Court. 2he principle of hierarchy of courts applies generally to
cases involving factual !uestions. As it is not a trier of facts, the Court cannot
entertain cases involving factual issues. 2he instant case, however, raises
constitutional issues of transcendental importance to the public.
--
2he Court can
resolve this case without determining any factual issue related to the case. Also, the
instant case is a petition for mandamus which falls under the original jurisdiction of
the Court under ection ., Article ;999 of the Constitution. ?e resolve to e0ercise
primary jurisdiction over the instant case.
#hird issue: whether the petition merits dismissal for non%e'haustion of
administrative remedies.
,EA faults petitioner for see(ing judicial intervention in compelling ,EA to disclose
publicly certain information without first as(ing ,EA the needed information. ,EA
claims petitioner<s direct resort to the Court violates the principle of e0haustion of
administrative remedies. 9t also violates the rule that mandamus may issue only if
there is no other plain, speedy and ade!uate remedy in the ordinary course of law.
,EA distinguishes the instant case from 2aGada v. 2uvera
-#
where the Court granted
the petition for mandamus even if the petitioners there did not initially demand from
the 7ffice of the ,resident the publication of the presidential decrees. ,EA points out
that in 2aGada, the E0ecutive 5epartment had an affirmative statutory duty under
Article - of the Civil Code
-/
and ection ) of Commonwealth Act No. &#%
-.
to
publish the presidential decrees. 2here was, therefore, no need for the petitioners in
2aGada to ma(e an initial demand from the 7ffice of the ,resident. 9n the instant
case, ,EA claims it has no affirmative statutory duty to disclose publicly information
about its renegotiation of the 6;A. 2hus, ,EA asserts that the Court must apply the
principle of e0haustion of administrative remedies to the instant case in view of the
failure of petitioner here to demand initially from ,EA the needed information.
2he original 6;A sought to dispose to A8A49 public lands held by ,EA, a
government corporation. Ender ection $* of the Dovernment Auditing Code,
-&
the
disposition of government lands to private parties re!uires public bidding. ()* was
under a positive legal duty to disclose to the public the terms and conditions for the
sale of its lands. 2he law obligated ,EA to ma(e this public disclosure even without
demand from petitioner or from anyone. ,EA failed to ma(e this public disclosure
because the original 6;A, li(e the Amended 6;A, was the result of a negotiated
contract, not of a public bidding. Considering that ,EA had an affirmative statutory
duty to ma(e the public disclosure, and was even in breach of this legal duty,
petitioner had the right to see( direct judicial intervention.
8oreover, and this alone is determinative of this issue, the principle of e0haustion of
administrative remedies does not apply when the issue involved is a purely legal or
constitutional !uestion.
-$
2he principal issue in the instant case is the capacity of
A8A49 to ac!uire lands held by ,EA in view of the constitutional ban prohibiting
the alienation of lands of the public domain to private corporations. ?e rule that the
principle of e0haustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
,EA argues that petitioner has no standing to institute mandamus proceedings to
enforce his constitutional right to information without a showing that ,EA refused to
perform an affirmative duty imposed on ,EA by the Constitution. ,EA also claims
that petitioner has not shown that he will suffer any concrete injury because of the
signing or implementation of the Amended 6;A. 2hus, there is no actual controversy
re!uiring the e0ercise of the power of judicial review.
2he petitioner has standing to bring this ta0payer<s suit because the petition see(s to
compel ,EA to comply with its constitutional duties. 2here are two constitutional
issues involved here. First is the right of citiFens to information on matters of public
concern. econd is the application of a constitutional provision intended to insure the
e!uitable distribution of alienable lands of the public domain among Filipino
citiFens. 2he thrust of the first issue is to compel ,EA to disclose publicly
information on the sale of government lands worth billions of pesos, information
which the Constitution and statutory law mandate ,EA to disclose. 2he thrust of the
second issue is to prevent ,EA from alienating hundreds of hectares of alienable
lands of the public domain in violation of the Constitution, compelling ,EA to
comply with a constitutional duty to the nation.
8oreover, the petition raises matters of transcendental importance to the public.
9n +have, v. (+--,
-%
the Court upheld the right of a citiFen to bring a ta0payer<s suit
on matters of transcendental importance to the public, thus -
>1esides, petitioner emphasiFes, the matter of recovering the ill-gotten
wealth of the 8arcoses is an issue of <transcendental importance to the
public.< =e asserts that ordinary ta0payers have a right to initiate and
prosecute actions !uestioning the validity of acts or orders of government
agencies or instrumentalities, if the issues raised are of <paramount public
interest,< and if they <immediately affect the social, economic and moral well
being of the people.<
8oreover, the mere fact that he is a citiFen satisfies the re!uirement of
personal interest, when the proceeding involves the assertion of a public
right, such as in this case. =e invo(es several decisions of this Court which
have set aside the procedural matter of locus standi, when the subject of the
case involved public interest.
0 0 0
9n $a-ada v. $uvera, the Court asserted that when the issue concerns a
public right and the object of mandamus is to obtain the enforcement of a
public duty, the people are regarded as the real parties in interest@ and
because it is sufficient that petitioner is a citiFen and as such is interested in
the e0ecution of the laws, he need not show that he has any legal or special
interest in the result of the action. 9n the aforesaid case, the petitioners
sought to enforce their right to be informed on matters of public concern, a
right then recogniFed in ection &, Article 9; of the )*$# Constitution, in
connection with the rule that laws in order to be valid and enforceable must
be published in the 7fficial DaFette or otherwise effectively promulgated. 9n
ruling for the petitioners< legal standing, the Court declared that the right
they sought to be enforced <is a public right recogniFed by no less than the
fundamental law of the land.<
)egaspi v. *ivil Service *ommission, while reiterating 2aGada, further
declared that <when a mandamus proceeding involves the assertion of a
public right, the re!uirement of personal interest is satisfied by the mere fact
that petitioner is a citiFen and, therefore, part of the general <public< which
possesses the right.<
Further, in %lbano v. Re!es, we said that while e0penditure of public funds
may not have been involved under the !uestioned contract for the
development, management and operation of the 8anila 9nternational
Container 2erminal, <public interest BwasC definitely involved considering
the important role Bof the subject contractC . . . in the economic development
of the country and the magnitude of the financial consideration involved.<
?e concluded that, as a conse!uence, the disclosure provision in the
Constitution would constitute sufficient authority for upholding the
petitioner<s standing.
imilarly, the instant petition is anchored on the right of the people to
information and access to official records, documents and papers M a right
guaranteed under ection $, Article 999 of the )*%$ Constitution. ,etitioner,
a former solicitor general, is a Filipino citiFen. 1ecause of the satisfaction
of the two basic re!uisites laid down by decisional law to sustain
petitioner<s legal standing, i.e. ')+ the enforcement of a public right '-+
espoused by a Filipino citiFen, we rule that the petition at bar should be
allowed.>
?e rule that since the instant petition, brought by a citiFen, involves the enforcement
of constitutional rights - to information and to the e!uitable diffusion of natural
resources - matters of transcendental public importance, the petitioner has the
re!uisite locus standi.
Fifth issue: whether the constitutional right to information includes official
information on on%going negotiations before a final agreement.
ection $, Article 999 of the Constitution e0plains the people<s right to information on
matters of public concern in this mannerA
>ec. $. 2he right of the people to information on matters of public concern
shall be recogniFed. *ccess to official records. and to documents. and
papers pertaining to official acts. transactions. or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citiFen, subject to such limitations as may be provided by law.>
'Emphasis supplied+
2he tate policy of full transparency in all transactions involving public interest
reinforces the people<s right to information on matters of public concern. 2his tate
policy is e0pressed in ection -%, Article 99 of the Constitution, thusA
>ec. -%. ubject to reasonable conditions prescribed by law, the tate
adopts and implements a policy of full public disclosure of all its
transactions involving public interest.> 'Emphasis supplied+
2hese twin provisions of the Constitution see( to promote transparency in policy-
ma(ing and in the operations of the government, as well as provide the people
sufficient information to e0ercise effectively other constitutional rights. 2hese twin
provisions are essential to the e0ercise of freedom of e0pression. 9f the government
does not disclose its official acts, transactions and decisions to citiFens, whatever
citiFens say, even if e0pressed without any restraint, will be speculative and amount
to nothing. 2hese twin provisions are also essential to hold public officials >at all
times 0 0 0 accountable to the people,>
-*
for unless citiFens have the proper
information, they cannot hold public officials accountable for anything. Armed with
the right information, citiFens can participate in public discussions leading to the
formulation of government policies and their effective implementation. An informed
citiFenry is essential to the e0istence and proper functioning of any democracy. As
e0plained by the Court in/almonte v. !elmonte. Jr.
#:
N
>An essential element of these freedoms is to (eep open a continuing
dialogue or process of communication between the government and the
people. 9t is in the interest of the tate that the channels for free political
discussion be maintained to the end that the government may perceive and
be responsive to the people<s will. Iet, this open dialogue can be effective
only to the e0tent that the citiFenry is informed and thus able to formulate
its will intelligently. 7nly when the participants in the discussion are aware
of the issues and have access to information relating thereto can such bear
fruit.>
,EA asserts, citing +have, v. (+--,
#)
that in cases of on-going negotiations the
right to information is limited to >definite propositions of the government.> ,EA
maintains the right does not include access to >intra-agency or inter-agency
recommendations or communications during the stage when common assertions are
still in the process of being formulated or are in the <e0ploratory stage<.>
Also, A8A49 contends that petitioner cannot invo(e the right at the pre-decisional
stage or before the closing of the transaction. 2o support its contention, A8A49 cites
the following discussion in the )*%& Constitutional CommissionA
5Mr. Suare6. And when we say <transactions< which should be
distinguished from contracts, agreements, or treaties or whatever, does the
Dentleman refer to the steps leading to the consummation of the contract, or
does he refer to the contract itselfO
Mr. O7/e% #he 0transactions0 used here. $ suppose is generic and
therefore. it can cover both steps leading to a contract and already a
consummated contract. r. (residing 1fficer.
r. &uare,: #his contemplates inclusion of negotiations leading to the
consummation of the transaction.
r. 1ple: 2es. sub"ect only to reasonable safeguards on the national
interest.
r. &uare,: 2han( you.>
#-
'Emphasis supplied+
A8A49 argues there must first be a consummated contract before petitioner can
invo(e the right. 4e!uiring government officials to reveal their deliberations at the
pre-decisional stage will degrade the !uality of decision-ma(ing in government
agencies. Dovernment officials will hesitate to e0press their real sentiments during
deliberations if there is immediate public dissemination of their discussions, putting
them under all (inds of pressure before they decide.
?e must first distinguish between information the law on public bidding re!uires
,EA to disclose publicly, and information the constitutional right to information
re!uires ,EA to release to the public. 1efore the consummation of the contract, ,EA
must, on its own and without demand from anyone, disclose to the public matters
relating to the disposition of its property. 2hese include the siFe, location, technical
description and nature of the property being disposed of, the terms and conditions of
the disposition, the parties !ualified to bid, the minimum price and similar
information. ,EA must prepare all these data and disclose them to the public at the
start of the disposition process, long before the consummation of the contract,
because the Dovernment Auditing Code re!uires public bidding. 9f ,EA fails to
ma(e this disclosure, any citiFen can demand from ,EA this information at any time
during the bidding process.
9nformation, however, on on%going evaluation or review of bids or proposals being
underta(en by the bidding or review committee is not immediately accessible under
the right to information. ?hile the evaluation or review is still on-going, there are no
>official acts, transactions, or decisions> on the bids or proposals. =owever, once the
committee ma(es its official recommendation, there arises a 3definite
proposition3 on the part of the government. From this moment, the public<s right to
information attaches, and any citiFen can access all the non-proprietary information
leading to such definite proposition. 9n +have, v. (+--,
##
the Court ruled as
followsA
>Considering the intent of the framers of the Constitution, we believe that it
is incumbent upon the ,CDD and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed
settlement they have decided to ta(e up with the ostensible owners and
holders of ill-gotten wealth. uch information, though, must pertain
to definite propositions of the government, not necessarily to intra-agency
or inter-agency recommendations or communications during the stage when
common assertions are still in the process of being formulated or are in the
>e0ploratory> stage. 2here is need, of course, to observe the same
restrictions on disclosure of information in general, as discussed earlier N
such as on matters involving national security, diplomatic or foreign
relations, intelligence and other classified information.> 'Emphasis
supplied+
Contrary to A8A49<s contention, the commissioners of the )*%& Constitutional
Commission understood that the right to information 3contemplates inclusion of
negotiations leading to the consummation of the transaction.3 Certainly, a
consummated contract is not a re!uirement for the e0ercise of the right to
information. 7therwise, the people can never e0ercise the right if no contract is
consummated, and if one is consummated, it may be too late for the public to e0pose
its defects.1.wphi1.n/t
4e!uiring a consummated contract will (eep the public in the dar( until the contract,
which may be grossly disadvantageous to the government or even illegal, becomes
a fait accompli. 2his negates the tate policy of full transparency on matters of
public concern, a situation which the framers of the Constitution could not have
intended. uch a re!uirement will prevent the citiFenry from participating in the
public discussion of any proposedcontract, effectively truncating a basic right
enshrined in the 1ill of 4ights. ?e can allow neither an emasculation of a
constitutional right, nor a retreat by the tate of its avowed >policy of full disclosure
of all its transactions involving public interest.>
2he right covers three categories of information which are >matters of public
concern,> namelyA ')+ official records@ '-+ documents and papers pertaining to
official acts, transactions and decisions@ and '#+ government research data used in
formulating policies. 2he first category refers to any document that is part of the
public records in the custody of government agencies or officials. 2he second
category refers to documents and papers recording, evidencing, establishing,
confirming, supporting, justifying or e0plaining official acts, transactions or
decisions of government agencies or officials. 2he third category refers to research
data, whether raw, collated or processed, owned by the government and used in
formulating government policies.
2he information that petitioner may access on the renegotiation of the 6;A includes
evaluation reports, recommendations, legal and e0pert opinions, minutes of
meetings, terms of reference and other documents attached to such reports or
minutes, all relating to the 6;A. =owever, the right to information does not compel
,EA to prepare lists, abstracts, summaries and the li(e relating to the renegotiation of
the 6;A.
#/
2he right only affords access to records, documents and papers, which
means the opportunity to inspect and copy them. 7ne who e0ercises the right must
copy the records, documents and papers at his e0pense. 2he e0ercise of the right is
also subject to reasonable regulations to protect the integrity of the public records
and to minimiFe disruption to government operations, li(e rules specifying when and
how to conduct the inspection and copying.
#.
2he right to information, however, does not e0tend to matters recogniFed as
privileged information under the separation of powers.
#&
2he right does not also
apply to information on military and diplomatic secrets, information affecting
national security, and information on investigations of crimes by law enforcement
agencies before the prosecution of the accused, which courts have long recogniFed as
confidential.
#$
2he right may also be subject to other limitations that Congress may
impose by law.
2here is no claim by ,EA that the information demanded by petitioner is privileged
information rooted in the separation of powers. 2he information does not cover
,residential conversations, correspondences, or discussions during closed-door
Cabinet meetings which, li(e internal deliberations of the upreme Court and other
collegiate courts, or e0ecutive sessions of either house of Congress,
#%
are recogniFed
as confidential. 2his (ind of information cannot be pried open by a co-e!ual branch
of government. A fran( e0change of e0ploratory ideas and assessments, free from the
glare of publicity and pressure by interested parties, is essential to protect the
independence of decision-ma(ing of those tas(ed to e0ercise ,residential,
"egislative and 6udicial power.
#*
2his is not the situation in the instant case.
?e rule, therefore, that the constitutional right to information includes official
information on on%going negotiations before a final contract. 2he information,
however, must constitute definite propositions by the government and should not
cover recogniFed e0ceptions li(e privileged information, military and diplomatic
secrets and similar matters affecting national security and public order.
/:
Congress
has also prescribed other limitations on the right to information in several
legislations.
/)
&i'th issue: whether stipulations in the *mended J/* for the transfer to **4$
of lands. reclaimed or to be reclaimed. violate the +onstitution.
#he 4egalian 5octrine
2he ownership of lands reclaimed from foreshore and submerged areas is rooted in
the 4egalian doctrine which holds that the tate owns all lands and waters of the
public domain. Epon the panish con!uest of the ,hilippines, ownership of all
>lands, territories and possessions> in the ,hilippines passed to the panish
Crown.
/-
2he Hing, as the sovereign ruler and representative of the people, ac!uired
and owned all lands and territories in the ,hilippines e0cept those he disposed of by
grant or sale to private individuals.
2he )*#., )*$# and )*%$ Constitutions adopted the 4egalian doctrine substituting,
however, the tate, in lieu of the Hing, as the owner of all lands and waters of the
public domain. 2he 4egalian doctrine is the foundation of the time-honored principle
of land ownership that >all lands that were not ac!uired from the Dovernment, either
by purchase or by grant, belong to the public domain.>
/#
Article ##* of the Civil
Code of )%%*, which is now Article /-: of the Civil Code of )*.:, incorporated the
4egalian doctrine.
1wnership and 5isposition of 4eclaimed 6ands
2he panish "aw of ?aters of )%&& was the first statutory law governing the
ownership and disposition of reclaimed lands in the ,hilippines. 7n 8ay )%, )*:$,
the ,hilippine Commission enacted Act No. )&./ which provided for the lease. but
not the sale. of reclaimed lands of the government to corporations and individuals.
"ater, on November -*, )*)*, the ,hilippine "egislature approved Act No. -%$/, the
,ublic "and Act, which authoriFed the lease. but not the sale. of reclaimed lands of
the government to corporations and individuals. 7n November $, )*#&, the
National Assembly passed Commonwealth Act No. )/), also (nown as the ,ublic
"and Act, which authori,ed the lease. but not the sale. of reclaimed lands of the
government to corporations and individuals. CA No. )/) continues to this day as
the general law governing the classification and disposition of lands of the public
domain.
#he &panish 6aw of 7aters of 8966 and the +ivil +ode of 899:
Ender the panish "aw of ?aters of )%&&, the shores, bays, coves, inlets and all
waters within the maritime Fone of the panish territory belonged to the public
domain for public use.
//
2he panish "aw of ?aters of )%&& allowed the reclamation
of the sea under Article ., which provided as followsA
>Article .. "ands reclaimed from the sea in conse!uence of wor(s
constructed by the tate, or by the provinces, pueblos or private persons,
with proper permission, shall become the property of the party constructing
such wor(s, unless otherwise provided by the terms of the grant of
authority.>
Ender the panish "aw of ?aters, land reclaimed from the sea belonged to the party
underta(ing the reclamation, provided the government issued the necessary permit
and did not reserve ownership of the reclaimed land to the tate.
Article ##* of the Civil Code of )%%* defined property of public dominion as
followsA
>Art. ##*. ,roperty of public dominion is N
). 2hat devoted to public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the tate, riverban(s, shores, roadsteads, and
that of a similar character@
-. 2hat belonging e0clusively to the tate which, without being of general
public use, is employed in some public service, or in the development of the
national wealth, such as walls, fortresses, and other wor(s for the defense of
the territory, and mines, until granted to private individuals.>
,roperty devoted to public use referred to property open for use by the public. 9n
contrast, property devoted to public service referred to property used for some
specific public service and open only to those authoriFed to use the property.
,roperty of public dominion referred not only to property devoted to public use, but
also to property not so used but employed to develop the national wealth. 2his class
of property constituted property of public dominion although employed for some
economic or commercial activity to increase the national wealth.
Article #/) of the Civil Code of )%%* governed the re-classification of property of
public dominion into private property, to witA
>Art. #/). ,roperty of public dominion, when no longer devoted to public
use or to the defense of the territory, shall become a part of the private
property of the tate.>
2his provision, however, was not self-e0ecuting. 2he legislature, or the e0ecutive
department pursuant to law, must declare the property no longer needed for public
use or territorial defense before the government could lease or alienate the property
to private parties.
/.
*ct ;o. 865< of the (hilippine +ommission
7n 8ay %, )*:$, the ,hilippine Commission enacted Act No. )&./ which regulated
the lease of reclaimed and foreshore lands. 2he salient provisions of this law were as
followsA
>ection ). 2he control and disposition of the foreshore as defined in
e0isting law, and the title to all -overnment or public lands made or
reclaimed by the -overnment by dredging or filling or otherwise
throughout the ,hilippine 9slands, shall be retained by the
-overnment without prejudice to vested rights and without prejudice to
rights conceded to the City of 8anila in the "uneta E0tension.
ection -. 'a+ 2he ecretary of the 9nterior shall cause all Dovernment or
public lands made or reclaimed by the Dovernment by dredging or filling or
otherwise to be divided into lots or bloc(s, with the necessary streets and
alleyways located thereon, and shall cause plats and plans of such surveys
to be prepared and filed with the 1ureau of "ands.
'b+ Epon completion of such plats and plans the -overnor%-eneral shall
give notice to the public that such parts of the lands so made or reclaimed
as are not needed for public purposes will be leased for commercial and
business purposes, 0 0 0.
0 0 0
'e+ #he leases above provided for shall be disposed of to the highest and
best bidder therefore, subject to such regulations and safeguards as the
Dovernor-Deneral may by e0ecutive order prescribe.> 'Emphasis supplied+
Act No. )&./ mandated that the government should retain title to all lands
reclaimed by the government. 2he Act also vested in the government control and
disposition of foreshore lands. ,rivate parties could lease lands reclaimed by the
government only if these lands were no longer needed for public purpose. Act No.
)&./ mandated public bidding in the lease of government reclaimed lands. Act No.
)&./ made government reclaimed lands sui generis in that unli(e other public lands
which the government could sell to private parties, these reclaimed lands were
available only for lease to private parties.
Act No. )&./, however, did not repeal ection . of the panish "aw of ?aters of
)%&&. Act No. )&./ did not prohibit private parties from reclaiming parts of the sea
under ection . of the panish "aw of ?aters. "ands reclaimed from the sea by
private parties with government permission remained private lands.
*ct ;o. =97< of the (hilippine 6egislature
7n November -*, )*)*, the ,hilippine "egislature enacted Act No. -%$/, the ,ublic
"and Act.
/&
2he salient provisions of Act No. -%$/, on reclaimed lands, were as
followsA
>ec. &. #he -overnor%-eneral. upon the recommendation of the
&ecretary of *griculture and ;atural 4esources. shall from time to time
classify the lands of the public domain into N
'a+ *lienable or disposable,
'b+ 2imber, and
'c+ 8ineral lands, 0 0 0.
ec. $. For the purposes of the government and disposition of alienable or
disposable public lands, the -overnor%-eneral. upon recommendation by
the &ecretary of *griculture and ;atural 4esources. shall from time to
time declare what lands are open to disposition or concession under this
*ct.>
ec. %. 1nly those lands shall be declared open to disposition or
concession which have been officially delimited or classified 0 0 0.
0 0 0
ec. ... Any tract of land of the public domain which, being neither timber
nor mineral land, shall be classified as suitable for residential purposes or
for commercial. industrial. or other productive purposes other than
agricultural purposes, and shall be open to disposition or concession, shall
be disposed of under the provisions of this chapter, and not otherwise.
ec. .&. #he lands disposable under this title shall be classified as followsA
>a? 6ands reclaimed by the -overnment by dredging. filling. or
other means@
>b? Foreshore@
>c? arshy lands or lands covered with water bordering upon the
shores or ban(s of navigable la(es or rivers@
'd+ "ands not included in any of the foregoing classes.
0 0 0.
ec. .%. #he lands comprised in classes >a?. >b?. and >c? of section fifty%si'
shall be disposed of to private parties by lease only and not otherwise, as
soon as the -overnor%-eneral. upon recommendation by the &ecretary of
*griculture and ;atural 4esources. shall declare that the same are not
necessary for the public service and are open to disposition under this
chapter. #he lands included in class >d? may be disposed of by sale or
lease under the provisions of this *ct.> 'Emphasis supplied+
ection & of Act No. -%$/ authoriFed the Dovernor-Deneral to >classify lands of the
public domain into 0 0 0 alienable or disposable>
/$
lands. ection $ of the Act
empowered the Dovernor-Deneral to >declare what lands are open to disposition or
concession.> ection % of the Act limited alienable or disposable lands only to those
lands which have been >officially delimited and classified.>
ection .& of Act No. -%$/ stated that lands >disposable under this title
/%
shall be
classified> as government reclaimed, foreshore and marshy lands, as well as other
lands. All these lands, however, must be suitable for residential, commercial,
industrial or other productive non%agricultural purposes. 2hese provisions vested
upon the Dovernor-Deneral the power to classify inalienable lands of the public
domain into disposable lands of the public domain. 2hese provisions also
empowered the Dovernor-Deneral to classify further such disposable lands of the
public domain into government reclaimed, foreshore or marshy lands of the public
domain, as well as other non-agricultural lands.
ection .% of Act No. -%$/ categorically mandated that disposable lands of the
public domain classified as government reclaimed, foreshore and marshy
lands 3shall be disposed of to private parties by lease only and not otherwise.3 2he
Dovernor-Deneral, before allowing the lease of these lands to private parties, must
formally declare that the lands were >not necessary for the public service.> Act No.
-%$/ reiterated the tate policy to lease and not to sell government reclaimed,
foreshore and marshy lands of the public domain, a policy first enunciated in )*:$ in
Act No. )&./. Dovernment reclaimed, foreshore and marshy lands remained sui
generis, as the only alienable or disposable lands of the public domain that the
government could not sell to private parties.
2he rationale behind this tate policy is obvious. Dovernment reclaimed, foreshore
and marshy public lands for non-agricultural purposes retain their inherent potential
as areas for public service. 2his is the reason the government prohibited the sale, and
only allowed the lease, of these lands to private parties. 2he tate always reserved
these lands for some future public service.
Act No. -%$/ did not authoriFe the reclassification of government reclaimed,
foreshore and marshy lands into other non-agricultural lands under ection .& 'd+.
"ands falling under ection .& 'd+ were the only lands for non-agricultural purposes
the government could sell to private parties. 2hus, under Act No. -%$/, the
government could not sell government reclaimed, foreshore and marshy lands to
private parties. unless the legislature passed a law allowing their sale.
/*
Act No. -%$/ did not prohibit private parties from reclaiming parts of the sea
pursuant to ection . of the panish "aw of ?aters of )%&&. "ands reclaimed from
the sea by private parties with government permission remained private lands.
5ispositions under the 8:35 +onstitution
7n 8ay )/, )*#., the )*#. Constitution too( effect upon its ratification by the
Filipino people. 2he )*#. Constitution, in adopting the 4egalian doctrine, declared
in ection ), Article K999, that N
>ection ). All agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy and other natural resources of the ,hilippines belong to the
tate, and their disposition, e0ploitation, development, or utiliFation shall be
limited to citiFens of the ,hilippines or to corporations or associations at
least si0ty per centum of the capital of which is owned by such citiFens,
subject to any e0isting right, grant, lease, or concession at the time of the
inauguration of the Dovernment established under this
Constitution. ;atural resources. with the e'ception of public agricultural
land. shall not be alienated, and no license, concession, or lease for the
e0ploitation, development, or utiliFation of any of the natural resources
shall be granted for a period e0ceeding twenty-five years, renewable for
another twenty-five years, e0cept as to water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water
power, in which cases beneficial use may be the measure and limit of the
grant.> 'Emphasis supplied+
2he )*#. Constitution barred the alienation of all natural resources e0cept public
agricultural lands, which were the only natural resources the tate could alienate.
2hus, foreshore lands, considered part of the tate<s natural resources, became
inalienable by constitutional fiat, available only for lease for -. years, renewable for
another -. years. 2he government could alienate foreshore lands only after these
lands were reclaimed and classified as alienable agricultural lands of the public
domain. Dovernment reclaimed and marshy lands of the public domain, being
neither timber nor mineral lands, fell under the classification of public agricultural
lands.
.:
=owever, government reclaimed and marshy lands, although subject to
classification as disposable public agricultural lands, could only be leased and not
sold to private parties because of Act No. -%$/.
2he prohibition on private parties from ac!uiring ownership of government
reclaimed and marshy lands of the public domain was only a statutory prohibition
and the legislature could therefore remove such prohibition. 2he )*#. Constitution
did not prohibit individuals and corporations from ac!uiring government reclaimed
and marshy lands of the public domain that were classified as agricultural lands
under e0isting public land laws. ection -, Article K999 of the )*#. Constitution
provided as followsA
>ection -. ;o private corporation or association may acquire. lease. or
hold public agricultural lands in e'cess of one thousand and twenty four
hectares. nor may any individual acquire such lands by purchase in
e'cess of one hundred and forty hectares. or by lease in e'cess of one
thousand and twenty%four hectares, or by homestead in e0cess of twenty-
four hectares. "ands adapted to graFing, not e0ceeding two thousand
hectares, may be leased to an individual, private corporation, or
association.> 'Emphasis supplied+
till, after the effectivity of the )*#. Constitution, the legislature did not repeal
ection .% of Act No. -%$/ to open for sale to private parties government reclaimed
and marshy lands of the public domain. 7n the contrary, the legislature continued the
long established tate policy of retaining for the government title and ownership of
government reclaimed and marshy lands of the public domain.
+ommonwealth *ct ;o. 8<8 of the (hilippine ;ational *ssembly
7n November $, )*#&, the National Assembly approved Commonwealth Act No.
)/), also (nown as the ,ublic "and Act, which compiled the then e0isting laws on
lands of the public domain. CA No. )/), as amended, remains to this day
the e'isting general law governing the classification and disposition of lands of the
public domain other than timber and mineral lands.
.)
ection & of CA No. )/) empowers the ,resident to classify lands of the public
domain into >alienable or disposable>
.-
lands of the public domain, which prior to
such classification are inalienable and outside the commerce of man. ection $ of CA
No. )/) authoriFes the ,resident to >declare what lands are open to disposition or
concession.> ection % of CA No. )/) states that the government can declare open
for disposition or concession only lands that are >officially delimited and classified.>
ections &, $ and % of CA No. )/) read as followsA
>ec. &. #he (resident. upon the recommendation of the &ecretary of
*griculture and +ommerce. shall from time to time classify the lands of
the public domain into N
>a? *lienable or disposable,
'b+ 2imber, and
'c+ 8ineral lands,
and may at any time and in li(e manner transfer such lands from one class
to another,
.#
for the purpose of their administration and disposition.
ec. $. For the purposes of the administration and disposition of alienable or
disposable public lands, the (resident. upon recommendation by the
&ecretary of *griculture and +ommerce. shall from time to time declare
what lands are open to disposition or concession under this Act.
ec. %. 1nly those lands shall be declared open to disposition or
concession which have been officially delimited and classified and, when
practicable, surveyed, and which have not been reserved for public or
quasi%public uses, nor appropriated by the Dovernment, nor in any manner
become private property, nor those on which a private right authoriFed and
recogniFed by this Act or any other valid law may be claimed, or which,
having been reserved or appropriated, have ceased to be so. 0 0 0.>
2hus, before the government could alienate or dispose of lands of the public domain,
the ,resident must first officially classify these lands as alienable or disposable, and
then declare them open to disposition or concession. 2here must be no law reserving
these lands for public or !uasi-public uses.
2he salient provisions of CA No. )/), on government reclaimed, foreshore and
marshy lands of the public domain, are as followsA
>ec. .%. *ny tract of land of the public domain which. being neither
timber nor mineral land. is intended to be used for residential purposes or
for commercial. industrial. or other productive purposes other than
agricultural. and is open to disposition or concession. shall be disposed of
under the provisions of this chapter and not otherwise.
ec. .*. #he lands disposable under this title shall be classified as followsA
>a? 6ands reclaimed by the -overnment by dredging. filling. or
other means@
>b? Foreshore@
>c? arshy lands or lands covered with water bordering upon the
shores or ban(s of navigable la(es or rivers@
'd+ "ands not included in any of the foregoing classes.
ec. &:. Any tract of land comprised under this title may be leased or sold,
as the case may be, to any person, corporation, or association authoriFed to
purchase or lease public lands for agricultural purposes. 0 0 0.
ec. &). #he lands comprised in classes >a?. >b?. and >c? of section fifty%
nine shall be disposed of to private parties by lease only and not
otherwise, as soon as the (resident, upon recommendation by the ecretary
of Agriculture, shall declare that the same are not necessary for the public
service and are open to disposition under this chapter. #he lands included
in class >d? may be disposed of by sale or lease under the provisions of
this *ct.> 'Emphasis supplied+
ection &) of CA No. )/) readopted, after the effectivity of the )*#. Constitution,
ection .% of Act No. -%$/ prohibiting the sale of government reclaimed, foreshore
and marshy disposable lands of the public domain. All these lands are intended for
residential, commercial, industrial or other non-agricultural purposes. As before,
ection &) allowed only the lease of such lands to private parties. 2he government
could sell to private parties only lands falling under ection .* 'd+ of CA No. )/), or
those lands for non-agricultural purposes not classified as government reclaimed,
foreshore and marshy disposable lands of the public domain. Foreshore lands,
however, became inalienable under the )*#. Constitution which only allowed the
lease of these lands to !ualified private parties.
ection .% of CA No. )/) e0pressly states that disposable lands of the public domain
intended for residential, commercial, industrial or other productive purposes other
than agricultural >shall be disposed of under the provisions of this chapter and not
otherwise.> Ender ection ): of CA No. )/), the term >disposition> includes lease of
the land. Any disposition of government reclaimed, foreshore and marshy disposable
lands for non-agricultural purposes must comply with Chapter 9K, 2itle 999 of CA No.
)/),
./
unless a subse!uent law amended or repealed these provisions.
9n his concurring opinion in the landmar( case of 4epublic 4eal )state +orporation
v. +ourt of *ppeals,
..
6ustice 4eynato . ,uno summariFed succinctly the law on this
matter, as followsA
>Foreshore lands are lands of public dominion intended for public use. o
too are lands reclaimed by the government by dredging, filling, or other
means. Act )&./ mandated that the control and disposition of the foreshore
and lands under water remained in the national government. aid law
allowed only the <leasing< of reclaimed land. 2he ,ublic "and Acts of )*)*
and )*#& also declared that the foreshore and lands reclaimed by the
government were to be >disposed of to private parties by lease only and not
otherwise.> 1efore leasing, however, the Dovernor-Deneral, upon
recommendation of the ecretary of Agriculture and Natural 4esources, had
first to determine that the land reclaimed was not necessary for the public
service. 2his re!uisite must have been met before the land could be
disposed of. !ut even then. the foreshore and lands under water were not
to be alienated and sold to private parties. #he disposition of the
reclaimed land was only by lease. #he land remained property of the
&tate.> 'Emphasis supplied+
As observed by 6ustice ,uno in his concurring opinion, >Commonwealth Act No.
)/) has remained in effect at present.>
2he tate policy prohibiting the sale to private parties of government reclaimed,
foreshore and marshy alienable lands of the public domain, first implemented in
)*:$ was thus reaffirmed in CA No. )/) after the )*#. Constitution too( effect. 2he
prohibition on the sale of foreshore lands, however, became a constitutional edict
under the )*#. Constitution. Foreshore lands became inalienable as natural resources
of the tate, unless reclaimed by the government and classified as agricultural lands
of the public domain, in which case they would fall under the classification of
government reclaimed lands.
After the effectivity of the )*#. Constitution, government reclaimed and marshy
disposable lands of the public domain continued to be only leased and not sold to
private parties.
.&
2hese lands remained sui generis, as the only alienable or
disposable lands of the public domain the government could not sell to private
parties.
ince then and until now, the only way the government can sell to private parties
government reclaimed and marshy disposable lands of the public domain is for the
legislature to pass a law authoriFing such sale. CA No. )/) does not authoriFe the
,resident to reclassify government reclaimed and marshy lands into other non-
agricultural lands under ection .* 'd+. "ands classified under ection .* 'd+ are the
only alienable or disposable lands for non-agricultural purposes that the government
could sell to private parties.
8oreover, ection &: of CA No. )/) e'pressly re!uires congressional authority
before lands under ection .* that the government previously transferred to
government units or entities could be sold to private parties. ection &: of CA No.
)/) declares that N
>ec. &:. 0 0 0 2he area so leased or sold shall be such as shall, in the
judgment of the ecretary of Agriculture and Natural 4esources, be
reasonably necessary for the purposes for which such sale or lease is
re!uested, and shall not e0ceed one hundred and forty-four hectaresA
,rovided, however, 2hat this limitation shall not apply to grants, donations,
or transfers made to a province, municipality or branch or subdivision of the
Dovernment for the purposes deemed by said entities conducive to the
public interest@but the land so granted. donated. or transferred to a
province. municipality or branch or subdivision of the -overnment shall
not be alienated. encumbered. or otherwise disposed of in a manner
affecting its title. e'cept when authori,ed by +ongressA 0 0 0.> 'Emphasis
supplied+
2he congressional authority re!uired in ection &: of CA No. )/) mirrors the
legislative authority re!uired in ection .& of Act No. -%$/.
7ne reason for the congressional authority is that ection &: of CA No. )/)
e0empted government units and entities from the ma0imum area of public lands that
could be ac!uired from the tate. 2hese government units and entities should not just
turn around and sell these lands to private parties in violation of constitutional or
statutory limitations. 7therwise, the transfer of lands for non-agricultural purposes to
government units and entities could be used to circumvent constitutional limitations
on ownership of alienable or disposable lands of the public domain. 9n the same
manner, such transfers could also be used to evade the statutory prohibition in CA
No. )/) on the sale of government reclaimed and marshy lands of the public domain
to private parties. ection &: of CA No. )/) constitutes by operation of law a lien on
these lands.
.$
9n case of sale or lease of disposable lands of the public domain falling under
ection .* of CA No. )/), ections &# and &$ re!uire a public bidding. ections &#
and &$ of CA No. )/) provide as followsA
>ec. &#. ?henever it is decided that lands covered by this chapter are not
needed for public purposes, the 5irector of "ands shall as( the ecretary of
Agriculture and Commerce 'now the ecretary of Natural 4esources+ for
authority to dispose of the same. Epon receipt of such authority, the
5irector of "ands shall give notice by public advertisement in the same
manner as in the case of leases or sales of agricultural public land, 0 0 0.
ec. &$. #he lease or sale shall be made by oral bidding@ and ad"udication
shall be made to the highest bidder. 0 0 0.> 'Emphasis supplied+
2hus, CA No. )/) mandates the Dovernment to put to public auction all leases or
sales of alienable or disposable lands of the public domain.
.%
"i(e Act No. )&./ and Act No. -%$/ before it, CA No. )/) did not repeal ection .
of the panish "aw of ?aters of )%&&. ,rivate parties could still reclaim portions of
the sea with government permission. =owever, the reclaimed land could become
private land only if classified as alienable agricultural land of the public
domain open to disposition under CA No. )/). 2he )*#. Constitution prohibited the
alienation of all natural resources e0cept public agricultural lands.
#he +ivil +ode of 8:5A
2he Civil Code of )*.: readopted substantially the definition of property of public
dominion found in the Civil Code of )%%*. Articles /-: and /-- of the Civil Code of
)*.: state that N
>Art. /-:. 2he following things are property of public dominionA
')+ 2hose intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the tate, ban(s, shores, roadsteads, and
others of similar character@
'-+ 2hose which belong to the tate, without being for public use, and are
intended for some public service or for the development of the national
wealth.
0 0 0.
Art. /--. ,roperty of public dominion, when no longer intended for public
use or for public service, shall form part of the patrimonial property of the
tate.>
Again, the government must formally declare that the property of public dominion is
no longer needed for public use or public service, before the same could be classified
as patrimonial property of the tate.
.*
9n the case of government reclaimed and
marshy lands of the public domain, the declaration of their being disposable, as well
as the manner of their disposition, is governed by the applicable provisions of CA
No. )/).
"i(e the Civil Code of )%%*, the Civil Code of )*.: included as property of public
dominion those properties of the tate which, without being for public use, are
intended for public service or the >development of the national wealth.> 2hus,
government reclaimed and marshy lands of the tate, even if not employed for public
use or public service, if developed to enhance the national wealth, are classified as
property of public dominion.
5ispositions under the 8:73 +onstitution
2he )*$# Constitution, which too( effect on 6anuary )$, )*$#, li(ewise adopted the
4egalian doctrine. ection %, Article K9; of the )*$# Constitution stated that N
>ec. %. All lands of the public domain, waters, minerals, coal, petroleum
and other mineral oils, all forces of potential energy, fisheries, wildlife, and
other natural resources of the ,hilippines belong to the tate. 7ith the
e'ception of agricultural. industrial or commercial. residential. and
resettlement lands of the public domain. natural resources shall not be
alienated, and no license, concession, or lease for the e0ploration,
development, e0ploitation, or utiliFation of any of the natural resources
shall be granted for a period e0ceeding twenty-five years, renewable for not
more than twenty-five years, e0cept as to water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water
power, in which cases, beneficial use may be the measure and the limit of
the grant.> 'Emphasis supplied+
2he )*$# Constitution prohibited the alienation of all natural resources with the
e0ception of >agricultural, industrial or commercial, residential, and resettlement
lands of the public domain.> 9n contrast, the )*#. Constitution barred the alienation
of all natural resources e0cept >public agricultural lands.> =owever, the term >public
agricultural lands> in the )*#. Constitution encompassed industrial, commercial,
residential and resettlement lands of the public domain.
&:
9f the land of public domain
were neither timber nor mineral land, it would fall under the classification of
agricultural land of the public domain. !oth the 8:35 and 8:73 +onstitutions.
therefore. prohibited the alienation of all natural resources e'cept agricultural
lands of the public domain.
2he )*$# Constitution, however, limited the alienation of lands of the public domain
to individuals who were citiFens of the ,hilippines. ,rivate corporations, even if
wholly owned by ,hilippine citiFens, were no longer allowed to ac!uire alienable
lands of the public domain unli(e in the )*#. Constitution. ection )), Article K9;
of the )*$# Constitution declared that N
>ec. )). 2he 1atasang ,ambansa, ta(ing into account conservation,
ecological, and development re!uirements of the natural resources, shall
determine by law the siFe of land of the public domain which may be
developed, held or ac!uired by, or leased to, any !ualified individual,
corporation, or association, and the conditions therefor. ;o private
corporation or association may hold alienable lands of the public domain
e'cept by lease not to e0ceed one thousand hectares in area nor may any
citiFen hold such lands by lease in e0cess of five hundred hectares or
ac!uire by purchase, homestead or grant, in e0cess of twenty-four hectares.
No private corporation or association may hold by lease, concession, license
or permit, timber or forest lands and other timber or forest resources in
e0cess of one hundred thousand hectares. =owever, such area may be
increased by the 1atasang ,ambansa upon recommendation of the National
Economic and 5evelopment Authority.> 'Emphasis supplied+
2hus, under the )*$# Constitution, private corporations could hold alienable lands of
the public domain only through lease. 7nly individuals could now ac!uire alienable
lands of the public domain, and private corporations became absolutely barred
from acquiring any Bind of alienable land of the public domain. 2he constitutional
ban e0tended to all (inds of alienable lands of the public domain, while the statutory
ban under CA No. )/) applied only to government reclaimed, foreshore and marshy
alienable lands of the public domain.
(5 ;o. 8A9< +reating the (ublic )states *uthority
7n February /, )*$$, then ,resident Ferdinand 8arcos issued ,residential 5ecree
No. ):%/ creating ,EA, a wholly government owned and controlled corporation with
a special charter. ections / and % of ,5 No. ):%/, vests ,EA with the following
purposes and powersA
>ec. /. ,urpose. 2he Authority is hereby created for the following
purposesA
'a+ #o reclaim land. including foreshore and submerged areas. by
dredging. filling or other means. or to acquire reclaimed land@
'b+ 2o develop, improve, ac!uire, administer, deal in, subdivide,
dispose, lease and sell any and all Binds of lands, buildings, estates and
other forms of real property, owned, managed, controlled and3or operated
by the government@
'c+ 2o provide for, operate or administer such service as may be necessary
for the efficient, economical and beneficial utiliFation of the above
properties.
ec. .. ,owers and functions of the Authority. 2he Authority shall, in
carrying out the purposes for which it is created, have the following powers
and functionsA
'a+2o prescribe its by-laws.
0 0 0
'i+ #o hold lands of the public domain in e0cess of the area permitted to
private corporations by statute.
'j+ #o reclaim lands and to construct wor( across, or otherwise, any stream,
watercourse, canal, ditch, flume 0 0 0.
0 0 0
'o+ 2o perform such acts and e0ercise such functions as may be necessary
for the attainment of the purposes and objectives herein specified.>
'Emphasis supplied+
,5 No. ):%/ authoriFes ,EA to reclaim both foreshore and submerged areas of the
public domain. Foreshore areas are those covered and uncovered by the ebb and flow
of the tide.
&)
ubmerged areas are those permanently under water regardless of the
ebb and flow of the tide.
&-
Foreshore and submerged areas indisputably belong to the
public domain
&#
and are inalienable unless reclaimed, classified as alienable lands
open to disposition, and further declared no longer needed for public service.
2he ban in the )*$# Constitution on private corporations from ac!uiring alienable
lands of the public domain did not apply to ,EA since it was then, and until today, a
fully owned government corporation. 2he constitutional ban applied then, as it still
applies now, only to >private corporations and associations.> ,5 No. ):%/ e0pressly
empowers ()* 3to hold lands of the public domain> even >in e0cess of the area
permitted to private corporations by statute.> #hus. ()* can hold title to private
lands. as well as title to lands of the public domain.
9n order for ,EA to sell its reclaimed foreshore and submerged alienable lands of the
public domain, there must be legislative authority empowering ,EA to sell these
lands. 2his legislative authority is necessary in view of ection &: of CA No.)/),
which states N
>ec. &:. 0 0 0@ but the land so granted, donated or transferred to a province,
municipality, or branch or subdivision of the Dovernment shall not be
alienated, encumbered or otherwise disposed of in a manner affecting its
title, e'cept when authori,ed by +ongress@ 0 0 0.> 'Emphasis supplied+
?ithout such legislative authority, ,EA could not sell but only lease its reclaimed
foreshore and submerged alienable lands of the public domain. Nevertheless, any
legislative authority granted to ,EA to sell its reclaimed alienable lands of the public
domain would be subject to the constitutional ban on private corporations from
ac!uiring alienable lands of the public domain. =ence, such legislative authority
could only benefit private individuals.
5ispositions under the 8:97 +onstitution
2he )*%$ Constitution, li(e the )*#. and )*$# Constitutions before it, has adopted
the 4egalian doctrine. 2he )*%$ Constitution declares that all natural resources are
>owned by the &tate,> and e0cept for alienable agricultural lands of the public
domain, natural resources cannot be alienated. ections - and #, Article K99 of the
)*%$ Constitution state that N
>ection -. All lands of the public domain, waters, minerals, coal, petroleum
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the &tate. 7ith the e'ception of agricultural lands. all other natural
resources shall not be alienated. 2he e0ploration, development, and
utiliFation of natural resources shall be under the full control and
supervision of the tate. 0 0 0.
ection #. "ands of the public domain are classified into agricultural, forest
or timber, mineral lands, and national par(s. Agricultural lands of the public
domain may be further classified by law according to the uses which they
may be devoted. *lienable lands of the public domain shall be limited to
agricultural lands. (rivate corporations or associations may not hold
such alienable lands of the public domain e'cept by lease. for a period not
e'ceeding twenty%five years. renewable for not more than twenty%five
years. and not to e'ceed one thousand hectares in area. CitiFens of the
,hilippines may lease not more than five hundred hectares, or ac!uire not
more than twelve hectares thereof by purchase, homestead, or grant.
2a(ing into account the re!uirements of conservation, ecology, and
development, and subject to the re!uirements of agrarian reform, the
Congress shall determine, by law, the siFe of lands of the public domain
which may be ac!uired, developed, held, or leased and the conditions
therefor.> 'Emphasis supplied+
2he )*%$ Constitution continues the tate policy in the )*$# Constitution banning
private corporations fromacquiring any Bind of alienable land of the public
domain. "i(e the )*$# Constitution, the )*%$ Constitution allows private
corporations to hold alienable lands of the public domain only through lease. As in
the )*#. and )*$# Constitutions, the general law governing the lease to private
corporations of reclaimed, foreshore and marshy alienable lands of the public
domain is still CA No. )/).
#he 4ationale behind the +onstitutional !an
2he rationale behind the constitutional ban on corporations from ac!uiring, e0cept
through lease, alienable lands of the public domain is not well understood. 5uring
the deliberations of the )*%& Constitutional Commission, the commissioners probed
the rationale behind this ban, thusA
>F4. 1E4NAA 8r. ;ice-,resident, my !uestions have reference to page #,
line . which saysA
PNo private corporation or association may hold alienable lands of the
public domain e0cept by lease, not to e0ceed one thousand hectares in area.<
9f we recall, this provision did not e0ist under the )*#. Constitution, but
this was introduced in the )*$# Constitution. 9n effect, it prohibits private
corporations from ac!uiring alienable public lands. !ut it has not been very
clear in "urisprudence what the reason for this is. 9n some of the cases
decided in )*%- and )*%#, it was indicated that the purpose of this is to
prevent large landholdings. 9s that the intent of this provisionO
84. ;9""EDAA 9 thin( that is the spirit of the provision.
F4. 1E4NAA 9n e0isting decisions involving the 9glesia ni Cristo, there
were instances where the 9glesia ni Cristo was not allowed to ac!uire a mere
#)#-s!uare meter land where a chapel stood because the upreme Court
said it would be in violation of this.> 'Emphasis supplied+
9n *yog v. +usi,
&/
the Court e0plained the rationale behind this constitutional ban in
this wayA
>9ndeed, one purpose of the constitutional prohibition against purchases of
public agricultural lands by private corporations is to e!uitably diffuse land
ownership or to encourage <owner-cultivatorship and the economic family-
siFe farm< and to prevent a recurrence of cases li(e the instant case. =uge
landholdings by corporations or private persons had spawned social unrest.>
=owever, if the constitutional intent is to prevent huge landholdings, the Constitution
could have simply limited the siFe of alienable lands of the public domain that
corporations could ac!uire. 2he Constitution could have followed the limitations on
individuals, who could ac!uire not more than -/ hectares of alienable lands of the
public domain under the )*$# Constitution, and not more than )- hectares under the
)*%$ Constitution.
9f the constitutional intent is to encourage economic family-siFe farms, placing the
land in the name of a corporation would be more effective in preventing the brea(-up
of farmlands. 9f the farmland is registered in the name of a corporation, upon the
death of the owner, his heirs would inherit shares in the corporation instead of
subdivided parcels of the farmland. 2his would prevent the continuing brea(-up of
farmlands into smaller and smaller plots from one generation to the ne0t.
9n actual practice, the constitutional ban strengthens the constitutional limitation on
individuals from ac!uiring more than the allowed area of alienable lands of the
public domain. ?ithout the constitutional ban, individuals who already ac!uired the
ma0imum area of alienable lands of the public domain could easily set up
corporations to ac!uire more alienable public lands. An individual could own as
many corporations as his means would allow him. An individual could even hide his
ownership of a corporation by putting his nominees as stoc(holders of the
corporation. 2he corporation is a convenient vehicle to circumvent the constitutional
limitation on ac!uisition by individuals of alienable lands of the public domain.
2he constitutional intent, under the )*$# and )*%$ Constitutions, is to transfer
ownership of only a limited area of alienable land of the public domain to a !ualified
individual. 2his constitutional intent is safeguarded by the provision prohibiting
corporations from ac!uiring alienable lands of the public domain, since the vehicle to
circumvent the constitutional intent is removed. 2he available alienable public lands
are gradually decreasing in the face of an ever-growing population. 2he most
effective way to insure faithful adherence to this constitutional intent is to grant or
sell alienable lands of the public domain only to individuals. 2his, it would seem, is
the practical benefit arising from the constitutional ban.
#he *mended Joint /enture *greement
2he subject matter of the Amended 6;A, as stated in its second ?hereas clause,
consists of three properties, namelyA
). >B2Chree partially reclaimed and substantially eroded islands along
Emilio Aguinaldo 1oulevard in ,arana!ue and "as ,inas, 8etro 8anila,
with a combined titled area of ),.$%,//) s!uare meters@>
-. >BACnother area of -,/-),..* s!uare meters contiguous to the three
islands@> and
#. >BACt A8A49<s option as approved by ,EA, an additional #.: hectares
more or less to regulariFe the configuration of the reclaimed area.>
&.
,EA confirms that the Amended 6;A involves >the development of the Freedom
9slands and further reclamation of about -.: hectares 0 0 0,> plus an option >granted
to A8A49 to subse!uently reclaim another #.: hectares 0 0 0.>
&&
9n short, the Amended 6;A covers a reclamation area of $.: hectares. 1nly 857.9<
hectares of the 75A%hectare reclamation pro"ect have been reclaimed. and the rest
of the 5:=.85 hectares are still submerged areas forming part of anila !ay.
Ender the Amended 6;A, A8A49 will reimburse ,EA the sum of
,),%*/,)-*,-::.:: for ,EA<s >actual cost> in partially reclaiming the Freedom
9slands. A8A49 will also complete, at its own e0pense, the reclamation of the
Freedom 9slands. A8A49 will further shoulder all the reclamation costs of all the
other areas, totaling .*-.). hectares, still to be reclaimed. A8A49 and ,EA will
share, in the proportion of $: percent and #: percent, respectively, the total net
usable area which is defined in the Amended 6;A as the total reclaimed area less #:
percent earmar(ed for common areas. 2itle to A8A49<s share in the net usable area,
totaling #&$.. hectares, will be issued in the name of A8A49. ection ..- 'c+ of the
Amended 6;A provides that N
>0 0 0, ,EA shall have the duty to e0ecute without delay the necessary deed
of transfer or conveyance of the title pertaining to A8A49<s "and share
based on the "and Allocation ,lan. ()*. when requested in writing by
**4$. shall then cause the issuance and delivery of the proper
certificates of title covering **4$0s 6and &hare in the name of **4$,
0 0 0@ provided, that if more than seventy percent '$:Q+ of the titled area at
any given time pertains to A8A49, ,EA shall deliver to A8A49 only
seventy percent '$:Q+ of the titles pertaining to A8A49, until such time
when a corresponding proportionate area of additional land pertaining to
,EA has been titled.> 'Emphasis supplied+
$ndisputably. under the *mended J/* **4$ will acquire and own a ma'imum
of 367.5 hectares of reclaimed land which will be titled in its name.
2o implement the Amended 6;A, ,EA delegated to the unincorporated ,EA-A8A49
joint venture ,EA<s statutory authority, rights and privileges to reclaim foreshore and
submerged areas in 8anila 1ay. ection #.-.a of the Amended 6;A states that N
>,EA hereby contributes to the joint venture its rights and privileges to
perform 4awland 4eclamation and =oriFontal 5evelopment as well as own
the 4eclamation Area, thereby granting the 6oint ;enture the full and
e0clusive right, authority and privilege to underta(e the ,roject in
accordance with the 8aster 5evelopment ,lan.>
2he Amended 6;A is the product of a renegotiation of the original 6;A dated April
-., )**. and its supplemental agreement dated August *, )**..
#he #hreshold $ssue
2he threshold issue is whether A8A49, a private corporation, can ac!uire and own
under the Amended 6;A #&$.. hectares of reclaimed foreshore and submerged areas
in 8anila 1ay in view of ections - and #, Article K99 of the )*%$ Constitution
which state thatA
>ection -. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna, and other natural resources are
owned by the tate. 7ith the e'ception of agricultural lands. all other
natural resources shall not be alienated. 0 0 0.
0 0 0
ection #. 0 0 0 Alienable lands of the public domain shall be limited to
agricultural lands. (rivate corporations or associations may not hold such
alienable lands of the public domain e'cept by lease, 0 0 0.>'Emphasis
supplied+
+lassification of 4eclaimed Foreshore and &ubmerged *reas
,EA readily concedes that lands reclaimed from foreshore or submerged areas of
8anila 1ay are alienable or disposable lands of the public domain. 9n its
8emorandum,
&$
,EA admits that N
>Ender the ,ublic "and Act 'CA )/), as amended+, reclaimed lands are
classified as alienable and disposable lands of the public domainA
<ec. .*. 2he lands disposable under this title shall be classified as
followsA
'a+ "ands reclaimed by the government by dredging, filling, or
other means@
0 0 0.<> 'Emphasis supplied+
"i(ewise, the "egal 2as( Force
&%
constituted under ,residential Administrative 7rder
No. #&. admitted in its 4eport and 4ecommendation to then ,resident Fidel ;.
4amos, 3C4Declaimed lands are classified as alienable and disposable lands of the
public domain.>
&*
2he "egal 2as( Force concluded that N
>5. Conclusion
4eclaimed lands are lands of the public domain. =owever, by statutory
authority, the rights of ownership and disposition over reclaimed lands have
been transferred to ,EA, by virtue of which ,EA, as owner, may validly
convey the same to any !ualified person without violating the Constitution
or any statute.
2he constitutional provision prohibiting private corporations from holding
public land, e0cept by lease 'ec. #, Art. K;99,
$:
)*%$ Constitution+, does
not apply to reclaimed lands whose ownership has passed on to ,EA by
statutory grant.>
Ender ection -, Article K99 of the )*%$ Constitution, the foreshore and submerged
areas of 8anila 1ay are part of the >lands of the public domain, waters 0 0 0 and
other natural resources> and conse!uently >owned by the tate.> As such, foreshore
and submerged areas >shall not be alienated,> unless they are classified as
>agricultural lands> of the public domain. 2he mere reclamation of these areas by
,EA does not convert these inalienable natural resources of the tate into alienable
or disposable lands of the public domain. 2here must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or disposable
and open to disposition or concession. 8oreover, these reclaimed lands cannot be
classified as alienable or disposable if the law has reserved them for some public or
!uasi-public use.
$)
ection % of CA No. )/) provides that >only those lands shall be declared open to
disposition or concession which have been officially delimited and classified.>
$-
2he
,resident has the authority to classify inalienable lands of the public domain into
alienable or disposable lands of the public domain, pursuant to ection & of CA No.
)/). 9n "aurel vs. Darcia,
$#
the E0ecutive 5epartment attempted to sell the 4oppongi
property in 2o(yo, 6apan, which was ac!uired by the ,hilippine Dovernment for use
as the Chancery of the ,hilippine Embassy. Although the Chancery had transferred to
another location thirteen years earlier, the Court still ruled that, under Article /--
$/
of
the Civil Code, a property of public dominion retains such character until formally
declared otherwise. 2he Court ruled that N
>2he fact that the 4oppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property.
Any such conversion happens only if the property is withdrawn from public
use 'Cebu 70ygen and Acetylene Co. v. 1ercilles, && C4A /%) B)*$.C. *
property continues to be part of the public domain. not available for
private appropriation or ownership 0until there is a formal declaration on
the part of the government to withdraw it from being such0 '9gnacio v.
5irector of "ands, ):% ,hil. ##. B)*&:C.> 'Emphasis supplied+
,5 No. ):%., issued on February /, )*$$, authoriFed the issuance of special land
patents for lands reclaimed by ,EA from the foreshore or submerged areas of 8anila
1ay. 7n 6anuary )*, )*%% then ,resident CoraFon C. A!uino issued pecial ,atent
No. #.)$ in the name of ,EA for the ).$.%/ hectares comprising the partially
reclaimed Freedom 9slands. ubse!uently, on April *, )*** the 4egister of 5eeds of
the 8unicipality of ,arana!ue issued 2C2 Nos. $#:*, $#)) and $#)- in the name of
,EA pursuant to ection ):# of ,5 No. ).-* authoriFing the issuance of certificates
of title corresponding to land patents. 2o this day, these certificates of title are still in
the name of ,EA.
,5 No. ):%., coupled with ,resident A!uino<s actual issuance of a special patent
covering the Freedom 9slands, is e!uivalent to an official proclamation classifying
the Freedom 9slands as alienable or disposable lands of the public domain. ,5 No.
):%. and ,resident A!uino<s issuance of a land patent also constitute a declaration
that the Freedom 9slands are no longer needed for public service. #he Freedom
$slands are thus alienable or disposable lands of the public domain. open to
disposition or concession to qualified parties.
At the time then ,resident A!uino issued pecial ,atent No. #.)$, ,EA had already
reclaimed the Freedom 9slands although subse!uently there were partial erosions on
some areas. 2he government had also completed the necessary surveys on these
islands. 2hus, the Freedom 9slands were no longer part of 8anila 1ay but part of the
land mass. ection #, Article K99 of the )*%$ Constitution classifies lands of the
public domain into >agricultural, forest or timber, mineral lands, and national par(s.>
1eing neither timber, mineral, nor national par( lands, the reclaimed Freedom
9slands necessarily fall under the classification of agricultural lands of the public
domain. Ender the )*%$ Constitution, agricultural lands of the public domain are the
only natural resources that the tate may alienate to !ualified private parties. All
other natural resources, such as the seas or bays, are >waters 0 0 0 owned by the
tate> forming part of the public domain, and are inalienable pursuant to ection -,
Article K99 of the )*%$ Constitution.
A8A49 claims that the Freedom 9slands are private lands because C5C,, then a
private corporation, reclaimed the islands under a contract dated November -:, )*$#
with the Commissioner of ,ublic =ighways. A8A49, citing Article . of the panish
"aw of ?aters of )%&&, argues that >if the ownership of reclaimed lands may be
given to the party constructing the wor(s, then it cannot be said that reclaimed lands
are lands of the public domain which the tate may not alienate.>
$.
Article . of the
panish "aw of ?aters reads as followsA
>Article .. "ands reclaimed from the sea in conse!uence of wor(s
constructed by the tate, or by the provinces, pueblos or private
persons, with proper permission, shall become the property of the party
constructing such wor(s, unless otherwise provided by the terms of the
grant of authority.> 'Emphasis supplied+
Ender Article . of the panish "aw of ?aters of )%&&, private parties could reclaim
from the sea only with >proper permission> from the tate. ,rivate parties could own
the reclaimed land only if not >otherwise provided by the terms of the grant of
authority.> 2his clearly meant that no one could reclaim from the sea without
permission from the tate because the sea is property of public dominion. 9t also
meant that the tate could grant or withhold ownership of the reclaimed land because
any reclaimed land, li(e the sea from which it emerged, belonged to the tate. 2hus,
a private person reclaiming from the sea without permission from the tate could not
ac!uire ownership of the reclaimed land which would remain property of public
dominion li(e the sea it replaced.
$&
Article . of the panish "aw of ?aters of )%&&
adopted the time-honored principle of land ownership that >all lands that were not
ac!uired from the government, either by purchase or by grant, belong to the public
domain.>
$$
Article . of the panish "aw of ?aters must be read together with laws subse!uently
enacted on the disposition of public lands. 9n particular, CA No. )/) re!uires that
lands of the public domain must first be classified as alienable or disposable before
the government can alienate them. 2hese lands must not be reserved for public or
!uasi-public purposes.
$%
8oreover, the contract between C5C, and the government
was e0ecuted after the effectivity of the )*$# Constitution which barred private
corporations from ac!uiring any (ind of alienable land of the public domain. 2his
contract could not have converted the Freedom 9slands into private lands of a private
corporation.
,residential 5ecree No. #-A, issued on 6anuary )), )*$#, revo(ed all laws
authoriFing the reclamation of areas under water and revested solely in the National
Dovernment the power to reclaim lands. ection ) of ,5 No. #-A declared that N
>#he provisions of any law to the contrary notwithstanding, the
reclamation of areas under water, whether foreshore or inland, shall
be limited to the ;ational -overnment or any person authori,ed by it
under a proper contract. 'Emphasis supplied+
0 0 0.>
,5 No. #-A repealed ection . of the panish "aw of ?aters of )%&& because
reclamation of areas under water could now be underta(en only by the National
Dovernment or by a person contracted by the National Dovernment. ,rivate parties
may reclaim from the sea only under a contract with the National Dovernment, and
no longer by grant or permission as provided in ection . of the panish "aw of
?aters of )%&&.
E0ecutive 7rder No. .-., issued on February )/, )*$*, designated ,EA as the
National Dovernment<s implementing arm to underta(e >all reclamation projects of
the government,> which >shall be undertaBen by the ()* or through a proper
contract e'ecuted by it with any person or entity.> Ender such contract, a private
party receives compensation for reclamation services rendered to ,EA. ,ayment to
the contractor may be in cash, or in (ind consisting of portions of the reclaimed land,
subject to the constitutional ban on private corporations from ac!uiring alienable
lands of the public domain. 2he reclaimed land can be used as payment in (ind only
if the reclaimed land is first classified as alienable or disposable land open to
disposition, and then declared no longer needed for public service.
2he Amended 6;A covers not only the Freedom 9slands, but also an additional
.*-.). hectares which are still submerged and forming part of 8anila 1ay. #here is
no legislative or (residential act classifying these submerged areas as alienable or
disposable lands of the public domain open to disposition. 2hese submerged areas
are not covered by any patent or certificate of title. 2here can be no dispute that these
submerged areas form part of the public domain, and in their present state
are inalienable and outside the commerce of man. Entil reclaimed from the sea,
these submerged areas are, under the Constitution, >waters 0 0 0 owned by the
tate,> forming part of the public domain and conse!uently inalienable. 7nly when
actually reclaimed from the sea can these submerged areas be classified as public
agricultural lands, which under the Constitution are the only natural resources that
the tate may alienate. 7nce reclaimed and transformed into public agricultural
lands, the government may then officially classify these lands as alienable or
disposable lands open to disposition. 2hereafter, the government may declare these
lands no longer needed for public service. 7nly then can these reclaimed lands be
considered alienable or disposable lands of the public domain and within the
commerce of man.
2he classification of ,EA<s reclaimed foreshore and submerged lands into alienable
or disposable lands open to disposition is necessary because ,EA is tas(ed under its
charter to underta(e public services that re!uire the use of lands of the public
domain. Ender ection . of ,5 No. ):%/, the functions of ,EA include the
followingA >B2Co own or operate railroads, tramways and other (inds of land
transportation, 0 0 0@ B2Co construct, maintain and operate such systems of sanitary
sewers as may be necessary@ B2Co construct, maintain and operate such storm drains
as may be necessary.> ,EA is empowered to issue >rules and regulations as may be
necessary for the proper use by private parties of any or all of the highways. roads.
utilities. buildings andEor any of its properties and to impose or collect fees or tolls
for their use.> 2hus, part of the reclaimed foreshore and submerged lands held by the
,EA would actually be needed for public use or service since many of the functions
imposed on ,EA by its charter constitute essential public services.
8oreover, ection ) of E0ecutive 7rder No. .-. provides that ,EA >shall be
primarily responsible for integrating, directing, and coordinating all reclamation
projects for and on behalf of the National Dovernment.> 2he same section also states
that >BACll reclamation projects shall be approved by the ,resident upon
recommendation of the ,EA, and shall be underta(en by the ,EA or through a proper
contract e0ecuted by it with any person or entity@ 0 0 0.> 2hus, under E7 No. .-., in
relation to ,5 No. #-A and ,5 No.):%/, ,EA became the primary implementing
agency of the National Dovernment to reclaim foreshore and submerged lands of the
public domain. E7 No. .-. recogniFed ,EA as the government entity >to underta(e
the reclamation of lands and ensure their ma0imum utiliFation in promoting public
welfare and interests.>
$*
ince large portions of these reclaimed lands would
obviously be needed for public service, there must be a formal declaration
segregating reclaimed lands no longer needed for public service from those still
needed for public service.1.wphi1.n/t
ection # of E7 No. .-., by declaring that all lands reclaimed by ,EA >shall belong
to or be owned by the ,EA,> could not automatically operate to classify inalienable
lands into alienable or disposable lands of the public domain. 7therwise, reclaimed
foreshore and submerged lands of the public domain would automatically become
alienable once reclaimed by ,EA, whether or not classified as alienable or
disposable.
2he 4evised Administrative Code of )*%$, a later law than either ,5 No. ):%/ or
E7 No. .-., vests in the 5epartment of Environment and Natural 4esources
'>5EN4> for brevity+ the following powers and functionsA
>ec. /. ,owers and Functions. 2he 5epartment shallA
')+ 0 0 0
0 0 0
'/+ )'ercise supervision and control over forest lands, alienable and
disposable public lands, mineral resources and, in the process of e0ercising
such control, impose appropriate ta0es, fees, charges, rentals and any such
form of levy and collect such revenues for the e0ploration, development,
utiliFation or gathering of such resources@
0 0 0
')/+ (romulgate rules. regulations and guidelines on the issuance of
licenses. permits. concessions. lease agreements and such other privileges
concerning the development. e'ploration and utili,ation of the country0s
marine. freshwater. and bracBish water and over all aquatic resources of
the country and shall continue to oversee. supervise and police our
natural resources@ cancel or cause to cancel such privileges upon failure,
non-compliance or violations of any regulation, order, and for all other
causes which are in furtherance of the conservation of natural resources and
supportive of the national interest@
').+ )'ercise e'clusive "urisdiction on the management and disposition of
all lands of the public domain and serve as the sole agency responsible
for classification, sub-classification, surveying and titling of lands in
consultation with appropriate agencies.>
%:
'Emphasis supplied+
As manager, conservator and overseer of the natural resources of the tate, 5EN4
e0ercises >supervision and control over alienable and disposable public lands.>
5EN4 also e0ercises >e0clusive jurisdiction on the management and disposition of
all lands of the public domain.> 2hus, 5EN4 decides whether areas under water, li(e
foreshore or submerged areas of 8anila 1ay, should be reclaimed or not. 2his means
that ,EA needs authoriFation from 5EN4 before ,EA can underta(e reclamation
projects in 8anila 1ay, or in any part of the country.
5EN4 also e0ercises e0clusive jurisdiction over the disposition of all lands of the
public domain. =ence, 5EN4 decides whether reclaimed lands of ,EA should be
classified as alienable under ections &
%)
and $
%-
of CA No. )/). 7nce 5EN4
decides that the reclaimed lands should be so classified, it then recommends to the
,resident the issuance of a proclamation classifying the lands as alienable or
disposable lands of the public domain open to disposition. ?e note that then 5EN4
ecretary Fulgencio . Factoran, 6r. countersigned pecial ,atent No. #.)$ in
compliance with the 4evised Administrative Code and ections & and $ of CA No.
)/).
9n short, 5EN4 is vested with the power to authoriFe the reclamation of areas under
water, while ,EA is vested with the power to underta(e the physical reclamation of
areas under water, whether directly or through private contractors. 5EN4 is also
empowered to classify lands of the public domain into alienable or disposable lands
subject to the approval of the ,resident. 7n the other hand, ,EA is tas(ed to develop,
sell or lease the reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by ,EA of foreshore or submerged
areas does not ma(e the reclaimed lands alienable or disposable lands of the public
domain, much less patrimonial lands of ,EA. "i(ewise, the mere transfer by the
National Dovernment of lands of the public domain to ,EA does not ma(e the lands
alienable or disposable lands of the public domain, much less patrimonial lands of
,EA.
Absent two official acts N a classification that these lands are alienable or disposable
and open to disposition and a declaration that these lands are not needed for public
service, lands reclaimed by ,EA remain inalienable lands of the public domain. 7nly
such an official classification and formal declaration can convert reclaimed lands
into alienable or disposable lands of the public domain, open to disposition under the
Constitution, 2itle 9 and 2itle 999
%#
of CA No. )/) and other applicable laws.
%/
()*0s *uthority to &ell 4eclaimed 6ands
,EA, li(e the "egal 2as( Force, argues that as alienable or disposable lands of the
public domain, the reclaimed lands shall be disposed of in accordance with CA No.
)/), the ,ublic "and Act. ,EA, citing ection &: of CA No. )/), admits that
reclaimed lands transferred to a branch or subdivision of the government >shall not
be alienated, encumbered, or otherwise disposed of in a manner affecting its
title, e'cept when authori,ed by +ongressA 0 0 0.>
%.
'Emphasis by ,EA+
9n 6aurel vs. -arcia,
%&
the Court cited ection /% of the 4evised Administrative
Code of )*%$, which states that N
>ec. /%. 7fficial AuthoriFed to Convey 4eal ,roperty. ?henever real
property of the Dovernment is authori,ed by law to be conveyed, the deed
of conveyance shall be e0ecuted in behalf of the government by the
followingA 0 0 0.>
2hus, the Court concluded that a law is needed to convey any real property
belonging to the Dovernment. 2he Court declared that -
>9t is not for the ,resident to convey real property of the government on his
or her own sole will. *ny such conveyance must be authori,ed and
approved by a law enacted by the +ongress. 9t re!uires e0ecutive and
legislative concurrence.> 'Emphasis supplied+
,EA contends that ,5 No. ):%. and E7 No. .-. constitute the legislative authority
allowing ,EA to sell its reclaimed lands. ,5 No. ):%., issued on February /, )*$$,
provides that N
>#he land reclaimed in the foreshore and offshore area of anila
!ay pursuant to the contract for the reclamation and construction of the
8anila-Cavite Coastal 4oad ,roject between the 4epublic of the
,hilippines and the Construction and 5evelopment Corporation of the
,hilippines dated November -:, )*$# and3or any other contract or
reclamation covering the same area is hereby transferred. conveyed and
assigned to the ownership and administration of the (ublic )states
*uthority established pursuant to ,5 No. ):%/@ ,rovided, however, 2hat
the rights and interests of the Construction and 5evelopment Corporation of
the ,hilippines pursuant to the aforesaid contract shall be recogniFed and
respected.
=enceforth, the ,ublic Estates Authority shall e0ercise the rights and
assume the obligations of the 4epublic of the ,hilippines '5epartment of
,ublic =ighways+ arising from, or incident to, the aforesaid contract
between the 4epublic of the ,hilippines and the Construction and
5evelopment Corporation of the ,hilippines.
9n consideration of the foregoing transfer and assignment, the ,ublic Estates
Authority shall issue in favor of the 4epublic of the ,hilippines the
corresponding shares of stoc( in said entity with an issued value of said
shares of stoc( 'which+ shall be deemed fully paid and non-assessable.
2he ecretary of ,ublic =ighways and the Deneral 8anager of the ,ublic
Estates Authority shall e0ecute such contracts or agreements, including
appropriate agreements with the Construction and 5evelopment
Corporation of the ,hilippines, as may be necessary to implement the
above.
&pecial land patentEpatents shall be issued by the &ecretary of ;atural
4esources in favor of the (ublic )states *uthority without pre"udice to
the subsequent transfer to the contractor or his assignees of such portion
or portions of the land reclaimed or to be reclaimed as provided for in the
above%mentioned contract. 1n the basis of such patents. the 6and
4egistration +ommission shall issue the corresponding certificate of
title.> 'Emphasis supplied+
7n the other hand, ection # of E7 No. .-., issued on February )/, )*$*, provides
that -
>ec. #. *ll lands reclaimed by ()* shall belong to or be owned by the
()* which shall be responsible for its administration, development,
utiliFation or disposition in accordance with the provisions of ,residential
5ecree No. ):%/. Any and all income that the ,EA may derive from the
sale, lease or use of reclaimed lands shall be used in accordance with the
provisions of ,residential 5ecree No. ):%/.>
2here is no e0press authority under either ,5 No. ):%. or E7 No. .-. for ,EA to
sell its reclaimed lands. ,5 No. ):%. merely transferred >ownership and
administration> of lands reclaimed from 8anila 1ay to ,EA, while E7 No. .-.
declared that lands reclaimed by ,EA >shall belong to or be owned by ,EA.> E7 No.
.-. e0pressly states that ,EA should dispose of its reclaimed lands >in accordance
with the provisions of ,residential 5ecree No. ):%/,> the charter of ,EA.
,EA<s charter, however, e0pressly tas(s ,EA >to develop, improve, ac!uire,
administer, deal in, subdivide, dispose, lease and sell any and all Binds of lands 0 0
0 owned, managed, controlled and3or operated by the government.>
%$
'Emphasis
supplied+ #here is. therefore. legislative authority granted to ()* to sell its lands.
whether patrimonial or alienable lands of the public domain. ,EA may sell to
private parties its patrimonial properties in accordance with the ,EA charter free
from constitutional limitations. 2he constitutional ban on private corporations from
ac!uiring alienable lands of the public domain does not apply to the sale of ,EA<s
patrimonial lands.
,EA may also sell its alienable or disposable lands of the public domain to private
individuals since, with the legislative authority, there is no longer any statutory
prohibition against such sales and the constitutional ban does not apply to
individuals. ,EA, however, cannot sell any of its alienable or disposable lands of the
public domain to private corporations since ection #, Article K99 of the )*%$
Constitution e0pressly prohibits such sales. 2he legislative authority benefits only
individuals. ,rivate corporations remain barred from ac!uiring any (ind of alienable
land of the public domain, including government reclaimed lands.
2he provision in ,5 No. ):%. stating that portions of the reclaimed lands could be
transferred by ,EA to the >contractor or his assignees> 'Emphasis supplied+ would
not apply to private corporations but only to individuals because of the constitutional
ban. 7therwise, the provisions of ,5 No. ):%. would violate both the )*$# and )*%$
Constitutions.
#he requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of ,EA are classified as alienable or disposable lands
open to disposition, and further declared no longer needed for public service, ,EA
would have to conduct a public bidding in selling or leasing these lands. ,EA must
observe the provisions of ections &# and &$ of CA No. )/) re!uiring public auction,
in the absence of a law e0empting ,EA from holding a public auction.
%%
pecial
,atent No. #.)$ e0pressly states that the patent is issued by authority of the
Constitution and ,5 No. ):%/, >supplemented by Commonwealth Act No. )/), as
amended.> 2his is an ac(nowledgment that the provisions of CA No. )/) apply to
the disposition of reclaimed alienable lands of the public domain unless otherwise
provided by law. E0ecutive 7rder No. &./,
%*
which authoriFes ,EA >to determine the
(ind and manner of payment for the transfer> of its assets and properties, does not
e0empt ,EA from the re!uirement of public auction. E7 No. &./ merely authoriFes
,EA to decide the mode of payment, whether in (ind and in installment, but does not
authoriFe ,EA to dispense with public auction.
8oreover, under ection $* of ,5 No. )//., otherwise (nown as the Dovernment
Auditing Code, the government is re!uired to sell valuable government property
through public bidding. ection $* of ,5 No. )//. mandates that N
>ection $*. 7hen government property has become unserviceable for any
cause, or is no longer needed, it shall, upon application of the officer
accountable therefor, be inspected by the head of the agency or his duly
authoriFed representative in the presence of the auditor concerned and, if
found to be valueless or unsaleable, it may be destroyed in their presence. $f
found to be valuable. it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award or similar
body in the presence of the auditor concerned or other authoriFed
representative of the Commission, after advertising by printed notice in the
1fficial -a,ette. or for not less than three consecutive days in any
newspaper of general circulation, or where the value of the property does
not warrant the e0pense of publication, by notices posted for a li(e period in
at least three public places in the locality where the property is to be
sold. $n the event that the public auction fails. the property may be sold at
a private sale at such price as may be fi'ed by the same committee or body
concerned and approved by the +ommission.>
9t is only when the public auction fails that a negotiated sale is allowed, in which
case the Commission on Audit must approve the selling price.
*:
2he Commission on
Audit implements ection $* of the Dovernment Auditing Code through Circular
No. %*--*&
*)
dated 6anuary -$, )*%*. 2his circular emphasiFes that government
assets must be disposed of only through public auction, and a negotiated sale can be
resorted to only in case of >failure of public auction.>
At the public auction sale, only ,hilippine citiFens are !ualified to bid for ,EA<s
reclaimed foreshore and submerged alienable lands of the public domain. ,rivate
corporations are barred from bidding at the auction sale of any (ind of alienable land
of the public domain.
,EA originally scheduled a public bidding for the Freedom 9slands on 5ecember ):,
)**). ,EA imposed a condition that the winning bidder should reclaim another -.:
hectares of submerged areas to regulariFe the shape of the Freedom 9slands, under a
&:-/: sharing of the additional reclaimed areas in favor of the winning bidder.
*-
No
one, however, submitted a bid. 7n 5ecember -#, )**/, the Dovernment Corporate
Counsel advised ,EA it could sell the Freedom 9slands through negotiation, without
need of another public bidding, because of the failure of the public bidding on
5ecember ):, )**).
*#
=owever, the original 6;A dated April -., )**. covered not only the Freedom
9slands and the additional -.: hectares still to be reclaimed, it also granted an option
to A8A49 to reclaim another #.: hectares. 2he original 6;A, a negotiated contract,
enlarged the reclamation area to 75A hectares.
*/
2he failure of public bidding on
5ecember ):, )**), involving only /:$.%/ hectares,
*.
is not a valid justification for a
negotiated sale of $.: hectares, almost double the area publicly auctioned. 1esides,
the failure of public bidding happened on 5ecember ):, )**), more than three years
before the signing of the original 6;A on April -., )**.. 2he economic situation in
the country had greatly improved during the intervening period.
4eclamation under the !1# 6aw and the 6ocal -overnment +ode
2he constitutional prohibition in ection #, Article K99 of the )*%$ Constitution is
absolute and clearA >,rivate corporations or associations may not hold such alienable
lands of the public domain e0cept by lease, 0 0 0.> Even 4epublic Act No. &*.$
'>172 "aw,> for brevity+, cited by ,EA and A8A49 as legislative authority to sell
reclaimed lands to private parties, recogniFes the constitutional ban. ection & of 4A
No. &*.$ states N
>ec. &. 4epayment cheme. - For the financing, construction, operation
and maintenance of any infrastructure projects underta(en through the
build-operate-and-transfer arrangement or any of its variations pursuant to
the provisions of this Act, the project proponent 0 0 0 may li(ewise be
repaid in the form of a share in the revenue of the project or other non-
monetary payments, such as, but not limited to, the grant of a portion or
percentage of the reclaimed land, sub"ect to the constitutional
requirements with respect to the ownership of the landA 0 0 0.> 'Emphasis
supplied+
A private corporation, even one that underta(es the physical reclamation of a
government 172 project, cannot ac!uire reclaimed alienable lands of the public
domain in view of the constitutional ban.
ection #:- of the "ocal Dovernment Code, also mentioned by ,EA and A8A49,
authoriFes local governments in land reclamation projects to pay the contractor or
developer in (ind consisting of a percentage of the reclaimed land, to witA
>ection #:-. Financing, Construction, 8aintenance, 7peration, and
8anagement of 9nfrastructure ,rojects by the ,rivate ector. 0 0 0
0 0 0
9n case of land reclamation or construction of industrial estates, the
repayment plan may consist of the grant of a portion or percentage of the
reclaimed land or the industrial estate constructed.>
Although ection #:- of the "ocal Dovernment Code does not contain a proviso
similar to that of the 172 "aw, the constitutional restrictions on land ownership
automatically apply even though not e0pressly mentioned in the "ocal Dovernment
Code.
2hus, under either the 172 "aw or the "ocal Dovernment Code, the contractor or
developer, if a corporate entity, can only be paid with leaseholds on portions of the
reclaimed land. 9f the contractor or developer is an individual, portions of the
reclaimed land, not e0ceeding )- hectares
*&
of non-agricultural lands, may be
conveyed to him in ownership in view of the legislative authority allowing such
conveyance. 2his is the only way these provisions of the 172 "aw and the "ocal
Dovernment Code can avoid a direct collision with ection #, Article K99 of the )*%$
Constitution.
4egistration of lands of the public domain
Finally, ,EA theoriFes that the >act of conveying the ownership of the reclaimed
lands to public respondent ,EA transformed such lands of the public domain to
private lands.> 2his theory is echoed by A8A49 which maintains that the >issuance
of the special patent leading to the eventual issuance of title ta(es the subject land
away from the land of public domain and converts the property into patrimonial or
private property.> 9n short, ,EA and A8A49 contend that with the issuance of
pecial ,atent No. #.)$ and the corresponding certificates of titles, the ).$.%/
hectares comprising the Freedom 9slands have become private lands of ,EA. 9n
support of their theory, ,EA and A8A49 cite the following rulings of the CourtA
). Sumail v. Judge of *0" of *otabato,
*$
where the Court held N
>7nce the patent was granted and the corresponding certificate of title was
issued, the land ceased to be part of the public domain and became private
property over which the 5irector of "ands has neither control nor
jurisdiction.>
-. )ee 1ong 1o2 v. avid,
*%
where the Court declared -
>After the registration and issuance of the certificate and duplicate
certificate of title based on a public land patent, the land covered thereby
automatically comes under the operation of 4epublic Act /*& subject to all
the safeguards provided therein.>#. 1eirs of 3regorio $engco v. 1eirs of
Jose %liwalas,
**
where the Court ruled -
>?hile the 5irector of "ands has the power to review homestead patents, he
may do so only so long as the land remains part of the public domain and
continues to be under his e0clusive control@ but once the patent is registered
and a certificate of title is issued, the land ceases to be part of the public
domain and becomes private property over which the 5irector of "ands has
neither control nor jurisdiction.>
/. Manalo v. "ntermediate %ppellate *ourt,
)::
where the Court held N
>?hen the lots in dispute were certified as disposable on 8ay )*, )*$), and
free patents were issued covering the same in favor of the private
respondents, the said lots ceased to be part of the public domain and,
therefore, the 5irector of "ands lost jurisdiction over the same.>
..4epublic v. Court of Appeals,
):)
where the Court stated N
>,roclamation No. #.:, dated 7ctober *, )*.&, of ,resident 8agsaysay
legally effected a land grant to the 8indanao 8edical Center, 1ureau of
8edical ervices, 5epartment of =ealth, of the whole lot, validly sufficient
for initial registration under the "and 4egistration Act. uch land grant is
constitutive of a <fee simple< title or absolute title in favor of petitioner
8indanao 8edical Center. 2hus, ection )-- of the Act, which governs the
registration of grants or patents involving public lands, provides that
<?henever public lands in the ,hilippine 9slands belonging to the
Dovernment of the Enited tates or to the Dovernment of the ,hilippines
are alienated, granted or conveyed to persons or to public or private
corporations, the same shall be brought forthwith under the operation of this
Act '"and 4egistration Act, Act /*&+ and shall become registered lands.<>
2he first four cases cited involve petitions to cancel the land patents and the
corresponding certificates of titlesissued to private parties. 2hese four cases
uniformly hold that the 5irector of "ands has no jurisdiction over private lands or
that upon issuance of the certificate of title the land automatically comes under the
2orrens ystem. 2he fifth case cited involves the registration under the 2orrens
ystem of a )-.%-hectare public land granted by the National Dovernment to
8indanao 8edical Center, a government unit under the 5epartment of =ealth. 2he
National Dovernment transferred the )-.%-hectare public land to serve as the site for
the hospital buildings and other facilities of 8indanao 8edical Center, which
performed a public service. 2he Court affirmed the registration of the )-.%-hectare
public land in the name of 8indanao 8edical Center under ection )-- of Act No.
/*&. 2his fifth case is an e0ample of a public land being registered under Act No.
/*& without the land losing its character as a property of public dominion.
9n the instant case, the only patent and certificates of title issued are those in the
name of ,EA, a wholly government owned corporation performing public as well as
proprietary functions. No patent or certificate of title has been issued to any private
party. No one is as(ing the 5irector of "ands to cancel ,EA<s patent or certificates of
title. 9n fact, the thrust of the instant petition is that ,EA<s certificates of title should
remain with ,EA, and the land covered by these certificates, being alienable lands of
the public domain, should not be sold to a private corporation.
4egistration of land under Act No. /*& or ,5 No. ).-* does not vest in the registrant
private or public ownership of the land. 4egistration is not a mode of ac!uiring
ownership but is merely evidence of ownership previously conferred by any of the
recogniFed modes of ac!uiring ownership. 4egistration does not give the registrant a
better right than what the registrant had prior to the registration.
):-
2he registration of
lands of the public domain under the 2orrens system, by itself, cannot convert public
lands into private lands.
):#
6urisprudence holding that upon the grant of the patent or issuance of the certificate
of title the alienable land of the public domain automatically becomes private land
cannot apply to government units and entities li(e ,EA. 2he transfer of the Freedom
9slands to ,EA was made subject to the provisions of CA No. )/) as e0pressly stated
in pecial ,atent No. #.)$ issued by then ,resident A!uino, to witA
>N7?, 2=E4EF74E, HN7? IE, that by authority of the Constitution of
the ,hilippines and in conformity with the provisions of ,residential 5ecree
No. ):%/. supplemented by +ommonwealth *ct ;o. 8<8. as amended,
there are hereby granted and conveyed unto the ,ublic Estates Authority the
aforesaid tracts of land containing a total area of one million nine hundred
fifteen thousand eight hundred ninety four '),*).,%*/+ s!uare meters@ the
technical description of which are hereto attached and made an integral part
hereof.> 'Emphasis supplied+
2hus, the provisions of CA No. )/) apply to the Freedom 9slands on matters not
covered by ,5 No. ):%/. ection &: of CA No. )/) prohibits, >e0cept when
authoriFed by Congress,> the sale of alienable lands of the public domain that are
transferred to government units or entities. ection &: of CA No. )/) constitutes,
under ection // of ,5 No. ).-*, a >statutory lien affecting title> of the registered
land even if not annotated on the certificate of title.
):/
Alienable lands of the public
domain held by government entities under ection &: of CA No. )/) remain public
lands because they cannot be alienated or encumbered unless Congress passes a law
authoriFing their disposition. Congress, however, cannot authoriFe the sale to private
corporations of reclaimed alienable lands of the public domain because of the
constitutional ban. 7nly individuals can benefit from such law.
2he grant of legislative authority to sell public lands in accordance with ection &:
of CA No. )/) does not automatically convert alienable lands of the public domain
into private or patrimonial lands. 2he alienable lands of the public domain must be
transferred to !ualified private parties, or to government entities not tas(ed to
dispose of public lands, before these lands can become private or patrimonial lands.
7therwise, the constitutional ban will become illusory if Congress can declare lands
of the public domain as private or patrimonial lands in the hands of a government
agency tas(ed to dispose of public lands. 2his will allow private corporations to
ac!uire directly from government agencies limitless areas of lands which, prior to
such law, are concededly public lands.
Ender E7 No. .-., ,EA became the central implementing agency of the National
Dovernment to reclaim foreshore and submerged areas of the public domain. 2hus,
E7 No. .-. declares that N
>EKECE29;E 745E4 N7. .-.
5esignating the ,ublic Estates Authority as the Agency ,rimarily
4esponsible for all 4eclamation ,rojects
?hereas, there are several reclamation projects which are ongoing or being
proposed to be underta(en in various parts of the country which need to be
evaluated for consistency with national programs@
?hereas, there is a need to give further institutional support to the
Dovernment<s declared policy to provide for a coordinated, economical and
efficient reclamation of lands@
?hereas, ,residential 5ecree No. #-A re!uires that all reclamation of areas
shall be limited to the National Dovernment or any person authoriFed by it
under proper contract@
7hereas. a central authority is needed to act on behalf of the ;ational
-overnment which shall ensure a coordinated and integrated approach in
the reclamation of lands@
7hereas. (residential 5ecree ;o. 8A9< creates the (ublic )states
*uthority as a government corporation to undertaBe reclamation of lands
and ensure their ma'imum utili,ation in promoting public welfare and
interests@ and
?hereas, ,residential 5ecree No. )/)& provides the ,resident with
continuing authority to reorganiFe the national government including the
transfer, abolition, or merger of functions and offices.
N7?, 2=E4EF74E, 9, FE459NAN5 E. 8A4C7, ,resident of the
,hilippines, by virtue of the powers vested in me by the Constitution and
pursuant to ,residential 5ecree No. )/)&, do hereby order and direct the
followingA
ection ). #he (ublic )states *uthority >()*? shall be primarily
responsible for integrating. directing. and coordinating all reclamation
pro"ects for and on behalf of the ;ational -overnment. All reclamation
projects shall be approved by the ,resident upon recommendation of the
,EA, and shall be underta(en by the ,EA or through a proper contract
e0ecuted by it with any person or entity@ ,rovided, that, reclamation
projects of any national government agency or entity authoriFed under its
charter shall be underta(en in consultation with the ,EA upon approval of
the ,resident.
0 0 0 .>
As the central implementing agency tas(ed to underta(e reclamation projects
nationwide, with authority to sell reclaimed lands, ,EA too( the place of 5EN4 as
the government agency charged with leasing or selling reclaimed lands of the public
domain. 2he reclaimed lands being leased or sold by ,EA are not private lands, in
the same manner that 5EN4, when it disposes of other alienable lands, does not
dispose of private lands but alienable lands of the public domain. 7nly when
!ualified private parties ac!uire these lands will the lands become private lands. $n
the hands of the government agency tasBed and authori,ed to dispose of alienable
of disposable lands of the public domain. these lands are still public. not private
lands.
Furthermore, ,EA<s charter e0pressly states that ,EA >shall hold lands of the public
domain> as well as >any and all (inds of lands.> ,EA can hold both lands of the
public domain and private lands. 2hus, the mere fact that alienable lands of the
public domain li(e the Freedom 9slands are transferred to ,EA and issued land
patents or certificates of title in ,EA<s name does not automatically ma(e such lands
private.
2o allow vast areas of reclaimed lands of the public domain to be transferred to ,EA
as private lands will sanction a gross violation of the constitutional ban on private
corporations from ac!uiring any (ind of alienable land of the public domain. ,EA
will simply turn around, as ()* has now done under the *mended J/*, and
transfer several hundreds of hectares of these reclaimed and still to be reclaimed
lands to a single private corporation in only one transaction. 2his scheme will
effectively nullify the constitutional ban in ection #, Article K99 of the )*%$
Constitution which was intended to diffuse e!uitably the ownership of alienable
lands of the public domain among Filipinos, now numbering over %: million strong.
2his scheme, if allowed, can even be applied to alienable agricultural lands of the
public domain since ,EA can >ac!uire 0 0 0 any and all (inds of lands.> 2his will
open the floodgates to corporations and even individuals ac!uiring hundreds of
hectares of alienable lands of the public domain under the guise that in the hands of
,EA these lands are private lands. 2his will result in corporations amassing huge
landholdings never before seen in this country - creating the very evil that the
constitutional ban was designed to prevent. 2his will completely reverse the clear
direction of constitutional development in this country. 2he )*#. Constitution
allowed private corporations to ac!uire not more than ),:-/ hectares of public
lands.
):.
2he )*$# Constitution prohibited private corporations from ac!uiring any
(ind of public land, and the )*%$ Constitution has une!uivocally reiterated this
prohibition.
2he contention of ,EA and A8A49 that public lands, once registered under Act No.
/*& or ,5 No. ).-*, automatically become private lands is contrary to e0isting laws.
everal laws authoriFe lands of the public domain to be registered under the 2orrens
ystem or Act No. /*&, now ,5 No. ).-*, without losing their character as public
lands. ection )-- of Act No. /*&, and ection ):# of ,5 No. ).-*, respectively,
provide as followsA
Act No. /*&
>ec. )--. ?henever public lands in the ,hilippine 9slands belonging to the
0 0 0 Dovernment of the ,hilippine 9slands are alienated, granted, or
conveyed to persons or the public or private corporations, the same shall be
brought forthwith under the operation of this Act and shall become
registered lands.>
,5 No. ).-*
>ec. ):#. Certificate of 2itle to ,atents. ?henever public land is by the
Dovernment alienated, granted or conveyed to any person, the same shall
be brought forthwith under the operation of this 5ecree.> 'Emphasis
supplied+
1ased on its legislative history, the phrase >conveyed to any person> in ection ):#
of ,5 No. ).-* includes conveyances of public lands to public corporations.
Alienable lands of the public domain >granted, donated, or transferred to a province,
municipality, or branch or subdivision of the Dovernment,> as provided in ection &:
of CA No. )/), may be registered under the 2orrens ystem pursuant to ection ):#
of ,5 No. ).-*. uch registration, however, is e0pressly subject to the condition in
ection &: of CA No. )/) that the land >shall not be alienated, encumbered or
otherwise disposed of in a manner affecting its title. e'cept when authori,ed by
+ongress.> 2his provision refers to government reclaimed, foreshore and marshy
lands of the public domain that have been titled but still cannot be alienated or
encumbered unless e0pressly authoriFed by Congress. 2he need for legislative
authority prevents the registered land of the public domain from becoming private
land that can be disposed of to !ualified private parties.
2he 4evised Administrative Code of )*%$ also recogniFes that lands of the public
domain may be registered under the 2orrens ystem. ection /%, Chapter )-, 1oo( 9
of the Code states N
>ec. /%. 7fficial AuthoriFed to Convey 4eal ,roperty. ?henever real
property of the Dovernment is authoriFed by law to be conveyed, the deed
of conveyance shall be e0ecuted in behalf of the government by the
followingA
')+ 0 0 0
'-+ For property belonging to the 4epublic of the (hilippines. but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the e0ecutive head of the agency or instrumentality.>
'Emphasis supplied+
2hus, private property purchased by the National Dovernment for e0pansion of a
public wharf may be titled in the name of a government corporation regulating port
operations in the country. ,rivate property purchased by the National Dovernment
for e0pansion of an airport may also be titled in the name of the government agency
tas(ed to administer the airport. ,rivate property donated to a municipality for use as
a town plaFa or public school site may li(ewise be titled in the name of the
municipality.
):&
All these properties become properties of the public domain, and if
already registered under Act No. /*& or ,5 No. ).-*, remain registered land. 2here
is no re!uirement or provision in any e0isting law for the de-registration of land from
the 2orrens ystem.
,rivate lands ta(en by the Dovernment for public use under its power of eminent
domain become un!uestionably part of the public domain. Nevertheless, ection %.
of ,5 No. ).-* authoriFes the 4egister of 5eeds to issue in the name of the National
Dovernment new certificates of title covering such e0propriated lands. ection %. of
,5 No. ).-* states N
>ec. %.. "and ta(en by eminent domain. ?henever any registered land, or
interest therein, is e0propriated or ta(en by eminent domain, the National
Dovernment, province, city or municipality, or any other agency or
instrumentality e0ercising such right shall file for registration in the proper
4egistry a certified copy of the judgment which shall state definitely by an
ade!uate description, the particular property or interest e0propriated, the
number of the certificate of title, and the nature of the public use. A
memorandum of the right or interest ta(en shall be made on each certificate
of title by the 4egister of 5eeds, and where the fee simple is ta(en, a new
certificate shall be issued in favor of the ;ational -overnment. province.
city. municipality, or any other agency or instrumentality e0ercising such
right for the land so ta(en. 2he legal e0penses incident to the memorandum
of registration or issuance of a new certificate of title shall be for the
account of the authority ta(ing the land or interest therein.> 'Emphasis
supplied+
Conse!uently, lands registered under Act No. /*& or ,5 No. ).-* are not
e0clusively private or patrimonial lands. "ands of the public domain may also be
registered pursuant to e0isting laws.
A8A49 ma(es a parting shot that the Amended 6;A is not a sale to A8A49 of the
Freedom 9slands or of the lands to be reclaimed from submerged areas of 8anila
1ay. 9n the words of A8A49, the Amended 6;A >is not a sale but a joint venture
with a stipulation for reimbursement of the original cost incurred by ,EA for the
earlier reclamation and construction wor(s performed by the C5C, under its )*$#
contract with the 4epublic.> ?hether the Amended 6;A is a sale or a joint venture,
the fact remains that the Amended 6;A re!uires ,EA to >cause the issuance and
delivery of the certificates of title conveying A8A49<s "and hare in the name of
A8A49.>
):$
2his stipulation still contravenes ection #, Article K99 of the )*%$ Constitution
which provides that private corporations >shall not hold such alienable lands of the
public domain e0cept by lease.> 2he transfer of title and ownership to A8A49
clearly means that A8A49 will >hold> the reclaimed lands other than by lease. 2he
transfer of title and ownership is a >disposition> of the reclaimed lands, a transaction
considered a sale or alienation under CA No. )/),
):%
the Dovernment Auditing
Code,
):*
and ection #, Article K99 of the )*%$ Constitution.
2he 4egalian doctrine is deeply implanted in our legal system. Foreshore and
submerged areas form part of the public domain and are inalienable. "ands reclaimed
from foreshore and submerged areas also form part of the public domain and are also
inalienable, unless converted pursuant to law into alienable or disposable lands of the
public domain. =istorically, lands reclaimed by the government are sui generis, not
available for sale to private parties unli(e other alienable public lands. 4eclaimed
lands retain their inherent potential as areas for public use or public service.
Alienable lands of the public domain, increasingly becoming scarce natural
resources, are to be distributed e!uitably among our ever-growing population. 2o
insure such e!uitable distribution, the )*$# and )*%$ Constitutions have barred
private corporations from ac!uiring any (ind of alienable land of the public domain.
2hose who attempt to dispose of inalienable natural resources of the tate, or see( to
circumvent the constitutional ban on alienation of lands of the public domain to
private corporations, do so at their own ris(.
?e can now summariFe our conclusions as followsA
). 2he ).$.%/ hectares of reclaimed lands comprising the Freedom 9slands,
now covered by certificates of title in the name of ,EA, are alienable lands
of the public domain. ,EA may lease these lands to private corporations but
may not sell or transfer ownership of these lands to private corporations.
,EA may only sell these lands to ,hilippine citiFens, subject to the
ownership limitations in the )*%$ Constitution and e0isting laws.
-. 2he .*-.). hectares of submerged areas of 8anila 1ay remain
inalienable natural resources of the public domain until classified as
alienable or disposable lands open to disposition and declared no longer
needed for public service. 2he government can ma(e such classification and
declaration only after ,EA has reclaimed these submerged areas. 7nly then
can these lands !ualify as agricultural lands of the public domain, which are
the only natural resources the government can alienate. 9n their present
state, the .*-.). hectares of submerged areas are inalienable and outside
the commerce of man.
#. ince the Amended 6;A see(s to transfer to A8A49, a private
corporation, ownership of $$.#/ hectares
)):
of the Freedom 9slands, such
transfer is void for being contrary to ection #, Article K99 of the )*%$
Constitution which prohibits private corporations from ac!uiring any (ind
of alienable land of the public domain.
/. ince the Amended 6;A also see(s to transfer to A8A49 ownership of
-*:.).& hectares
)))
of still submerged areas of 8anila 1ay, such transfer is
void for being contrary to ection -, Article K99 of the )*%$ Constitution
which prohibits the alienation of natural resources other than agricultural
lands of the public domain. ,EA may reclaim these submerged areas.
2hereafter, the government can classify the reclaimed lands as alienable or
disposable, and further declare them no longer needed for public service.
till, the transfer of such reclaimed alienable lands of the public domain to
A8A49 will be void in view of ection #, Article K99 of the )*%$
Constitution which prohibits private corporations from ac!uiring any (ind
of alienable land of the public domain.
Clearly, the Amended 6;A violates glaringly ections - and #, Article K99 of the
)*%$ Constitution. Ender Article )/:*
))-
of the Civil Code, contracts whose >object
or purpose is contrary to law,> or whose >object is outside the commerce of men,> are
>ine0istent and void from the beginning.> 2he Court must perform its duty to defend
and uphold the Constitution, and therefore declares the Amended J/* null and void
ab initio.
&eventh issue: whether the +ourt is the proper forum to raise the issue of whether
the *mended J/* is grossly disadvantageous to the government.
Considering that the Amended 6;A is null and void ab initio, there is no necessity to
rule on this last issue. 1esides, the Court is not a trier of facts, and this last issue
involves a determination of factual matters.
?=E4EF74E, the petition is GRANTED. 2he ,ublic Estates Authority and Amari
Coastal 1ay 5evelopment Corporation are !ERMANENTL1 EN)OINED from
implementing the Amended 6oint ;enture Agreement which is hereby
declared N"LL and VOID ab initio.
7 745E4E5.
G.R. No. 188.57 )a*uary 17, 2..5
RE!"#LI OF T0E !0ILI!!INES, petitioner,
vs.
T0E 0ONORA#LE O"RT OF A!!EALS a*, ORA$ON
NAG"IT, respondents.
5 E C 9 9 7 N
TINGA, J.:
2his is a Petition for Review on *ertiorari under 4ule /. of the )**$ 4ules of Civil
,rocedure, see(ing to review the 5ecision
)
of the i0th 5ivision of the Court of
Appeals dated 6uly )-, -::: in CA-D.4. , No. .)*-). 2he appellate court affirmed
the decisions of both the 4egional 2rial Court '42C+,
-
1ranch %, of Halibo, A(lan
dated February -&, )***, and the $th 8unicipal Circuit 2rial Court '8C2C+
#
of
9bajay-Nabas, A(lan dated February )%, )**%, which granted the application for
registration of a parcel of land of CoraFon Naguit 'Naguit+, the respondent herein.
2he facts are as followsA
7n 6anuary ., )**#, Naguit, a Filipino citiFen, of legal age and married to 8anolito
. Naguit, filed with the 8C2C of 9bajay-Nabas, A(lan, a petition for registration of
title of a parcel of land situated in 1rgy. Enion, Nabas, A(lan. 2he parcel of land is
designated as "ot No. )::/*, Cad. $.%-5, Nabas Cadastre, A, N :&:/)/-:)/$$*,
and contains an area of #),#$/ s!uare meters. 2he application see(s judicial
confirmation of respondentRs imperfect title over the aforesaid land.
7n February -:, )**., the court held initial hearing on the application. 2he public
prosecutor, appearing for the government, and 6ose Angeles, representing the heirs of
4ustico Angeles, opposed the petition. 7n a later date, however, the heirs of 4ustico
Angeles filed a formal op#position to the petition. Also on February -:, )**., the
court issued an order of general default against the whole world e0cept as to the heirs
of 4ustico Angeles and the government.
2he evidence on record reveals that the subject parcel of land was originally declared
for ta0ation purposes in the name of 4amon Erbano 'Erbano+ in )*/. under 2a0
5eclaration No. #%%% until )**).
/
7n 6uly *, )**-, Erbano e0ecuted a 5eed of
Luitclaim in favor of the heirs of =onorato 8aming '8aming+, wherein he
renounced all his rights to the subject property and confirmed the sale made by his
father to 8aming sometime in )*.. or )*.&.
.
ubse!uently, the heirs of 8aming
e0ecuted a deed of absolute sale in favor of respondent Naguit who thereupon started
occupying the same. he constituted 8anuel 1lanco, 6r. as her attorney-in-fact and
administrator. 2he administrator introduced improvements, planted trees, such as
mahogany, coconut and gemelina trees in addition to e0isting coconut trees which
were then .: to &: years old, and paid the corresponding ta0es due on the subject
land. At present, there are parcels of land surrounding the subject land which have
been issued titles by virtue of judicial decrees. Naguit and her predecessors-in-
interest have occupied the land openly and in the concept of owner without any
objection from any private person or even the government until she filed her
application for registration.
After the presentation of evidence for Naguit, the public prosecutor manifested that
the government did not intend to present any evidence while oppositor 6ose Angeles,
as representative of the heirs of 4ustico Angeles, failed to appear during the trial
despite notice. 7n eptember -$, )**$, the 8C2C rendered a decision ordering that
the subject parcel be brought under the operation of the ,roperty 4egistration 5ecree
or ,residential 5ecree ',.5.+ No. ).-* and that the title thereto registered and
confirmed in the name of Naguit.
&
2he 4epublic of the ,hilippines '4epublic+, thru the 7ffice of the olicitor Deneral
'7D+, filed a motion for reconsideration. 2he 7D stressed that the land applied for
was declared alienable and disposable only on 7ctober )., )*%:, per the certification
from 4egional E0ecutive 5irector 4aoul 2. Deollegue of the 5epartment of
Environment and Natural 4esources, 4egion ;9.
$
=owever, the court denied the
motion for reconsideration in an order dated February )%, )**%.
%
1awphi1.n4t
2hereafter, the 4epublic appealed the decision and the order of the 8C2C to the
42C, Halibo, A(lan, 1ranch %. 7n February -&, )***, the 42C rendered its decision,
dismissing the appeal.
*
Endaunted, the 4epublic elevated the case to the Court of Appeals via 4ule /- of the
)**$ 4ules of Civil ,rocedure. 7n 6uly )-, -:::, the appellate court rendered a
decision dismissing the petition filed by the 4epublic and affirmed in toto the
assailed decision of the 42C.
=ence, the present petition for review raising a pure !uestion of law was filed by the
4epublic on eptember /, -:::.
):
2he 7D assails the decision of the Court of Appeals contending that the appellate
court gravely erred in holding that there is no need for the governmentRs prior release
of the subject lot from the public domain before it can be considered alienable or
disposable within the meaning of ,.5. No. ).-*, and that Naguit had been in
possession of "ot No. )::/* in the concept of owner for the re!uired period.
))
=ence, the central !uestion for resolution is whether is necessary under ection )/')+
of the ,roperty 4egistration 5ecree that the subject land be first classified as
alienable and disposable before the applicantRs possession under a bona fide claim of
ownership could even start.
2he 7D invo(es our holding in irector of )ands v. "ntermediate %ppellate
*ourt
)-
in arguing that the property which is in open, continuous and e0clusive
possession must first be alienable. ince the subject land was declared alienable only
on 7ctober )., )*%:, Naguit could not have maintained a bona fide claim of
ownership since 6une )-, )*/., as re!uired by ection )/ of the ,roperty
4egistration 5ecree, since prior to )*%:, the land was not alienable or disposable, the
7D argues.
ection )/ of the ,roperty 4egistration 5ecree, governing original registration
proceedings, bears close e0amination. 9t e0pressly providesA
EC297N )/. ?ho may apply.M 2he following persons may file in the proper
Court of First 9nstance an application for registration of title to land, whether
personally or through their duly authoriFed representativesA
')+ those who by themselves or through their predecessors-in-interest have
been in open, continuous, e0clusive and notorious possession and
occupation of alienable and disposable lands of the public domain under a
bona fide claim of ownership since 6une )-, )*/., or earlier.
'-+ 2hose who have ac!uired ownership over private lands by prescription
under the provisions of e0isting laws.
. . . .
2here are three obvious re!uisites for the filing of an application for registration of
title under ection )/')+ N that the property in !uestion is alienable and disposable
land of the public domain@ that the applicants by themselves or through their
predecessors-in-interest have been in open, continuous, e0clusive and notorious
possession and occupation, and@ that such possession is under a bona fide claim of
ownership since 6une )-, )*/. or earlier.
,etitioner suggests an interpretation that the alienable and disposable character of the
land should have already been established since 6une )-, )*/. or earlier. 2his is not
borne out by the plain meaning of ection )/')+. >ince 6une )-, )*/.,> as used in
the provision, !ualifies its antecedent phrase >under a bonafide claim of ownership.>
Denerally spea(ing, !ualifying words restrict or modify only the words or phrases to
which they are immediately associated, and not those distantly or remotely
located.
)#
%d pro5imum antecedents fiat relation nisi impediatur sentencia.
1esides, we are mindful of the absurdity that would result if we adopt petitionerRs
position. Absent a legislative amendment, the rule would be, adopting the 7DRs
view, that all lands of the public domain which were not declared alienable or
disposable before 6une )-, )*/. would not be susceptible to original registration, no
matter the length of unchallenged possession by the occupant. uch interpretation
renders paragraph ')+ of ection )/ virtually inoperative and even precludes the
government from giving it effect even as it decides to reclassify public agricultural
lands as alienable and disposable. 2he unreasonableness of the situation would even
be aggravated considering that before 6une )-, )*/., the ,hilippines was not yet
even considered an independent state.
9nstead, the more reasonable interpretation of ection )/')+ is that it merely re!uires
the property sought to be registered as already alienable and disposable at the time
the application for registration of title is filed. 9f the tate, at the time the application
is made, has not yet deemed it proper to release the property for alienation or
disposition, the presumption is that the government is still reserving the right to
utiliFe the property@ hence, the need to preserve its ownership in the tate
irrespective of the length of adverse possession even if in good faith. =owever, if the
property has already been classified as alienable and disposable, as it is in this case,
then there is already an intention on the part of the tate to abdicate its e0clusive
prerogative over the property.
2his reading aligns conformably with our holding in Republic v. *ourt of
%ppeals .
)/
2herein, the Court noted that >to prove that the land subject of an
application for registration is alienable, an applicant must establish the e0istence of a
positive act of the government such as a presidential proclamation or an e0ecutive
order@ an administrative action@ investigation reports of 1ureau of "ands
investigators@ and a legislative act or a statute.>
).
9n that case, the subject land had
been certified by the 5EN4 as alienable and disposable in )*%:, thus the Court
concluded that the alienable status of the land, compounded by the established fact
that therein respondents had occupied the land even before )*-$, sufficed to allow
the application for registration of the said property. 9n the case at bar, even the
petitioner admits that the subject property was released and certified as within
alienable and disposable Fone in )*%: by the 5EN4.
)&
2his case is distinguishable from 6racewell v. *ourt of %ppeals,
)$
wherein the Court
noted that while the claimant had been in possession since )*:%, it was only in )*$-
that the lands in !uestion were classified as alienable and disposable. 2hus, the bid at
registration therein did not succeed. 9n 6racewell, the claimant had filed his
application in )*&#, or nine '*+ years before the property was declared alienable and
disposable.1awphi1.n4t 2hus, in this case, where the application was made years
after the property had been certified as alienable and disposable, the6racewell ruling
does not apply.
A different rule obtains for forest lands,
)%
such as those which form part of a
reservation for provincial par( purposes
)*
the possession of which cannot ripen into
ownership.
-:
9t is elementary in the law governing natural resources that forest land
cannot be owned by private persons. As held in Palomo v. *ourt of %ppeals,
-)
forest
land is not registrable and possession thereof, no matter how lengthy, cannot convert
it into private property, unless such lands are reclassified and considered disposable
and alienable.
--
9n the case at bar, the property in !uestion was undisputedly
classified as disposable and alienable@ hence, the ruling in Palomo is inapplicable, as
correctly held by the Court of Appeals.
-#
9t must be noted that the present case was decided by the lower courts on the basis of
ection )/')+ of the ,roperty 4egistration 5ecree, which pertains to original
registration through ordinary registration proceedings. 2he right to file the
application for registration derives from a bona fide claim of ownership going bac(
to 6une )-, )*/. or earlier, by reason of the claimantRs open, continuous, e0clusive
and notorious possession of alienable and disposable lands of the public domain.
A similar right is given under ection /%'b+ of the ,ublic "and Act, which readsA
ec. /%. 2he following described citiFens of the ,hilippines, occupying lands of the
public domain or claiming to own any such land or an interest therein, but those titles
have not been perfected or completed, may apply to the Court of First 9nstance of the
province where the land is located for confirmation of their claims and the issuance
of a certificate of title therefor, under the "and 4egistration Act, to witA
000 000 000
'b+ 2hose who by themselves or through their predecessors in interest have been in
open, continuous, e0clusive, and notorious possession and occupation of agricultural
lands of the public domain, under a bona fide claim of ac!uisition of ownership, for
at least thirty years immediately preceding the filing of the application for
confirmation of title e0cept when prevented by war or force majeure. 2hese shall be
conclusively presumed to have performed all the conditions essential to a
Dovernment grant and shall be entitled to a certificate of title under the provisions of
this chapter.
?hen the ,ublic "and Act was first promulgated in )*#&, the period of possession
deemed necessary to vest the right to register their title to agricultural lands of the
public domain commenced from 6uly -&, )%*/. =owever, this period was amended
by 4.A. No. )*/-, which provided that the bona fide claim of ownership must have
been for at least thirty '#:+ years. 2hen in )*$$, ection /%'b+ of the ,ublic "and Act
was again amended, this time by ,.5. No. ):$#, which pegged the rec(oning date at
6une )-, )*/.. 2his new starting point is concordant with ection )/')+ of the
,roperty 4egistration 5ecree.
9ndeed, there are no material differences between ection )/')+ of the ,roperty
4egistration 5ecree and ection /%'b+ of the ,ublic "and Act, as amended. 2rue, the
,ublic "and Act does refer to >agricultural lands of the public domain,> while the
,roperty 4egistration 5ecree uses the term >alienable and disposable lands of the
public domain.> 9t must be noted though that the Constitution declares that >alienable
lands of the public domain shall be limited to agricultural lands.>
-/
Clearly, the
subject lands under ection /%'b+ of the ,ublic "and Act and ection )/')+ of the
,roperty 4egistration 5ecree are of the same type.
5id the enactment of the ,roperty 4egistration 5ecree and the amendatory ,.5. No.
):$# preclude the application for registration of alienable lands of the public domain,
possession over which commenced only after 6une )-, )*/.O 9t did not, considering
ection )/'-+ of the ,roperty 4egistration 5ecree, which governs and authoriFes the
application of >those who have ac!uired ownership of private lands by prescription
under the provisions of e0isting laws.>
,rescription is one of the modes of ac!uiring ownership under the Civil
Code.
-.
2here is a consistent jurisprudential rule that properties classified as
alienable public land may be converted into private property by reason of open,
continuous and e0clusive possession of at least thirty '#:+ years.
-&
?ith such
conversion, such property may now fall within the contemplation of >private lands>
under ection )/'-+, and thus susceptible to registration by those who have ac!uired
ownership through prescription. 2hus, even if possession of the alienable public land
commenced on a date later than 6une )-, )*/., and such possession being been open,
continuous and e0clusive, then the possessor may have the right to register the land
by virtue of ection )/'-+ of the ,roperty 4egistration 5ecree.
2he land in !uestion was found to be cocal in nature, it having been planted with
coconut trees now over fifty years old.
-$
2he inherent nature of the land but confirms
its certification in )*%: as alienable, hence agricultural. 2here is no impediment to
the application of ection )/')+ of the ,roperty 4egistration 5ecree, as correctly
accomplished by the lower courts.l7vvphi1.net
2he 7D posits that the Court of Appeals erred in holding that Naguit had been in
possession in the concept of owner for the re!uired period. 2he argument begs the
!uestion. 9t is again hinged on the assertionMshown earlier to be unfoundedMthat
there could have been no bona fide claim of ownership prior to )*%:, when the
subject land was declared alienable or disposable.
?e find no reason to disturb the conclusion of both the 42C and the Court of
Appeals that Naguit had the right to apply for registration owing to the continuous
possession by her and her predecessors-in-interest of the land since )*/.. 2he basis
of such conclusion is primarily factual, and the Court generally respects the factual
findings made by lower courts. Notably, possession since )*/. was established
through proof of the e0istence of .: to &:-year old trees at the time Naguit purchased
the property as well as ta0 declarations e0ecuted by Erbano in )*/.. Although ta0
declarations and realty ta0 payment of property are not conclusive evidence of
ownership, nevertheless, they are good indicia of the possession in the concept of
owner for no one in his right mind would be paying ta0es for a property that is not in
his actual or at least constructive possession. 2hey constitute at least proof that the
holder has a claim of title over the property. 2he voluntary declaration of a piece of
property for ta0ation purposes manifests not only oneRs sincere and honest desire to
obtain title to the property and announces his adverse claim against the tate and all
other interested parties, but also the intention to contribute needed revenues to the
Dovernment. uch an act +(re*&(2e*+ o*e9+ bona fide 3/a': o; a3<u'+'('o* o;
o=*er+2'7.
2>
Considering that the possession of the subject parcel of land by the respondent can
be traced bac( to that of her predecessors-in-interest which commenced since )*/.
or for almost fifty '.:+ years, it is indeed beyond any cloud of doubt that she has
ac!uired title thereto which may be properly brought under the operation of the
2orrens system. 2hat she has been in possession of the land in the concept of an
owner, open, continuous, peaceful and without any opposition from any private
person and the government itself ma(es her right thereto undoubtedly settled and
deserving of protection under the law.
?0EREFORE, foregoing premises considered, the assailed ecision of the Court
of Appeals dated 6uly )-, -::: is hereby AFF948E5. No costs.
7 745E4E5.
@
G.R. No. 127>>2. De3e:ber 1, 2..8A
LA #"GAL-#9LAAN TRI#AL ASSOIATION, IN., Re7re+e*(e, by '(+
2a'r:a* F9LONG MIG"EL M. L"MA1ONGB ?IG#ERTO E.
TACADAB !ONIANO #ENNAGENB )AIME TADEOB RENATO R.
ONSTANTINO )R.B F9LONG AG"STIN M. DA#IEB RO#ERTO !.
AMLO1B RADIM L. DA#IEB SIMEON 0. DOLO)OB IMELDA M.
GANDONB LEN1 #. G"SANANB MARELO L. G"SANANB
D"INTOL A. LA#"A1ANB LOMINGGES D. LA?A1B #ENITA !.
TA"A1ANB M'*or+ )OL1 L. #"GO1, Re7re+e*(e, by 0'+ Fa(2er
"NDERO D. #"GO1 a*, ROGER M. DADINGB Re7re+e*(e, by 0'+
Fa(2er ANTONIO L. DADINGB ROM1 M. LAGARO, Re7re+e*(e, by
0'+ Fa(2er TOTING A. LAGAROB MIEEN1 )ONG #. L"MA1ONG,
Re7re+e*(e, by 0'+ Fa(2er MIG"EL M. L"MA1ONGB RENE T.
MIG"EL, Re7re+e*(e, by 0'+ Mo(2er EDIT0A T. MIG"ELB
ALDEMAR L. SAL, Re7re+e*(e, by 0'+ Fa(2er DANN1 M. SALB
DAIS1 REARSE, Re7re+e*(e, by 0er Mo(2er L1DIA S. SANTOSB
ED?ARD M. EM"1B ALAN !. MAM!ARAIRB MARIO L.
MANGALB ALDEN S. T"SANB AM!ARO S. 1A!B VIRGILIO
"LARB MARVI M.V.F. LEONENB )"LIA REGINA "LAR, GIAN
ARLO "LAR, VIRGILIO "LAR )R., Re7re+e*(e, by T2e'r
Fa(2er VIRGILIO "LARB !A"L ANTONIO !. VILLAMOR,
Re7re+e*(e, by 0'+ !are*(+ )OSE VILLAMOR a*, ELI$A#ET0
!"A-VILLAMORB ANA GININA R. TAL)A, Re7re+e*(e, by 0er
Fa(2er MARIO )OSE #. TAL)AB S0ARMAINE R. "NANAN,
Re7re+e*(e, by 0er Fa(2er ALFREDO M. "NANANB ANTONIO
)OSE A. VIT"G III, Re7re+e*(e, by 0'+ Mo(2er ANNALI$A A.
VIT"G, LEAN D. NARVADE$, Re7re+e*(e, by 0'+ Fa(2er MAN"EL
E. NARVADE$ )R.B ROSERIO MARALAG LINGATING,
Re7re+e*(e, by 0er Fa(2er RIO OLIM!IO A. LINGATINGB MARIO
)OSE #. TAL)AB DAVID E. DE VERAB MARIA MILAGROS L. SAN
)OSEB Sr. S"SAN O. #OLANIO, ONDB LOLITA G.
DEMONTEVERDEB #EN)IE L. NED"INTOB
B)C
ROSE LILIA S.
ROMANOB RO#ERTO S. VER$OLAB ED"ARDO A"RELIO .
RE1ESB LEAN LO"EL A. !ERIA, Re7re+e*(e, by 0'+ Fa(2er
EL!IDIO V. !ERIAB
B-C
GREEN FOR"M !0ILI!!INESB GREEN
FOR"M ?ESTERN VISA1AS FGF-?VGB ENVIRONMENTAL
LEGAL ASSISTANE ENTER FELAGB EAISA0AN T"NGO SA
EA"NLARAN NG EANA1"NAN AT RE!ORMANG
!ANSAEA0AN FEAISA0ANGB
B#C
!ARTNERS0I! FOR AGRARIAN
REFORM a*, R"RAL DEVELO!MENT SERVIES, IN.
F!ARRDSGB !0ILI!!INE !ARTNERS0I! FOR T0E
DEVELO!MENT OF 0"MAN RESO"RES IN T0E R"RAL
AREAS, IN. F!0ILD0RRAGB ?OMEN9S LEGAL #"REA" F?L#GB
ENTER FOR ALTERNATIVE DEVELO!MENT INITIATIVES,
IN. FADIGB "!LAND DEVELO!MENT INSTIT"TE F"DIGB
EINAI1A0AN FO"NDATION, IN.B SENTRO NG
ALTERNATI#ONG LINGA! !ANLIGAL FSALIGANGB a*, LEGAL
RIG0TS AND NAT"RAL RESO"RES ENTER, IN.
FLRG, petitioners. vs. VITOR O. RAMOS, Se3re(ary, De7ar(:e*( o;
E*H'ro*:e*( a*, Na(ura/ Re+our3e+ FDENRGB 0ORAIO RAMOS,
D're3(or, M'*e+ a*, Geo+3'e*3e+ #ureau FMG#-DENRGB R"#EN
TORRES, EIe3u('He Se3re(aryB a*, ?M F!0ILI!!INESG, IN.,
B/C
respondents.
R E S O L " T I O N
!ANGANI#AN, J.:
All mineral resources are owned by the tate. 2heir e0ploration, development
and utiliFation 'E5E+ must always be subject to the full control and supervision of
the tate. 8ore specifically, given the inade!uacy of Filipino capital and technology
in large8scale E5E activities, the tate may secure the help of foreign companies in
all relevant matters -- especially financial and technical assistance -- provided that, at
all times, the tate maintains its right of full control. 2he foreign assistor or
contractor assumes all financial, technical and entrepreneurial ris(s in the E5E
activities@ hence, it may be given reasonable management, operational, mar(eting,
audit and other prerogatives to protect its investments and to enable the business to
succeed.
Full control is not anathematic to day-to-day management by the contractor,
provided that the tate retains the power to direct overall strategy@ and to set aside,
reverse or modify plans and actions of the contractor. 2he idea of full control is
similar to that which is e0ercised by the board of directors of a private corporationA
the performance of managerial, operational, financial, mar(eting and other functions
may be delegated to subordinate officers or given to contractual entities, but the
board retains full residual control of the business.
?ho or what organ of government actually e0ercises this power of control on
behalf of the tateO 2he Constitution is crystal clearA the !re+',e*(. 9ndeed, the
Chief E0ecutive is the official constitutionally mandated to Senter into agreements
with foreign owned corporations.T 7n the other hand, Congress may review the
action of the ,resident once it is notified of Severy contract entered into in
accordance with this BconstitutionalC provision within thirty days from its
e0ecution.T 9n contrast to this e0press mandate of the ,resident and Congress in the
E5E of natural resources, Article K99 of the Constitution is silent on the role of the
judiciary. =owever, should the ,resident and3or Congress gravely abuse their
discretion in this regard, the courts may -- in a proper case -- e0ercise their residual
duty under Article ;999. Clearly then, the judiciary should not inordinately interfere
in the e0ercise of this presidential power of control over the E5E of our natural
resources.
2he Constitution should be read in broad, life-giving stro(es. 9t should not be
used to strangulate economic growth or to serve narrow, parochial interests. 4ather,
it should be construed to grant the ,resident and Congress sufficient discretion and
reasonable leeway to enable them to attract foreign investments and e0pertise, as
well as to secure for our people and our posterity the blessings of prosperity and
peace.
7n the basis of this control standard, this Court upholds the constitutionality of
the ,hilippine 8ining "aw, its 9mplementing 4ules and 4egulations -- insofar as they
relate to financial and technical agreements -- as well as the subject Financial and
2echnical Assistance Agreement 'F2AA+.
B.C
!acBground
2he ,etition for ,rohibition and 8andamus before the Court challenges the
constitutionality of ')+ 4epublic Act No. B4AC $*/- '2he ,hilippine 8ining Act of
)**.+@ '-+ its 9mplementing 4ules and 4egulations '5EN4 Administrative 7rder No.
B5A7C *&-/:+@ and '#+ the F2AA dated 8arch #:, )**.,
B&C
e0ecuted by the
government with ?estern 8ining Corporation ',hilippines+, 9nc. '?8C,+.
B$C
7n 6anuary -$, -::/, the Court en banc promulgated its 5ecision
B%C
granting the
,etition and declaring the unconstitutionality of certain provisions of 4A $*/-, 5A7 *&-/:,
as well as of the entire F2AA e0ecuted between the government and ?8C,, mainly on the
finding that F2AAs are +erH'3e 3o*(ra3(+ 7ro2'b'(e, by (2e 19>7 o*+('(u('o*.
2he 5ecision struc( down the subject F2AA for being similar to service contracts,
B*C
which, though permitted under the )*$# Constitution,
B):C
were subse!uently denounced
for being antithetical to the principle of sovereignty over our natural resources, because they
allowed foreign control over the e0ploitation of our natural resources, to the prejudice of the
Filipino nation.
2he 5ecision !uoted several legal scholars and authors who had criticiFed
service contracts for, inter alia9 vesting in the foreign
contractor e5clusive management and control of the enterprise, including operation
of the field in the event petroleum was discovered@ control of production, e0pansion
and development@ nearly unfettered control over the disposition and sale of the
products discovered3e0tracted@ effective ownership of the natural resource at the
point of e0traction@ and beneficial ownership of our economic resources. According
to the 5ecision, the )*%$ Constitution 'ection - of Article K99+ effectively banned
such service contracts.
ubse!uently, respondents filed separate 8otions for 4econsideration. 9n a
4esolution dated 8arch *, -::/, the Court re!uired petitioners to comment thereon.
9n the 4esolution of 6une %, -::/, it set the case for 7ral Argument on 6une -*, -::/.
After hearing the opposing sides, the Court re!uired the parties to submit their
respective 8emoranda in amplification of their arguments. 9n a 4esolution issued
later the same day, 6une -*, -::/, the Court noted, inter alia9 the 8anifestation and
8otion 'in lieu of comment+ filed by the 7ffice of the olicitor Deneral '7D+ on
behalf of public respondents. 2he 7D said that it was not interposing any objection
to the 8otion for 9ntervention filed by the Chamber of 8ines of the ,hilippines, 9nc.
'C8,+ and was in fact joining and adopting the latterRs 8otion for 4econsideration.
8emoranda were accordingly filed by the intervenor as well as by petitioners,
public respondents, and private respondent, dwelling at length on the three issues
discussed below. "ater, ?8C, submitted its 4eply 8emorandum, while the 7D --
in obedience to an 7rder of this Court -- filed a Compliance submitting copies of
more F2AAs entered into by the government.
#hree $ssues $dentified by the +ourt
5uring the 7ral Argument, the Court identified the three issues to be resolved
in the present controversy, as followsA
). =as the case been rendered moot by the sale of ?8C shares in ?8C, to
agittarius '&: percent of agittariusR e!uity is owned by Filipinos and3or Filipino-
owned corporations while /: percent is owned by 9ndophil 4esources N", an
Australian company+ and by the subse!uent transfer and registration of the F2AA
from ?8C, to agittariusO
-. Assuming that the case has been rendered moot, would it still be proper to
resolve the constitutionality of the assailed provisions of the 8ining "aw, 5A7 *&-
/: and the ?8C, F2AAO
#. ?hat is the proper interpretation of the phrase %greements "nvolving :ither
$echnical or 0inancial %ssistance contained in paragraph / of ection - of Article
K99 of the ConstitutionO
&hould the otion for 4econsideration
!e -rantedF
4espondentsR and intervenorRs 8otions for 4econsideration should be granted,
for the reasons discussed below. 2he foregoing three issues identified by the Court
shall now be ta(en up seriatim.
F'r+( I++ue%
ootness
9n declaring unconstitutional certain provisions of 4A $*/-, 5A7 *&-/:, and
the ?8C, F2AA, the majority 5ecision agreed with petitionersR contention that the
subject F2AA had been e0ecuted in violation of ection - of Article K99 of the )*%$
Constitution. According to petitioners, the F2AAs entered into by the government
with foreign-owned corporations are limited by the fourth paragraph of the said
provision to agreements involving onl! technical or financial assistance for large-
scale e0ploration, development and utiliFation of minerals, petroleum and other
mineral oils. Furthermore, the foreign contractor is allegedly permitted by the F2AA
in !uestion to fully manage and control the mining operations and, therefore, to
ac!uire Sbeneficial ownershipT of our mineral resources.
2he 5ecision merely shrugged off the 8anifestation by ?8,C informing the
Court ')+ that on 6anuary -#, -::), ?8C had sold all its shares in ?8C, to
agittarius 8ines, 9nc., &: percent of whose e!uity was held by Filipinos@ and '-+
that the assailed F2AA had li(ewise been transferred from ?8C, to agittarius.
B))C
2he ponencia declared that the instant case had not been rendered moot by the
transfer and registration of the F2AA to a Filipino-owned corporation, and that the
validity of the said transfer remained in dispute and awaited final judicial
determination.
B)-C
,atently therefore, the 5ecision is anchored on the assumption that
?8C, had remained a foreign corporation.
2he cru0 of this issue of mootness is the fact that ?8C,, at the time it entered
into the 0$%%9 happened to be wholly owned by ?8C 4esources 9nternational ,ty.,
"td. '?8C+, which in turn was a wholly owned subsidiary of ?estern 8ining
Corporation =oldings "td., a publicly listed major Australian mining and e0ploration
company.
2he nullity of the F2AA was obviously premised upon the contractor being
a ;ore'&* corporation. =ad the F2AA been originally issued to a Filipino-owned
corporation, there would have been no constitutionality issue to spea( of. Epon the
other hand, the conveyance of the ?8C, F2AA to a Filipino corporation can be
li(ened to the sale of land to a foreigner who subse!uently ac!uires Filipino
citiFenship, or who later resells the same land to a Filipino citiFen. 2he conveyance
would be validated, as the property in !uestion would no longer be owned by a
dis!ualified vendee.
And, inasmuch as the F2AA is to be implemented now by a Filipino
corporation, it is no longer possible for the Court to declare it unconstitutional. 2he
case pending in the Court of Appeals is a dispute between two Filipino companies
'agittarius and "epanto+, both claiming the right to purchase the foreign shares in
?8C,. o, regardless of which side eventually wins, the F2AA would still be in the
hands of a !ualified Filipino company. Considering that there is no longer any
justiciable controversy, the plea to nullify the 8ining "aw has become a virtual
petition for declaratory relief, over which this Court has no original jurisdiction.
9n their Final 8emorandum9 however, petitioners argue that the case has not
become moot, considering the invalidity of the alleged sale of the shares in ?8C,
from ?8C to agittarius, and of the transfer of the F2AA from ?8C, to
agittarius, resulting in the change of contractor in the F2AA in !uestion. And even
assuming that the said transfers were valid, there still e0ists an actual case predicated
on the invalidity of 4A $*/- and its 9mplementing 4ules and 4egulations '5A7 *&-
/:+. ,resently, we shall discuss petitionersR objections to the transfer of both the
shares and the F2AA. (e shall ta2e up the alleged invalidit! of R% ;94< and %&
9=84> later on in the discussion of the third issue.
;o #ransgression of the +onstitution
by the #ransfer of the 7+( &hares
,etitioners claim, first9 that the alleged invalidity of the transfer of the (M*P
shares to agittarius violates the fourth paragraph of ection - of Article K99 of the
Constitution@ second9 that it is contrary to the provisions of the ?8C, F2AA itself@
and third9 that the sale of the shares is suspect and should therefore be the subject of
a case in which its validity may properly be litigated.
7n the first ground, petitioners assert that paragraph / of ection - of Article
K99 permits the government to enter into F2AAs only with foreign-owned
corporations. ,etitioners insist that the first paragraph of this constitutional
provision limits the participation of Filipino corporations in the e0ploration,
development and utiliFation of natural resources to only three species of contracts --
production sharing, co-production and joint venture -- to the e0clusion of all other
arrangements or variations thereof, and the ?8C, F2AA may therefore not be
validly assumed and implemented by agittarius. "n short9 petitioners claim that a
0ilipino corporation is not allowed b! the *onstitution to enter into an 0$%% with
the government.
=owever, a te0tual analysis of the first paragraph of ection - of Article K99
does not support petitionersR argument. 2he pertinent part of the said provision
statesA ?Sec. <. 5 5 5 $he e5ploration9 development and utili@ation of natural
resources shall be under the full control and supervision of the State. $he State ma!
directl! underta2e such activities9 or it ma! enter into co8production9 'oint venture9
or production8sharing agreements with 0ilipino citi@ens9 or corporations or
associations at least si5t! per centum of whose capital is owned b! such citi@ens. 5 5
5.A Nowhere in the provision is there any e0press limitation or restriction insofar as
arrangements other than the three aforementioned contractual schemes are
concerned.
Neither can one reasonably discern any implied stricture to that effect. 1esides,
there is no basis to believe that the framers of the Constitution, a majority of whom
were obviously concerned with furthering the development and utiliFation of the
countryRs natural resources, could have wanted to restrict Filipino participation in
that area. 2his point is clear, especially in the light of the overarching constitutional
principle of giving preference and priority to Filipinos and Filipino corporations in
the development of our natural resources.
1esides, even assuming 'purely for argumentRs sa(e+ that a constitutional
limitation barring Filipino corporations from holding and implementing an F2AA
actually e0ists, nevertheless, such provision would apply only to the transfer of the
F2AA to agittarius, but definitely not to the sale of ?8CRs e!uity sta(e in ?8C,
to agittarius. 7therwise, an unreasonable curtailment of property rights without due
process of law would ensue. ,etitionersR argument must therefore fail.
F#** ;ot $ntended
&olely for Foreign +orporation
E!ually barren of merit is the second ground cited by petitioners -- that the
F2AA was intended to apply solely to a foreign corporation, as can allegedly be seen
from the provisions therein. 2hey manage to cite only one ?8C, F2AA provision
that can be regarded as clearly intended to apply only to a foreign contractorA ection
)-, which provides for international commercial arbitration under the auspices of the
9nternational Chamber of Commerce, after local remedies are e0hausted. 2his
provision, however, does not necessarily imply that the ?8C, F2AA cannot be
transferred to and assumed by a Filipino corporation li(e agittarius, in which event
the said provision should simpl! be disregarded as a superfluit!.
;o ;eed for a &eparate
6itigation of the &ale of &hares
,etitioners claim as third ground the SsuspiciousT sale of shares from ?8C to
agittarius@ hence, the need to litigate it in a separate case. ection /: of 4A $*/-
'the 8ining "aw+ allegedly re!uires the ,residentRs prior approval of a transfer.
A re-reading of the said provision, however, leads to a different
conclusion. ?Sec. 4>. Assignment32ransfer -- % financial or technical assistance
agreement ma! be assigned or transferred9 in whole or in part9 to a #ualified person
sub'ect to the prior approval of the PresidentB Provided9 $hat the President shall
notif! *ongress of ever! financial or technical assistance agreement assigned or
converted in accordance with this provision within thirt! CD>E da!s from the date of
the approval thereof.A
Section 4> e5pressl! applies to the assignment or transfer of the 0$%%9 not to
the sale and transfer of shares of stoc2 in (M*P. 8oreover, when the transferee of
an F2AA is another foreigncorporation, there is a logical application of the
re!uirement of prior approval by the ,resident of the 4epublic and notification to
Congress in the event of assignment or transfer of an F2AA. 9n this situation, such
approval and notification are appropriate safeguards, considering that the new
contractor is the subject of a foreign government.
7n the other hand, when the transferee of the F2AA happens to be
a 0ilipino corporation, the need for such safeguard is not critical@ hence, the lac( of
prior approval and notification may not be deemed fatal as to render the transfer
invalid. 1esides, it is not as if approval by the ,resident is entirely absent in this
instance. As pointed out by private respondent in its 8emorandum9
B)#C
the issue of
approval is the subject of one of the cases brought by "epanto against agittarius in
D4 No. )&-##). 2hat case involved the review of the 5ecision of the Court of
Appeals dated November -), -::# in CA-D4 , No. $/)&), which affirmed the
5EN4 7rder dated 5ecember #), -::) and the 5ecision of the 7ffice of the
,resident dated 6uly -#, -::-, both approving the assignment of the ?8C, F2AA to
agittarius.
,etitioners also !uestion the sale price and the financial capacity of the
transferee. According to the 5eed of Absolute ale dated 6anuary -#, -::), e0ecuted
between ?8C and agittarius, the price of the ?8C, shares was fi0ed at
EU*,%$.,:::, e!uivalent to ,..# million at an e0change rate of .&A). agittarius
had an authoriFed capital stoc( of ,-.: million and a paid up capital of ,&: million.
2herefore, at the time of approval of the sale by the 5EN4, the debt-to-e!uity ratio
of the transferee was over *A) -- hardly ideal for an F2AA contractor, according to
petitioners.
=owever, private respondents counter that the 5eed of ale specifically
provides that the payment of the purchase price would ta(e place onl! after
SagittariusF commencement of commercial production from mining operations, if at
all. Conse!uently, under the circumstances, we believe it would not be reasonable to
conclude, as petitioners did, that the transfereeRs high debt-to-e!uity ratio per se
necessarily carried negative implications for the enterprise@ and it would certainly be
improper to invalidate the sale on that basis, as petitioners propose.
F#** ;ot /oid.
#hus #ransferrable
2o bolster further their claim that the case is not moot, petitioners insist that the
F2AA is void and, hence cannot be transferred@ and that its transfer does not operate
to cure the constitutional infirmity that is inherent in it@ neither will a change in the
circumstances of one of the parties serve to ratify the void contract.
?hile the discussion in their Final 8emorandum was s(impy, petitioners in
their Comment 'on the 84+ did ratiocinate that this Court had declared the F2AA to
be void because, at the time it was e0ecuted with ?8C,, the latter was a fully
foreign-owned corporation, in which the former vested full control and management
with respect to the e0ploration, development and utiliFation of mineral resources,
contrary to the provisions of paragraph / of ection - of Article K99 of the
Constitution. And since the F2AA was per se void, no valid right could be
transferred@ neither could it be ratified, so petitioners conclude.
,etitioners have assumed as fact that which has yet to be established. 0irst and
foremost, the 5ecision of this Court declaring the F2AA void has not yet become
final. 2hat was precisely the reason the Court still heard 7ral Argument in this
case. Second, the F2AA does not vest in the foreign corporation full control and
supervision over the e0ploration, development and utiliFation of mineral resources,
to the e0clusion of the government. 2his point will be dealt with in greater detail
below@ but for now, suffice it to say that a perusal of the F2AA provisions will prove
that the government has effective overall direction and control of the mining
operations, including mar(eting and product pricing, and that the contractorRs wor(
programs and budgets are subject to its review and approval or disapproval.
As will be detailed later on, the government does not have to micro-manage the
mining operations and dip its hands into the day-to-day management of the
enterprise in order to be considered as having overall control and direction. 1esides,
for practical and pragmatic reasons, there is a need for government agencies to
delegate certain aspects of the management wor( to the contractor. 2hus the basis
for declaring the F2AA void still has to be revisited, ree0amined and reconsidered.
,etitioners sniff at the citation of *have@ v. Public :states %uthorit!,
B)/C
and 1alili v. *%,
B).C
claiming that the doctrines in these cases are wholly
inapplicable to the instant case.
*have@ clearly teachesA ?$hus9 the *ourt has ruled consistentl! that where a
0ilipino citi@en sells land to an alien who later sells the land to a 0ilipino9 the
invalidit! of the first transfer is corrected b! the subse#uent sale to a citi@en.
Similarl!9 where the alien who bu!s the land subse#uentl! ac#uires Philippine
citi@enship9 the sale is validated since the purpose of the constitutional ban to limit
land ownership to 0ilipinos has been achieved. "n short9 the law disregards the
constitutional dis#ualification of the bu!er to hold land if the land is subse#uentl!
transferred to a #ualified part!9 or the bu!er himself becomes a #ualified part!.A
B)&C
9n their Comment, petitioners contend that in *have@ and 1alili9 the object of
the transfer 'the land+ was not what was assailed for alleged unconstitutionality.
4ather, it was the transaction that was assailed@ hence subse!uent compliance with
constitutional provisions would cure its infirmity. 9n contrast, in the instant case it is
the F2AA itself, the object of the transfer, that is being assailed as invalid and
unconstitutional. o, petitioners claim that the subse!uent transfer of a void F2AA
to a Filipino corporation would not cure the defect.
,etitioners are confusing themselves. 2he present ,etition has been filed,
precisely because the grantee of the F2AA was a wholly owned subsidiary of a
foreign corporation. 9t cannot be gainsaid that anyone would have asserted that the
same F2AA was void if it had at the outset been issued to a Filipino corporation.
2he F2AA, therefore, is not per se defective or unconstitutional. 9t was !uestioned
only because it had been issued to an allegedly non-!ualified, foreign-owned
corporation.
?e believe that this case is clearly analogous to 1alili9 in which the land
ac!uired by a non-Filipino was re-conveyed to a !ualified vendee and the original
transaction was thereby cured. ,araphrasing1alili9 the same rationale applies to the
instant caseA assuming arguendo the invalidity of its prior grant to a foreign
corporation, the disputed F2AA -- being now held by a Filipino corporation -- can no
longer be assailed@ the objective of the constitutional provision -- to (eep the
e0ploration, development and utiliFation of our natural resources in Filipino hands --
has been served.
8ore accurately spea(ing, the present situation is one degree better than that
obtaining in 1alili9 in which the original sale to a non-Filipino was clearly and
indisputably violative of the constitutional prohibition and thus void ab initio. 9n the
present case, the issuance3grant of the subject F2AA to the then foreign-owned
?8C, was not illegal, void or unconstitutional at the time. 2he matter had to be
brought to court, precisely for adjudication as to whether the F2AA and the 8ining
"aw had indeed violated the Constitution. ince, up to this point, the decision of this
Court declaring the F2AA void has yet to become final, to all intents and purposes,
the F2AA must be deemed valid and constitutional.
B)$C
At bottom, we find completely outlandish petitionersR contention that an F2AA
could be entered into by the government only with a foreign corporation, never with
a 0ilipino enterprise. 9ndeed, the nationalistic provisions of the Constitution are all
anchored on the protection of Filipino interests. =ow petitioners can now argue that
foreigners have the e0clusive right to F2AAs totally overturns the entire basis of the
,etition -- preference for the Filipino in the e0ploration, development and utiliFation
of our natural resources. "t does not ta2e deep 2nowledge of law and logic to
understand that what the *onstitution grants to foreigners should be e#uall!
available to 0ilipinos.
Se3o*, I++ue%
7hether the +ourt +an &till 5ecide the +ase.
)ven *ssuming $t $s oot
All the protagonists are in agreement that the Court has jurisdiction to decide
this controversy, even assuming it to be moot.
,etitioners stress the following points. 0irst, while a case becomes moot and
academic when ?there is no more actual controvers! between the parties or no
useful purpose can be served in passing upon the merits9A
B)%C
what is at issue in the
instant case is not only the validity of the ?8C, F2AA, but also the
constitutionality of 4A $*/- and its 9mplementing 4ules and
4egulations. Second9 the acts of private respondent cannot operate to cure the law of
its alleged unconstitutionality or to divest this Court of its jurisdiction to
decide. $hird9 the Constitution imposes upon the upreme Court the duty to declare
invalid any law that offends the Constitution.
,etitioners also argue that no amendatory laws have been passed to ma(e the
8ining Act of )**. conform to constitutional strictures 'assuming that, at present, it
does not+@ that public respondents will continue to implement and enforce the statute
until this Court rules otherwise@ and that the said law continues to be the source of
legal authority in accepting, processing and approving numerous applications for
mining rights.
9ndeed, it appears that as of 6une #:, -::-, some /# F2AA applications had
been filed with the 8ines and Deosciences 1ureau '8D1+, with an aggregate area of
-,:&/,*:%.&. hectares -- spread over "uFon, the ;isayas and 8indanao
B)*C
-- applied
for. 9t may be a bit far-fetched to assert, as petitioners do, that each and every F2AA
that was entered into under the provisions of the 8ining Act Sinvites potential
litigationT for as long as the constitutional issues are not resolved with finality.
Nevertheless, we must concede that there e5ists the distinct possibilit! that one or
more of the future 0$%%s will be the sub'ect of !et another suit grounded on
constitutional issues.
1ut of e!ual if not greater significance is the cloud of uncertainty hanging over
the mining industry, which is even now scaring away foreign investments. Attesting
to this climate of an0iety is the fact that the Chamber of 8ines of the ,hilippines saw
the urgent need to intervene in the case and to present its position during the 7ral
Argument@ and that ecretary Deneral 4omulo Neri of the National Economic
5evelopment Authority 'NE5A+ re!uested this Court to allow him to spea(, during
that 7ral Argument, on the economic conse!uences of the 5ecision of 6anuary -$,
-::/.
B-:C
?e are convinced. (e now agree that the *ourt must recogni@e the e5ceptional
character of the situation and the paramount public interest involved9 as well as the
necessit! for a ruling to put an end to the uncertainties plaguing the mining industr!
and the affected communities as a result of doubts cast upon the constitutionalit! and
validit! of the Mining %ct9 the sub'ect 0$%% and future 0$%%s9 and the need to avert
a multiplicit! of suits. ,araphrasing 3on@ales v. *ommission on :lections9
B-)C
it is
evident that strong reasons of public policy demand that the constitutionality issue be
resolved now.
B--C
9n further support of the immediate resolution of the constitutionality issue,
public respondents cite %cop v. 3uingona9
B-#C
to the effect that the courts will decide a
!uestion -- otherwise moot and academic -- if it is ?capable of repetition9 !et
evading review.A
B-/C
,ublic respondents as( the Court to avoid a situation in which
the constitutionality issue may again arise with respect to another F2AA, the
resolution of which may not be achieved until after it has become too late for our
mining industry to grow out of its infancy. 2hey also recall Salonga v. *ru@ Pa-o9
B-.C
in which this Court declared that ?CtEhe *ourt also has the dut! to formulate
guiding and controlling constitutional principles9 precepts9 doctrines or rules. "t has
the s!mbolic function of educating the bench and bar on the e5tent of protection
given b! constitutional guarantees. 5 5 5.A
2he mootness of the case in relation to the ?8C, F2AA led the
undersigned ponente to state in his dissent to the 5ecision that there was no more
justiciable controversy and the plea to nullify the 8ining "aw has become a virtual
petition for declaratory relief.
B-&C
2he entry of the Chamber of 8ines of the
,hilippines, 9nc., however, has put into focus the seriousness of the allegations of
unconstitutionality of 4A $*/- and 5A7 *&-/: which converts the case to one for
prohibition
B-$C
in the enforcement of the said law and regulations.
9ndeed, this C8, entry brings to fore that the real issue in this case is whether
paragraph / of ection - of Article K99 of the Constitution is contravened by 4A
$*/- and 5A7 *&-/:, not whether it was violated by specific acts implementing 4A
$*/- and 5A7 *&-/:. SB?Chen an act of the legislative department is seriously
alleged to have infringed the Constitution, settling the controversy becomes the duty
of this Court. 1y the mere enactment of the !uestioned law or the approval of the
challenged action, the dispute is said to have ripened into a judicial controversy even
without any other overt act.T
B-%C
2his ruling can be traced from $a-ada v. %ngara,
B-*C
in which the Court saidA
S9n see(ing to nullify an act of the ,hilippine enate on the ground that it
contravenes the Constitution, the petition no doubt raises a justiciable
controversy. (here an action of the legislative branch is seriousl! alleged to have
infringed the *onstitution9 it becomes not onl! the right but in fact the dut! of the
'udiciar! to settle the dispute.
0 0 0 0 0 0 0 0 0
SAs this Court has repeatedly and firmly emphasiFed in many cases, it will not shir(,
digress from or abandon its sacred duty and authority to uphold the Constitution in
matters that involve grave abuse of discretion brought before it in appropriate cases,
committed by any officer, agency, instrumentality or department of the
government.T
B#:C
Additionally, the entry of C8, into this case has also effectively forestalled any
possible objections arising from the standing or legal interest of the original parties.
For all the foregoing reasons, we believe that the Court should proceed to a
resolution of the constitutional issues in this case.
T2'r, I++ue%
#he (roper $nterpretation of the +onstitutional (hrase
G*greements $nvolving )ither #echnical or Financial *ssistanceH
2he constitutional provision at the nucleus of the controversy is paragraph / of
ection - of Article K99 of the )*%$ Constitution. 9n order to appreciate its conte0t,
ection - is reproduced in fullA
?Sec. <. %ll lands of the public domain9 waters9 minerals9 coal9 petroleum9 and other
mineral oils9 all forces of potential energ!9 fisheries9 forests or timber9 wildlife9 flora
and fauna9 and other natural resources are owned b! the State. (ith the e5ception
of agricultural lands9 all other natural resources shall not be alienated. $he
e5ploration9 development and utili@ation of natural resources shall be under the full
control and supervision of the State. $he State ma! directl! underta2e such
activities9 or it ma! enter into co8production9 'oint venture or production8sharing
agreements with 0ilipino citi@ens or corporations or associations at least si5t! per
centum of whose capital is owned b! such citi@ens. Such agreements ma! be for a
period not e5ceeding twent!8five !ears9 renewable for not more than twent!8five
!ears9 and under such terms and conditions as ma! be provided b! law. "n cases of
water rights for irrigation9 water suppl!9 fisheries9 or industrial uses other than the
development of water power9 beneficial use ma! be the measure and limit of the
grant.
?$he State shall protect the nationFs marine wealth in its archipelagic waters9
territorial sea9 and e5clusive economic @one9 and reserve its use and en'o!ment
e5clusivel! to 0ilipino citi@ens.
?$he *ongress ma!9 b! law9 allow small8scale utili@ation of natural resources b!
0ilipino citi@ens9 as well as cooperative fish farming9 with priorit! to subsistence
fishermen and fish8wor2ers in rivers9 la2es9 ba!s and lagoons.
?$he President ma! enter into agreements with foreign8owned
corporations involving either technical or financial assistance for large%scale
e'ploration. development. and utili,ation of minerals. petroleum. and other
mineral oils according to the general terms and conditions provided b! law9 based
on real contributions to the economic growth and general welfare of the countr!. "n
such agreements9 the State shall promote the development and use of local scientific
and technical resources.
?$he President shall notif! the *ongress of ever! contract entered into in
accordance with this provision9 within thirt! da!s from its e5ecution.A
B#)C
;o 4estriction of eaning by
a Verba Le&'+ $nterpretation
2o interpret the foregoing provision, petitioners adamantly assert that the
language of the Constitution should prevail@ that the primary method of interpreting
it is to see( the ordinary meaning of the words used in its provisions. 2hey rely on
rulings of this Court, such as the followingA
?$he fundamental principle in constitutional construction however is that the
primar! source from which to ascertain constitutional intent or purpose is the
language of the provision itself. $he presumption is that the words in which the
constitutional provisions are couched e5press the ob'ective sought to be attained. "n
other words9 verba legis prevails. &nl! when the meaning of the words used is
unclear and e#uivocal should resort be made to e5traneous aids of construction and
interpretation9 such as the proceedings of the *onstitutional *ommission or
*onvention to shed light on and ascertain the true intent or purpose of the provision
being construed.A
B#-C
;ery recently, in 0rancisco v. $he 1ouse of Representatives9
B##C
this Court
indeed had the occasion to reiterate the well-settled principles of constitutional
constructionA
?0irst9 verba legis9 that is9 wherever possible9 the words used in the *onstitution
must be given their ordinar! meaning e5cept where technical terms are emplo!ed. 5
5 5.
5 5 5 5 5 5 5 5 5
?Second9 where there is ambiguit!9 ratio legis est anima. $he words of the
*onstitution should be interpreted in accordance with the intent of its framers. 5 5 5.
5 5 5 5 5 5 5 5 5
?0inall!9 ut magis valeat !uam pereat. $he *onstitution is to be interpreted as a
whole.A
B#/C
For ease of reference and in consonance with verba legis, we reconstruct and
stratify the afore!uoted ection - as followsA
). All natural resources are owned by the tate. E0cept for agricultural lands, natural
resources cannot be alienated by the tate.
-. 2he e0ploration, development and utiliFation 'E5E+ of natural resources shall be
under the full control and supervision of the tate.
#. 2he tate may underta(e these E5E activities through either of the followingA
'a+ 1y itself directly and solely
'b+ 1y 'i+ co-production@ 'ii+ joint venture@ or 'iii+ production sharing agreements
with Filipino citiFens or corporations, at least &: percent of the capital of which is
owned by such citiFens
/. Small8scale utiliFation of natural resources may be allowed by law in favor of
Filipino citiFens.
.. For large8scale E5E of minerals, petroleum and other mineral oils, the ,resident
may enter into Sagreements with foreign-owned corporations involving either
technical or financial assistance according to the general terms and conditions
provided by law 0 0 0.T
Note that in all the three foregoing mining activities -- e5ploration9
development and utili@ation -- the tate may underta(e such E5E activities by itself
or in tandem with Filipinos or Filipino corporations, e0cept in two instancesA first, in
small-scale utiliFation of natural resources, which Filipinos may be allowed by law
to underta(e@ and second, in large-scale E5E of minerals, petroleum and mineral
oils, which may be underta(en by the tate via Sagreements with foreign8owned
corporations involving either technical or financial assistanceT as provided by law.
,etitioners claim that the phrase ?agreements 5 5 5 involving either technical or
financial assistanceA simply means technical assistance or financial assistance
agreements, nothing more and nothing else. 2hey insist that there is no ambiguity in
the phrase, and that a plain reading of paragraph / !uoted above leads to the
inescapable conclusion that what a foreign-owned corporation may enter into with
the government is merely an agreement for either financial or technical
assistance onl!, for the large-scale e0ploration, development and utiliFation of
minerals, petroleum and other mineral oils@ such a limitation, they argue, e0cludes
foreign management and operation of a mining enterprise.
B#.C
2his restrictive interpretation, petitioners believe, is in line with the general
policy enunciated by the Constitution reserving to Filipino citiFens and corporations
the use and enjoyment of the countryRs natural resources. 2hey maintain that this
CourtRs 5ecision
B#&C
of 6anuary -$, -::/ correctly declared the ?8C, F2AA, along
with pertinent provisions of 4A $*/-, void for allowing a foreign contractor to have
direct and e0clusive management of a mining enterprise. Allowing such a privilege
not only runs counter to the Sfull control and supervisionT that the tate is
constitutionally mandated to e0ercise over the e0ploration, development and
utiliFation of the countryRs natural resources@ doing so also vests in the foreign
company Sbeneficial ownershipT of our mineral resources. 9t will be recalled that the
5ecision of 6anuary -$, -::/ Feroed in on Smanagement or other forms of
assistanceT or other activities associated with the Sservice contractsT of the martial
law regime, since ?the management or operation of mining activities b! foreign
contractors9 which is the primar! feature of service contracts9 was precisel! the evil
that the drafters of the 19G; *onstitution sought to eradicate.A
7n the other hand, the intervenor
B#$C
and public respondents argue that the
F2AA allowed by paragraph / is not merely an agreement for supplying limited and
specific financial or technical services to the tate. 4ather, such F2AA is a
comprehensive agreement for the foreign-owned
corporationRs integrated e0ploration, development and utiliFation of mineral,
petroleum or other mineral oils on a large-scale basis. 2he agreement, therefore,
authoriFes the foreign contractorRs rendition of a whole range of integrated and
comprehensive services, ranging from the discovery to the development, utiliFation
and production of minerals or petroleum products.
?e do not see how applying a strictly literal or verba legis interpretation of
paragraph / could ine0orably lead to the conclusions arrived at in
the ponencia. 0irst, the draftersR choice of words -- their use of the
phrase agreements 5 5 5 involving either technical or financial assistance -- does not
indicate the intent to e5clude other modes of assistance. 2he drafters opted to
use involving when they could have simply said agreements for financial or
technical assistance9 if that was their intention to begin with. 9n this case, the
limitation would be very clear and no further debate would ensue.
9n contrast, the use of the word SinvolvingT signifies the 7o++'b'/'(y o; (2e
'*3/u+'o* o; o(2er ;or:+ o; a++'+(a*3e or a3('H'('e+ having to do with, otherwise
related to or compatible with financial or technical assistance. 2he word SinvolvingT
as used in this conte0t has three connotations that can be differentiated thusA one9 the
sense of Sconcerning,T Shaving to do with,T or SaffectingT@ two, Sentailing,T
Sre!uiring,T SimplyingT or SnecessitatingT@ and three, Sincluding,T ScontainingT or
Scomprising.T
B#%C
,lainly, none of the three connotations convey a sense of e0clusivity.
8oreover, the word Sinvolving,T when understood in the sense of Sincluding,T as
in including technical or financial assistance9necessarily implies that there
are activities other than those that are being included. 9n other words, if an
agreement includes technical or financial assistance, there is apart from such
assistance -- something else already in, and covered or may be covered by, the said
agreement.
9n short, it allows for the possibility that matters, other than those e0plicitly
mentioned, could be made part of the agreement. 2hus, we are now led to the
conclusion that the use of the word SinvolvingT implies that these agreements with
foreign corporations are not limited to mere financial or technical assistance. 2he
difference in sense becomes very apparent when we ju0tapose
Sagreements fortechnical or financial assistanceT against
Sagreements including technical or financial assistance.T 2his much is unalterably
clear in a verba legis approach.
Second, if the real intention of the drafters was to confine foreign corporations
to financial or technical assistance and nothing more, their language would have
certainly been so u*:'+(aJab/y re+(r'3('He a*, +(r'*&e*( as to leave no doubt in
anyoneRs mind about their true intent. For e0ample, they would have used the
sentence foreign corporations are absolutely prohibited from involvement in the
management or operation of mining or similar ventures or words of similar import.
A search for such stringent wording yields negative results. #hus. we come to the
inevitable conclusion that there was a conscious and deliberate decision to avoid
the use of restrictive wording that bespeaBs an intent not to use the e'pression
Gagreements ' ' ' involving either technical or financial assistanceH in an
e'clusionary and limiting manner.
5eletion of G&ervice +ontractsH to
*void (itfalls of (revious +onstitutions.
;ot to !an &ervice +ontracts (er &e
2hird, we do not see how a verba legis approach leads to the conclusion
that ?the management or operation of mining activities b! foreign contractors9
which is the primar! feature of service contracts9 was precisel! the evil that the
drafters of the 19G; *onstitution sought to eradicate.A Nowhere in the above-
!uoted ection can be discerned the objective to (eep out of foreign hands the
management or operation of mining activities or the plan to eradicate service
contracts as these were understood in the )*$# Constitution. till, petitioners
maintain that the deletion or omission from the )*%$ Constitution of the term
Sservice contractsT found in the )*$# Constitution sufficiently proves the draftersR
intent to e0clude foreigners from the management of the affected enterprises.
2o our mind, however, such intent cannot be definitively and conclusively
established from the mere failure to carry the same e0pression or term over to the
new Constitution, absent a more specific, e0plicit and une!uivocal statement to that
effect. ?hat petitioners see( 'a complete ban on foreign participation in the
management of mining operations, as previously allowed by the earlier
Constitutions+ is nothing short of bringing about a momentous sea change in the
economic and developmental policies@ and the fundamentally capitalist, free-
enterprise philosophy of our government. ?e cannot imagine such a radical
shift being underta(en by our government, to the great prejudice of the mining sector
in particular and our economy in general, merely on the basis of the omission of the
terms service contract from or the failure to carry them over to the new
Constitution. 2here has to be a much more definite and even unarguable basis for
such a drastic reversal of policies.
0ourth9 a literal and restrictive interpretation of paragraph /, such as that
proposed by petitioners, suffers from certain internal logical inconsistencies that
generate ambiguities in the understanding of the provision. As the intervenor pointed
out, there has never been any constitutional or statutory provision that reserved to
Filipino citiFens or corporations, at least &: percent of which is Filipino-owned, the
rendition of financial or technical assistance to companies engaged in mining or the
development of any other natural resource. 2he ta(ing out of foreign-currency or
peso-denominated loans or any other (ind of financial assistance, as well as the
rendition of technical assistance -- whether to the tate or to any other entity in the
,hilippines -- has never been restricted in favor of Filipino citiFens or corporations
having a certain minimum percentage of Filipino e!uity. uch a restriction would
certainly be preposterous and unnecessary. As a matter of fact, financial, and even
technical assistance,regardless of the nationality of its source, would be welcomed in
the mining industry anytime with open arms, on account of the dearth of local capital
and the need to continually update technological (now-how and improve technical
s(ills.
2here was therefore no need for a constitutional provision specifically allowing
foreign-owned corporations to render financial or technical assistance, whether in
respect of mining or some other resource development or commercial activity in the
,hilippines. T2e /a+( 7o'*( *ee,+ (o be e:72a+'6e,% '; :ere/y ;'*a*3'a/ or
(e32*'3a/ a++'+(a*3e a&ree:e*(+ are a//o=e,, (2ere =ou/, be *o *ee, (o /':'(
(2e: (o large%scale mining operations. a+ (2ere =ou/, be ;ar &rea(er *ee, ;or
(2e: '* (2e +:a//er-+3a/e :'*'*& a3('H'('e+ Fa*, eHe* '* *o*-:'*'*& area+G.
ObH'ou+/y, (2e 7roH'+'o* '* <ue+('o* =a+ '*(e*,e, (o re;er (o a&ree:e*(+ o(2er
(2a* (2o+e ;or :ere ;'*a*3'a/ or (e32*'3a/ a++'+(a*3e.
9n li(e manner, there would be no need to re!uire the ,resident of the 4epublic
to report to Congress, if only financial or technical assistance agreements are
involved. uch agreements are in the nature of foreign loans that -- pursuant to
ection -: of Article ;99
B#*C
of the )*%$ Constitution -- the ,resident may contract or
guarantee, merely with the prior concurrence of the 8onetary 1oard. 9n turn, the
1oard is re!uired to report to Congress within thirt! da!s from the end of ever!
#uarter of the calendar !ear9 not thirty days after the agreement is entered into.
And if paragraph / permits only agreements for loans and other forms of
financial, or technical assistance, what is the point of re!uiring that they be based on
real contributions to the economic growth and general welfare of the countr!O For
instance, how is one to measure and assess the Sreal contributionsT to the Seconomic
growthT and Sgeneral welfareT of the country that may ensue from a foreign-
currency loan agreement or a technical-assistance agreement for, say, the
refurbishing of an e0isting power generating plant for a mining operation somewhere
in 8indanaoO uch a criterion would ma(e more sense when applied to a major
business investment in a principal sector of the industry.
2he conclusion is clear and inescapable -- a verba legis construction shows that
paragraph / is not to be understood as one limited only to foreign loans 'or other
forms of financial support+ and to technical assistance. 2here is definitely more to it
than that. T2e+e are 7roH'+'o*+ 7er:'(('*& 7ar('3'7a('o* by ;ore'&* 3o:7a*'e+B
re<u'r'*& (2e !re+',e*(9+ re7or( (o o*&re++B a*, u+'*&, a+ yar,+('3J,
3o*(r'bu('o*+ ba+e, o* e3o*o:'3 &ro=(2 a*, &e*era/ =e/;are. T2e+e =ere
*e'(2er a33',e*(a//y '*+er(e, '*(o (2e o*+('(u('o* *or 3are/e++/y 3obb/e,
(o&e(2er by (2e ,ra;(er+ '* /'7 +erH'3e (o +2a//o= *a('o*a/'+:. 2he provisions
patently have significance and usefulness in a conte0t that allows agreements with
foreign companies to include more than mere financial or technical assistance.
0ifth, it is argued that ection - of Article K99 authoriFes nothing more than a
rendition of specific and limited financial service or technical assistance by a foreign
company. 2his argument begs the !uestion S2o whom or for whom would it be
renderedTO or ?ho is being assistedO 9f the answer is S2he tate,T then it necessarily
implies that the tate itself is the one directl! and solel! underta(ing the large-scale
e0ploration, development and utiliFation of a mineral resource, so it follows that the
tate must itself bear the liability and cost of repaying the financing sourced from the
foreign lender and3or of paying compensation to the foreign entity rendering
technical assistance.
=owever, it is of common (nowledge, and of judicial notice as well, that the
government is and has for many many years been financially strapped, to the point
that even the most essential services have suffered serious curtailments -- education
and health care, for instance, not to mention judicial services -- have had to ma(e do
with inade!uate budgetary allocations. 2hus, government has had to resort to build-
operate-transfer and similar arrangements with the private sector, in order to get vital
infrastructure projects built without any governmental outlay.
2he very recent brouhaha over the gargantuan Sfiscal crisisT or Sbudget deficitT
merely confirms what the ordinary citiFen has suspected all along. After the reality
chec(, one will have to admit the implausibility of a direct underta(ing -- by the
tate itself -- of large8scale e0ploration, development and utiliFation of minerals,
petroleum and other mineral oils. uch an underta(ing entails not only humongous
capital re!uirements, but also the attendant ris( of never finding and developing
economically viable !uantities of minerals, petroleum and other mineral oils.
B/:C
9t is e!ually difficult to imagine that such a provision restricting foreign
companies to the rendition of only financial or technical assistance to the
government was deliberately crafted by the drafters of the Constitution, who were all
well aware of the capital-intensive and technology-oriented nature of large-scale
mineral or petroleum e0traction and the countryRs deficiency in precisely those areas.
B/)C
2o say so would be tantamount to asserting that the provision was purposely
designed to ladle the large-scale development and utiliFation of mineral, petroleum
and related resources with impossible conditions@ and to remain forever and
permanently SreservedT for future generations of Filipinos.
* ore 4easonable 6ooB
at the +harterIs (lain 6anguage
Si5th9 we shall now loo( closer at the plain language of the Charter and
e0amining the logical inferences. 2he drafters chose to emphasiFe and
highlight agreements 5 5 5 involving either technical or financial assistance in
relation to foreign corporationsR participation in large-scale E5E. 2he inclusion of
this clause on Stechnical or financial assistanceT recogniFes the fact that foreign
business entities and multinational corporations are the ones with the resources and
(now-how to provide technical and3or financial assistance of the magnitude and type
re!uired for large-scale e0ploration, development and utiliFation of these resources.
2he drafters -- whose ran(s included many academicians, economists,
businessmen, lawyers, politicians and government officials -- were not unfamiliar
with the practices of foreign corporations and multinationals.
Neither were they so naVve as to believe that these entities would provide
SassistanceT without conditionalities or some #uid pro #uo. 5efinitely, as business
persons well (now and as a matter of judicial notice, this matter is not just a !uestion
of signing a promissory note or e0ecuting a technology transfer agreement. Foreign
corporations usually re!uire that they be given a say in the management, for instance,
of day-to-day operations of the joint venture. 2hey would demand the appointment
of their own men as, for e0ample, operations managers, technical e0perts, !uality
control heads, internal auditors or comptrollers. Furthermore, they would probably
re!uire seats on the 1oard of 5irectors -- all these to ensure the success of the
enterprise and the repayment of the loans and other financial assistance and to ma(e
certain that the funding and the technology they supply would not go to waste.
Eltimately, they would also want to protect their business reputation and bottom
lines.
B/-C
9n short, the drafters will have to be credited with enough pragmatism and
savvy to (now that these foreign entities will not enter into such Sagreements
involving assistanceT without re!uiring arrangements for the protection of their
investments, gains and benefits.
2hus, by specifying such Sagreements involving assistance,T the drafters
necessarily gave implied assent to everything that these agreements necessarily
entailed@ or that could reasonably be deemed necessary to ma(e them tenable and
effective, including management authority with respect to the day-to-day operations
of the enterprise and measures for the protection of the interests of the foreign
corporation, ,47;95E5 2=A2 ,hilippine sovereignty over natural resources and
full control over the enterprise underta(ing the E5E activities remain firmly in the
tate.
(etitionersI #heory 5eflated by the
*bsence of +losing%1ut 4ules or -uidelines
Seventh and final point regarding the plain-language approach, one of the
practical difficulties that results from it is the fact that there is nothing by way of
transitory provisions that would serve to confirm the theory that the omission of the
term Sservice contractT from the )*%$ Constitution signaled the demise of service
contracts.
2he framers (new at the time they were deliberating that there were various
service contracts e0tant and in force and effect, including those in the petroleum
industry. 8any of these service contracts were long-term '-. years+ and had several
more years to run. "f the! had meant to ban service contracts altogether9 the! would
have had to provide for the termination or pretermination of the e5isting contracts.
%ccordingl!9 the! would have supplied the specifics and the when and how of
effecting the e5tinguishment of these e5isting contracts Cor at least the mechanics for
determining themEH and of putting in place the means to address the 'ust claims of
the contractors for compensation for their investments9 lost opportunities9 and so on9
if not for the recover! thereof.
9f the framers had intended to put an end to service contracts, they would have
at least left specific instructions to Congress to deal with these closing-out issues,
perhaps by way of general guidelines and a timeline within which to carry them out.
2he following are some e0tant e0amples of such transitory guidelines set forth in
Article K;999 of our ConstitutionA
?Section <D. %dvertising entities affected b! paragraph C<E9 Section 11 of %rticle IJ"
of this *onstitution shall have five !ears from its ratification to compl! on a
graduated and proportionate basis with the minimum 0ilipino ownership
re#uirement therein.
0 0 0 0 0 0 0 0 0
?Section <K. %fter the e5piration in 1991 of the %greement between the Republic of
the Philippines and the +nited States of %merica concerning militar! bases9 foreign
militar! bases9 troops9 or facilities shall not be allowed in the Philippines e5cept
under a treat! dul! concurred in b! the Senate and9 when the *ongress so re#uires9
ratified b! a ma'orit! of the votes cast b! the people in a national referendum held
for that purpose9 and recogni@ed as a treat! b! the other contracting State.
?Section <=. $he authorit! to issue se#uestration or free@e orders under
Proclamation ,o. D dated March <K9 19G= in relation to the recover! of ill8gotten
wealth shall remain operative for not more than eighteen months after the
ratification of this *onstitution. 1owever9 in the national interest9 as certified b! the
President9 the *ongress ma! e5tend such period.
% se#uestration or free@e order shall be issued onl! upon showing of a prima facie
case. $he order and the list of the se#uestered or fro@en properties shall forthwith be
registered with the proper court. 0or orders issued before the ratification of this
*onstitution9 the corresponding 'udicial action or proceeding shall be filed within
si5 months from its ratification. 0or those issued after such ratification9 the 'udicial
action or proceeding shall be commenced within si5 months from the issuance
thereof.
$he se#uestration or free@e order is deemed automaticall! lifted if no 'udicial action
or proceeding is commenced as herein provided.A
C<3D
9t is inconceivable that the drafters of the Constitution would leave such an
important matter -- an e0pression of sovereignty as it were -- indefinitely hanging in
the air in a formless and ineffective state. 9ndeed, the complete absence of even a
general framewor( only serves to further deflate petitionersR theory, li(e a childRs
balloon losing its air.
Ender the circumstances, the logical inconsistencies resulting from petitionersR
literal and purely verba legis approach to paragraph / of ection - of Article K99
compel a resort to other aids to interpretation.
(etitionersI (osture *lso ;egated
by Ra('o Le&'+ E( A*':a
2hus9 in order to resolve the inconsistencies9 incongruities and ambiguities
encountered and to suppl! the deficiencies of the plain8language approach9 there is a
need for recourse to the proceedings of the 19G= *onstitutional *ommission. 2here
is a need for ratio legis et anima.
&ervice +ontracts ;ot
G5econstitutionali,edH
,ertinent portions of the deliberations of the members of the Constitutional
Commission 'ConCom+ conclusively show that they discussed agreements involving
either technical or financial assistancein the same breadth as service contracts and
used the terms interchangeably. 2he following e0change between Commissioner
6amir 'sponsor of the provision+ and Commissioner uareF irrefutably proves that the
Sagreements involving technical or financial assistanceT were none other than
service contracts.
2=E ,4E95EN2. Commissioner 6amir is recogniFed. ?e are still on
ection #.
84. 6A894. Ies, 8adam ,resident. ?ith respect to the second
paragraph of ection #, my amendment by substitution readsA 2=E
,4E95EN2 8AI EN2E4 9N27 AD4EE8EN2 ?92=
F74E9DN-7?NE5 C74,74A297N 9N;7";9ND E92=E4
2EC=N9CA" 74 F9NANC9A" A92ANCE F74 "A4DE-
CA"E EK,"74A297N, 5E;E"7,8EN2 AN5 E29"9JA297N
7F NA2E4A" 4E7E4CE ACC7459ND 27 2=E 2E48
AN5 C7N59297N ,47;95E5 1I "A?.
84. ;9""EDA. 2he Committee accepts the amendment.
Commissioner uareF will give the bac(ground.
84. 6A894. 2han( you.
2=E ,4E95EN2. Commissioner uareF is recogniFed.
84. EA4EJ. 2han( you, 8adam ,resident.
?ill Commissioner 6amir answer a few clarificatory !uestionsO
84. 6A894. Ies, 8adam ,resident.
84. EA4EJ. 2his particular portion of the section has reference
to =2a( =a+ 7o7u/ar/y J*o=* be;ore a+ +erH'3e 3o*(ra3(+, among
other things, is that correctO
84. 6A894. Ies, 8adam ,resident.
84. EA4EJ. As it is formulated, the ,resident may enter into +erH'3e
3o*(ra3(+ but subject to the guidelines that may be promulgated by
CongressO
84. 6A894. 2hat is correct.
84. EA4EJ. 2herefore, that aspect of negotiation and consummation
will fall on the ,resident, not upon CongressO
84. 6A894. 2hat is also correct, 8adam ,resident.
84. EA4EJ. E0cept that all of (2e+e 3o*(ra3(+, +erH'3e or o(2er='+e,
must be made strictly in accordance with guidelines prescribed by
CongressO
84. 6A894. 2hat is also correct.
84. EA4EJ. And the Dentleman is thin(ing in terms of a law that
uniformly covers situations of the same natureO
84. 6A894. 2hat is ):: percent correct.
84. EA4EJ. 9 than( the Commissioner.
84. 6A894. 2han( you very much.
B//C
2he following e0change leaves no doubt that the commissioners (new e0actly
what they were dealing withA service contracts.
2=E ,4E95EN2. Commissioner Dascon is recogniFed.
84. DAC7N. Commissioner 6amir had proposed an amendment with
regard to special +erH'3e 3o*(ra3(+ which was accepted by the
Committee. ince the Committee has accepted it, 9 would li(e to as(
some !uestions.
2=E ,4E95EN2. Commissioner Dascon may proceed.
84. DAC7N. As it is proposed now, such +erH'3e 3o*(ra3(+ will be
entered into by the ,resident with the guidelines of a general law
on +erH'3e 3o*(ra3( to be enacted by Congress. 9s that correctO
84. ;9""EDA. 2he Commissioner is right, 8adam ,resident.
84. DAC7N. According to the original proposal, if the ,resident were
to enter into a particular agreement, he would need the concurrence
of Congress. Now that it has been changed by the proposal of
Commissioner 6amir in that Congress will set the general law to
which the ,resident shall comply, the ,resident will, therefore, not
need the concurrence of Congress every time he enters into +erH'3e
3o*(ra3(+. 9s that correctO
84. ;9""EDA. 2hat is right.
84. DAC7N. 2he proposed amendment of Commissioner 6amir is in
indirect contrast to my proposed amendment, so 9 would li(e to
object and present my proposed amendment to the body.
0 0 0 0 0 0 0 0 0
84. DAC7N. Ies, it will be up to the body.
9 feel that the general law to be set by Congress as regard +erH'3e
3o*(ra3( a&ree:e*(+ which the ,resident will enter into might be
too general or since we do not (now the content yet of such a law, it
might be that certain agreements will be detrimental to the interest of
the Filipinos. 2his is in direct contrast to my proposal which
provides that there be effective constraints in the implementation
of +erH'3e 3o*(ra3(+.
o instead of a general law to be passed by Congress to serve as a
guideline to the ,resident when entering into +erH'3e 3o*(ra3(
a&ree:e*(+, 9 propose that every +erH'3e 3o*(ra3( entered into by
the ,resident would need the concurrence of Congress, so as to
assure the Filipinos of their interests with regard to the issue in
ection # on all lands of the public domain. 8y alternative
amendment, which we will discuss later, readsA 2=A2 2=E
,4E95EN2 =A"" EN2E4 9N27 EC= AD4EE8EN2 7N"I
?92= 2=E C7NCE44ENCE 7F 2?7-2=945 ;72E 7F A""
2=E 8E81E4 7F C7ND4E 9229ND E,A4A2E"I.
0 0 0 0 0 0 0 0 0
84. 1ENDJ7N. 2he reason we made that shift is that we realiFed the
original proposal could breed corruption. 1y the way, this is not just
confined to +erH'3e 3o*(ra3(+ but also to ;'*a*3'a/ a++'+(a*3e. 9f we
are going to ma(e every single contract subject to the concurrence of
Congress N which, according to the CommissionerRs amendment is
the concurrence of two-thirds of Congress voting separately N then
')+ there is a very great chance that each contract will be different
from another@ and '-+ there is a great temptation that it would breed
corruption because of the great lobbying that is going to happen.
And we do not want to subject our legislature to that.
Now, to answer the CommissionerRs apprehension, by Sgeneral law,T we do not mean
statements of motherhood. Congress can build all the restrictions that it wishes into
that general law so that every contract entered into by the ,resident under that
specific area will have to be uniform. 2he ,resident has no choice but to follow all
the guidelines that will be provided by law.
84. DAC7N. 1ut my basic problem is that we do not (now as of yet
the contents of such a general law as to how much constraints there
will be in it. And to my mind, although the CommitteeRs contention
that the regular concurrence from Congress would subject Congress
to e0tensive lobbying, 9 thin( that is a ris( we will have to ta(e since
Congress is a body of representatives of the people whose
membership will be changing regularly as there will be changing
circumstances every time certain agreements are made. 9t would be
best then to (eep in tab and attuned to the interest of the Filipino
people, whenever the ,resident enters into any agreement with
regard to such an important matter as (e32*'3a/ or ;'*a*3'a/
a++'+(a*3e ;or /ar&e-+3a/e eI7/ora('o*, ,eHe/o7:e*( a*,
u('/'6a('o* o; *a(ura/ re+our3e+ or +erH'3e 3o*(ra3(+, the peopleRs
elected representatives should be on top of it.
0 0 0 0 0 0 0 0 0
84. 7,"E. 8adam ,resident, we do not need to suspend the session. 9f
Commissioner Dascon needs a few minutes, 9 can fill up the
remaining time while he completes his proposed amendment. 9 just
wanted to as( Commissioner 6amir whether he would entertain a
minor amendment to his amendment, and it reads as followsA 2=E
,4E95EN2 =A"" E1ELEEN2"I N729FI C7ND4E 7F
E;E4I SERVIE ONTRAT EN2E4E5 9N27 9N
ACC745ANCE ?92= 2=E DENE4A" "A?. 9 thin( the reason
is, if 9 may state it briefly, as Commissioner 1engFon said, Congress
can always change the general law later on to conform to new
perceptions of standards that should be built into +erH'3e 3o*(ra3(+.
1ut the only way Congress can do this is if there were a notification
re!uirement from the 7ffice of the ,resident that such +erH'3e
3o*(ra3(+ had been entered into, subject then to the scrutiny of the
8embers of Congress. 2his pertains to a situation where the +erH'3e
3o*(ra3(+ are already entered into, and all that this amendment see(s
is the reporting re!uirement from the 7ffice of the ,resident. ?ill
Commissioner 6amir entertain thatO
84. 6A894. 9 will gladly do so, if it is still within my power.
84. ;9""EDA. Ies, the Committee accepts the amendment.
0 0 0 0 0 0 0 0 0
4. 2AN. 8adam ,resident, may 9 as( a !uestionO
2=E ,4E95EN2. Commissioner 2an is recogniFed.
4. 2AN. Am 9 correct in thin(ing that the only difference between these
future +erH'3e 3o*(ra3(+ and the past +erH'3e 3o*(ra3(+ under 8r.
8arcos is the general law to be enacted by the legislature and the
notification of Congress by the ,residentO 2hat is the only
difference, is it notO
84. ;9""EDA. 2hat is right.
4. 2AN. o those are the safeguards.
84. ;9""EDA. Ies. 2here was no law at all governing +erH'3e
3o*(ra3(+ before.
4. 2AN. 2han( you, 8adam ,resident.
B/.C
ore #han ere Financial
and #echnical *ssistance
)ntailed by the *greements
2he clear words of Commissioner 6ose N. Nolledo !uoted below e0plicitly and
elo!uently demonstrate that the drafters (new that the agreements with foreign
corporations were going to entail not mere technical or financial assistance but,
rather, foreign investment in and management of an enterprise involved in large8
scale e5ploration, development and utili@ation of minerals9 petroleum9 and other
mineral oils.
2=E ,4E95EN2. Commissioner Nolledo is recogniFed.
84. N7""E57. 8adam ,resident, 9 have the permission of the Acting
Floor "eader to spea( for only two minutes in favor of the
amendment of Commissioner Dascon.
2=E ,4E95EN2. Commissioner Nolledo may proceed.
84. N7""E57. ?ith due respect to the members of the Committee and
Commissioner 6amir, 9 am in favor of the objection of Commissioner
Dascon.
8adam ,resident, 9 was one of those who refused to sign the )*$# Constitution, and
one of the reasons is that there were many provisions in the 2ransitory ,rovisions
therein that favored aliens. 9 was shoc(ed when 9 read a provision
authoriFing +erH'3e 3o*(ra3(+ while we, in this Constitutional Commission, provided
for Filipino control of the economy. ?e are, therefore, providing for e0ceptional
instances where aliens may circumvent Filipino control of our economy. And one
way of circumventing the rule in favor of Filipino control of the economy is to
recogniFe +erH'3e 3o*(ra3(+.
As far as 9 am concerned, if 9 should have my own way, 9 am for the complete
deletion of this provision. 0o=eHer, =e are 7re+e*('*& a 3o:7ro:'+e in the sense
that we are re!uiring a two-thirds vote of all the 8embers of Congress as a
safeguard. 9 thin( we should not mistrust the future 8embers of Congress by saying
that the purpose of this provision is to avoid corruption. ?e cannot claim that they
are less patriotic than we are. 9 thin( the 8embers of this Commission should (now
that entering into +erH'3e 3o*(ra3(+ is an e0ception to the rule on protection of
natural resources for the interest of the nation, and therefore, being an e0ception it
should be subject, whenever possible, to stringent rules. 9t seems to me that we are
liberaliFing the rules in favor of aliens.
9 say these things with a heavy heart, 8adam ,resident. 9 do not claim to be a
nationalist, but 9 love my country. A/(2ou&2 =e *ee, '*He+(:e*(+, =e :u+( a,o7(
+a;e&uar,+ that are truly reflective of the sentiments of the people and not mere
cosmetic safeguards as they now appear in the 6amir amendment. 'Applause+
2han( you, 8adam ,resident.
B/&C
Another e0cerpt, featuring then Commissioner 'now Chief 6ustice+ =ilario D.
5avide 6r., indicates the limitations of the scope of such service contracts -- the! are
valid onl! in regard to minerals9 petroleum and other mineral oils9 not to all natural
resources.
2=E ,4E95EN2. Commissioner 5avide is recogniFed.
84. 5A;95E. 2han( you, 8adam ,resident. 2his is an amendment to
the 6amir amendment and also to the 7ple amendment. 9 propose to
delete SNA2E4A" 4E7E4CET and substitute it with the
followingA 89NE4A", ,E247"EE8 AN5 72=E4 89NE4A"
79". 7n the 7ple amendment, 9 propose to addA 2=E
N729F9CA297N 27 C7ND4E =A"" 1E ?92=9N 2=942I
5AI F478 2=E EKECE297N 7F 2=E E4;9CE C7N24AC2.
2=E ,4E95EN2. ?hat does the Committee say with respect to the first
amendment in lieu of SNA2E4A" 4E7E4CETO
84. ;9""EDA. Could Commissioner 5avide e0plain thatO
84. 5A;95E. 8adam ,resident, with the use of SNA2E4A"
4E7E4CET here, it would necessarily include all lands of the
public domain, our marine resources, forests, par(s and so on. o
we would li(e to limit the scope of these +erH'3e 3o*(ra3(+ to those
areas really where these may be needed, the e0ploitation,
development and e0ploration of minerals, petroleum and other
mineral oils. And so, we believe that we should really, if we want to
grant +erH'3e 3o*(ra3(+ at all, limit the same to o*/y (2o+e
7ar('3u/ar area+ =2ere F'/'7'*o 3a7'(a/ :ay *o( be +u;;'3'e*(, and
not to all natural resources.
84. EA4EJ. 6ust a point of clarification again, 8adam ,resident.
?hen the Commissioner made those enumerations and
specifications, 9 suppose he deliberately did not include Sagricultural
landTO
84. 5A;95E. 2hat is precisely the reason we have to enumerate what
these resources are into which +erH'3e 3o*(ra3(+ may enter. o,
beyond the reach of any +erH'3e 3o*(ra3( will be lands of the public
domain, timberlands, forests, marine resources, fauna and flora,
wildlife and national par(s.
B/$C
After the 6amir amendment was voted upon and approved by a vote of -) to ):
with - abstentions, Commissioner 5avide made the following statement, which is
very relevant to our !uestA
2=E ,4E95EN2. Commissioner 5avide is recogniFed.
84. 5A;95E. 9 am very glad that Commissioner ,adilla emphasiFed
minerals, petroleum and mineral oils. 2he Commission has just
approved the possible foreign entry into the development,
e0ploration and utiliFation of these minerals, petroleum and other
mineral oils by virtue of the 6amir amendment. 9 voted in favor of
the 6amir amendment because it will eventually give way to vesting
in e0clusively Filipino citiFens and corporations wholly owned by
Filipino citiFens the right to utiliFe the other natural resources. 2his
means that as a matter of policy, natural resources should be utiliFed
and e0ploited only by Filipino citiFens or corporations wholly owned
by such citiFens. 1ut by virtue of the 6amir amendment, since we
feel that Filipino capital may not be enough for the development and
utiliFation of minerals, petroleum and other mineral oils, the
,resident can enter into +erH'3e 3o*(ra3(+ with foreign corporations
precisely for the development and utiliFation of such resources. And
so, there is nothing to fear that we will stagnate in the development
of minerals, petroleum and mineral oils be3au+e =e *o= a//o=
+erH'3e 3o*(ra3(+. 0 0 0.T
B/%C
2he foregoing are mere fragments of the framersR lengthy discussions of the
provision dealing with agreements 5 5 5 involving either technical or financial
assistance9 which ultimately became paragraph / of ection - of Article K99 of the
Constitution. 1eyond any doubt, the members of the ConCom were actually
debating about the martial-law-era +erH'3e 3o*(ra3(+ for which the! were
craftinga77ro7r'a(e +a;e&uar,+.
9n the voting that led to the approval of Article K99 by the ConCom, the
e0planations given by Commissioners Dascon, Darcia and 2adeo indicated that they
had voted to reject this provision on account of their objections to the
SconstitutionaliFationT of the Sservice contractT concept.
8r. Dascon said, ?" felt that if we would constitutionali@e an! provision
on service contracts9 this should alwa!s be with the concurrence of *ongress and
not guided onl! b! a general law to be promulgated b! *ongress.A
B/*C
8r. Darcia
e0plained, ?&ervice contracts are given constitutional legitimi@ation in Sec. D9 even
when the! have been proven to be inimical to the interests of the nation9 providing9
as the! do9 the legal loophole for the e5ploitation of our natural resources for the
benefit of foreign interests.A
B.:C
"i(ewise, 8r. 2adeo cited inter alia the fact that
service contracts continued to subsist, enabling foreign interests to benefit from our
natural resources.
B.)C
I( =a+ 2ar,/y /'Je/y (2a( (2e+e &e*(/e:e* =ou/, 2aHe
obKe3(e, +o +(re*uou+/y, 2a, (2e 7roH'+'o* 3a//e, ;or :ere (e32*'3a/ or ;'*a*3'a/
a++'+(a*3e a*, *o(2'*& :ore.
2he deliberations of the ConCom and some commissionersR e0planation of their
votes leave no room for doubt that the service contract concept precisely
underpinned the commissionersR understanding of the Sagreements involving either
technical or financial assistance.T
&ummation of the
+oncom 5eliberations
At this point, we sum up the matters established, based on a careful reading of
the ConCom deliberations, as followsA
W 9n their deliberations on what was to become paragraph /, the
framers used the term service contracts in referring
to agreements 5 5 5 involving either technical or financial
assistance.
W 2hey spo(e of service contracts as the concept was understood
in the )*$# Constitution.
W 9t was obvious from their discussions that they were not about
to ban or eradicate service contracts.
W 9nstead, the! were plainl! crafting provisions to put in place
safeguards that would eliminate or minimi@e the abuses
prevalent during the marital law regime. 9n brief, they were
going to permit service contracts with foreign corporations as
contractors, but with safety measures to prevent abuses, as an
e0ception to the general norm established in the first paragraph
of ection - of Article K99. 2his provision reserves or limits to
Filipino citiFens -- and corporations at least &: percent of which
is owned by such citiFens -- the e0ploration, development and
utiliFation of natural resources.
W 2his provision was prompted by the perceived insufficiency of
Filipino capital and the felt need for foreign investments in the
E5E of minerals and petroleum resources.
W 2he framers for the most part debated about the sort of
safeguards that would be considered ade!uate and reasonable.
1ut some of them, having more SradicalT leanings, wanted to
ban service contracts altogether@ for them, the provision would
permit aliens to e0ploit and benefit from the nationRs natural
resources, which they felt should be reserved only for Filipinos.
W 9n the e0planation of their votes, the individual commissioners
were heard by the entire body. 2hey sounded off their individual
opinions, openly enunciated their philosophies, and supported or
attac(ed the provisions with fervor. EveryoneRs viewpoint was
heard.
W 9n the final voting, the Article on the National Economy and
,atrimony -- including paragraph / allowing service contracts
with foreign corporations as an e0ception to the general norm in
paragraph ) of ection - of the same article -- was resoundingly
approved by a vote of #- to $, with - abstentions.
*greements $nvolving #echnical
or Financial *ssistance *re
&ervice +ontracts 7ith &afeguards
From the foregoing, we are impelled to conclude that the phrase agreements
involving either technical or financial assistance9 referred to in paragraph /, are in
fact service contracts. 1ut unli(e those of the )*$# variety, the new ones are
between foreign corporations acting as contractors on the one hand@ and on the other,
the government as principal or SownerT of the wor(s. 9n the new service contracts,
the foreign contractors provide capital, technology and technical (now-how, and
managerial e0pertise in the creation and operation of large-scale mining3e0tractive
enterprises@ and the government, through its agencies '5EN4, 8D1+, actively
e0ercises control and supervision over the entire operation.
uch service contracts may be entered into onl! with respect to minerals9
petroleum and other mineral oils. 2he grant thereof is subject to several safeguards,
among which are these re!uirementsA
')+ 2he service contract shall be crafted in accordance with a general law that will
set standard or uniform terms, conditions and re!uirements, presumably to attain a
certain uniformity in provisions and avoid the possible insertion of terms
disadvantageous to the country.
'-+ 2he ,resident shall be the signatory for the government because, supposedly
before an agreement is presented to the ,resident for signature, it will have been
vetted several times over at different levels to ensure that it conforms to law and can
withstand public scrutiny.
'#+ ?ithin thirty days of the e0ecuted agreement, the ,resident shall report it to
Congress to give that branch of government an opportunity to loo( over the
agreement and interpose timely objections, if any.
Jse of the 4ecord of the
+on+om to *scertain $ntent
At this juncture, we shall address, rather than gloss over, the use of the
SframersR intentT approach, and the criticism hurled by petitioners who !uote a ruling
of this CourtA
?(hile it is permissible in this 'urisdiction to consult the debates and proceedings of
the constitutional convention in order to arrive at the reason and purpose of the
resulting *onstitution9 resort thereto ma! be had onl! when other guides fail as said
proceedings are powerless to var! the terms of the *onstitution when the meaning is
clear. ebates in the constitutional convention Lare of value as showing the views of
the individual members, and as indicating the reason for their votes, but they give us
no light as to the views of the large majority who did not tal(, much less the mass of
our fellow citiFens whose votes at the polls gave that instrument the force of
fundamental law. ?e thin( it safer to construe the constitution from what appears
upon its face.R $he proper interpretation therefore depends more on how it was
understood b! the people adopting it than in the framersF understanding thereof.A
B.-C
2he notion that the deliberations reflect only the views of those members who
spo(e out and not the views of the majority who remained silent should be clarified.
?e must never forget that those who spo(e out were heard by those who remained
silent and did not react. 9f the latter were silent because they happened not to be
present at the time, they are presumed to have read the minutes and (ept abreast of
the deliberations. 1y remaining silent, they are deemed to have signified their assent
to and3or conformity with at least some of the views propounded or their lac( of
objections thereto. 9t was incumbent upon them, as representatives of the entire
Filipino people, to follow the deliberations closely and to spea( their minds on the
matter if they did not see eye to eye with the proponents of the draft provisions.
9n any event, each and every one of the commissioners had the opportunity to
spea( out and to vote on the matter. 8oreover, the individual e0planations of votes
are on record, and they show where each delegate stood on the issues. I* +u:, =e
3a**o( 3o:7/e(e/y ,e*'&ra(e (2e Ha/ue or u+e;u/*e++ o; (2e re3or, o; (2e
o*o:, +':7/y be3au+e 3er(a'* :e:ber+ 32o+e *o( (o +7eaJ ou(.
9t is contended that the deliberations therein did not necessarily reflect the
thin(ing of the voting population that participated in the referendum and ratified the
Constitution. ;erily, whether we li(e it or not, it is a bit too much to assume that
every one of those who voted to ratify the proposed Charter did so only after
carefully reading and mulling over it, provision by provision.
"i(ewise, it appears rather e0travagant to assume that every one of those who
did in fact bother to read the draft Charter actually understood the import of its
provisions, much less analyFed it vis-X-vis the previous Constitutions. ?e believe
that in reality, a good percentage of those who voted in favor of it did so more out of
faith and trust. For them, it was the product of the hard wor( and careful
deliberation of a group of intelligent, dedicated and trustworthy men and women of
integrity and conviction, whose love of country and fidelity to duty could not be
!uestioned.
9n short, a large proportion of the voters voted SyesT because the drafters, or a
majority of them, endorsed the proposed Constitution. ?hat this fact translates to is
the inescapable conclusion that many of the voters in the referendum did not form
their own isolated judgment about the draft Charter, much less about particular
provisions therein. 2hey only relied or fell bac( and acted upon the favorable
endorsement or recommendation of the framers as a group. 9n other words, by
voting !es, they may be deemed to have signified their voluntary adoption of the
understanding and interpretation of the delegates with respect to the proposed
Charter and its particular provisions. S9f itRs good enough for them, itRs good enough
for me@T or, in many instances, S9f itRs good enough for ,resident Cory A!uino, itRs
good enough for me.T
And even for those who voted based on their own individual assessment of the
proposed Charter, there is no evidence available to indicate that their assessment or
understanding of its provisions was in fact different from that of the drafters. 2his
unwritten assumption seems to be petitionersR as well. For all we (now, this segment
of voters must have read and understood the provisions of the Constitution in the
same way the framers had, an assumption that would account for the favorable votes.
Fundamentally spea(ing, in the process of rewriting the Charter, the members
of the ConCom as a group were supposed to represent the entire Filipino people.
2hus, we cannot but regard their views as being very much indicative of the thin(ing
of the people with respect to the matters deliberated upon and to the Charter as a
whole.
I( '+ (2ere;ore rea+o*ab/e a*, u*aHo',ab/e (o :aJe (2e ;o//o='*&
3o*3/u+'o*, ba+e, o* (2e aboHe ar&u:e*(+. A+ =r'((e* by (2e ;ra:er+ a*,
ra(';'e, a*, a,o7(e, by (2e 7eo7/e, (2e o*+('(u('o* a//o=+ (2e 3o*('*ue, u+e o;
+erH'3e 3o*(ra3(+ ='(2 ;ore'&* 3or7ora('o*+ -- a+ 3o*(ra3(or+ =2o =ou/, '*He+( '*
a*, o7era(e a*, :a*a&e eI(ra3('He e*(er7r'+e+, +ubKe3( (o (2e ;u// 3o*(ro/ a*,
+u7erH'+'o* o; (2e S(a(e -- +a*+ (2e abu+e+ o; (2e 7a+( re&':e. T2e 7ur7o+e '+
3/ear% (o ,eHe/o7 a*, u('/'6e our :'*era/, 7e(ro/eu: a*, o(2er re+our3e+ o* a
/ar&e +3a/e ;or (2e '::e,'a(e a*, (a*&'b/e be*e;'( o; (2e F'/'7'*o 7eo7/e.
9n view of the foregoing discussion, we should reverse the 5ecision of 6anuary
-$, -::/, and in fact now hold a view different from that of the 5ecision, which had
these findingsA 'a+ paragraph / of ection - of Article K99 limits foreign involvement
in the local mining industry to agreements strictly for either financial or technical
assistance only@ 'b+ the same paragraph precludes agreements that grant to foreign
corporations the management of local mining operations, as such agreements are
purportedly in the nature of service contracts as these were understood under the
)*$# Constitution@ 'c+ these service contracts were supposedly Sde-
constitutionaliFedT and proscribed by the omission of the term service contracts from
the )*%$ Constitution@ 'd+ since the ?8C, F2AA contains provisions permitting the
foreign contractor to manage the concern, the said F2AA is invalid for being a
prohibited service contract@ and 'e+ provisions of 4A $*/- and 5A7 *&-/:, which
li(ewise grant managerial authority to the foreign contractor, are also invalid and
unconstitutional.
Jltimate #est: &tateIs G+ontrolH
5eterminative of +onstitutionality
1ut we are not yet at the end of our !uest. Far from it. 9t seems that we are
confronted with a possible collision of constitutional provisions. 7n the one hand,
paragraph ) of ection - of Article K99 e0plicitly mandates the tate to e0ercise Sfull
control and supervisionT over the e0ploration, development and utiliFation of natural
resources. 7n the other hand, paragraph / permits safeguarded service contracts
with foreign contractors. Normally, pursuant thereto, the contractors e0ercise
management prerogatives over the mining operations and the enterprise as a whole.
2here is thus a legitimate ground to be concerned that either the tateRs full control
and supervision may rule out any e0ercise of management authority by the foreign
contractor@ or, the other way around, allowing the foreign contractor full
management prerogatives may ultimately negate the tateRs full control and
supervision.
"( Ma&'+ Va/ea(
Dua: !erea(
Ender the third principle of constitutional construction laid down
in 0rancisco -- ut magis valeat #uam pereat 88 every part of the Constitution is to be
given effect, and the Constitution is to be read and understood as a harmonious
whole. 2hus, ?full control and supervisionA b! the State must be understood as one
that does not preclude the legitimate e5ercise of management prerogatives b! the
foreign contractor. 1efore any further discussion, we must stress the primacy and
supremacy of the principle of sovereignty and tate control and supervision over all
aspects of e0ploration, development and utiliFation of the countryRs natural
resources, as mandated in the first paragraph of ection - of Article K99.
1ut in the ne0t breadth we have to point out that Sfull control and supervisionT
cannot be ta(en literally to mean that the tate controls and supervises ever!thing
involved9 down to the minutest details, and ma(es all decisions re!uired in the
mining operations. 2his strained concept of control and supervision over the mining
enterprise would render impossible the legitimate e0ercise by the contractors of a
reasonable degree of management prerogative and authority necessary and
indispensable to their proper functioning.
For one thing, such an interpretation would discourage foreign entry into large-
scale e0ploration, development and utiliFation activities@ and result in the
unmitigated stagnation of this sector, to the detriment of our nationRs development.
2his scenario renders paragraph / inoperative and useless. And as respondents have
correctly pointed out, the government does not have to micro-manage the mining
operations and dip its hands into the day-to-day affairs of the enterprise in order for it
to be considered as having full control and supervision.
2he concept of control
B.#C
adopted in ection - of Article K99 must be ta(en to
mean less than dictatorial, all-encompassing control@ but nevertheless sufficient to
give the tate the power to direct, restrain, regulate and govern the affairs of the
e0tractive enterprises. Control by the tate may be on a macro level, through the
establishment of policies, guidelines, regulations, industry standards and similar
measures that would enable the government to control the conduct of affairs in
various enterprises and restrain activities deemed not desirable or beneficial.
2he end in view is ensuring that these enterprises contribute to the economic
development and general welfare of the country, conserve the environment, and
uplift the well-being of the affected local communities. uch a concept of control
would be compatible with permitting the foreign contractor sufficient and reasonable
management authority over the enterprise it invested in, in order to ensure that it is
operating efficiently and profitably, to protect its investments and to enable it to
succeed.
T2e <ue+('o* (o be a*+=ere,, (2e*, '+ =2e(2er RA 7982 a*, '(+
I:7/e:e*('*& Ru/e+ e*ab/e (2e &oHer*:e*( (o eIer3'+e (2a( ,e&ree o; 3o*(ro/
+u;;'3'e*( (o ,'re3( a*, re&u/a(e (2e 3o*,u3( o; a;;a'r+ o; '*,'H',ua/ e*(er7r'+e+
a*, re+(ra'* u*,e+'rab/e a3('H'('e+.
7n the resolution of these !uestions will depend the validity and
constitutionality of certain provisions of the ,hilippine 8ining Act of )**. '4A
$*/-+ and its 9mplementing 4ules and 4egulations '5A7 *&-/:+, as well as the
?8C, F2AA.
9ndeed, petitioners charge
B./C
that 4A $*/-, as well as its 9mplementing 4ules
and 4egulations, ma(es it possible for F2AA contracts to cede full control and
management of mining enterprises over to fully foreign-owned corporations, with the
result that the tate is allegedly reduced to a passive regulator dependent on
submitted plans and reports, with wea( review and audit powers. 2he tate does not
supposedly act as the owner of the natural resources for and on behalf of the Filipino
people@ it practically has little effective say in the decisions made by the enterprise.
,etitioners then conclude that the law, the implementing regulations, and the ?8C,
F2AA cede Sbeneficial ownershipT of the mineral resources to the foreign contractor.
A careful scrutiny of the provisions of 4A $*/- and its 9mplementing 4ules
belies petitionersR claims. ,araphrasing the Constitution, ection / of the statute
clearly affirms the tateRs control thusA
?Sec. 4. &wnership of Mineral Resources. M Mineral resources are owned b! the
State and the e5ploration9 development9 utili@ation and processing thereof shall be
under its full control and supervision. $he State ma! directl! underta2e such
activities or it ma! enter into mineral agreements with contractors.
?$he State shall recogni@e and protect the rights of the indigenous cultural
communities to their ancestral lands as provided for b! the *onstitution.A
2he afore!uoted provision is substantively reiterated in ection - of 5A7 *&-
/: as followsA
?Sec. <. eclaration of Polic!. %ll mineral resources in public and private lands
within the territor! and e5clusive economic @one of the Republic of the Philippines
are owned b! the State. "t shall be the responsibilit! of the State to promote their
rational e5ploration9 development9 utili@ation and conservation through the
combined efforts of the 3overnment and private sector in order to enhance national
growth in a wa! that effectivel! safeguards the environment and protects the rights of
affected communities.A
&ufficient +ontrol 1ver ining
1perations /ested in the &tate
by 4* 7:<= and 5*1 :6%<A
4A $*/- provides for the tateRs control and supervision over mining
operations. 2he following provisions thereof establish the mechanism of inspection
and visitorial rights over mining operations and institute reportorial re!uirements in
this mannerA
). ec. % which provides for the 5EN4Rs power of over-all
supervision and periodic review for Sthe conservation,
management, development and proper use of the tateRs mineral
resourcesT@
-. ec. * which authoriFes the 8ines and Deosciences 1ureau '8D1+
under the 5EN4 to e0ercise Sdirect charge in the administration
and disposition of mineral resourcesT, and empowers the 8D1 to
Smonitor the compliance by the contractor of the terms and
conditions of the mineral agreementsT, Sconfiscate surety and
performance bondsT, and deputiFe whenever necessary any
member or unit of the ,hil. National ,olice, barangay, duly
registered non-governmental organiFation 'ND7+ or any !ualified
person to police mining activities@
#. ec. && which vests in the 4egional 5irector Te0clusive jurisdiction
over safety inspections of all installations, whether surface or
undergroundT, utiliFed in mining operations.
/. ec. #., which incorporates into all F2AAs the following terms,
conditions and warrantiesA
S'g+ 8ining operations shall be conducted in accordance
with the provisions of the Act and its 944.
S'h+ ?or( programs and minimum e0penditures
commitments.
0 0 0 0 0 0 0 0 0
S'(+ 4e!uiring proponent to effectively use appropriate
anti-pollution technology and facilities to protect
the environment and restore or rehabilitate mined-
out areas.
S'l+ 2he contractors shall furnish the Dovernment
records of geologic, accounting and other relevant
data for its mining operation, and that boo(s of
accounts and records shall be open for inspection
by the government. 0 0 0.
S'm+ 4e!uiring the proponent to dispose of the minerals
at the highest price and more advantageous terms
and conditions.
S'n+ 0 0 0 0 0 0 0 0 0
S'o+ uch other terms and conditions consistent with the
Constitution and with this Act as the ecretary may
deem to be for the best interest of the tate and the
welfare of the Filipino people.T
2he foregoing provisions of ection #. of 4A $*/- are also reflected and
implemented in ection .& 'g+, 'h+, 'l+, 'm+ and 'n+ of the 9mplementing 4ules, 5A7
*&-/:.
8oreover, 4A $*/- and 5A7 *&-/: also provide various stipulations
confirming the governmentRs control over mining enterprisesA
W 2he contractor is to relin!uish to the government those portions of
the contract area not needed for mining operations and not covered by
any declaration of mining feasibility 'ection #.-e, 4A $*/-@ ection
&:, 5A7 *&-/:+.
W 2he contractor must comply with the provisions pertaining to mine
safety, health and environmental protection 'Chapter K9, 4A $*/-@
Chapters K; and K;9, 5A7 *&-/:+.
W For violation of any of its terms and conditions, government may
cancel an F2AA. 'Chapter K;99, 4A $*/-@ Chapter KK9;, 5A7 *&-
/:+.
W An F2AA contractor is obliged to open its boo(s of accounts and
records for inspection by the government 'ection .&-m, 5A7 *&-/:+.
W An F2AA contractor has to dispose of the minerals and by-products
at the highest mar(et price and register with the 8D1 a copy of the
sales agreement 'ection .&-n, 5A7 *&-/:+.
W 8D1 is mandated to monitor the contractorRs compliance with the
terms and conditions of the F2AA@ and to deputiFe, when necessary,
any member or unit of the ,hilippine National ,olice, the barangay or
a 5EN4-accredited nongovernmental organiFation to police mining
activities 'ection $-d and -f, 5A7 *&-/:+.
W An F2AA cannot be transferred or assigned without prior approval by
the ,resident 'ection /:, 4A $*/-@ ection &&, 5A7 *&-/:+.
W A mining project under an F2AA cannot proceed to the
construction3development3utiliFation stage, unless its 5eclaration of
8ining ,roject Feasibility has been approved by government 'ection
-/, 4A $*/-+.
W 2he 5eclaration of 8ining ,roject Feasibility filed by the contractor
cannot be approved without submission of the following documentsA
). Approved mining project feasibility study
'ection .#-d, 5A7 *&-/:+
-. Approved three-year wor( program 'ection .#-
a-/, 5A7 *&-/:+
#. Environmental compliance certificate 'ection
$:, 4A $*/-+
/. Approved environmental protection and
enhancement program 'ection &*, 4A $*/-+
.. Approval by the angguniang
,anlalawigan31ayan31arangay 'ection $:, 4A
$*/-@ ection -$, 4A $)&:+
&. Free and prior informed consent by the
indigenous peoples concerned, including
payment of royalties through a 8emorandum
of Agreement 'ection )&, 4A $*/-@ ection
.*, 4A %#$)+
W 2he F2AA contractor is obliged to
assist in the development of its mining community, promotion of the
general welfare of its inhabitants, and development of science and
mining technology 'ection .$, 4A $*/-+.
W 2he F2AA contractor is obliged to
submit reports 'on !uarterly, semi-annual or annual basis as the case
may be@ per ection -$:, 5A7 *&-/:+, pertaining to the followingA
). E0ploration
-. 5rilling
#. 8ineral resources and reserves
/. Energy consumption
.. ,roduction
&. ales and mar(eting
$. Employment
%. ,ayment of ta0es, royalties, fees and other
Dovernment hares
*. 8ine safety, health and environment
):. "and use
)). ocial development
)-. E0plosives consumption
W An F2AA pertaining to areas within
government reservations cannot be granted without a written
clearance from the government agencies concerned 'ection )*, 4A
$*/-@ ection ./, 5A7 *&-/:+.
W An F2AA contractor is re!uired to
post a financial guarantee bond in favor of the government in an
amount e!uivalent to its e0penditures obligations for any particular
year. 2his re!uirement is apart from the representations and
warranties of the contractor that it has access to all the financing,
managerial and technical e0pertise and technology necessary to carry
out the objectives of the F2AA 'ection #.-b, -e, and -f, 4A $*/-+.
W 7ther reports to be submitted by the
contractor, as re!uired under 5A7 *&-/:, are as followsA an
environmental report on the rehabilitation of the mined-out area
and3or mine waste3tailing covered area, and anti-pollution measures
underta(en 'ection #.-a--+@ annual reports of the mining operations
and records of geologic accounting 'ection .&-m+@ annual progress
reports and final report of e0ploration activities 'ection .&--+.
W 7ther programs re!uired to be
submitted by the contractor, pursuant to 5A7 *&-/:, are the
followingA a safety and health program 'ection )//+@ an
environmental wor( program 'ection )&%+@ an annual environmental
protection and enhancement program 'ection )$)+.
2he foregoing gamut of re!uirements, regulations, restrictions and limitations
imposed upon the F2AA contractor by the statute and regulations easily overturns
petitionersR contention. 2he setup under 4A $*/- and 5A7 *&-/: hardly relegates
the tate to the role of a Spassive regulatorT dependent on submitted plans and
reports. 7n the contrary, the government agencies concerned are empowered to
approve or disapprove -- hence, to influence, direct and change -- the various wor(
programs and the corresponding minimum e0penditure commitments for each of the
e0ploration, development and utiliFation phases of the mining enterprise.
7nce these plans and reports are approved, the contractor is bound to comply
with its commitments therein. Figures for mineral production and sales are regularly
monitored and subjected to government review, in order to ensure that the products
and by-products are disposed of at the best prices possible@ even copies of sales
agreements have to be submitted to and registered with 8D1. And the contractor is
mandated to open its boo(s of accounts and records for scrutiny, so as to enable the
tate to determine if the government share has been fully paid.
2he tate may li(ewise compel the contractorRs compliance with mandatory
re!uirements on mine safety, health and environmental protection, and the use of
anti-pollution technology and facilities. 8oreover, the contractor is also obligated to
assist in the development of the mining community and to pay royalties to the
indigenous peoples concerned.
Cancellation of the F2AA may be the penalty for violation of any of its terms
and conditions and3or noncompliance with statutes or regulations. 2his general, all-
around, multipurpose sanction is no trifling matter, especially to a contractor who
may have yet to recover the tens or hundreds of millions of dollars sun( into a
mining project.
7verall, considering the provisions of the statute and the regulations just
discussed, we believe that the tate definitely possesses the means by which it can
have the ultimate word in the operation of the enterprise, set directions and
objectives, and detect deviations and noncompliance by the contractor@ li(ewise, it
has the capability to enforce compliance and to impose sanctions, should the
occasion therefor arise.
I* o(2er =or,+, (2e FTAA 3o*(ra3(or '+ *o( ;ree (o ,o =2a(eHer '( 7/ea+e+
a*, &e( a=ay ='(2 '(B o* (2e 3o*(rary, '( ='// 2aHe (o ;o//o= (2e &oHer*:e*( /'*e
'; '( =a*(+ (o +(ay '* (2e e*(er7r'+e. I*e/u3(ab/y (2e*, RA 7982 a*, DAO 96-8.
He+( '* (2e &oHer*:e*( :ore (2a* a +u;;'3'e*( ,e&ree o; 3o*(ro/ a*, +u7erH'+'o*
oHer (2e 3o*,u3( o; :'*'*& o7era('o*+.
&ection 3>aq? of 4* 7:<=
;ot Jnconstitutional
An objection has been e0pressed that ection #'a!+
B..C
of 4A $*/- -- which
allows a foreign contractor to apply for and hold an e5ploration permit 88 is
unconstitutional. 2he reasoning is that ection - of Article K99 of the Constitution
does not allow foreign-owned corporations to underta(e mining operations directly.
2hey may act only as contractors of the tate under an F2AA@ and the tate, as the
party directly underta(ing e0ploitation of its natural resources, must hold through the
government all e0ploration permits and similar authoriFations. =ence, ection #'a!+,
in permitting foreign-owned corporations to hold e0ploration permits, is
unconstitutional.
2he objection, however, is not well-founded. ?hile the Constitution mandates
the tate to e0ercise full control and supervision over the e0ploitation of mineral
resources, nowhere does it re#uire the government to hold all e5ploration permits
and similar authori@ations. 9n fact, there is no prohibition at all against foreign or
local corporations or contractors holding e0ploration permits. 2he reason is not hard
to see.
,ursuant to ection -: of 4A $*/-, an e0ploration permit merely grants to a
!ualified person the right to conduct e5ploration for all minerals in specified
areas. Such a permit does not amount to an authori@ation to e5tract and carr! off
the mineral resources that ma! be discovered. 2his phase involves nothing but
e0penditures for e0ploring the contract area and locating the mineral bodies. As no
e0traction is involved, there are no revenues or incomes to spea( of. 9n short, the
e0ploration permit is an authoriFation for the grantee to spend its own funds on
e0ploration programs that are pre-approved by the government, without any right to
recover anything should no minerals in commercial !uantities be discovered. 2he
tate ris(s nothing and loses nothing by granting these permits to local or foreign
firms@ in fact, it stands to gain in the form of data generated by the e0ploration
activities.
,ursuant to ection -/ of 4A $*/-, an e0ploration permit grantee who
determines the commercial viability of a mining area may, within the term of the
permit, file with the 8D1 a declaration of mining project feasibility accompanied by
a wor( program for development. 2he approval of the mining project feasibility and
compliance with other re!uirements of 4A $*/- vests in the grantee the e0clusive
right to an 8,A or any other mineral agreement, or to an F2AA.
2hus, the permit grantee may apply for an 8,A, a joint venture agreement, a
co-production agreement, or an F2AA over the permit area, and the application shall
be approved if the permit grantee meets the necessary !ualifications and the terms
and conditions of any such agreement. 2herefore, the contractor will be in a position
to e0tract minerals and earn revenues only when the 8,A or another mineral
agreement, or an F2AA, is granted. At that point, the contractorRs rights and
obligations will be covered by an F2AA or a mineral agreement.
1ut prior to the issuance of such F2AA or mineral agreement, the e0ploration
permit grantee 'or prospective contractor+ cannot yet be deemed to have entered into
any contract or agreement with the tate, and the grantee would definitely need to
have some document or instrument as evidence of its right to conduct e0ploration
wor(s within the specified area. 2his need is met by the e0ploration permit issued
pursuant to ections #'a!+, -: and -# of 4A $*/-.
I* br'e;, (2e eI7/ora('o* 7er:'( +erHe+ a 7ra3('3a/ a*, /e&'(':a(e 7ur7o+e
'* (2a( '( 7ro(e3(+ (2e '*(ere+(+ a*, 7re+erHe+ (2e r'&2(+ o; (2e eI7/ora('o* 7er:'(
&ra*(ee F(2e =ou/,-be 3o*(ra3(orG -- ;ore'&* or /o3a/ -- ,ur'*& (2e 7er'o, o; (':e
(2a( '( '+ +7e*,'*& 2eaH'/y o* eI7/ora('o* =orJ+, ='(2ou( ye( be'*& ab/e (o ear*
reHe*ue+ (o re3ou7 a*y o; '(+ '*He+(:e*(+ a*, eI7e*,'(ure+. 8inus this permit
and the protection it affords, the e0ploration wor(s and e0penditures may end up
benefiting only claim-jumpers. uch a possibility tends to discourage investors and
contractors. 2hus, ection #'a!+ of 4A $*/- may not be deemed unconstitutional.
#he #erms of the 7+( F#**
* 5eference to &tate +ontrol
A perusal of the ?8C, F2AA also reveals a slew of stipulations providing for
tate control and supervisionA
). 2he contractor is obligated to account for the value of production and
sale of minerals 'Clause )./+.
-. 2he contractorRs wor( program, activities and budgets must be
approved by3on behalf of the tate 'Clause -.)+.
#. 2he 5EN4 secretary has the power to e0tend the e0ploration period
'Clause #.--a+.
/. Approval by the tate is necessary for incorporating lands into the
F2AA contract area 'Clause /.#-c+.
.. 2he 1ureau of Forest 5evelopment is vested with discretion in
regard to approving the inclusion of forest reserves as part of the
F2AA contract area 'Clause /..+.
&. 2he contractor is obliged to relin!uish periodically parts of the
contract area not needed for e0ploration and development 'Clause
/.&+.
$. A 5eclaration of 8ining Feasibility must be submitted for approval
by the tate 'Clause /.&-b+.
%. 2he contractor is obligated to report to the tate its e0ploration
activities 'Clause /.*+.
*. 2he contractor is re!uired to obtain tate approval of its wor(
programs for the succeeding two-year periods, containing the
proposed wor( activities and e0penditures budget related to
e0ploration 'Clause ..)+.
):. 2he contractor is re!uired to obtain tate approval for its proposed
e0penditures for e0ploration activities 'Clause ..-+.
)). 2he contractor is re!uired to submit an annual report on geological,
geophysical, geochemical and other information relating to its
e0plorations within the F2AA area 'Clause ..#-a+.
)-. 2he contractor is to submit within si0 months after e0piration of
e0ploration period a final report on all its findings in the contract
area 'Clause ..#-b+.
)#. 2he contractor, after conducting feasibility studies, shall submit a
declaration of mining feasibility, along with a description of the area
to be developed and mined, a description of the proposed mining
operations and the technology to be employed, and a proposed wor(
program for the development phase, for approval by the 5EN4
secretary 'Clause ../+.
)/. 2he contractor is obliged to complete the development of the mine,
including construction of the production facilities, within the period
stated in the approved wor( program 'Clause &.)+.
).. 2he contractor is obligated to submit for approval of the 5EN4
secretary a wor( program covering each period of three fiscal years
'Clause &.-+.
)&. 2he contractor is to submit reports to the 5EN4 secretary on the
production, ore reserves, wor( accomplished and wor( in progress,
profile of its wor( force and management staff, and other technical
information 'Clause &.#+.
)$. Any e0pansions, modifications, improvements and replacements of
mining facilities shall be subject to the approval of the secretary
'Clause &./+.
)%. 2he tate has control with respect to the amount of funds that the
contractor may borrow within the ,hilippines 'Clause $.-+.
)*. 2he tate has supervisory power with respect to technical, financial
and mar(eting issues 'Clause ):.)-a+.
-:. 2he contractor is re!uired to ensure &: percent Filipino e!uity in the
contractor, within ten years of recovering specified e0penditures,
unless not so re!uired by subse!uent legislation 'Clause ):.)+.
-). 2he tate has the right to terminate the F2AA for the contractorRs
unremedied substantial breach thereof 'Clause )#.-+@
--. 2he tateRs approval is needed for any assignment of the F2AA by
the contractor to an entity other than an affiliate 'Clause )/.)+.
?e should elaborate a little on the wor( programs and budgets, and what they
mean with respect to the tateRs ability to e0ercise full control and effective
supervision over the enterprise. For instance, throughout the initial five-
year e5ploration and feasibilit! phase of the project, the contractor is mandated by
Clause ..) of the ?8C, F2AA to submit a series of wor( programs 'copy furnished
the director of 8D1+ to the 5EN4 secretary for approval. 2he programs will detail
the contractorRs proposed e5ploration activities and budget covering each subse!uent
period of two fiscal years.
9n other words, the concerned government officials will be informed
beforehand of the proposed e0ploration activities and e0penditures of the contractor
for each succeeding two-year period, with the right to approve3disapprove them or
re!uire changes or adjustments therein if deemed necessary.
"i(ewise, under Clause ..-'a+, the amount that the contractor was supposed to
spend for e0ploration activities during the first contract year of the e0ploration
period was fi0ed at not less than ,-/ million@ and then for the succeeding years, the
amount shall be as agreed between the 5EN4 secretary and the contractor prior to
the commencement of each subse!uent fiscal year. 9f no such agreement is arrived
upon, the previous yearRs e0penditure commitment shall apply.
2his provision alone grants the government through the 5EN4 secretary a very
big say in the e0ploration phase of the project. 2his fact is not something to be ta(en
lightly, considering that thegovernment has absolutel! no contribution to the
e5ploration e5penditures or wor2 activities and !et is given veto power over such a
critical aspect of the pro'ect. ?e cannot but construe as very significant such a
degree of control over the project and, resultantly, over the mining enterprise itself.
Following its e0ploration activities or feasibility studies, if the contractor
believes that any part of the contract area is li(ely to contain an economic mineral
resource, it shall submit to the 5EN4 secretary a declaration of mining feasibility
'per Clause ../ of the F2AA+, together with a technical description of the area
delineated for development and production, a description of the proposed mining
operations including the technolog! to be used9 a wor2 program for development9 an
environmental impact statement9 and a description of the contributions to the
economic and general welfare of the country to be generated by the mining
operations 'pursuant to Clause ...+.
2he wor2 program for development is subject to the approval of the :,R
secretar!. Epon its approval, the contractor must comply with it and complete the
development of the mine, including the construction of production facilities and
installation of machinery and e!uipment, within the period provided in the approved
wor( program for development 'per Clause &.)+.
2hus, notably, the development phase of the project is li(ewise subject to the
control and supervision of the government. 9t cannot be emphasiFed enough that the
proper and timely construction and deployment of the production facilities and the
development of the mine are of pivotal significance to the success of the mining
venture. Any missteps here will potentially be very costly to remedy. =ence, the
submission of the wor( program for development to the 5EN4 secretary for
approval is particularly noteworthy, considering that so many millions of dollars
worth of investments -- courtesy of the contractor -- are made to depend on the
tateRs consideration and action.
2hroughout the operating period, the contractor is re!uired to submit to the
5EN4 secretary for approval, copy furnished the director of 8D1, wor( programs
covering each period of three fiscal years 'per Clause &.-+. 5uring the same period
'per Clause &.#+, the contractor is mandated to submit various !uarterly and annual
reports to the 5EN4 secretary, copy furnished the director of 8D1, on the tonnages
of production in terms of ores and concentrates, with corresponding grades, values
and destinations@ reports of sales@ total ore reserves, total tonnage of ores, wor(
accomplished and wor( in progress 'installations and facilities related to mining
operations+, investments made or committed, and so on and so forth.
Ender ection ;999, during the period of mining operations, the contractor is
also re!uired to submit to the 5EN4 secretary 'copy furnished the director of 8D1+
the wor( program and corresponding budget for the contract area, describing the
mining operations that are proposed to be carried out during the period covered. 2he
secretary is, of course, entitled to grant or deny approval of any wor( program or
budget and3or propose revisions thereto. 7nce the program3budget has been
approved, the contractor shall comply therewith.
"n sum9 the above provisions of the (M*P 0$%% ta2en together9 far from
constituting a surrender of control and a grant of beneficial ownership of mineral
resources to the contractor in #uestion9be+(o= u7o* (2e S(a(e :ore (2a* a,e<ua(e
3o*(ro/ a*, +u7erH'+'o* oHer (2e a3('H'('e+ o; (2e 3o*(ra3(or a*, (2e e*(er7r'+e.
;o &urrender of +ontrol
Jnder the 7+( F#**
,etitioners, however, ta(e aim at Clause %.-, %.#, and %.. of the ?8C, F2AA
which, they say, amount to a relin!uishment of control by the tate, since it Scannot
truly impose its own discretionT in respect of the submitted wor( programs.
?G.<. $he Secretar! shall be deemed to have approved an! (or2
Programme or 6udget or variation thereof submitted b! the
*ontractor unless within si5t! C=>E da!s after submission b! the
*ontractor the Secretar! gives notice declining such approval or
proposing a revision of certain features and specif!ing its reasons
therefor CLthe Re'ection ,oticeFE.
G.D. "f the Secretar! gives a Re'ection ,otice9 the Parties shall
promptl! meet and endeavor to agree on amendments to the (or2
Programme or 6udget. "f the Secretar! and the *ontractor fail to
agree on the proposed revision within D> da!s from deliver! of the
Re'ection ,otice then the (or2 Programme or 6udget or
variation thereof proposed b! the *ontractor shall be deemed
approved9 so as not to unnecessaril! dela! the performance of the
%greement.
G.4. 5 5 5 5 5 5 5 5 5
G.K. So far as is practicable9 the *ontractor shall compl! with an!
approved (or2 Programme and 6udget. "t is recogni@ed b! the
Secretar! and the *ontractor that the details of an! (or2
Programmes or 6udgets ma! re#uire changes in the light of
changing circumstances. $he *ontractor ma! ma2e such changes
without approval of the Secretar! provided the! do not change the
general ob'ective of an! (or2 Programme9 nor entail a
downward variance of more than twent! per centum C<>percentE
of the relevant 6udget. %ll other variations to an approved (or2
Programme or 6udget shall be submitted for approval of the
Secretar!.A
From the provisions !uoted above, petitioners generaliFe by asserting that the
government does not participate in ma(ing critical decisions regarding the operations
of the mining firm. Furthermore, while the tate can re!uire the submission of wor(
programs and budgets, the decision of the contractor will still prevail, if the parties
have a difference of opinion with regard to matters affecting operations and
management.
?e hold, however, that the foregoing provisions do not manifest a
relin!uishment of control. For instance, Clause %.- merely provides a mechanism for
preventing the business or mining operations from grinding to a complete halt as a
result of possibly over-long and unjustified delays in the governmentRs handling,
processing and approval of submitted wor( programs and budgets. Anyway, the
provision does give the 5EN4 secretary more than sufficient time '&: days+ to react
to submitted wor( programs and budgets. 9t cannot be supposed that proper grounds
for objecting thereto, if any e0ist, cannot be discovered within a period of two
months.
7n the other hand, Clause %.# see(s to provide a temporary, stop-gap solution
in the event a disagreement over the submitted wor( program or budget arises
between the tate and the contractor and results in a stalemate or impasse, in order
that there will be no unreasonably long delays in the performance of the wor(s.
2hese temporary or stop-gap solutions are not necessarily evil or wrong.
Neither does it follow that the government will ine0orably be aggrieved if and when
these temporary remedies come into play. 0irst, avoidance of long delays in these
situations will undoubtedly redound to the benefit of the tate as well as the
contractor. Second, who is to say that the wor( program or budget proposed by the
contractor and deemed approved under Clause %.# would not be the better or more
reasonable or more effective alternativeO 2he contractor, being the Sinsider,T as it
were, may be said to be in a better position than the tate -- an outsider loo(ing in --
to determine what wor( program or budget would be appropriate, more effective, or
more suitable under the circumstances.
All things considered, we ta(e e0ception to the characteriFation of the 5EN4
secretary as a subservient nonentity whom the contractor can overrule at will, on
account of Clause %.#. And neither is it true that under the same clause, the 5EN4
secretary has no authority whatsoever to disapprove the wor( program. As
4espondent ?8C, reasoned in its 4eply-8emorandum, the tate -- despite Clause
%.# -- still has control over the contract area and it may, as sovereign authority,
prohibit wor( thereon until the dispute is resolved. And ultimately, the tate may
terminate the agreement, pursuant to Clause )#.- of the same F2AA, citing
substantial breach thereof. =ence, it clearly retains full and effective control of the
e0ploitation of the mineral resources.
7n the other hand, Clause %.. is merely an ac(nowledgment of the partiesR need
for fle0ibility, given that no one can accurately forecast under all circumstances, or
predict how situations may change. =ence, while approved wor( programs and
budgets are to be followed and complied with as far as practicable, there may be
instances in which changes will have to be effected, and effected rapidly, since
events may ta(e shape and unfold with suddenness and urgency. 2hus, Clause %..
allows the contractor to move ahead and ma(e changes without the e0press or
implicit approval of the 5EN4 secretary. uch changes are, however, subject to
certain conditions that will serve to limit or restrict the variance and prevent the
contractor from straying very far from what has been approved.
Clause %.. provides the contractor a certain amount of fle0ibility to meet
une0pected situations, while still guaranteeing that the approved wor( programs and
budgets are not abandoned altogether. Clause %.. does not constitute proof that the
tate has relin!uished control. And ultimately, should there be disagreement with
the actions ta(en by the contractor in this instance as well as under Clause %.#
discussed above, the 5EN4 secretary may resort to cancellation3termination of the
F2AA as the ultimate sanction.
5iscretion to &elect +ontract
*rea ;ot an *bdication of +ontrol
Ne0t, petitioners complain that the contractor has full discretion to select -- and
the government has no say whatsoever as to -- the parts of the contract area to be
relin!uished pursuant to Clause /.& of the ?8C, F2AA.
B.&C
2his clause, however,
does not constitute abdication of control. 4ather, it is a mere ac(nowledgment of the
fact that the contractor will have determined, after appropriate e0ploration wor(s,
which portions of the contract area do not contain minerals in commercial !uantities
sufficient to justify developing the same and ought therefore to be relin!uished. 2he
tate cannot just substitute its judgment for that of the contractor and dictate upon
the latter which areas to give up.
8oreover, we can be certain that the contractorRs self-interest will propel proper and
efficient relin!uishment. According to private respondent,
B.$C
a mining company tries to
relin!uish as much non-mineral areas as soon as possible, because the annual occupation
fees paid to the government are based on the total hectarage of the contract area, net of
the areas relin!uished. 2hus, the larger the remaining area, the heftier the amount of
occupation fees to be paid by the contractor. Accordingly, relin!uishment is not an issue,
given that the contractor will not want to pay the annual occupation fees on the non-
mineral parts of its contract area. Neither will it want to relin!uish promising sites,
which other contractors may subse!uently pic( up.
-overnment ;ot
a &ubcontractor
,etitioners further maintain that the contractor can compel the government to
e0ercise its power of eminent domain to ac!uire surface areas within the contract
area for the contractorRs use. Clause ):.- 'e+ of the ?8C, F2AA provides that the
government agrees that the contractor shall ?CeE have the right to re#uire the
3overnment at the *ontractorFs own cost9 to purchase or ac#uire surface areas for
and on behalf of the *ontractor at such price and terms as ma! be acceptable to the
contractor. %t the termination of this %greement such areas shall be sold b! public
auction or tender and the *ontractor shall be entitled to reimbursement of the costs
of ac#uisition and maintenance9 ad'usted for inflation9 from the proceeds of sale.A
According to petitioners, Sgovernment becomes a subcontractor to the
contractorT and may, on account of this provision, be compelled Sto ma2e use of its
power of eminent domain9 not for public purposes but on behalf of a private part!9
i.e.9 the contractor.T 8oreover, the power of the courts to determine the amount
corresponding to the constitutional re!uirement of just compensation has allegedly
also been contracted away by the government, on account of the latterRs commitment
that the ac!uisition shall be at such terms as may be acceptable to the contractor.
=owever, private respondent has proffered a logical e0planation for the
provision.
B.%C
ection ):.-'e+ contemplates a situation applicable to foreign-owned
corporations. ?8C,, at the time of the e0ecution of the F2AA, was a foreign-
owned corporation and therefore not !ualified to own land. As contractor, it has at
some future date to construct the infrastructure -- the mine processing plant, the
camp site, the tailings dam, and other infrastructure -- needed for the large-scale
mining operations. 9t will then have to identify and pinpoint, within the F2AA
contract area, the particular surface areas with favorable topography deemed ideal
for such infrastructure and will need to ac!uire the surface rights. 2he tate owns
the mineral deposits in the earth, and is also !ualified to own land.
ection ):.-'e+ sets forth the mechanism whereby the foreign-owned
contractor, dis!ualified to own land, identifies to the government the specific surface
areas within the F2AA contract area to be ac!uired for the mine infrastructure. 2he
government then ac!uires ownership of the surface land areas on behalf of the
contractor, in order to enable the latter to proceed to fully implement the F2AA.
2he contractor, of course, shoulders the purchase price of the land. =ence, the
provision allows it, after termination of the F2AA, to be reimbursed from proceeds
of the sale of the surface areas, which the government will dispose of through public
bidding. 9t should be noted that this provision will not be applicable to agittarius as
the present F2AA contractor, since it is a Filipino corporation !ualified to own and
hold land. As such, it may therefore freely negotiate with the surface rights owners
and ac!uire the surface property in its own right.
Clearly, petitioners have needlessly jumped to unwarranted conclusions,
without being aware of the rationale for the said provision. 2hat provision does not
call for the e0ercise of the power of eminent domain -- and determination of just
compensation is not an issue -- as much as it calls for a !ualified party to ac!uire the
surface rights on behalf of a foreign-owned contractor.
4ather than having the foreign contractor act through a dummy corporation,
having the tate do the purchasing is a better alternative. 2his will at least cause the
government to be aware of such transaction3s and foster transparency in the
contractorRs dealings with the local property owners. 2he government, then, will not
act as a subcontractor of the contractor@ rather9 it will facilitate the transaction and
enable the parties to avoid a technical violation of the %nti8umm! )aw.
*bsence of (rovision
4equiring &ale at (osted
(rices ;ot (roblematic
2he supposed absence of any provision in the ?8C, F2AA directly and
e0plicitly re!uiring the contractor to sell the mineral products at posted or mar2et
prices is not a problem. Apart from Clause )./ of the F2AA obligating the contractor
to account for the total value of mineral production and the sale of minerals, we can
also loo( to ection #. of 4A $*/-, which incorporates into all F2AAs certain terms,
conditions and warranties, including the followingA
?ClE $he contractors shall furnish the 3overnment records of geologic9
accounting and other relevant data for its mining operation9 and
that boo2s of accounts and records shall be open for inspection b!
the government. 5 5 5
CmE Re#uiring the proponent to dispose of the minerals at the highest
price and more advantageous terms and conditions.A
For that matter, ection .&'n+ of 5A7 **-.& specifically obligates an F2AA
contractor to dispose of the minerals and by-products at the highest mar(et price and
to register with the 8D1 a copy of the sales agreement. After all, the provisions of
prevailing statutes as well as rules and regulations are deemed written into contracts.
+ontractorIs 4ight to ortgage
;ot 1b"ectionable (er &e
,etitioners also !uestion the absolute right of the contractor under Clause ):.-
'l+ to mortgage and encumber not only its rights and interests in the F2AA and the
infrastructure and improvements introduced, but also the mineral products
e5tracted. ,rivate respondents do not touch on this matter, but we believe that this
provision may have to do with the conditions imposed by the creditor-ban(s of the
then foreign contractor ?8C, to secure the lendings made or to be made to the
latter. 7rdinarily, ban(s lend not only on the security of mortgages on fi0ed assets,
but also on encumbrances of goods produced that can easily be sold and converted
into cash that can be applied to the repayment of loans. 1an(s even lend on the
security of accounts receivable that are collectible within *: days.
B.*C
9t is not uncommon to find that a debtor corporation has e0ecuted deeds of
assignment Sby way of securityT over the production for the ne0t twelve months
and3or the proceeds of the sale thereof -- or the corresponding accounts receivable, if
sold on terms -- in favor of its creditor-ban(s. uch deeds may include authoriFing
the creditors to sell the products themselves and to collect the sales proceeds and3or
the accounts receivable.
een in this conte0t, Clause ):.-'l+ is not something out of the ordinary or
objectionable. 9n any case, as will be e0plained below, even if it is allowed
to mortgage or encumber the mineral end-products themselves, the contractor is not
freed of its obligation to pay the government its basic and additional shares in the net
mining revenue, which is the essential thing to consider.
9n brief, the alarum raised over the contractorRs right to mortgage the minerals
is simply unwarranted. 6ust the same, the contractor must account for the value of
mineral production and the sales proceeds therefrom. "i(ewise, under the ?8C,
F2AA, the government remains entitled to its si0ty percent share in the net mining
revenues of the contractor. 2he latterRs right to mortgage the minerals does not
negate the tateRs right to receive its share of net mining revenues.
&hareholders Free
to &ell #heir &tocBs
,etitioners li(ewise criticiFe Clause ):.-'(+, which gives the contractor
authority Sto change its e!uity structure at any time.T 2his provision may seem
somewhat unusual, but considering that ?8C, then was ):: percent foreign-
owned, any change would mean that such percentage would either stay unaltered or
be decreased in favor of Filipino ownership. 8oreover, the foreign-held shares may
change hands freely. uch eventuality is as it should be.
?e believe it is not necessary for government to attempt to limit or restrict the
freedom of the shareholders in the contractor to freely transfer, dispose of or
encumber their shareholdings, consonant with the unfettered e0ercise of their
business judgment and discretion. 4ather, what is critical is that9 regardless of the
identit!9 nationalit! and percentage ownership of the various shareholders of the
contractor 88 and regardless of whether these shareholders decide to ta2e the
compan! public9 float bonds and other fi5ed8income instruments9 or allow the
creditor8ban2s to ta2e an e#uit! position in the compan! 88 the foreign8owned
contractor is alwa!s in a position to render the services re#uired under the 0$%%9
under the direction and control of the government.
+ontractorIs 4ight to *sB
For *mendment ;ot *bsolute
?ith respect to Clauses ):./'e+ and 'i+, petitioners complain that these
provisions bind government to allow amendments to the F2AA if re!uired by ban(s
and other financial institutions as part of the conditions for new lendings. =owever,
we do not find anything wrong with Clause ):./'e+, which only states that ?if the
*ontractor see2s to obtain financing contemplated herein from ban2s or other
financial institutions9 Cthe 3overnment shallE cooperate with the *ontractor in such
efforts provided that such financing arrangements will in no event reduce the
*ontractorFs obligations or the 3overnmentFs rights hereunder.A
2he colatilla obviously safeguards the tateRs interests@ if breached, it will give the
government cause to object to the proposed amendments.
7n the other hand, Clause ):./'i+ provides that ?the 3overnment shall
favourabl! consider an! re#uest from NtheO *ontractor for amendments of this
%greement which are necessar! in order for the *ontractor to successfull! obtain the
financing.A ,etitioners see in this provision a complete renunciation of control. ?e
disagree.
2he proviso does not say that the government shall grant any re!uest for
amendment. Clause ):./'i+ only obliges the tate to favorably consider any such
re!uest, which is not at all unreasonable, as it is not e!uivalent to saying that the
government must automatically consent to it. 2his provision should be read together
with the rest of the F2AA provisions instituting government control and supervision
over the mining enterprise. 2he clause should not be given an interpretation that
enables the contractor to wiggle out of the restrictions imposed upon it by merely
suggesting that certain amendments are re!uested by the lenders.
4ather, it is up to the contractor to prove to the government that the re!uested
changes to the F2AA are indispensable, as they enable the contractor to obtain the
needed financing@ that without such contract changes, the funders would absolutely
refuse to e0tend the loan@ that there are no other sources of financing available to the
contractor 'a very unli(ely scenario+@ and that without the needed financing, the
e0ecution of the wor( programs will not proceed. 1ut the bottom line is, in the
e0ercise of its power of control, the government has the final sa! on whether to
approve or disapprove such re!uested amendments to the F2AA. "n short9 approval
thereof is not mandator! on the part of the government.
I* ;'*e, (2e ;ore&o'*& eHa/ua('o* a*, a*a/y+'+ o; (2e a;ore:e*('o*e, FTAA
7roH'+'o*+ +u;;'3'e*(/y oHer(ur*+ 7e('('o*er+9 /'(a*y o; obKe3('o*+ (o a*,
3r'('3'+:+ o; (2e S(a(e9+ a//e&e, /a3J o; 3o*(ro/.
Financial !enefits ;ot
&urrendered to the +ontractor
7ne of the main reasons certain provisions of 4A $*/- were struc( down was
the finding mentioned in the 5ecision that beneficial ownership of the mineral
resources had been conveyed to the contractor. 2his finding was based on the
underlying assumption, common to the said provisions, that the foreign contractor
manages the mineral resources in the same way that foreign contractors in service
contracts used to. ?6! allowing foreign contractors to manage or operate all the
aspects of the mining operation9 the above8cited provisions of R.%. ,o. ;94< have in
effect conveyed beneficial ownership over the nationFs mineral resources to these
contractors9 leaving the State with nothing but bare title thereto.A
B&:C
As the ?8C,
F2AA contained similar provisions deemed by the ponente to be abhorrent to the
Constitution, the 5ecision struc( down the Contract as well.
1eneficial ownership has been defined as ownership recogniFed by law and
capable of being enforced in the courts at the suit of the beneficial owner.
B&)C
1lac(Rs )aw ictionar! indicates that the term is used in two sensesA first, to
indicate the interest of a beneficiary in trust property 'also called Se!uitable
ownershipT+@ and second, to refer to the power of a corporate shareholder to buy or
sell the shares, though the shareholder is not registered in the corporationRs boo(s as
the owner.
B&-C
Esually, beneficial ownership is distinguished from na(ed ownership,
which is the enjoyment of all the benefits and privileges of ownership, as against
possession of the bare title to property.
An assiduous e0amination of the ?8C, F2AA uncovers no indication that it
confers upon ?8C, ownership, beneficial or otherwise, of the mining property it is
to develop, the minerals to be produced, or the proceeds of their sale, which can be
legally asserted and enforced as against the tate.
As public respondents correctly point out, any interest the contractor may have
in the proceeds of the mining operation is merely the e!uivalent of the consideration
the government has underta(en to pay for its services. All lawful contracts re!uire
such mutual prestations, and the ?8C, F2AA is no different. 2he contractor
commits to perform certain services for the government in respect of the mining
operation, and in turn it is to be compensated out of the net mining revenues
generated from the sale of mineral products. ?hat would be objectionable is a
contractual provision that unduly benefits the contractor far in e0cess of the service
rendered or value delivered, if any, in e0change therefor.
A careful perusal of the statute itself and its implementing rules reveals that
neither 4A $*/- nor 5A7 **-.& can be said to convey beneficial ownership of any
mineral resource or product to any foreign F2AA contractor.
)quitable &haring
of Financial !enefits
7n the contrary, 5A7 **-.&, entitled ?3uidelines :stablishing the 0iscal
Regime of 0inancial or $echnical %ssistance %greementsA aims to ensure an
e!uitable sharing of the benefits derived from mineral resources. 2hese benefits are
to be e!uitably shared among the government 'national and local+, the F2AA
contractor, and the affected communities. 2he purpose is to ensure sustainable
mineral resources development@ and a fair, e!uitable, competitive and stable
investment regime for the large-scale e0ploration, development and commercial
utiliFation of minerals. $he general framewor2 or concept followed in crafting the
fiscal regime of the 0$%% is based on the principle that the government e5pects real
contributions to the economic growth and general welfare of the countr!9 while the
contractor e5pects a reasonable return on its investments in the pro'ect.
B&#C
pecifically, under the fiscal regime, the governmentRs e0pectation is, inter
alia9 the receipt of its share from the ta0es and fees normally paid by a mining
enterprise. 7n the other hand, the F2AA contractor is granted by the government
certain fiscal and non-fiscal incentives
B&/C
to help support the formerRs cash flow
during the most critical phase 'cost recovery+ and to ma(e the ,hilippines
competitive with other mineral-producing countries. After the contractor has
recovered its initial investment, it will pay all the normal ta0es and fees comprising
the basic share of the government, plus an additional share for the government based
on the options and formulae set forth in 5A7 **-.&.
2he said 5A7 spells out the financial benefits the government will receive
from an F2AA, referred to as Sthe Dovernment hare,T composed of a basic
government share a*, a* additional government share.
2he ba+'3 &oHer*:e*( +2are is comprised of all direct ta0es, fees and
royalties, as well as other payments made by the contractor during the term of the
F2AA. 2hese are amounts paid directly to 'i+ the national government 'through the
1ureau of 9nternal 4evenue, 1ureau of Customs, 8ines Y Deosciences 1ureau and
other national government agencies imposing ta0es or fees+, 'ii+ the local
government units where the mining activity is conducted, and 'iii+ persons and
communities directly affected by the mining project. 2he major ta0es and other
payments constituting the basic government share are enumerated belowA
B&.C
,ayments to the National DovernmentA
W E0cise ta0 on minerals - - percent of the gross output of mining
operations
W ContractorR income ta0 - ma0imum of #- percent of ta0able
income for corporations
W Customs duties and fees on imported capital e!uipment -the
rate is set by the 2ariff and Customs Code '#-$ percent for
chemicals@ #-): percent for e0plosives@ #-). percent for
mechanical and electrical e!uipment@ and #-): percent for
vehicles, aircraft and vessels
W ;A2 on imported e!uipment, goods and services N ): percent
of value
W 4oyalties due the government on minerals e0tracted from
mineral reservations, if applicable N . percent of the actual
mar(et value of the minerals produced
W 5ocumentary stamp ta0 - the rate depends on the type of
transaction
W Capital gains ta0 on traded stoc(s - . to ): percent of the value
of the shares
W ?ithholding ta0 on interest payments on foreign loans -).
percent of the amount of interest
W ?ithholding ta0 on dividend payments to foreign stoc(holders
N ). percent of the dividend
W ?harfage and port fees
W "icensing fees 'for e0ample, radio permit, firearms permit,
professional fees+
W 7ther national ta0es and fees.
,ayments to "ocal DovernmentsA
W "ocal business ta0 - a ma0imum of - percent of gross sales or
receipts 'the rate varies among local government units+
W 4eal property ta0 - - percent of the fair mar(et value of the
property, based on an assessment level set by the local
government
W pecial education levy - ) percent of the basis used for the real
property ta0
W 7ccupation fees - ,h,.: per hectare per year@ ,h,):: per
hectare per year if located in a mineral reservation
W Community ta0 - ma0imum of ,h,):,.:: per year
W All other local government ta0es, fees and imposts as of the
effective date of the F2AA - the rate and the type depend on the
local government
7ther ,aymentsA
W 4oyalty to indigenous cultural communities, if any N ) percent
of gross output from mining operations
W pecial allowance - payment to claim owners and surface rights
holders
Apart from the basic share, an a,,'('o*a/ &oHer*:e*( +2are is also collected
from the F2AA contractor in accordance with the second paragraph of ection %) of
4A $*/-, which provides that the government share shall be comprised of, among
other things9 certain ta0es, duties and fees. 2he subject proviso readsA
?$he 3overnment share in a financial or technical assistance agreement shall
consist of9 among other things9 the contractorFs corporate income ta59 e5cise ta59
special allowance9 withholding ta5 due from the contractorFs foreign stoc2holders
arising from dividend or interest pa!ments to the said foreign stoc2holder in case of
a foreign national9 and all such other ta5es9 duties and fees as provided for under
e5isting laws.A'1old types supplied.+
2he government, through the 5EN4 and the 8D1, has interpreted the insertion
of the phrase among other things as signifying that the government is entitled to an
Sadditional government shareT to be paid by the contractor apart from the Sbasic
share,T in order to attain a fifty-fifty sharing of net benefits from mining.
2he a,,'('o*a/ &oHer*:e*( +2are is computed by using one of three options
or schemes presented in 5A7 **-.&A ')+ a fifty-fifty sharing in the cumulative
present value of cash flows@ '-+ the share based on e0cess profits@ and '#+ the sharing
based on the cumulative net mining revenue. 2he particular formula to be applied
will be selected by the contractor, with a written notice to the government prior to the
commencement of the development and construction phase of the mining project.
B&&C
,roceeds from the government shares arising from an F2AA contract are
distributed to and received by the different levels of government in the following
proportionsA
National Dovernment .: percent
,rovincial Dovernment ): percent
8unicipal Dovernment -: percent
Affected 1arangays -: percent
2he portion of revenues remaining after the deduction of the basic and
additional government shares is what goes to the contractor.
-overnmentIs &hare in an
F#** ;ot +onsisting &olely
of #a'es. 5uties and Fees
9n connection with the foregoing discussion on the ba+'3 a*, a,,'('o*a/
&oHer*:e*( shares, it is pertinent at this juncture to mention the criticism leveled at
the second paragraph of ection %) of 4A $*/-, !uoted earlier. 2he said proviso has
been denounced, because, allegedly, the tateRs share in F2AAs with foreign
contractors has been limited to ta0es, fees and duties only@ in effect, the tate has
been deprived of a share in the after8ta5 income of the enterprise. 9n the face of this
allegation, one has to consider that the law does not define the term among other
thingsH and the 7ffice of the olicitor Deneral, in its 8otion for 4econsideration,
appears to have erroneously claimed that the phrase refers to indirect ta5es.
2he law provides no definition of the term among other things9 for the reason
that Congress deliberately avoided setting unnecessary limitations as to what may
constitute compensation to the tate for the e0ploitation and use of mineral
resources. 1ut the inclusion of that phrase clearly and unmista(ably reveals
the legislative intent to have the State collect more than 'ust the usual ta5es9 duties
and fees. Certainly, there is nothing in that phrase -- or in the second paragraph of
ection %) -- that would suggest that such phrase should be interpreted as referring
only to ta0es, duties, fees and the li(e.
,recisely for that reason, to fulfill the legislative intent behind the inclusion of
the phrase among other things in the second paragraph of ection %),
B&$C
the 5EN4
structured and formulated in 5A7 **-.& the said a,,'('o*a/ &oHer*:e*( +2are.
uch a share was to consist not of ta0es, but of a +2are '* (2e ear*'*&+ or 3a+2
;/o=+ o; (2e :'*'*& e*(er7r'+e. 2he additional government share was to be paid by
the contractor on top of the basic share, so as to achieve a fift!8fift! sharing
88 between the government and the contractor -- of net benefits from mining. "n the
Ramos8eJera paper9 the e5planation of the (2ree o7('o*+ or
;or:u/a+
B&%C
-- presented in %& 998K= for the computation of the additional
government share 88 serves to debun2 the claim that the governmentFs ta2e from an
0$%% consists solel! of ta5es9 fees and duties.
Enfortunately, the 7ffice of the olicitor Deneral -- although in possession of
the relevant data -- failed to fully replicate or echo the pertinent elucidation in the
4amos-5e;era paper regarding the three schemes or options for computing the
additional government share presented in 5A7 **-.&. =ad due care been ta(en by the
7D, the Court would have been duly apprised of the real nature and particulars of
the additional share.
1ut, perhaps, on account of the esoteric discussion in the 4amos-5e;era paper,
and the even more abstruse mathematical jargon employed in 5A7 **-.&, the 7D
omitted any mention of the three options. 9nstead, the 7D s(ipped to a side
discussion of the effect of indirect ta5es9 which had nothing at all to do with the
additional government share9 to begin with. Enfortunately, this move created the
wrong impression, pointed out in 6ustice Antonio 2. CarpioRs 7pinion, that the 7D
had ta(en the position that the additional government share consisted of indirect
ta0es.
9n any event, what is !uite evident is the fact that the a,,'('o*a/ &oHer*:e*(
+2are, as formulated, has nothing to do with ta0es -- direct or indirect -- or with
duties, fees or charges. 2o repeat, it is over and above the basic government share
composed of ta0es and duties. imply put, the additional share may be 'a+ an
amount that will result in a .:-.: sharing of the cumulative present value of the cash
flows
B&*C
of the enterprise@ 'b+ an amount e!uivalent to -. percent of the additional or
e5cess profits of the enterprise, rec(oned against a benchmar( return on investments@
or 'c+ an amount that will result in a fifty-fifty sharing of the cumulative net mining
revenue from the end of the recovery period up to the ta0able year in !uestion. 2he
contractor is re!uired to select one of the three options or formulae for computing the
additional share, an option it will apply to all of its mining operations.
As used above, Snet mining revenueT is defined as the gross output from
mining operations for a calendar year, less deductible e0penses 'inclusive of ta0es,
duties and fees+. uch revenue would roughly be e!uivalent to Sta0able incomeT
or income before income ta5. 5efinitely, as compared with, say, calculating
the a,,'('o*a/ &oHer*:e*( +2are on the basis of net income 'after income ta0+, the
net mining revenue is a better and much more reasonable basis for such computation,
as it gives a truer picture of the profitability of the company.
2o demonstrate that the three options or formulations will operate as intended,
8essrs. 4amos and de ;era also performed some !uantifications of the government
share via a financial modeling of each of the three options discussed above. 2hey
found that the government would get the highest share from the option that is based
on the net mining revenue, as compared with the other two options, considering only
the basic and the additional shares@ and that, even though production rate decreases,
the government share will actually increase when the net mining revenue and the
additional profit-based options are used.
Furthermore, it should be noted that the three options or formulae do not !et
ta2e into account the indirect ta5es
B$:C
and other financial contributions
B$)C
of mining
pro'ects. 2hese indirect ta0es and other contributions are real and actual benefits
enjoyed by the Filipino people and3or government. Now, if some of the !uantifiable
items are ta(en into account in the computations, the financial modeling would show
that the total government share increases to &: percent or higher -- in one instance,
as much as $$ percent and even %* percent -- of the net present value of total benefits
from the project. As noted in the 4amos-5e;era paper, these results are not at all
shabby, considering that the contractor puts in all the capital re!uirements and
assumes all the ris(s, without the government having to contribute or ris( anything.
5espite the foregoing e0planation, 6ustice Carpio still insisted during the
CourtRs deliberations that the phrase among other things refers only to ta0es, duties
and fees. ?e are bewildered by his position. 7n the one hand, he condemns the
8ining "aw for allegedly limiting the governmentRs benefits only to ta0es, duties
and fees@ and on the other, he refuses to allow the tate to benefit from the correct
and proper interpretation of the 5EN438D1. 2o remove all doubts then, we hold
that the tateRs share is not limited to ta0es, duties and fees only and that the
5EN438D1 interpretation of the phrase among other things is correct. 5efinitely,
this 5EN438D1 interpretation is not only legally sound, but also greatly
advantageous to the government.
7ne last point on the subject. 2he legislature acted judiciously in not defining
the terms among other things and, instead, leaving it to the agencies concerned to
devise and develop the various modes of arriving at a reasonable and fair amount for
the a,,'('o*a/ &oHer*:e*( +2are. As can be seen from 5A7 **-.&, the agencies
concerned did an admirable job of conceiving and developing not just one formula,
but three different formulae for arriving at the additional government share. Each of
these options is !uite fair and reasonable@ and, as 8essrs. 4amos and 5e ;era stated,
other alternatives or schemes for a possible improvement of the fiscal regime for
F2AAs are also being studied by the government.
1esides, not loc(ing into a fi0ed definition of the term among other things will
ultimately be more beneficial to the government, as it will have that innate fle0ibility
to adjust to and cope with rapidly changing circumstances, particularly those in the
international mar(ets. uch fle0ibility is especially significant for the government in
terms of helping our mining enterprises remain competitive in world mar(ets despite
challenging and shifting economic scenarios.
I* 3o*3/u+'o*, =e +(re++ (2a( =e ,o *o( +2are (2e H'e= (2a( '* FTAA+ ='(2
;ore'&* 3o*(ra3(or+ u*,er RA 7982, (2e &oHer*:e*(9+ +2are '+ /':'(e, (o (aIe+,
;ee+ a*, ,u('e+. o*+e<ue*(/y, =e ;'*, (2e a((a3J+ o* (2e +e3o*, 7ara&ra72 o;
Se3('o* >1 o; RA 7982 (o(a//y u*=arra*(e,.
+ollections ;ot ade Jncertain
by the #hird (aragraph of &ection 98
2he third or last paragraph of ection %)
B$-C
provides that the government share
in F2AAs shall be collected when the contractor shall have recovered its pre-
operating e0penses and e0ploration and development e0penditures. 2he objection
has been advanced that, on account of the proviso, the collection of the tateRs share
is not even certain, as there is no time limit in 4A $*/- for this grace period or
recovery period.
?e believe that Congress did not set any time limit for the grace period,
preferring to leave it to the concerned agencies, which are, on account of their
technical e0pertise and training, in a better position to determine the appropriate
durations for such recovery periods. After all, these recovery periods are determined,
to a great e0tent, by technical and technological factors peculiar to the mining
industry. 1esides, with developments and advances in technology and in the
geosciences, we cannot discount the possibility of shorter recovery periods. At any
rate, the concerned agencies have not been remiss in this area. 2he )**. and )**&
9mplementing 4ules and 4egulations of 4A $*/- specify that the period of recovery,
rec(oned from the date of commercial operation, shall be for a period not e5ceeding
five !ears9 or until the date of actual recover!9 whichever comes earlier.
*pproval of (re%1perating
)'penses 4equired by 4* 7:<=
till, 4A $*/- is criticiFed for allegedly not re!uiring government approval of
pre-operating, e0ploration and development e0penses of the foreign contractors, who
are in effect given unfettered discretion to determine the amounts of such e0penses.
upposedly, nothing prevents the contractors from recording such e0penses in
amounts e!ual to the mining revenues anticipated for the first ): or ). years of
commercial production, with the result that the share of the tate will be Fero for the
first ): or ). years. 8oreover, under the circumstances, the government would be
unable to say when it would start to receive its share under the F2AA.
?e believe that the argument is based on incorrect information as well as
speculation. 7bviously, certain crucial provisions in the 8ining "aw were
overloo(ed. ection -#, dealing with the rights and obligations of the e0ploration
permit grantee, statesA ?$he permittee shall underta2e e5ploration wor2 on the area
as specified b! its permit based on an approved wor2 program.A 2he ne0t proviso
readsA?%n! e5penditure in e5cess of the !earl! budget of the approved wor2
program ma! be carried forward and credited to the succeeding !ears covering the
duration of the permit. 5 5 5.A 'underscoring supplied+
Clearly, even at the stage of application for an e0ploration permit, the applicant
is re!uired to submit -- for approval by the government -- a proposed wor( program
for e0ploration, containing a yearly budget of proposed e0penditures. 2he tate has
the opportunity to pass upon 'and approve or reject+ such proposed e0penditures,
with the fore(nowledge that -- if approved -- these will subse!uently be recorded as
pre-operating e0penses that the contractor will have to recoup over the grace period.
2hat is not all.
Ender ection -/, an e0ploration permit holder who determines the commercial
viability of a project covering a mining area may, within the term of the permit, file
with the 8ines and Deosciences 1ureau a declaration of mining pro'ect
feasibilit!. 2his declaration is to be accompanied by a wor2 program for
development for the 1ureauRs approval, the necessary prelude for entering into an
F2AA, a mineral production sharing agreement '8,A+, or some other mineral
agreement. At this stage, too, the government obviously has the opportunity to
approve or reject the proposed wor( program and budgeted e0penditures
for development wor2s on the project. uch e0penditures will ultimately become the
pre-operating and development costs that will have to be recovered by the contractor.
Naturally, with the submission of approved wor( programs and budgets for the
e0ploration and the development3construction phases, the government will be able to
scrutiniFe and approve or re'ect such e0penditures. 9t will be well-informed as to the
amounts of pre-operating and other e0penses that the contractor may legitimately
recover and the appro0imate period of time needed to effect such a recovery. 2here
is therefore no way the contractor can just randomly post any amount of pre-
operating e0penses and e0pect to recover the same.
2he aforecited provisions on approved wor( programs and budgets have
counterparts in ection #., which deals with the terms and conditions e0clusively
applicable to F2AAs. 2he said provision re!uires certain terms and conditions to be
incorporated into F2AAs@ among them, ?a firm commitment 5 5 5 of an amount
corresponding to the e5penditure obligation that will be invested in the contract
areaA and ?representations and warranties 5 5 5 to timel! deplo! these Bfinancing,
managerial and technical e0pertise and technologicalC resources under its
supervision pursuant to the periodic wor2 programs and related budgets 5 5 59A as
well as ?wor2 programs and minimum e5penditures commitments.A 'underscoring
supplied+
Enarguably, given the provisions of ection #., the tate has every opportunity
to pass upon the proposed e0penditures under an F2AA and approve or re'ect them.
9t has access to all the information it may need in order to determine in advance the
amounts of pre-operating and developmental e0penses that will have to be recovered
by the contractor and the amount of time needed for such recovery.
I* +u::ary, =e 3a**o( a&ree (2a( (2e (2'r, or /a+( 7ara&ra72 o; Se3('o* >1
o; RA 7982 '+ '* a*y :a**er u*3o*+('(u('o*a/.
;o 5eprivation of
!eneficial 4ights
9t is also claimed that aside from the second and the third paragraphs of ection
%) 'discussed above+, ections %:, %/ and ))- of 4A $*/- also operate to deprive the
tate of beneficial rights of ownership over mineral resources@ and give them away
for free to private business enterprises 'including foreign owned corporations+.
"i(ewise, the said provisions have been construed as constituting, together with
ection %), an ingenious attempt to resurrect the old and discredited system of
Slicense, concession or lease.T
pecifically, ection %: is condemned for limiting the tateRs share in a mineral
production-sharing agreement '8,A+ to just the e0cise ta0 on the mineral product.
Ender ection ).)'A+ of the 2a0 Code, such ta0 is only - percent of the mar(et
value of the gross output of the minerals. 2he colatilla in ection %/, the portion
considered offensive to the Constitution, reiterates the same limitation made in
ection %:.
B$#C
9t should be pointed out that ection %: and the colatilla in ection %/ pertain
onl! to MPS%s and have no application to 0$%%s. 2hese particular statutory
provisions do not come within the issues that were defined and delineated by this
Court during the 7ral Argument -- particularly the third issue, which pertained
e0clusively to F2AAs. Neither did the parties argue upon them in their pleadings.
=ence, this Court cannot ma(e any pronouncement in this case regarding the
constitutionality of ections %: and %/ without violating the fundamental rules of
due process. 9ndeed, the two provisos will have to await another case specifically
placing them in issue.
7n the other hand, ection ))-
B$/C
is disparaged for allegedly reverting F2AAs
and all mineral agreements to the old and discredited Slicense, concession or leaseT
system. 2his ection states in relevant part that ?the provisions of *hapter
I"J Bwhich includes ections %: to %-C on government share in mineral production8
sharing agreement 5 5 5 shall immediatel! govern and appl! to a mining lessee or
contractor.A 'underscoring supplied+ 2his provision is construed as signifying that
the - percent e0cise ta0 which, pursuant to ection %:, comprises the government
share in 8,As shall now also constitute the government share in F2AAs -- as well
as in co-production agreements and joint venture agreements -- to the e0clusion of
revenues of any other nature or from any other source.
Apart from the fact that ection ))- li(ewise does not come within the issues
delineated by this Court during the 7ral Argument, and was never touched upon by
the parties in their pleadings, it must also be noted that the criticism hurled against
this ection is rooted in unwarranted conclusions made without considering other
relevant provisions in the statute. ?hether ection ))- may properly apply to co-
production or joint venture agreements, the fact of the matter is that it cannot be
made to appl! to 0$%%s.
0irst, ection ))- does not specifically mention or refer to F2AAs@ the only
reason it is being applied to them at all is the fact that it happens to use the word
Scontractor.T =ence, it is a bit of a stretch to insist that it covers F2AAs as
well. Second, mineral agreements, of which there are three types -- 8,As, co-
production agreements, and joint venture agreements -- are covered by Chapter ; of
4A $*/-. 7n the other hand, F2AAs are covered by and in fact are the subject of
Chapter ;9, an entirely different chapter altogether. 2he law obviously intends to
treat them as a breed apart from mineral agreements, since ection #. 'found in
Chapter ;9+ creates a long list of specific terms, conditions, commitments,
representations and warranties -- which have not been made applicable to mineral
agreements -- to be incorporated into F2AAs.
$hird, under ection #*, the F2AA contractor is given the option to
SdowngradeT -- to convert the F2AA into a mineral agreement at any time during the
term if the economic viability of the contract area is inade!uate to sustain large-scale
mining operations. 2hus, there is no reason to thin( that the law through ection ))-
intends to e0act from F2AA contractors merely the same government share 'a -
percent e0cise ta0+ that it apparently demands from contractors under the three forms
of mineral agreements. I* br'e;, Se3('o* 112 ,oe+ *o( a77/y (o FTAA+.
Notwithstanding the foregoing e0planation, 6ustices Carpio and 8orales
maintain that the Court must rule now on the constitutionality of ections %:, %/ and
))-, allegedly because the ?8C, F2AA contains a provision which grants the
contractor unbridled and SautomaticT authority to convert the F2AA into an 8,A@
and should such conversion happen, the tate would be prejudiced since its share
would be limited to the - percent e0cise ta0. 6ustice Carpio adds that there are five
8,As already signed just awaiting the judgment of this Court on respondentsR and
intervenorRs 8otions for 4econsideration. ?e hold however that, at this point, this
argument is based on pure speculation. 2he Court cannot rule on mere surmises and
hypothetical assumptions, without firm factual anchor. ?e repeatA basic due process
re!uires that we hear the parties who have a real legal interest in the 8,As 'i.e. the
parties who e0ecuted them+ before these 8,As can be reviewed, or worse, struc(
down by the Court. Anything less than that re!uirement would be arbitrary and
capricious.
9n any event, the conversion of the present F2AA into an 8,A is
problematic. 0irst9 the contractor must comply with the law, particularly ection #*
of 4A $*/-@ inter alia9 it must convincingly show that the Seconomic viability of the
contract is found to be inade!uate to justify large-scale mining
operations@T second9 it must contend with the ,residentRs e0ercise of the power of
tate control over the E5E of natural resources@ and third9 it will have to ris( a
possible declaration of the unconstitutionality 'in a proper case+ of ections %:, %/
and ))-.
2he first re!uirement is not as simple as it loo(s. ection #* contemplates a
situation in which an F2AA has already been e0ecuted and entered into, and is
presumably being implemented, when the contractor SdiscoversT that the mineral ore
reserves in the contract area are not sufficient to justify large-scale mining, and thus
the contractor re!uests the conversion of the F2AA into an 8,A. 2he contractor in
effect needs to e0plain why, despite its e0ploration activities, including the conduct
of various geologic and other scientific tests and procedures in the contract area, it
was unable to determine correctly the mineral ore reserves and the economic
viability of the area. 2he contractor must e0plain why, after conducting such
e0ploration activities, it decided to file a declaration of mining feasibility, and to
apply for an F2AA, thereby leading the tate to believe that the area could sustain
large-scale mining. 2he contractor must justify fully why its earlier findings, based
on scientific procedures, tests and data, turned out to be wrong, or were way off. 9t
must li(ewise prove that its new findings, also based on scientific tests and
procedures, are correct. 4ight away, this puts the contractorRs technical capabilities
and e0pertise into serious doubt. ?e wonder if anyone would relish being in this
situation. 2he tate could even !uestion and challenge the contractorRs !ualification
and competence to continue the activity under an 8,A.
A// '* a//, =2'/e (2ere :ay be 3o&e*( &rou*,+ (o a++a'/ (2e a;ore3'(e,
Se3('o*+, (2'+ our( -- o* 3o*+',era('o*+ o; ,ue 7ro3e++ -- 3a**o( ru/e u7o* (2e:
2ere. A*y=ay, '; /a(er o* (2e+e Se3('o*+ are ,e3/are, u*3o*+('(u('o*a/, +u32
,e3/ara('o* ='// *o( a;;e3( (2e o(2er 7or('o*+ +'*3e (2ey are 3/ear/y +e7arab/e
;ro: (2e re+(.
1ur ineral 4esources ;ot
-iven *way for Free by 4* 7:<=
Nevertheless, if only to disabuse our minds, we should address the contention
that our mineral resources are effectively given away for free by the law '4A $*/-+
in general and by ections %:, %), %/ and ))- in particular.
Foreign contractors do not just waltF into town one day and leave the ne0t,
ta(ing away mineral resources without pa!ing an!thing. 9n order to get at the
minerals, they have to invest huge sums of money 'tens or hundreds of millions of
dollars+ in e0ploration wor(s first. 9f the e0ploration proves unsuccessful, all the
cash spent thereon will not be returned to the foreign investors@ rather, those funds
will have been infused into the local economy, to remain there permanently. 2he
benefits therefrom cannot be simply ignored. And assuming that the foreign
contractors are successful in finding ore bodies that are viable for commercial
e0ploitation, they do not just pluc( out the minerals and cart them off. 2hey have
first to build camp sites and roadways@ dig mine shafts and connecting tunnels@
prepare tailing ponds, storage areas and vehicle depots@ install their machinery and
e!uipment, generator sets, pumps, water tan(s and sewer systems, and so on.
9n short, they need to e0pend a great deal more of their funds for facilities,
e!uipment and supplies, fuel, salaries of local labor and technical staff, and other
operating e0penses. 9n the meantime, they also have to pay ta0es,
B$.C
duties, fees, and
royalties. All told, the e0ploration, pre-feasibility, feasibility, development and
construction phases together add up to as many as eleven years.
B$&C
2he contractors
have to continually shell out funds for the duration of over a decade, before they can
commence commercial production from which they would eventually derive
revenues. All that money translates into a lot of Spump-primingT for the local
economy.
Dranted that the contractors are allowed subse!uently to recover their pre-
operating e0penses, still, that eventuality will happen only after they shall have first
put out the cash and fueled the economy. 8oreover, in the process of recouping their
investments and costs, the foreign contractors do not actuall! pull out the mone!
from the econom!. 4ather, they recover or recoup their investments out of actual
commercial production by not paying a portion of the basic government share
corresponding to national ta0es, along with the additional government share, for a
period of not more than five years
B$$C
counted from the commencement of commercial
production.
9t must be noted that there can be no recover! without commencing actual
commercial production. 9n the meantime that the contractors are recouping costs,
they need to continue operating@ in order to do so, they have to disburse money to
meet their various needs. 9n short, money is continually infused into the economy.
2he foregoing discussion should serve to rid us of the mista(en belief that,
since the foreign contractors are allowed to recover their investments and costs, the
end result is that they practically get the minerals for free, which leaves the Filipino
people none the better for it.
*ll !usinesses )ntitled
to +ost 4ecovery
)et it be put on record that not onl! foreign contractors9 but all businessmen
and all business entities in general9 have to recoup their investments and costs. 2hat
is one of the first things a student learns in business school. 4egardless of its
nationality, and whether or not a business entity has a five-year cost recovery period,
it will -- must -- have to recoup its investments, one way or another. 2his is just
common business sense. 4ecovery of investments is absolutely indispensable for
business survival@ and business survival ensures soundness of the economy, which is
critical and contributory to the general welfare of the people. :ven government
corporations must recoup their investments in order to survive and continue in
operation. And, as the preceding discussion has shown, there is no business that gets
ahead or earns profits without any cost to it.
9t must also be stressed that, though the tate owns vast mineral wealth, such
wealth is not readily accessible or transformable into usable and negotiable currency
without the intervention of the credible mining companies. 2hose untapped mineral
resources, hidden beneath tons of earth and roc(, may as well not be there for all the
good they do us right now. 2hey have first to be e0tracted and converted into
mar(etable form, and the country needs the foreign contractorRs funds, technology
and (now-how for that.
After about eleven years of pre-operation and another five years for cost
recovery, the foreign contractors will have just bro(en even. 9s it li(ely that they
would at that point stop their operations and leaveO Certainly not. 2hey have yet to
ma(e profits. 2hus, for the remainder of the contract term, they must strive to
maintain profitability. 5uring this period, they pay the whole of the basic
government share and the additional government share which9 ta2en together with
indirect ta5es and other contributions9 amount to appro5imatel! => percent or more
of the entire financial benefits generated b! the mining venture.
9n sum, we can hardly tal( about foreign contractors ta(ing our mineral
resources for free. 9t ta(es a lot of hard cash to even begin to do what they do. %nd
what the! do in this countr! ultimatel! benefits the local econom!9 grows businesses9
generates emplo!ment9 and creates infrastructure, as discussed above. =ence, we
definitely disagree with the sweeping claim that no F2AA under ection %) will ever
ma(e any real contribution to the growth of the economy or to the general welfare of
the country. 2his is not a plea for foreign contractors. Rather9 this is a #uestion of
focusing the 'udicial spotlight s#uarel! on all the pertinent facts as the! bear upon
the issue at hand9 in order to avoid leaping precipitatel! to ill8conceived conclusions
not solidl! grounded upon fact.
4epatriation of
*fter%#a' $ncome
Another objection points to the alleged failure of the 8ining "aw to ensure real
contributions to the economic growth and general welfare of the country, as
mandated by ection - of Article K99 of the Constitution. ,ursuant to ection %) of
the law, the entire after-ta0 income arising from the e0ploitation of mineral resources
owned by the tate supposedly belongs to the foreign contractors, which will
naturally repatriate the said after-ta0 income to their home countries, thereby
resulting in no real contribution to the economic growth of this country. Clearly, this
contention is premised on erroneous assumptions.
0irst, as already discussed in detail hereinabove, the concerned agencies have
correctly interpreted the second paragraph of ection %) of 4A $*/- to mean that the
government is entitled to an additional share, to be computed based on any one of the
following factorsA net mining revenues, the present value of the cash flows, or e0cess
profits rec(oned against a benchmar( rate of return on investments. o it is not
correct to say that all of the after-ta0 income will accrue to the foreign F2AA
contractor, as the government effectivel! receives a significant portion thereof.
Second, the foreign contractors can hardly ?repatriate the entire after8ta5
income to their home countries.A Even a bit of (nowledge of corporate finance will
show that it will be impossible to maintain a business as a Sgoing concernT if the
entire Snet profitT earned in any particular year will be ta(en out and repatriated.
2he Snet incomeT figure reflected in the bottom line is a mere accounting figure not
necessarily corresponding to cash in the ban(, or other !uic( assets. 9n order to
produce and set aside cash in an amount e!uivalent to the bottom line figure, one
may need to sell off assets or immediately collect receivables or li!uidate short-term
investments@ but doing so may very li(ely disrupt normal business operations.
9n terms of cash flows, the funds corresponding to the net income as of a
particular point in time are actuall! in use in the normal course of business
operations. ,ulling out such net income disrupts the cash flows and cash position of
the enterprise and, depending on the amount being ta(en out, could seriously cripple
or endanger the normal operations and financial health of the business enterprise. I*
+2or(, *o +a*e bu+'*e++ 7er+o*, 3o*3er*e, ='(2 :a'*(a'*'*& (2e :'*'*&
e*(er7r'+e a+ a &o'*& 3o*3er* a*, Jee7'*& a ;oo(2o/, '* '(+ :arJe(, 3a* a;;or, (o
re7a(r'a(e (2e e*('re a;(er-(aI '*3o:e (o (2e 2o:e 3ou*(ry.
#he &tateIs 4eceipt of &i'ty
(ercent of an F#** +ontractorIs
*fter%#a' $ncome ;ot andatory
?e now come to the ne0t objection which runs this wayA 9n F2AAs with a
foreign contractor, the tate must receive at least &: percent of the after-ta0 income
from the e0ploitation of its mineral resources. 2his share is the e!uivalent of the
constitutional re!uirement that at least &: percent of the capital, and hence &:
percent of the income, of mining companies should remain in Filipino hands.
0irst, we fail to see how we can properly conclude that the Constitution
mandates the tate to e0tract at least &: percent of the after-ta0 income from a
mining company run by a foreign contractor. 2he argument is that the Charter
re!uires the tateRs partner in a co-production agreement, joint venture agreement or
8,A to be a Filipino corporation 'at least &: percent owned by Filipino citiFens+.
?e !uestion the logic of this reasoning, premised on a supposedly parallel or
analogous situation. ?e are, after all, dealing with an essentiall! different e#uation,
one that involves different elements. T2e 2ar(er ,', *o( '*(e*, (o ;'I a* 'ro*-
3/a, ru/e o* (2e 6. 7er3e*( +2are, a77/'3ab/e (o a// +'(ua('o*+ a( a// (':e+ a*, '*
a// 3'r3u:+(a*3e+. 9f ever such was the intention of the framers, they would have
spelt it out in blac( and white. Jerba legis will serve to dispel unwarranted and
untenable conclusions.
Second9 if we would bother to do the math, we might better appreciate the
impact 'and reasonableness+ of what we are demanding of the foreign contractor.
"et us use a simplified illustration. "et us base it on gross revenues of, say, ,.::.
After deducting operating e0penses, but prior to income ta0, suppose a mining firm
ma(es a ta5able income of ,)::. A corporate income ta0 of #- percent results
in ,#- of ta0able income going to the government, leaving the mining firm
with ,&%. Dovernment then ta(es => percent thereof, e!uivalent to ,/:.%:, leaving
only ,-$.-: for the mining firm.
At this point the government has poc(eted ,#-.:: plus ,/:.%:, or a total
of ,$-.%: for every ,):: of ta0able income, leaving the mining firm with
only ,-$.-:. 1ut that is not all. 2he government has also ta(en - percent e0cise ta0
Soff the top,T e!uivalent to another ,):. Ender the minimum &: percent proposal,
the government nets around ,%-.%: 'not counting other ta0es, duties, fees and
charges+ from a ta0able income of ,):: 'assuming gross revenues of ,.::, for
purposes of illustration+. 7n the other hand, the foreign contractor, which provided
all the capital9 e#uipment and labor9 and too2 all the entrepreneurial ris2s
88 receives ,-$.-:. 7ne cannot but wonder whether such a distribution is even
remotely e!uitable and reasonable, considering the nature of the mining business.
2he amount of,%-.%: out of ,)::.:: is really a lot N it does not matter that we call
part of it e5cise ta5 or income ta5, and another portion thereof income from
e5ploitation of mineral resources. ome might thin( it wonderful to be able to ta(e
the lionRs share of the benefits. 1ut we have to as( ourselves if we are really serious
in attracting the investments that are the indispensable and (ey element in generating
the monetary benefits of which we wish to ta(e the lionRs share. Fa'r*e++ '+ a 3re,o
*o( o*/y '* /a=, bu( a/+o '* bu+'*e++.
$hird9 the &: percent rule in the petroleum industry cannot be insisted upon at
all times in the mining business. 2he reason happens to be the fact that in petroleum
operations, the bul( of e0penditures is in e0ploration, but once the contractor has
found and tapped into the deposit, subse!uent investments and e0penditures are
relatively minimal. 2he crude 'or gas+ (eeps gushing out, and the wor( entailed is
just a matter of piping, transporting and storing. Not so in mineral mining. 2he ore
body does not pop out on its own. Even after it has been located, the contractor must
continually invest in machineries and e0pend funds to dig and build tunnels in order
to access and e0tract the minerals from underneath hundreds of tons of earth and
roc(.
As already stated, the numerous intrinsic differences involved in their
respective operations and re!uirements, cost structures and investment needs render
it highly inappropriate to use petroleum operations F2AAs as benchmar(s for mining
F2AAs. ;erily, we cannot just ignore the realities of the distinctl! different situations
and stubbornly insist on the Sminimum &: percent.T
#he ining and the 1il $ndustries
5ifferent From )ach 1ther
2o stress, there is no independent showing that the ta(ing of at least a &:
percent share in the after-ta0 income of a mining company operated by a foreign
contractor is fair and reasonable under most if not all circumstances. 2he fact that
some petroleum companies li(e hell acceded to such percentage of sharing does not
ipso facto mean that it is per se reasonable and applicable to non8petroleum
situations Cthat is9 mining companiesE as well. ?e can ta(e judicial notice of the fact
that there are, after all, numerous intrinsic differences involved in their respective
operations and e#uipment or technological re#uirements9 costs structures and
capital investment needs9 and product pricing and mar2ets.
2here is no showing, for instance, that mining companies can readily cope with
a &: percent government share in the same way petroleum companies apparently
can. ?hat we have is a suggestion to enforce the &: percent !uota on the basis of a
disjointed analogy. 2he only factor common to the two disparate situations is the
e0traction of natural resources.
9ndeed, we should ta(e note of the fact that Congress made a distinction
between mining firms and petroleum companies. 9n 4epublic Act No. $$-* -- ?%n
%ct Reducing the :5cise $a5 Rates on Metallic and ,on8Metallic Minerals and
Puarr! Resources9 %mending for the Purpose Section 1K1CaE of the ,ational "nternal
Revenue *ode9 as amendedA 88 the lawma(ers fi0ed the e0cise ta0 rate on metallic
and non-metallic minerals at two percent of the actual mar(et value of the annual
gross output at the time of removal. =owever, in the case of petroleum, the
lawma(ers set the e0cise ta0 rate for the first ta0able sale at fifteen percent of the fair
international mar(et price thereof.
2here must have been a ver! sound reason that impelled Congress to impose
two very dissimilar e0cise ta0 rate. ?e cannot assume, without proof, that our
honorable legislators acted arbitrarily, capriciously and whimsically in this instance.
?e cannot just ignore the reality of two distinctly different situations and stubbornly
insist on going Sminimum &: percent.T
2o repeat, the mere fact that gas and oil e0ploration contracts grant the tate &:
percent of the net revenues does not necessarily imply that mining contracts should
li(ewise yield a minimum of &: percent for the tate. Jumping to that erroneous
conclusion is li2e comparing apples with oranges. $he e5ploration9 development
and utili@ation of gas and oil are simpl! different from those of mineral resources.
2o stress again, the main ris( in gas and oil is in the e0ploration. 1ut once oil
in commercial !uantities is struc( and the wells are put in place, the ris( is relatively
over and blac( gold simply flows out continuously with comparativel! less need for
fresh investments and technology.
7n the other hand, even if minerals are found in viable !uantities, there is still
need for continuous fresh capital and e0pertise to dig the mineral ores from the
mines. 6ust because deposits of mineral ores are found in one area is no guarantee
that an e!ual amount can be found in the adjacent areas. 2here are simply continuing
ris(s and need for more capital, e0pertise and industry all the time.
Note, however, that the indirect benefits -- apart from the cash revenues -- are
much more in the mineral industry. As mines are e0plored and e0tracted, vast
employment is created, roads and other infrastructure are built, and other multiplier
effects arise. 7n the other hand, once oil wells start producing, there is less need for
employment. 4oads and other public wor(s need not be constructed continuously.
9n fine, there is no basis for saying that government revenues from the oil industry
and from the mineral industries are to be identical all the time.
0ourth9 to our mind, the proffered Sminimum &: percentT suggestion tends
to limit the fle5ibilit! and tie the hands of government, ultimately hampering the
countryRs competitiveness in the international mar(et, to the detriment of the Filipino
people. 2his Syou-have-to-give-us-&:-percent-of-after-ta0-income-or-we-donRt-
do- business-with-youT approach is !uite perilous. 2rue, this situation may not seem
too unpalatable to the foreign contractor during good years, when international
mar(et prices are up and the mining firm manages to (eep its costs in chec(.
=owever, under unfavorable economic and business conditions, with costs spiraling
s(ywards and minerals prices plummeting, a mining firm may consider itself luc(y
to ma(e just minimal profits.
2he infle0ible, carved-in-granite demand for a &: percent government share
may spell the end of the mining venture, scare away potential investors, and thereby
further worsen the already dismal economic scenario. 8oreover, such an unbending
or unyielding policy prevents the government from responding appropriately to
changing economic conditions and shifting mar(et forces. $his infle5ibilit! further
renders our countr! less attractive as an investment option compared with other
countries.
And fifth9 for this Court to decree imperiously that the governmentRs share
should be not less than &: percent of the after-ta0 income of F2AA contractors at all
times is nothing short of dictating upon the government. 2he result, ironically, is
that the State ends up losing control. 2o avoid compromising the tateRs full control
and supervision over the e0ploitation of mineral resources, this Court must bac( off
from insisting upon a Sminimum &: percentT rule. 9t is sufficient that the tate has
the power and means, should it so decide, to get a &: percent share 'or more+ in the
contractorRs net mining revenues or after-ta0 income, or whatever other basis the
government may decide to use in rec(oning its share. "t is not necessar! for it to do
so in ever! case9 regardless of circumstances.
9n fact, the government must be trusted, must be accorded the liberty and the
utmost fle0ibility to deal, negotiate and transact with contractors and third parties as
it sees fit@ and upon terms that it ascertains to be most favorable or most
acceptable under the circumstances, even if it means agreeing to less than &:
percent. Nothing must prevent the tate from agreeing to a share less than that,
should it be deemed fit@ otherwise the tate will be deprived of full control over
mineral e0ploitation that the Charter has vested in it.
2o stress again, there is simpl! no constitutional or legal provision fi5ing the
minimum share of the government in an F#** at &: percent of the net profit. For
this Court to decree such minimum is to wade into judicial legislation, and thereby
inordinately impinge on the control power of the tate. "et it be clearA the Court is
not against the grant of more benefits to the tate@ in fact, the more the better. 9f
during the F2AA negotiations, the ,resident can secure &: percent,
B$%C
or even *:
percent, then all the better for our people. 1ut, if under the peculiar
circumstances of a specific contract, the ,resident could secure only .: percent or ..
percent, so be it. Needless to say, the ,resident will have to report 'and be
responsible for+ the specific F2AA to Congress, and eventually to the people.
Finally, if it should later be found that the share agreed to is grossl!
disadvantageous to the government, the officials responsible for entering into such a
contract on its behalf will have to answer to the courts for their malfeasance. And
the contract provision voided. 1ut this Court would abuse its own authority should it
force the governmentRs hand to adopt the &: percent demand of some of our
esteemed colleagues.
+apital and )'pertise (rovided.
2et *ll 4isBs *ssumed by +ontractor
=ere, we will repeat what has not been emphasiFed and appreciated
enoughA the fact that the contractor in an 0$%% provides all the needed capital9
technical and managerial e5pertise9 and technolog! re#uired to underta2e the
pro'ect.
9n regard to the ?8C, F2AA, the then foreign-owned ?8C, as contractor
committed, at the very outset, to ma(e capital investments of up to EU.: million in
that single mining project. ?8C, claims to have already poured in well over ,%::
million into the country as of February )**%, with more in the pipeline. 2hese
resources, valued in the tens or hundreds of millions of dollars, are invested in a
mining project that provides no assurance whatsoever that any part of the investment
will be ultimately recouped.
At the same time, the contractor must comply with legally imposed
environmental standards and the social obligations, for which it also commits to
ma(e significant e0penditures of funds. 2hroughout, the contractor assumes all the
ris(s
B$*C
of the business, as mentioned earlier. 2hese ris(s are indeed very high,
considering that the rate of success in e0ploration is e0tremely low. 2he probability
of finding any mineral or petroleum in commercially viable !uantities is estimated to
be about )A),::: only. 7n that slim chance rides the contractorRs hope of recouping
investments and generating profits. And when the contractor has recouped its initial
investments in the project, the government share increases to si0ty percent of net
benefits -- without the tate ever being in peril of incurring costs, e0penses and
losses.
And even in the worst possible scenario -- an absence of commercial !uantities
of minerals to justify development -- the contractor would already have spent several
million pesos for e0ploration wor(s, before arriving at the point in which it can ma(e
that determination and decide to cut its losses. 9n fact, during the first year alone of
the e0ploration period, the contractor was already committed to spend not less
than ,-/ million. 2he F2AA therefore clearly ensures benefits for the local
economy, courtesy of the contractor.
A// '* a//, (2'+ +e(u7 3a**o( be re&ar,e, a+ ,'+a,Ha*(a&eou+ (o (2e S(a(e or
(2e F'/'7'*o 7eo7/eB '( 3er(a'*/y 3a**o( be +a', (o 3o*Hey be*e;'3'a/ o=*er+2'7 o;
our :'*era/ re+our3e+ (o ;ore'&* 3o*(ra3(or+.
5eductions *llowed by the
7+( F#** 4easonable
,etitioners !uestion whether the tateRs wea( control might render the sharing
arrangements ineffective. 2hey cite the so-called SsuspiciousT deductions allowed
by the ?8C, F2AA in arriving at the net mining revenue, which is the basis for
computing the government share. 2he ?8C, F2AA, for instance, allows
e0penditures for Sdevelopment within and outside the *ontract %rea relating to the
8ining 7perations,T
B%:C
Sconsulting fees incurred both inside and outside the
Philippines for wor( related directly to the 8ining 7perations,T
B%)C
and Sthe
establishment and administration of field offices including administrative overheads
incurred within and outside the Philippines which are properly allocatable to the
8ining 7perations and reasonably related to the performance of the ContractorRs
obligations and e0ercise of its rights under this Agreement.T
B%-C
9t is !uite well (nown, however, that mining companies do perform some
mar(eting activities abroad in respect of selling their mineral products and by-
products. =ence, it would not be improper to allow the deduction
of reasonable consulting fees incurred abroad, as well as administrative e0penses
and overheads related to mar(eting offices also located abroad -- provided that these
deductions are directly related or properly allocatable to the mining operations and
reasonably related to the performance of the contractorRs obligations and e0ercise of
its rights. 9n any event, more facts are needed. Entil we see how these provisions
actually operate, mere SsuspicionsT will not suffice to propel this Court into ta(ing
action.
&ection 7.: of the 7+( F#**
$nvalid and 5isadvantageous
=aving defended the ?8C, F2AA, we shall now turn to two defective
provisos. "et us start with ection $.* of the ?8C, F2AA. ?hile ection $.$
gives the government a &: percent share in the net mining revenues of ?8C, from
the commencement of commercial production, ection $.* deprives the government
of part or all of the said &: percent. Ender the latter provision, should ?8C,Rs
foreign shareholders -- who originally owned ):: percent of the e!uity -- sell &:
percent or more of its outstanding capital stoc( to a Filipino citiFen or corporation,
the tate loses its right to receive its &: percent share in net mining revenues under
ection $.$.
ection $.* providesA
$he percentage of ,et Mining Revenues pa!able to the 3overnment pursuant to
*lause ;.; shall be reduced b! 1percent of ,et Mining Revenues for ever! 1percent
ownership interest in the *ontractor Ci.e.9 (M*PE held b! a Pualified :ntit!.
B%#C
Evidently, what ection $.$ grants to the tate is ta(en away in the ne0t breath
by ection $.* without an! offsetting compensation to the State. 2hus, in reality, the
tate has no vested right to receive any income from the F2AA for the e0ploitation
of its mineral resources. ?orse, it would seem that what is given to the tate in
ection $.$ is b! mere tolerance of (M*PFs foreign stoc2holders9 who can at any
time cut off the governmentRs entire &: percent share. 2hey can do so by simply
selling &: percent of ?8C,Rs outstanding capital stoc( to a ,hilippine citiFen or
corporation. 8oreover, the proceeds of such sale will of course accrue to the foreign
stoc(holders of ?8C,, not to the tate.
2he sale of &: percent of ?8C,Rs outstanding e!uity to a corporation that is
&: percent Filipino-owned and /: percent foreign-owned will still trigger the
operation of ection $.*. Effectively, the tate will lose its right to receive all &:
percent of the net mining revenues of ?8C,@ and foreign stoc2holders will own
beneficiall! up to =4 percent of (M*P, consisting of the remaining /: percent
foreign e!uity therein, plus the -/ percent pro-rata share in the buyer-corporation.
B%/C
9n fact, the 6anuary -#, -::) sale by ?8C,Rs foreign stoc(holder of the entire
outstanding e!uity in ?8C, to agittarius 8ines, 9nc. -- a domestic corporation at
least &: percent Filipino owned -- may be deemed to have automatically triggered
the operation of ection $.*, without need of further action by any party, and
removed the tateRs right to receive the &: percent share in net mining revenues.
At bottom, ection $.* has the effect of depriving the tate of its &: percent
share in the net mining revenues of ?8C, without an! offset or compensation
whatsoever. 9t is possible that the inclusion of the offending provision was initially
prompted by the desire to provide some form of incentive for the principal foreign
stoc(holder in ?8C, to eventually reduce its e!uity position and ultimately divest
in favor of Filipino citiFens and corporations. =owever, as finally structured,
ection $.* has the deleterious effect of depriving government of the entire &:
percent share in ?8C,Rs net mining revenues, without any form of compensation
whatsoever. uch an outcome is completely unacceptable.
2he whole point of developing the nationRs natural resources is to benefit the
Filipino people, future generations included. And the tate as sovereign and
custodian of the nationRs natural wealth is mandated to protect, conserve, preserve
and develop that part of the national patrimony for their benefit. =ence, the Charter
lays great emphasis on Sreal contributions to the economic growth and general
welfare of the countryT
B%.C
as essential guiding principles to be (ept in mind when
negotiating the terms and conditions of F2AAs.
Earlier, we held ')+ that the tate must be accorded the liberty and the utmost
fle0ibility to deal, negotiate and transact with contractors and third parties as it sees
fit, and upon terms that it ascertains to be most favorable or most acceptable under
the circumstances, even if that should mean agreeing to less than &: percent@ '-+ that
it is not necessary for the tate to e0tract a &: percent share in every case and
regardless of circumstances@ and '#+ that should the tate be prevented from agreeing
to a share less than &: percent as it deems fit, it will be deprived of the full control
over mineral e0ploitation that the Charter has vested in it.
2hat full control is obviously not an end in itself@ it e0ists and subsists precisely
because of the need to serve and protect the national interest. 9n this instance,
national interest finds particular application in the protection of the national
patrimony and the development and e0ploitation of the countryRs mineral resources
for the benefit of the Filipino people and the enhancement of economic growth and
the general welfare of the country. "*,oub(e,/y, +u32 ;u// 3o*(ro/ 3a* be :'+u+e,
a*, abu+e,, a+ =e *o= ='(*e++.
ection $.* of the ?8C, F2AA effectivel! gives awa! the StateFs share of net
mining revenues Cprovided for in Section ;.;E without an!thing in e5change.
8oreover, this outcome constitutes un'ust enrichment on the part of the local and
foreign stoc(holders of ?8C,. 1y their mere divestment of up to &: percent e!uity
in ?8C, in favor of Filipino citiFens and3or corporations, the local and foreign
stoc(holders get a windfall. 2heir share in the net mining revenues of ?8C, is
automatically increased, without their having to pay the government anything for it.
9n short, the provision in !uestion is without a doubt grossl! disadvantageous to the
government9 detrimental to the interests of the 0ilipino people9 and violative of
public polic!.
8oreover, it has been reiterated in numerous decisions
B%&C
that the parties to a
contract may establish any agreements, terms and conditions that they deem
convenient@ but these should not be contrary to law, morals, good customs, public
order or public policy.
B%$C
1eing precisely violative of anti-graft provisions and
contrary to public policy, ection $.* must therefore be stric(en off as invalid.
?hether the government officials concerned acceded to that provision by sheer
mista(e or with full awareness of the ill conse!uences, is of no moment. 9t is
hornboo( doctrine that the principle of estoppel does not operate against the
government for the act of its agents,
B%%C
and that it is never estopped by any mista(e
or error on their part.
B%*C
9t is therefore possible and proper to rectify the situation at
this time. 8oreover, we may also say that the F2AA in !uestion does not involve
mere contractual rights@ being impressed as it is with public interest, the contractual
provisions and stipulations must yield to the common good and the national interest.
ince the offending provision is very much separable
B*:C
from ection $.$ and
the rest of the F2AA, the deletion of ection $.* can be done without affecting or
re!uiring the invalidation of the ?8C, F2AA itself. uch a deletion will preserve
for the government its due share of the benefits. 2his way, the mandates of the
Constitution are complied with and the interests of the government fully protected,
while the business operations of the contractor are not needlessly disrupted.
&ection 7.9>e? of the 7+( F#**
*lso $nvalid and 5isadvantageous
ection $.%'e+ of the ?8C, F2AA is li(ewise invalid. 9t provides thusA
?;.G $he 3overnment Share shall be deemed to include all of the following sumsB
?CaE all 3overnment ta5es9 fees9 levies9 costs9
imposts9 duties and ro!alties including e5cise
ta59 corporate income ta59 customs dut!9 sales
ta59 value added ta59 occupation and
regulator! fees9 3overnment controlled price
stabili@ation schemes9 an! other form of
3overnment bac2ed schemes9 an! ta5 on
dividend pa!ments b! the *ontractor or its
%ffiliates in respect of revenues from the
Mining &perations and an! ta5 on interest on
domestic and foreign loans or other financial
arrangements or accommodations9 including
loans e5tended to the *ontractor b! its
stoc2holdersH
?CbE an! pa!ments to local and regional government9
including ta5es9 fees9 levies9 costs9 imposts9
duties9 ro!alties9 occupation and regulator!
fees and infrastructure contributionsH
?CcE an! pa!ments to landowners9 surface rights
holders9 occupiers9 indigenous people or
*laimownersH
?CdE costs and e5penses of fulfilling the *ontractorFs
obligations to contribute to national
development in accordance with *lause 1>.1CiE
C1E and 1>.1CiE C<EH
?CeE an amount e#uivalent to whatever benefits that
ma! be e5tended in the future b! the
3overnment to the *ontractor or to financial
or technical assistance agreement contractors
in generalH
?CfE all of the foregoing items which have not
previousl! been offset against the 3overnment
Share in an earlier 0iscal Qear9 ad'usted for
inflation.A Cunderscoring suppliedE
ection $.%'e+ is out of place in the F2AA. 9t ma(es no sense why, for instance,
money spent by the government for the benefit of the contractor in building roads
leading to the mine site should still be deductible from the tateRs share in net mining
revenues. Allowing this deduction results in benefiting the contractor twice over. 9t
constitutes unjust enrichment on the part of the contractor at the e0pense of the
government, since the latter is effectively being made to pay twice for the same item.
B*)C
For being grossly disadvantageous and prejudicial to the government and contrary
to public policy, ection $.%'e+ is undoubtedly invalid and must be declared to be
without effect. Fortunately, this provision can also easily be stric(en off without
affecting the rest of the F2AA.
;othing 6eft 1ver
*fter 5eductionsF
9n connection with ection $.%, an objection has been raisedA pecified in
ection $.% are numerous items of deduction from the tateRs &: percent share. After
ta(ing these into account, will the tate ever receive anything for its ownership of the
mineral resourcesO
?e are confident that under normal circumstances, the answer will be ye+. 9f
we e0amine the various items of SdeductionT listed in ection $.% of the ?8C,
F2AA, we will find that they correspond closely to the components or elements of
the ba+'3 &oHer*:e*( +2are established in 5A7 **-.&, as discussed in the earlier
part of this 7pinion.
"i(ewise, the balance of the governmentRs &: percent share -- after netting out
the items of deduction listed in ection $.% --corresponds closely to the a,,'('o*a/
&oHer*:e*( +2are provided for in 5A7 **-.& which, we once again stress, has
nothing at all to do with indirect ta0es. 2he 4amos-5e;era paper
B*-C
concisely
presents the fiscal contribution of an F2AA under 5A7 **-.& in this e!uationA
4eceipts from an F2AA Z basic govRt share [ addRl govRt share
2ransposed into a similar e!uation, the fiscal payments system from the ?8C,
F2AA assumes the following formulationA
DovernmentRs &: percent share in net mining revenues of ?8C, Z items listed in
ec. $.% of the F2AA [ balance of DovRt share, payable / months from the end of
the fiscal year
9t should become apparent that the fiscal arrangement under the ?8C, F2AA
is very similar to that under 5A7 **-.&, with the Sbalance of government share
payable / months from end of fiscal yearT being the e!uivalent of the a,,'('o*a/
&oHer*:e*( +2are computed in accordance with the Snet-mining-revenue-based
optionT under 5A7 **-.&, as discussed above. As we have emphasiFed earlier, we
find each of the three options for computing the a,,'('o*a/ &oHer*:e*( +2are -- as
presented in 5A7 **-.& -- to be sound and reasonable.
?e (2ere;ore 3o*3/u,e (2a( (2ere '+ *o(2'*& '*2ere*(/y =ro*& '* (2e fiscal
regime o; (2e ?M! FTAA, a*, 3er(a'*/y *o(2'*& (o =arra*( (2e '*Ha/',a('o*
o; (2e FTAA '* '(+ e*('re(y.
&ection 3.3 of the 7+(
F#** +onstitutional
ection #.# of the ?8C, F2AA is assailed for violating supposed
constitutional restrictions on the term of F2AAs. 2he provision in !uestion readsA
?D.D $his %greement shall be renewed b! the 3overnment for a further
period of twent!8five C<KE !ears under the same terms and
conditions provided that the *ontractor lodges a re#uest for
renewal with the 3overnment not less than si5t! C=>E da!s prior to
the e5pir! of the initial term of this %greement and provided that
the *ontractor is not in breach of an! of the re#uirements of this
%greement.A
Allegedly, the above provision runs afoul of ection - of Article K99 of the
)*%$ Constitution, which statesA
?Sec. <. %ll lands of the public domain9 waters9 minerals9 coal9 petroleum9 and other
mineral oils9 all forces of potential energ!9 fisheries9 forests or timber9 wildlife9 flora
and fauna9 and other natural resources are owned b! the State. (ith the e5ception
of agricultural lands9 all other natural resources shall not be alienated. $he
e5ploration9 development and utili@ation of natural resources shall be under the full
control and supervision of the State. $he State ma! directl! underta2e such
activities9 or it ma! enter into co8production9 'oint venture or production8sharing
agreements with 0ilipino citi@ens or corporations or associations at least si5t! per
centum of whose capital is owned b! such citi@ens. &uch agreements may be for a
period not e'ceeding twenty%five years. renewable for not more than twenty%five
years. and under such terms and conditions as may be provided by law. "n cases of
water rights for irrigation9 water suppl!9 fisheries9 or industrial uses other than the
development of water power9 beneficial use ma! be the measure and limit of the
grant.
?$he State shall protect the nationFs marine wealth in its archipelagic waters9
territorial sea9 and e5clusive economic @one9 and reserve its use and en'o!ment
e5clusivel! to 0ilipino citi@ens.
?$he *ongress ma!9 b! law9 allow small8scale utili@ation of natural resources b!
0ilipino citi@ens9 as well as cooperative fish farming9 with priorit! to subsistence
fishermen and fish8wor2ers in rivers9 la2es9 ba!s and lagoons.
?$he President ma! enter into agreements with foreign8owned corporations
involving either technical or financial assistance for large8scale e5ploration9
development9 and utili@ation of minerals9 petroleum9 and other mineral oils
according to the general terms and conditions provided b! law9 based on real
contributions to the economic growth and general welfare of the countr!. "n such
agreements9 the State shall promote the development and use of local scientific and
technical resources.
?$he President shall notif! the *ongress of ever! contract entered into in
accordance with this provision9 within thirt! da!s from its e5ecution.A
B*#C
?e hold that the term limitation of twenty-five years does not apply to F2AAs.
2he reason is that the above provision is found within paragraph ) of ection - of
Article K99, which refers to mineral agreements -- co-production agreements, joint
venture agreements and mineral production-sharing agreements -- which the
government may enter into with Filipino citiFens and corporations, at least &:
percent owned by Filipino citiFens. 2he word SsuchT clearly refers to these three
mineral agreements -- C,As, 6;As and 8,As -- not to F2AAs.
pecifically, F2AAs are covered by paragraphs / and . of ection - of Article
K99 of the Constitution. 9t will be noted that there are no term limitations provided
for in the said paragraphs dealing with F2AAs. 2his shows that F2AAs are sui
generis, in a class of their own. 2his omission was obviously a deliberate move on
the part of the framers. 2hey probably realiFed that F2AAs would be different in
many ways from 8,As, 6;As and C,As. 2he reason the framers did not fi0 term
limitations applicable to F2AAs is that they preferred to leave the matter to the
discretion of the legislature and3or the agencies involved in implementing the laws
pertaining to F2AAs, in order to give the latter enough fle0ibility and elbow room to
meet changing circumstances.
Note also that, as previously stated, the e0ploratory phrases of an F2AA lasts
up to eleven years. 2hereafter, a few more years would be gobbled up in start-up
operations. 9t may ta(e fifteen years before an F2AA contractor can start earning
profits. And thus, the period of -. years may really be short for an F2AA. Consider
too that in this (ind of agreement, the contractor assumes all entrepreneurial ris(s. 9f
no commercial !uantities of minerals are found, the contractor bears all financial
losses. 2o compensate for this long gestation period and e0tra business ris(s, it
would not be totally unreasonable to allow it to continue E5E activities for another
twenty five years.
9n any event, the complaint is that, in essence, ection #.# gives the contractor
the power to compel the government to renew the ?8C, F2AA for another -. years
and deprives the tate of any say on whether to renew the contract.
?hile we agree that ection #.# could have been worded so as to prevent it
from favoring the contractor, this provision does not violate any constitutional limits,
since the said term limitation does not apply at all to F2AAs. Neither can the
provision be deemed in any manner to be illegal, as no law is being violated thereby.
9t is certainly not illegal for the government to waive its option to refuse the renewal
of a commercial contract.
;erily, the government did not have to agree to ection #.#. 9t could have said
SNoT to the stipulation, but it did not. 9t appears that, in the process of negotiations,
the other contracting party was able to convince the government to agree to the
renewal terms. Ender the circumstances, it does not seem proper for this Court to
intervene and step in to undo what might have perhaps been a possible
miscalculation on the part of the tate. 9f government believes that it is or will be
aggrieved by the effects of ection #.#, the remedy is the renegotiation of the
provision in order to provide the tate the option to not renew the F2AA.
Financial !enefits for Foreigners
;ot Forbidden by the +onstitution
1efore leaving this subject matter, we find it necessary for us to rid ourselves of
the false belief that the Constitution somehow forbids foreign-owned corporations
from deriving financial benefits from the development of our natural or mineral
resources.
2he Constitution has never prohibited foreign corporations from ac!uiring and
enjoying Sbeneficial interestT in the development of ,hilippine natural resources.
2he tate itself need not directly underta(e e0ploration, development, and utiliFation
activities. Alternatively, the Constitution authoriFes the government to enter into
joint venture agreements '6;As+, co-production agreements 'C,As+ and mineral
production sharing agreements '8,As+ with contractors who are Filipino citiFens
or corporations that are at least &: percent Filipino-owned. 2hey may do the actual
Sdirty wor(T -- the mining operations.
9n the case of a &: percent Filipino-owned corporation, the /: percent
individual and3or corporate non80ilipino sta2eholders obviously participate in the
beneficial interest derived from the development and utiliFation of our natural
resources. 2hey may receive by way of dividends, up to /: percent of the
contractorRs earnings from the mining project. "i(ewise, they may have a say in the
decisions of the board of directors, since they are entitled to representation therein to
the e0tent of their e!uity participation, which the Constitution permits to be up to /:
percent of the contractorRs e!uity. =ence, the non-Filipino sta(eholders may in that
manner also participate in the management of the contractorRs natural resource
development wor(. All of this is permitted by our Constitution, for any natural
resource, and without limitation even in regard to the magnitude of the mining
project or operations 'see paragraph ) of ection - of Article K99+.
9t is clear, then, that there is nothing inherentl! wrong with or constitutionall!
ob'ectionable about the idea of foreign individuals and entities having or en'o!ing
?beneficial interestA in 88 and participating in the management of operations
relative to 88 the e5ploration9 development and utili@ation of our natural resources.
F#** ore *dvantageous
#han 1ther &chemes
6iBe +(*. J/* and (&*
A final point on the subject of beneficial interest. ?e believe the F2AA is a
more advantageous proposition for the government as compared with other
agreements permitted by the Constitution. 9n a C,A that the government enters into
with one or more contractors, the government shall provide inputs to the mining
operations other than the mineral resource itself.
B*/C
9n a 6;A, a 6; company is organiFed by the government and the contractor,
with both parties having e!uity shares 'investments+@ and the contractor is granted
the e0clusive right to conduct mining operations and to e0tract minerals found in the
area.
B*.C
7n the other hand, in an 8,A, the government grants the contractor the
e0clusive right to conduct mining operations within the contract area andshares in
the gross output@ and the contractor provides the necessary financing, technology,
management and manpower.
2he point being made here is that, in two of the three types of agreements under
consideration, the government has to ante up some ris2 capital for the enterprise. 9n
other words, government funds 'public moneys+ are withdrawn from other possible
uses, put to wor( in the venture and placed at ris2 in case the venture fails. 2his
notwithstanding, management and control of the operations of the enterprise are -- in
all three arrangements -- in the hands of the contractor, with the government being
mainly a silent partner. 2he three types of agreement mentioned above apply to any
natural resource, without limitation and regardless of the siFe or magnitude of the
project or operations.
9n contrast to the foregoing arrangements, and pursuant to paragraph / of
ection - of Article K99, the F2AA is limited to large-scale projects and only for
minerals, petroleum and other mineral oils. =ere, the Constitution removes the /:
percent cap on foreign ownership and allows the foreign corporation to own up to
):: percent of the e!uity. Filipino capital may not be sufficient on account of the
siFe of the project, so the foreign entity may have to ante up all the ris( capital.
Correlatively, the foreign sta(eholder bears up to ):: percent of the ris( of loss
if the project fails. 9n respect of the particular F2AA granted to it, ?8C, 'then )::
percent foreign owned+ was responsible, as contractor, for providing the entire
e!uity, including all the inputs for the project. 9t was to bear ):: percent of the ris(
of loss if the project failed, but its ma0imum potential Sbeneficial interestT consisted
only of /: percent of the net beneficial interest, because the other &: percent is the
share of the government, which will never be e0posed to any ris( of loss whatsoever.
9n consonance with the degree of ris( assumed, the F2AA vested in ?8C,
the da!8to8da! management of the mining operations. till such management is
subject to the overall control and supervision of the tate in terms of regular
reporting, approvals of wor( programs and budgets, and so on.
o, one needs to consider in relative terms, the costs of inputs for, degree of
ris( attendant to, and benefits derived or to be derived from a C,A, a 6;A or an
8,A vis-X-vis those pertaining to an F2AA. 9t may not be realistically asserted
that the foreign grantee of an F2AA is being unduly favored or benefited as
compared with a foreign sta(eholder in a corporation holding a C,A, a 6;A or an
8,A. een the other way around, the government is definitely better off with an
F2AA than a C,A, a 6;A or an 8,A.
5evelopmental (olicy
on the ining $ndustry
5uring the 7ral Argument and in their Final 8emorandum9 petitioners
repeatedly urged the Court to consider whether mining as an industry and economic
activity deserved to be accorded priority, preference and government support as
against, say, agriculture and other activities in which Filipinos and the ,hilippines
may have an Seconomic advantage.T For instance, a recent E study
B*&C
reportedly
e0amined the economic performance of all local E counties that were dependent on
mining and -: percent of whose labor earnings between )*$: and -::: came from
mining enterprises.
2he study -- covering ):: E counties in -. states dependent on mining --
showed that per capita income grew about #: percent less in mining-dependent
communities in the )*%:s and -. percent less for the entire period )*%: to -:::@ the
level of per capita income was also lower. 2herefore, given the slower rate of
growth, the gap between these and other local counties increased.
,etitioners invite attention to the 7KFA8 %merica ReportFs warning to
developing nations that mining brings with it serious economic problems, including
increased regional ine!uality, unemployment and poverty. 2hey also cite the final
report
B*$C
of the E0tractive 9ndustries 4eview project commissioned by the ?orld
1an( 'the ?1-E94 4eport+, which warns of environmental degradation, social
disruption, conflict, and uneven sharing of benefits with local communities that bear
the negative social and environmental impact. 2he 4eport suggests that countries
need to decide on the best way to e0ploit their natural resources, in order to
ma0imiFe the value added from the development of their resources and ensure that
they are on the path to sustainable development once the resources run out.
?hatever priority or preference may be given to mining vis-X-vis other
economic or non-economic activities is a !uestion of policy that the ,resident and
Congress will have to address@ it is not for this Court to decide. $his *ourt declares
what the *onstitution and the laws sa!9 interprets onl! when necessar!9 and refrains
from delving into matters of polic!.
uffice it to say that the tate control accorded by the Constitution over mining
activities assures a proper balancing of interests. 8ore pointedly, such control will
enable the ,resident to demand the best mining practices and the use of the best
available technologies to protect the environment and to rehabilitate mined-out
areas. 9ndeed, under the 8ining "aw, the government can ensure the protection of
the environment during and after mining. 9t can li(ewise provide for the
mechanisms to protect the rights of indigenous communities, and thereby mold a
more socially-responsive, culturally-sensitive and sustainable mining industry.
Early on during the launching of the ,residential 8ineral 9ndustry
Environmental Awards on February &, )**$, then ,resident Fidel ;. 4amos captured
the essence of balanced and sustainable mining in these wordsA
?)ong term9 high profit mining translates into higher revenues for government9 more
decent 'obs for the population9 more raw materials to feed the engines of
downstream and allied industries9 and improved chances of human resource and
countr!side development b! creating self8reliant communities awa! from urban
centers.
5 5 5 5 5 5 5 5 5
?%gainst a fragile and finite environment9 it is sustainabilit! that holds the 2e!. "n
sustainable mining9 we ta2e a middle ground where both production and protection
goals are balanced9 and where parties8in8interest come to terms.A
Neither has the present leadership been remiss in addressing the concerns of
sustainable mining operations. 4ecently, on 6anuary )&, -::/ and April -:, -::/,
,resident Dloria 8acapagal Arroyo issued E0ecutive 7rders Nos. -$: and -$:-A,
respectively, Sto promote responsible mineral resources e0ploration, development
and utiliFation, in order to enhance economic growth, in a manner that adheres to the
principles of sustainable development and with due regard for justice and e!uity,
sensitivity to the culture of the Filipino people and respect for ,hilippine
sovereignty.T
B*%C
REF"TATION OF DISSENTS
2he Court will now ta(e up a number of other specific points raised in the
dissents of 6ustices Carpio and 8orales.
). 6ustice 8orales introduced us to =ugh 8organ, former president and chief
e0ecutive officer of ?estern 8ining Corporation '?8C+ and former president of the
Australian 8ining 9ndustry Council, who spearheaded the vociferous opposition to
the filing by aboriginal peoples of native title claims against mining companies in
Australia in the aftermath of the landmar( Mabo decision by the Australian =igh
Court. According to sources !uoted by our esteemed colleague, 8organ was also
a ra3'+( and a b'&o(. 9n the course of protesting Mabo9 8organ allegedly uttered
derogatory remar(s belittling the aboriginal culture and race.
An unwritten caveat of this introduction is that this Court should be careful not
to permit the entry of the li(es of =ugh 8organ and his hordes of alleged racist-
bigots at ?8C. ?ith all due respect, such scare tactics should have no place in the
discussion of this case. ?e are deliberating on the constitutionality of 4A $*/-,
5A7 *&-/: and the F2AA originally granted to ?8C,, which had been transferred
to agittarius 8ining, a Filipino corporation. ?e are not discussing the apparition of
white Anglo-a0on racists3bigots massing at our gates.
-. 7n the proper interpretation of the phrase agreements involving either
technical or financial assistance9 6ustice 8orales points out that at times we
Sconveniently omittedT the use of the disjunctiveeitherRor9 which according to her
denotes restriction@ hence the phrase must be deemed to connote restriction and
limitation.
1ut, as 6ustice Carpio himself pointed out during the 7ral Argument, the
disjunctive phrase either technical or financial assistance would, strictly spea(ing,
literally mean that a foreign contractor mayprovide only one or the other, but not
both. And if both technical and financial assistance were re!uired for a project, the
tate would have to deal with at least two different foreign contractors -- one for
financial and the other for technical assistance. And following on that, a foreign
contractor, though very much !ualified to provide both (inds of assistance, would
nevertheless be prohibited from providing one (ind as soon as it shall have agreed to
provide the other.
1ut if the Court should follow this restrictive and literal construction, can we
really find two 'or more+ contractors who are willing to participate in one single
project -- one to provide the Sfinancial assistanceT only and the other the Stechnical
assistanceT e0clusively@ it would be e0cellent if these two or more contractors
happen to be willing and are able to cooperate and wor( closely together on the same
project 'even if they are otherwise competitors+. And it would be superb if no
conflicts would arise between or among them in the entire course of the contract.
1ut what are the chances things will turn out this way in the real worldO 2o thin(
that the framers deliberately imposed this (ind of restriction is to say that they were
either e0ceedingly optimistic, or incredibly naVve. 2his begs the !uestion -- ?hat
laudable objective or purpose could possibly be served by such strict and restrictive
literal interpretationO
#. Citing &posa v. 0actoran Jr.9 6ustice 8orales claims that a service contract
is not a contract or propert! right which merits protection b! the due process clause
of the *onstitution9 but merely a license or privilege which may be validly revo(ed,
rescinded or withdrawn by e0ecutive action whenever dictated by public interest or
public welfare.
&posa cites $an v. irector of 0orestr! and Qsmael v. eput! :5ecutive
Secretar! as authority. 2he latter cases dealt specifically with (':ber /'3e*+e+
o*/y. &posa allegedly reiterated that a license is merel! a permit or privilege to do
what otherwise would be unlawful9 and is not a contract between the authorit!9
federal9 state or municipal9 granting it and the person to whom it is grantedH neither
is it propert! or a propert! right9 nor does it create a vested rightH nor is it ta5ation.
$hus this *ourt held that the granting of license does not create irrevocable rights9
neither is it propert! or propert! rights.
hould &posa be deemed applicable to the case at bar, on the argument that
natural resources are also involved in this situationO ?e do not thin( so. A grantee
of a timber license, permit or license agreement gets to cut the timber already
growing on the surface@ it need not dig up tons of earth to get at the logs. 9n a
logging concession, the investment of the licensee is not as substantial as the
investment of a large-scale mining contractor. 9f a timber license were revo(ed, the
licensee pac(s up its gear and moves to a new area applied for, and starts over@ what
it leaves behind are mainly the trails leading to the logging site.
9n contrast, the mining contractor will have sun( a great deal of money 'tens of
millions of dollars+ into the ground, so to spea(, for e0ploration activities, for
development of the mine site and infrastructure, and for the actual e0cavation and
e0traction of minerals, including the e0tensive tunneling wor( to reach the ore body.
2he cancellation of the mining contract will utterly deprive the contractor of its
investments 'i.e., prevent recovery of investments+, most of which cannot be pulled
out.
2o say that an F2AA is just li(e a mere timber license or permit and does not
involve contract or property rights which merit protection by the due process clause
of the Constitution, and may therefore be revo(ed or cancelled in the blin( of an eye,
is to adopt a well-nigh confiscatory stance@ at the very least, it is downright
dismissive of the property rights of businesspersons and corporate entities that have
investments in the mining industry, whose investments, operations and e0penditures
do contribute to the general welfare of the people, the coffers of government, and the
strength of the economy. uch a pronouncement will surely discourage investments
'local and foreign+ which are critically needed to fuel the engine of economic growth
and move this country out of the rut of poverty. 9n sum, &posa is not applicable.
/. 6ustice 8orales adverts to the supposedly Sclear intentionT of the framers of
the Constitution to reserve our natural resources e0clusively for the Filipino people.
he then !uoted from the records of the ConCom deliberations a passage in which
then Commissioner 5avide e0plained his vote, arguing in the process that aliens
ought not be allowed to participate in the enjoyment of our natural resources. 7ne
passage does not suffice to capture the tenor or substance of the entire e0tensive
deliberations of the commissioners, or to reveal the clear intention of the framers as a
group. A re-reading of the entire deliberations '!uoted here earlier+ is necessary if
we are to understand the true intent of the framers.
.. ince )*#., the Filipino people, through their Constitution, have decided that
the retardation or delay in the e0ploration, development or utiliFation of the nationRs
natural resources is merely secondary to the protection and preservation of their
ownership of the natural resources, so says 6ustice 8orales, citing Aruego. 9f it is
true that the framers of the )*%$ Constitution did not care much about alleviating the
retardation or delay in the development and utiliFation of our natural resources, why
did they bother to write paragraph / at allO ?ere they merely paying lip service to
large-scale e0ploration, development and utiliFationO 2hey could have just
completely ignored the subject matter and left it to be dealt with through a future
constitutional amendment. 1ut we have to harmoniFe every part of the Constitution
and to interpret each provision in a manner that would give life and meaning to it and
to the rest of the provisions. 9t is obvious that a literal interpretation of paragraph /
will render it utterly inutile and inoperative.
&. According to 6ustice 8orales, the deliberations of the Constitutional
Commission do not support our contention that the framers, by specifying such
agreements involving financial or technical assistance, necessarily gave implied
assent to everything that these agreements implicitly entailed, or that could
reasonably be deemed necessary to ma(e them tenable and effective, including
management authority in the day-to-day operations. As proof thereof, she !uotes one
single passage from the ConCom deliberations, consisting of an e0change among
Commissioners 2ingson, Darcia and 8onsod.
=owever, the !uoted e0change does not serve to contradict our argument@ it
even bolsters it. Comm. Christian 8onsod was !uoted as sayingA ?555 " thin2 we
have to ma2e a distinction that it is not reall! realistic to sa! that we will borrow on
our own terms. Ma!be we can sa! that we inherited un'ust loans9 and we would li2e
to repa! these on terms that are not pre'udicial to our own growth. 6ut the general
statement that we should onl! borrow on our own terms is a bit unrealistic.A Comm.
8onsod is one who (new whereof he spo(e.
$. 6ustice 8orales also declares that the optimal time for the conversion of an
F2AA into an 8,A is after completion of the e0ploration phase and just before
underta(ing the development and construction phase, on account of the fact that the
re!uirement for a minimum investment of U.: million is applicable only during the
development, construction and utiliFation phase, but not during the e0ploration
phase, when the foreign contractor need merely comply with minimum ground
e0penditures. 2hus by converting, the foreign contractor ma0imiFes its profits by
avoiding its obligation to ma(e the minimum investment of U.: million.
2his argument forgets that the foreign contractor is in the game precisely to
ma(e money. 9n order to come anywhere near profitability, the contractor must first
e0tract and sell the mineral ore. 9n order to do that, it must also develop and
construct the mining facilities, set up its machineries and e!uipment and dig the
tunnels to get to the deposit. 2he contractor is thus compelled to e0pend funds in
order to ma(e profits. 9f it decides to cut bac( on investments and e0penditures, it
will necessarily sacrifice the pace of development and utiliFation@ it will necessarily
sacrifice the amount of profits it can ma(e from the mining operations. 9n fact, at
certain less-than-optimal levels of operation, the stream of revenues generated may
not even be enough to cover variable e0penses, let alone overhead e0penses@ this is a
dismal situation anyone would want to avoid. 9n order to ma(e money, one has to
spend money. 2his truism applies to the mining industry as well.
%. 8ortgaging the minerals to secure a foreign F2AA contractorRs obligations is
anomalous, according to 6ustice 8orales since the contractor was from the beginning
obliged to provide all financing needed for the mining operations. =owever, the
mortgaging of minerals by the contractor does not necessarily signify that the
contractor is unable to provide all financing re!uired for the project, or that it does
not have the financial capability to underta(e large-scale operations. 8ortgaging of
mineral products, just li(e the assignment 'by way of security+ of manufactured
goods and goods in inventory, and the assignment of receivables, is an ordinary
re!uirement of ban(s, even in the case of clients with more than sufficient financial
resources. And nowadays, even the richest and best managed corporations ma(e use
of ban( credit facilities -- it does not necessarily signify that they do not have the
financial resources or are unable to provide the financing on their own@ it is just a
manner of ma0imiFing the use of their funds.
*. 5oes the contractor in reality ac!uire the surface rights Sfor free,T by virtue
of the fact that it is entitled to reimbursement for the costs of ac!uisition and
maintenance, adjusted for inflationO ?e thin( not. 2he SreimbursementT is possible
only at the end of the term of the contract, when the surface rights will no longer be
needed, and the land previously ac!uired will have to be disposed of, in which case
the contractor gets reimbursement from the sales proceeds. 2he contractor has to pay
out the ac!uisition price for the land. 2hat money will belong to the seller of the
land. 7nly if and when the land is finally sold off will the contractor get any
reimbursement. 9n other words, the contractor will have been cash-out for the entire
duration of the term of the contract -- -. or .: years, depending. 9f we calculate the
cost of money at say )- percent per annum, that is the cost or opportunity loss to the
contractor, in addition to the amount of the ac!uisition price. )- percent per annum
for .: years is &:: percent@ this, without any compounding yet. 2he cost of money
is therefore at least &:: percent of the original ac!uisition cost@ it is in addition to the
ac!uisition cost. SFor freeTO Not by a long shot.
):. 2he contractor will ac!uire and hold up to .,::: hectaresO ?e doubt it.
2he ac!uisition by the tate of land for the contractor is just to enable the contractor
to establish its mine site, build its facilities, establish a tailings pond, set up its
machinery and e!uipment, and dig mine shafts and tunnels, etc. 9t is impossible that
the surface re!uirement will aggregate .,::: hectares. 8uch of the operations will
consist of the tunneling and digging underground, which will not re!uire possessing
or using any land surface. .,::: hectares is way too much for the needs of a mining
operator. 9t simply will not spend its cash to ac!uire property that it will not need@
the cash may be better employed for the actual mining operations, to yield a profit.
)). 6ustice Carpio claims that the phrase among other things 'found in the
second paragraph of ection %) of the 8ining Act+ is being incorrectly treated as a
delegation of legislative power to the 5EN4 secretary to issue 5A7 **-.& and
prescribe the formulae therein on the tateRs share from mining operations. =e adds
that the phrase among other things was not intended as a delegation of legislative
power to the 5EN4 secretary, much less could it be deemed a valid delegation of
legislative power, since there is nothing in the second paragraph of ection %) which
can be said to grant any delegated legislative power to the 5EN4 secretary. And
even if there were, such delegation would be void, for lac( of any standards by
which the delegated power shall be e0ercised.
?hile there is nothing in the second paragraph of ection %) which can directly
be construed as a delegation of legislative power to the 5EN4 secretary, it does not
mean that 5A7 **-.& is invalid per se, or that the secretary acted without any
authority or jurisdiction in issuing 5A7 **-.&. As we stated earlier in our
,rologue, ?(ho or what organ of government actuall! e5ercises this power of
control on behalf of the StateS $he *onstitution is cr!stal clearB the (resident.
"ndeed9 the *hief :5ecutive is the official constitutionall! mandated to Lenter into
agreements with foreign owned corporations.F &n the other hand9 *ongress ma!
review the action of the President once it is notified of Lever! contract entered into in
accordance with this NconstitutionalO provision within thirt! da!s from its
e5ecution.FA 9t is the ,resident who is constitutionally mandated (o e*(er '*(o
FTAA+ with foreign corporations, and in doing so, it is within the ,residentRs
prerogative (o +7e3';y 3er(a'* (er:+ a*, 3o*,'('o*+ of the F2AAs, for e0ample, the
fiscal regime of F2AAs -- i.e., the sharing of the net mining revenues between the
contractor and the tate.
1eing the ,residentRs alter ego with respect to the control and supervision of the
mining industry, the 5EN4 secretary, acting for the ,resident, is necessarily clothed
with the re!uisite authority and power to draw up guidelines delineating certain
terms and conditions, and specifying therein the terms of sharing of benefits from
mining, to be applicable to F2AAs in general. 9t is important to remember that 5A7
**-.& has been in e0istence for almost si0 years, and has not been amended or
revo(ed by the ,resident.
$he issuance of %& 998K= did not involve the e5ercise of delegated legislative
power. 2he legislature did not delegate the power to determine the nature, e0tent and
composition of the items that would come under the phrase among other things. 2he
legislatureRs power pertains to the imposition of ta0es, duties and fees. 2his power
was not delegated to the 5EN4 secretary. 1ut the power to negotiate and enter into
F2AAs was withheld from Congress, and reserved for the ,resident. 9n determining
the sharing of mining benefits, i.e., in specifying what the phrase among other
things include, the ,resident 'through the secretary acting in his3her behalf+ was not
determining the amount or rate of ta0es, duties and fees, but rather the amount of
9NC78E to be derived from minerals to be e0tracted and sold, income which
belongs to the tate as owner of the mineral resources. ?e may say that, in the
second paragraph of ection %), the legislature in a sense intruded partially into the
,residentRs sphere of authority when the former provided that
?$he 3overnment share in financial or technical assistance agreement shall consist
of9 among other things9 the contractorFs corporate income ta59 e5cise ta59 special
allowance9 withholding ta5 due from the contractorFs foreign stoc2holders arising
from dividend or interest pa!ments to the said foreign stoc2holder in case of a
foreign national and all such other ta5es9 duties and fees as provided for under
e5isting laws.A'9talics supplied+
1ut it did not usurp the ,residentRs authority since the provision merely
included the enumerated items as part of the government share, without foreclosing
or in any way preventing 'as in fact Congress could not validly prevent+ the
,resident from determining what constitutes the tateRs compensation derived from
F2AAs. 9n this case, the ,resident in effect directed the inclusion or addition of
Sother things,T vi@.9 9NC78E for the owner of the resources, in the governmentRs
share, while adopting the items enumerated by Congress as part of the government
share also.
)-. 6ustice CarpioRs insistence on applying the e'usdem generis rule of statutory
construction to the phrase among other things is therefore useless, and must fall by
the wayside. 2here is no point trying to construe that phrase in relation to the
enumeration of ta0es, duties and fees found in paragraph - of ection %), precisely
because Gthe constitutional power to prescribe the sharing of mining income
between the &tate and mining companies.H to !uote 6ustice Carpio pursuant to an
F2AA is 3o*+('(u('o*a//y /o,&e, ='(2 (2e !re+',e*(, *o( ='(2 o*&re++. 9t thus
ma(es no sense to persist in giving the phrase among other things a restricted
meaning referring only to ta0es, duties and fees.
)#. trangely, 6ustice Carpio claims that the 5EN4 secretary can change the
formulae in 5A7 **-.& any time even without the approval of the ,resident, and the
secretary is the sole authority to determine the amount of consideration that the tate
shall receive in an F2AA, because ection . of the 5A7 states that ?555 an!
amendment of an 0$%% other than the provision on fiscal regime shall re#uire the
negotiation with the ,egotiation Panel and the recommendation of the Secretar! for
approval of the President 555A. Allegedly, because of that provision, if an
amendment in the F2AA involves non-fiscal matters, the amendment re!uires
approval of the ,resident, but if the amendment involves a change in the fiscal
regime, the 5EN4 secretary has the final authority, and approval of the ,resident
may be dispensed with@ hence the secretary is more powerful than the ,resident.
?e believe there is some distortion resulting from the !uoted provision being
ta(en out of conte0t. ection . of 5A7 **-.& reads as followsA
Section .. tatus of E0isting F2AAs. All F2AAs approved prior to the effectivity
of this Administrative 7rder shall remain valid and be recogniFed by the
DovernmentA ,rovided, 2hat should a Contractor desire to amend its F2AA, it shall
do so by filing a "etter of 9ntent '"79+ to the ecretary thru the 5irector. ,rovided,
further, 2hat if the Contractor desires to amend the fiscal regime of its F2AA, it may
do so by see(ing for the amendment of its F2AARs whole fiscal regime by adopting
the fiscal regime provided hereofA ,rovided, finally, 2hat any amendment of an
F2AA other than the provision on fiscal regime shall re!uire the negotiation with the
Negotiating ,anel and the recommendation of the ecretary for approval of the
,resident of the 4epublic of the ,hilippines.T 'underscoring supplied+
9t loo(s li(e another case of misapprehension. 2he proviso being objected to by
6ustice Carpio is actually preceded by a phrase that re!uires a contractor desiring to
amend the fiscal regime of its F2AA, to amend the same by adopting the fiscal
regime prescribed in 5A7 **-.& -- i.e., solely in that manner, and in no
other . ObH'ou+/y, +'*3e DAO 99-56 =a+ '++ue, by (2e +e3re(ary u*,er (2e
au(2or'(y a*, ='(2 (2e 7re+u:e, a77roHa/ o; (2e !re+',e*(, (2e a:e*,:e*( o;
a* FTAA by :ere/y a,o7('*& (2e ;'+3a/ re&':e 7re+3r'be, '* +a', DAO 99-56
Fa*, *o(2'*& :oreG *ee, *o( 2aHe (2e eI7re++ 3/eara*3e o; (2e !re+',e*(
a*y:ore. 9t is as if the same had been pre-approved. ?e cannot fathom the
complaint that that ma(es the secretary more powerful than the ,resident, or that the
former is trying to hide things from the ,resident or Congress.
)/. 1ased on the first sentence of ection . of 5A7 **-.&, which states SBACll
F2AAs approved prior to the effectivity of this Administrative 7rder shall remain
valid and be recogniFed by the DovernmentT, 6ustice Carpio concludes that said
Administrative 7rder allegedly eIe:7(+ F2AAs approved prior to its effectivity --
li(e the ?8C, F2AA -- from having to pay the tate any share from their mining
income, apart from ta0es, duties and fees.
?e disagree. ?hat we see in blac( and white is the statement that the F2AAs
approved before the 5A7 came into effect are to continue to be valid and will be
recogniFed by the tate. ,othing is said about their fiscal regimes. Certainly, there
is no basis to claim that the contractors under said F2AAs were being e0empted from
paying the government a share in their mining incomes.
For the record, the ?8C, F2AA is N72 and has never been e0empt from
paying the government share. T2e ?M! FTAA 2a+ '(+ o=* ;'+3a/ re&':e --
Se3('o* 7.7 -- =2'32 &'He+ (2e &oHer*:e*( a 6. 7er3e*( +2are '* (2e *e( :'*'*&
reHe*ue+ o; ?M! ;ro: (2e 3o::e*3e:e*( o; 3o::er3'a/ 7ro,u3('o*.
For that very reason, we have never said that 5A7 **-.& is the basis for
claiming that the ?8C, F2AA has a consideration. =ence, we find !uite out of
place 6ustice CarpioRs statement that ironicall!9 %& 998K=9 the ver! authorit! cited
to support the claim that the (M*P 0$%% has a consideration9 does not appl! to the
(M*P 0$%%. 6! its own e5press terms9 %& 998K= does not appl! to 0$%%s
e5ecuted before the issuance of %& 998K=9 li2e the (M*P 0$%%. $he ma'orit!Fs
position has allegedl! no leg to stand on since even %& 998K=9 assuming it is valid9
cannot save the (M*P 0$%% from want of consideration. Even
assuming arguendo that 5A7 **-.& does not apply to the ?8C, F2AA,
nevertheless, the ?8C, F2AA has its own fiscal regime, found in ection $.$
thereof. =ence, there is no such thing as Swant of considerationT here.
till more startling is this claimA $he ma'orit! supposedl! agrees that the
provisions of the (M*P 0$%%9 which grant a sham consideration to the State9 are
void. Since the ma'orit! agrees that the (M*P 0$%% has a sham consideration9 the
(M*P 0$%% thus lac2s the third element of a valid contract. $he ecision should
declare the (M*P 0$%% void for want of consideration unless it treats the contract
as an MPS% under Section G>. "ndeed the onl! recourse of (M*P to save the
validit! of its contract is to convert it into an MPS%.
2o clarify, we said that ections $.* and $.%'e+ of the ?8C, F2AA are
provisions grossly disadvantageous to government and detrimental to the interests of
the Filipino people, as well as violative of public policy, and must therefore be
stric(en off as invalid. ince the offending provisions are very much separable from
ection $.$ and the rest of the F2AA, the deletion of ections $.* and $.%'e+ can be
done without affecting or re!uiring the invalidation of the ?8C, F2AA itself, and
such deletion will preserve for government its due share of the &: percent benefits.
2herefore, the ?8C, F2AA is N72 bereft of a valid consideration 'assuming for
the nonce that indeed this is the SconsiderationT of the F2AA+.
S"MMATION
2o conclude, a summary of the (ey points discussed above is now in order.
#he eaning of G*greements $nvolving
)ither #echnical or Financial *ssistanceH
Applying familiar principles of constitutional construction to the
phrase agreements involving either technical or financial assistance, the framersR
choice of words does not indicate the intent to e0clude other modes of assistance, but
rather implies that there are other things being included or possibly being made part
of the agreement, apart from financial or technical assistance. 2he drafters avoided
the use of restrictive and stringent phraseology@ a verba legis scrutiny of ection - of
Article K99 of the Constitution discloses not even a hint of a desire to prohibit foreign
involvement in the management or operation of mining activities, or
to eradicate service contracts. uch moves would necessarily imply an underlying
drastic shift in fundamental economic and developmental policies of the tate. 2hat
change re!uires a much more definite and irrefutable basis than mere omission of the
words Sservice contractT from the new Constitution.
Furthermore, a literal and restrictive interpretation of this paragraph leads to
logical inconsistencies. A constitutional provision specifically allowing foreign-
owned corporations to render financial or technical assistance in respect of mining or
any other commercial activity was clearly unnecessary@ the provision was meant to
refer to more than mere financial or technical assistance.
Also, if paragraph / permits only agreements for financial or technical
assistance, there would be no point in re!uiring that they be ?based on real
contributions to the economic growth and general welfare of the countr!.A And
considering that there were various long-term service contracts still in force and
effect at the time the new Charter was being drafted, the absence of any transitory
provisions to govern the termination and closing-out of the then e0isting service
contracts strongly militates against the theory that the mere omission of Sservice
contractsT signaled their prohibition by the new Constitution.
4esort to the deliberations of the Constitutional Commission is therefore
unavoidable, and a careful scrutiny thereof conclusively shows that the ConCom
members discussed agreements involving either technical or financial assistance in
the same sense as service contracts and used the terms interchangeably. 2he drafters
in fact (new that the agreements with foreign corporations were going to entail not
mere technical or financial assistance but, rather, foreign investment in and
management of an enterprise for large8scale e0ploration, development and utiliFation
of minerals.
2he framers spo(e about service contracts as the concept was understood in the
)*$# Constitution. 9t is obvious from their discussions that they did not intend to ban or
eradicate service contracts. 9nstead, they were intent on crafting provisions to put in
place safeguards that would eliminate or minimiFe the abuses prevalent during the
martial law regime. I* br'e;, (2ey =ere &o'*& (o 7er:'( +erH'3e 3o*(ra3(+ ='(2 ;ore'&*
3or7ora('o*+ a+ 3o*(ra3(or+, bu( ='(2 +a;e(y :ea+ure+ (o 7reHe*( abu+e+, a+ a*
eI3e7('o* (o (2e &e*era/ *or: e+(ab/'+2e, '* (2e ;'r+( 7ara&ra72 o; Se3('o* 2 o;
Ar('3/e LII, =2'32 re+erHe+ or /':'(+ (o F'/'7'*o 3'('6e*+ a*, 3or7ora('o*+ a( /ea+( 6.
7er3e*( o=*e, by +u32 3'('6e*+ (2e eI7/ora('o*, ,eHe/o7:e*( a*, u('/'6a('o* o;
:'*era/ or 7e(ro/eu: re+our3e+. 2his was prompted by the perceived insufficiency of
Filipino capital and the felt need for foreign e0pertise in the E5E of mineral
resources.
5espite strong opposition from some ConCom members during the final
voting, the Article on the National Economy and ,atrimony -- including paragraph /
allowing service contracts with foreign corporations as an e0ception to the general
norm in paragraph ) of ection - of the same Article -- was resoundingly and
overwhelmingly approved.
2he drafters, many of whom were economists, academicians, lawyers,
businesspersons and politicians (new that foreign entities will not enter into
agreements involving assistance without re!uiring measures of protection to ensure
the success of the venture and repayment of their investments, loans and other
financial assistance, and ultimately to protect the business reputation of the foreign
corporations. 2he drafters, by specifying such agreements involving assistance,
necessarily gave implied assent to everything that these agreements entailed or that
could reasonably be deemed necessary to ma(e them tenable and effective --
including management authority with respect to the day-to-day operations of the
enterprise, and measures for the protection of the interests of the foreign corporation,
at least to the e0tent that they are consistent with ,hilippine sovereignty over natural
resources, the constitutional re!uirement of tate control, and beneficial ownership
of natural resources remaining vested in the tate.
From the foregoing, it is clear that agreements involving either technical or
financial assistance referred to in paragraph / are in fact service contracts, but such
new service contracts are between foreign corporations acting as contractors on the
one hand, and on the other hand government as principal or SownerT 'of the wor(s+,
whereby the foreign contractor provides the capital, technology and technical (now-
how, and managerial e0pertise in the creation and operation of the large-scale
mining3e0tractive enterprise, and government through its agencies '5EN4, 8D1+
actively e0ercises full control and supervision over the entire enterprise.
uch service contracts may be entered into onl! with respect to minerals,
petroleum and other mineral oils. 2he grant of such service contracts is subject to
several safeguards, among themA ')+ that the service contract be crafted in
accordance with a general law setting standard or uniform terms, conditions and
re!uirements@ '-+ the ,resident be the signatory for the government@ and '#+ the
,resident report the e0ecuted agreement to Congress within thirty days.
Jltimate #est:
Full &tate +ontrol
2o repeat, the primacy of the principle of the tateRs sovereign ownership of all
mineral resources, and its full control and supervision over all aspects of e0ploration,
development and utiliFation of natural resources must be upheld. 1ut Sfull control
and supervisionT cannot be ta(en literally to mean that the tate controls and
supervises ever!thing down to the minutest details and ma2es all re#uired actions, as
this would render impossible the legitimate e0ercise by the contractor of a reasonable
degree of management prerogative and authority, indispensable to the proper
functioning of the mining enterprise. Also, government need not micro-manage
mining operations and day-to-day affairs of the enterprise in order to be considered
as e0ercising full control and supervision.
*ontrol9 as utiliFed in ection - of Article K99, must be ta(en to mean a degree
of control sufficient to enable the tate to direct, restrain, regulate and govern the
affairs of the e0tractive enterprises. Control by the tate may be on a macro level,
through the establishment of policies, guidelines, regulations, industry standards and
similar measures that would enable government to regulate the conduct of affairs in
various enterprises, and restrain activities deemed not desirable or beneficial, with
the end in view of ensuring that these enterprises contribute to the economic
development and general welfare of the country, conserve the environment, and
uplift the well-being of the local affected communities. uch a degree of control
would be compatible with permitting the foreign contractor sufficient and reasonable
management authority over the enterprise it has invested in, to ensure efficient and
profitable operation.
-overnment -ranted Full +ontrol
by 4* 7:<= and 5*1 :6%<A
1aseless are petitionersR sweeping claims that 4A $*/- and its 9mplementing
4ules and 4egulations ma(e it possible for F2AA contracts to cede full control and
management of mining enterprises over to fully foreign owned corporations.
E!ually wobbly is the assertion that the tate is reduced to a passive regulator
dependent on submitted plans and reports, with wea( review and audit powers and
little say in the decision-ma(ing of the enterprise, for which reasons Sbeneficial
ownershipT of the mineral resources is allegedly ceded to the foreign contractor.
As discussed hereinabove, the tateRs full control and supervision over mining
operations are ensured through the following provisions in 4A $*/-A ections %, *,
)&, )*, -/, #.B'b+, 'e+, 'f+, 'g+, 'h+, '(+, 'l+, 'm+ and 'o+C, /:, .$, &&, &*, $:, and
Chapters K9 and K;99@ as well as the following provisions of 5A7 *&-/:A
ections$B'd+ and 'f+C, #.'a--+, .#B'a-/+ and 'd+C, ./, .&B'g+, 'h+, 'l+, 'm+ and 'n+C,
.&'-+, &:, &&, )//, )&%, )$) and -$:, and also Chapters K;, K;9 and KK9;.
2hrough the foregoing provisions, the government agencies concerned are
empowered to approve or disapprove -- hence, in a position to influence, direct, and
change -- the various wor( programs and the corresponding minimum e0penditure
commitments for each of the e0ploration, development and utiliFation phases of the
enterprise. 7nce they have been approved, the contractorRs compliance with its
commitments therein will be monitored. Figures for mineral production and sales
are regularly monitored and subjected to government review, to ensure that the
products and by-products are disposed of at the best prices@ copies of sales
agreements have to be submitted to and registered with 8D1.
2he contractor is mandated to open its boo(s of accounts and records for
scrutiny, to enable the tate to determine that the government share has been fully
paid. 2he tate may li(ewise compel compliance by the contractor with mandatory
re!uirements on mine safety, health and environmental protection, and the use of
anti-pollution technology and facilities. 2he contractor is also obligated to assist the
development of the mining community, and pay royalties to the indigenous peoples
concerned. And violation of any of the F2AARs terms and conditions, and3or non-
compliance with statutes or regulations, may be penaliFed by cancellation of the
F2AA. uch sanction is significant to a contractor who may have yet to recover the
tens or hundreds of millions of dollars sun( into a mining project.
7verall, the tate definitely has a pivotal say in the operation of the individual
enterprises, and can set directions and objectives, detect deviations and non-
compliances by the contractor, and enforce compliance and impose sanctions should
the occasion arise. =ence, 4A $*/- and 5A7 *&-/: vest in government more than a
sufficient degree of control and supervision over the conduct of mining operations.
ection #'a!+ of 4A $*/- was objected to as being unconstitutional for
allowing a foreign contractor to apply for and hold an e0ploration permit. 5uring the
e0ploration phase, the permit grantee 'and prospective contractor+ is spending and
investing heavily in e0ploration activities without yet being able to e0tract minerals
and generate revenues. 2he e0ploration permit issued under ections #'a!+, -: and
-# of 4A $*/-, which allows e0ploration but not e0traction, serves to protect the
interests and rights of the e0ploration permit grantee 'and would-be contractor+,
foreign or local. 7therwise, the e0ploration wor(s already conducted, and
e0penditures already made, may end up only benefiting claim-jumpers. 2hus,
ection #'a!+ of 4A $*/- is not unconstitutional.
7+( F#** 6iBewise -ives the
&tate Full +ontrol and &upervision
2he ?8C, F2AA obligates the contractor to account for the value of
production and sale of minerals 'Clause )./+@ re!uires that the contractorRs wor(
program, activities and budgets be approved by the tate 'Clause -.)+@ gives the
5EN4 secretary power to e0tend the e0ploration period 'Clause #.--a+@ re!uires
approval by the tate for incorporation of lands into the contract area 'Clause /.#-c+@
re!uires 1ureau of Forest 5evelopment approval for inclusion of forest reserves as
part of the F2AA contract area 'Clause /..+@ obligates the contractor to periodically
relin!uish parts of the contract area not needed for e0ploration and development
'Clause /.&+@ re!uires submission of a declaration of mining feasibility for approval
by the tate 'Clause /.&-b+@ obligates the contractor to report to the tate the results
of its e0ploration activities 'Clause /.*+@ re!uires the contractor to obtain tate
approval for its wor( programs for the succeeding two year periods, containing the
proposed wor( activities and e0penditures budget related to e0ploration 'Clause ..)+@
re!uires the contractor to obtain tate approval for its proposed e0penditures for
e0ploration activities 'Clause ..-+@ re!uires the contractor to submit an annual report
on geological, geophysical, geochemical and other information relating to its
e0plorations within the F2AA area 'Clause ..#-a+@ re!uires the contractor to submit
within si0 months after e0piration of e0ploration period a final report on all its
findings in the contract area 'Clause ..#-b+@ re!uires the contractor after conducting
feasibility studies to submit a declaration of mining feasibility, along with a
description of the area to be developed and mined, a description of the proposed
mining operations and the technology to be employed, and the proposed wor(
program for the development phase, for approval by the 5EN4 secretary 'Clause
../+@ obligates the contractor to complete the development of the mine, including
construction of the production facilities, within the period stated in the approved
wor( program 'Clause &.)+@ re!uires the contractor to submit for approval a wor(
program covering each period of three fiscal years 'Clause &.-+@ re!uires the
contractor to submit reports to the secretary on the production, ore reserves, wor(
accomplished and wor( in progress, profile of its wor( force and management staff,
and other technical information 'Clause &.#+@ subjects any e0pansions, modifications,
improvements and replacements of mining facilities to the approval of the secretary
'Clause &./+@ subjects to tate control the amount of funds that the contractor may
borrow within the ,hilippines 'Clause $.-+@ subjects to tate supervisory power any
technical, financial and mar(eting issues 'Clause ):.)-a+@ obligates the contractor to
ensure &: percent Filipino e!uity in the contractor within ten years of recovering
specified e0penditures unless not so re!uired by subse!uent legislation 'Clause
):.)+@ gives the tate the right to terminate the F2AA for unremedied substantial
breach thereof by the contractor 'Clause )#.-+@ re!uires tate approval for any
assignment of the F2AA by the contractor to an entity other than an affiliate 'Clause
)/.)+.
9n short, the aforementioned provisions of the ?8C, F2AA, far from
constituting a surrender of control and a grant of beneficial ownership of mineral
resources to the contractor in !uestion, vest the tate with control and supervision
over practically all aspects of the operations of the F2AA contractor, including the
charging of pre-operating and operating e0penses, and the disposition of mineral
products.
2here is li(ewise no relin!uishment of control on account of specific provisions
of the ?8C, F2AA. Clause %.- provides a mechanism to prevent the mining
operations from grinding to a complete halt as a result of possible delays of more
than &: days in the governmentRs processing and approval of submitted wor(
programs and budgets. Clause %.# see(s to provide a temporary, stop-gap solution in
case a disagreement between the tate and the contractor 'over the proposed wor(
program or budget submitted by the contractor+ should result in a deadloc( or
impasse, to avoid unreasonably long delays in the performance of the wor(s.
2he tate, despite Clause %.#, still has control over the contract area, and it
may, as sovereign authority, prohibit wor( thereon until the dispute is resolved, or it
may terminate the F2AA, citing substantial breach thereof. =ence, the tate clearly
retains full and effective control.
Clause %.., which allows the contractor to ma(e changes to approved wor(
programs and budgets without the prior approval of the 5EN4 secretary, subject to
certain limitations with respect to the variance3s, merely provides the contractor a
certain amount of fle0ibility to meet une0pected situations, while still guaranteeing
that the approved wor( programs and budgets are not abandoned altogether. And if
the secretary disagrees with the actions ta(en by the contractor in this instance, he
may also resort to cancellation3termination of the F2AA as the ultimate sanction.
Clause /.& of the ?8C, F2AA gives the contractor discretion to select parts of
the contract area to be relin!uished. 2he tate is not in a position to substitute its
judgment for that of the contractor, who (nows e0actly which portions of the
contract area do not contain minerals in commercial !uantities and should be
relin!uished. Also, since the annual occupation fees paid to government are based
on the total hectarage of the contract area, net of the areas relin!uished, the
contractorRs self-interest will assure proper and efficient relin!uishment.
Clause ):.-'e+ of the ?8C, F2AA does not mean that the contractor can
compel government to use its power of eminent domain. 9t contemplates a situation
in which the contractor is a foreign-owned corporation, hence, not !ualified to own
land. 2he contractor identifies the surface areas needed for it to construct the
infrastructure for mining operations, and the tate then ac!uires the surface rights on
behalf of the former. 2he provision does not call for the e0ercise of the power of
eminent domain 'or determination of just compensation+@ it see(s to avoid a violation
of the anti-dummy law.
Clause ):.-'l+ of the ?8C, F2AA giving the contractor the right to mortgage
and encumber the mineral products e0tracted may have been a result of conditions
imposed by creditor-ban(s to secure the loan obligations of ?8C,. 1an(s lend also
upon the security of encumbrances on goods produced, which can be easily sold and
converted into cash and applied to the repayment of loans. 2hus, Clause ):.-'l+ is
not something out of the ordinary. Neither is it objectionable, because even though
the contractor is allowed to mortgage or encumber the mineral end-products
themselves, the contractor is not thereby relieved of its obligation to pay the
government its basic and additional shares in the net mining revenue. 2he
contractorRs ability to mortgage the minerals does not negate the tateRs right to
receive its share of net mining revenues.
Clause ):.-'(+ which gives the contractor authority Sto change its e!uity
structure at any time,T means that ?8C,, which was then ):: percent foreign
owned, could permit Filipino e!uity ownership. 8oreover, what is important is that
the contractor, regardless of its ownership, is always in a position to render the
services re!uired under the F2AA, under the direction and control of the
government.
Clauses ):./'e+ and 'i+ bind government to allow amendments to the F2AA if
re!uired by ban(s and other financial institutions as part of the conditions of new
lendings. 2here is nothing objectionable here, since Clause ):./'e+ also provides
that such financing arrangements should in no event reduce the contractorRs
obligations or the governmentRs rights under the F2AA. Clause ):./'i+ provides that
government shall Sfavourably considerT any re!uest for amendments of this
agreement necessary for the contractor to successfully obtain financing. 2here is no
renunciation of control, as the proviso does not say that government shall
automatically grant any such re!uest. Also, it is up to the contractor to prove the
need for the re!uested changes. 2he government always has the final say on whether
to approve or disapprove such re!uests.
I* ;'*e, (2e FTAA 7roH'+'o*+ ,o *o( re,u3e or ab,'3a(e S(a(e 3o*(ro/.
;o &urrender of
Financial !enefits
2he second paragraph of ection %) of 4A $*/- has been denounced for
allegedly limiting the tateRs share in F2AAs with foreign contractors to just ta0es,
fees and duties, and depriving the tate of ashare in the after-ta0 income of the
enterprise. =owever, the inclusion of the phrase ?among other thingsA in the second
paragraph of ection %) clearly and unmista(ably reveals the legislative intent to
have the tate collect more than 'ust the usual ta5es9 duties and fees.
2hus, 5A7 **-.&, the ?3uidelines :stablishing the 0iscal Regime of
0inancial or $echnical %ssistance %greements9A spells out the financial benefits
government will receive from an F2AA, as consisting of not only a ba+'3
&oHer*:e*( +2are, comprised of all direct ta0es, fees and royalties, as well as other
payments made by the contractor during the term of the F2AA, but also
an a,,'('o*a/ &oHer*:e*( +2are, being a +2are '* (2e ear*'*&+ or 3a+2 ;/o=+ o;
(2e :'*'*& e*(er7r'+e, so as to achieve a fifty-fifty sharing of net benefits from
mining between the government and the contractor.
2he a,,'('o*a/ &oHer*:e*( +2are is computed using one of three '#+ options
or schemes detailed in 5A7 **-.&, vi@.9 ')+ the fifty-fifty sharing of cumulative
present value of cash flows@ '-+ the e0cess profit-related additional government
share@ and '#+ the additional sharing based on the cumulative net mining revenue.
?hichever option or computation is used, the additional government share has
nothing to do with ta0es, duties, fees or charges. 2he portion of revenues remaining
after the deduction of the basic and additional government shares is what goes to the
contractor.
2he basic government share and the additional government share do not yet
ta(e into account the indirect ta0es and other financial contributions of mining
projects, which are real and actual benefits enjoyed by the Filipino people@ if these
are ta(en into account, total government share increases to &: percent or higher 'as
much as $$ percent, and %* percent in one instance+ of the net present value of total
benefits from the project.
2he third or last paragraph of ection %) of 4A $*/- is slammed for deferring
the payment of the government share in F2AAs until after the contractor shall have
recovered its pre-operating e0penses, e0ploration and development e0penditures.
Allegedly, the collection of the tateRs share is rendered uncertain, as there is no time
limit in 4A $*/- for this grace period or recovery period. 1ut although 4A $*/- did
not limit the grace period, the concerned agencies '5EN4 and 8D1+ in formulating
the )**. and )**& 9mplementing 4ules and 4egulations provided that the period of
recovery, rec(oned from the date of commercial operation, shall be for a period not
e0ceeding five years, or until the date of actual recovery, whichever comes earlier.
And since 4A $*/- allegedly does not re!uire government approval for the pre-
operating, e0ploration and development e0penses of the foreign contractors, it is
feared that such e0penses could be bloated to wipe out mining revenues anticipated
for ): years, with the result that the tateRs share is Fero for the first ): years.
=owever, the argument is based on incorrect information.
Ender ection -# of 4A $*/-, the applicant for e0ploration permit is re!uired
to submit a proposed wor( program for e0ploration, containing a yearly budget of
proposed e0penditures, which the tate passes upon and either approves or rejects@ if
approved, the same will subse!uently be recorded as pre-operating e0penses that the
contractor will have to recoup over the grace period.
Ender ection -/, when an e0ploration permittee files with the 8D1 a
declaration of mining project feasibility, it must submit a wor( program for
development, with corresponding budget, for approval by the 1ureau, before
government may grant an F2AA or 8,A or other mineral agreements@ again,
government has the opportunity to approve or reject the proposed wor( program and
budgeted e0penditures for development wor(s, which will become the pre-operating
and development costs that will have to be recovered. Dovernment is able to (now
ahead of time the amounts of pre-operating and other e0penses to be recovered, and
the appro0imate period of time needed therefor. 2he aforecited provisions have
counterparts in ection #., which deals with the terms and conditions e0clusively
applicable to F2AAs. "n sum9 the third or last paragraph of Section G1 of R% ;94<
cannot be deemed defective.
ection %: of 4A $*/- allegedly limits the tateRs share in a mineral
production-sharing agreement '8,A+ to just the e0cise ta0 on the mineral product,
i.e., only - percent of mar(et value of the minerals. 2he colatilla in ection %/
reiterates the same limitation in ection %:. 0o=eHer, (2e+e (=o 7roH'+'o*+ 7er(a'*
o*/y (o M!SA+, a*, 2aHe *o a77/'3a('o* (o FTAA+. T2e+e 7ar('3u/ar 7roH'+'o*+
,o *o( 3o:e ='(2'* (2e '++ue+ ,e;'*e, by (2'+ our(. 0e*3e, o* ,ue 7ro3e++
&rou*,+, *o 7ro*ou*3e:e*( 3a* be :a,e '* (2'+ 3a+e '* re+7e3( o; (2e
3o*+('(u('o*a/'(y o; Se3('o*+ >. a*, >8.
ection ))- is disparaged for reverting F2AAs and all mineral agreements to
the old Slicense, concession or leaseT system, because it allegedly effectively reduces
the government share in F2AAs to just the - percent e0cise ta0 which pursuant to
ection %: comprises the government share in 8,As. =owever, ection ))-
li(ewise does not come within the issues delineated by this Court, and was never
touched upon by the parties in their pleadings. 8oreover, ection ))- may not
properly apply to F2AAs. $he mining law obviousl! meant to treat 0$%%s as a
breed apart from mineral agreements. 2here is absolutely no basis to believe that the
law intends to e0act from F2AA contractors merely the same government share 'i.e.,
the - percent e0cise ta0+ that it apparently demands from contractors under the three
forms of mineral agreements.
?hile there is ground to believe that ections %:, %/ and ))- are indeed
unconstitutional, they cannot be ruled upon here. 9n any event, they are separable@
thus, a later finding of nullity will not affect the rest of 4A $*/-.
I* ;'*e, (2e 32a//e*&e, 7roH'+'o*+ o; RA 7982 3a**o( be +a', (o +urre*,er
;'*a*3'a/ be*e;'(+ ;ro: a* FTAA (o (2e ;ore'&* 3o*(ra3(or+.
8oreover, there is no concrete basis for the view that, in F2AAs with a foreign
contractor, the tate must receive at least &: percent of the after-ta0 income from the
e0ploitation of its mineral resources, and that such share is the e!uivalent of the
constitutional re!uirement that at least &: percent of the capital, and hence &:
percent of the income, of mining companies should remain in Filipino hands. Even
if the tate is entitled to a &: percent share from other mineral agreements 'C,A,
6;A and 8,A+, that would not create a parallel or analogous situation for F2AAs.
?e are dealing with an essentially different e!uation. =ere we have the old apples
and oranges syndrome.
2he Charter did not intend to fi0 an iron-clad rule of &: percent share,
applicable to all situations, regardless of circumstances. 2here is no indication of
such an intention on the part of the framers. 8oreover, the terms and conditions of
petroleum F2AAs cannot serve as standards for mineral mining F2AAs, because (2e
(e32*'3a/ a*, o7era('o*a/ re<u're:e*(+, 3o+( +(ru3(ure+ a*, '*He+(:e*( *ee,+ o;
o;;-+2ore 7e(ro/eu: eI7/ora('o* a*, ,r'//'*& 3o:7a*'e+ ,o *o( 2aHe (2e
re:o(e+( re+e:b/a*3e (o (2o+e o; o*-+2ore :'*'*& 3o:7a*'e+.
2o ta(e the position that governmentRs share must be not less than &: percent of
after-ta0 income of F2AA contractors is nothing short of this Court dictating upon
the government. $he State resultantl! ends up losing control. 2o avoid
compromising the tateRs full control and supervision over the e0ploitation of
mineral resources, there must be no attempt to impose a Sminimum &: percentT rule.
9t is sufficient that the tate has the power and means, should it so decide, to get a &:
percent share 'or greater+@ and it is not necessary that the tate does so in ever! case.
$nvalid (rovisions of
the 7+( F#**
ection $.* of the ?8C, F2AA clearly renders illusory the tateRs &: percent
share of ?8C,Rs revenues. Ender ection $.*, should ?8C,Rs foreign
stoc(holders 'who originally owned ):: percent of the e!uity+ sell &: percent or
more of their e!uity to a Filipino citiFen or corporation, the tate loses its right to
receive its share in net mining revenues under ection $.$, without any offsetting
compensation to the tate. And what is given to the tate in ection $.$ is by mere
tolerance of ?8C,Rs foreign stoc(holders, who can at any time cut off the
governmentRs entire share by simply selling &: percent of ?8C,Rs e!uity to a
,hilippine citiFen or corporation.
9n fact, the sale by ?8C,Rs foreign stoc(holder on 6anuary -#, -::) of the
entire outstanding e!uity in ?8C, to agittarius 8ines, 9nc., a domestic
corporation at least &: percent Filipino owned, can be deemed to have automatically
triggered the operation of ection $.* and removed the tateRs right to receive its &:
percent share. ection $.* of the ?8C, F2AA has effectively given away the
tateRs share without anything in e0change.
8oreover, it constitutes unjust enrichment on the part of the local and foreign
stoc(holders in ?8C,, because by the mere act of divestment, the local and foreign
stoc(holders get a windfall, as their share in the net mining revenues of ?8C, is
automatically increased, without having to pay anything for it.
1eing grossly disadvantageous to government and detrimental to the Filipino
people, as well as violative of public policy, ection $.* must therefore be stric(en
off as invalid. 2he F2AA in !uestion does not involve mere contractual rights but,
being impressed as it is with public interest, the contractual provisions and
stipulations must yield to the common good and the national interest. ince the
offending provision is very much separable from the rest of the F2AA, the deletion
of ection $.* can be done without affecting or re!uiring the invalidation of the
entire ?8C, F2AA itself.
ection $.%'e+ of the ?8C, F2AA li(ewise is invalid, since by allowing the
sums spent by government for the benefit of the contractor to be deductible from the
tateRs share in net mining revenues, it results in benefiting the contractor twice
over. 2his constitutes unjust enrichment on the part of the contractor, at the e0pense
of government. For being grossly disadvantageous and prejudicial to government
and contrary to public policy, ection $.%'e+ must also be declared without effect. 9t
may li(ewise be stric(en off without affecting the rest of the F2AA.
E!ILOG"E
AF2E4 A"" 9 A95 AN5 57NE, it is clear that there is unanimous
agreement in the Court upon the (ey principle that the tate must e0ercise full
control and supervision over the e0ploration, development and utiliFation of mineral
resources.
$he cru5 of the controvers! is the amount of discretion to be accorded the
:5ecutive epartment9 particularl! the President of the Republic9 in respect of
negotiations over the terms of 0$%%s9 particularl! when it comes to the government
share of financial benefits from 0$%%s. 2he Court believes that it is not
unconstitutional to allow a wide degree of discretion to the Chief E0ecutive, given the
nature and comple0ity of such agreements, the humongous amounts of capital and
financing re!uired for large-scale mining operations, the complicated technology
needed, and the intricacies of international trade, coupled with the tateRs need to
maintain fle0ibility in its dealings, in order to preserve and enhance our countryRs
competitiveness in world mar(ets.
?e are all, in one way or another, sorely affected by the recently reported
scandals involving corruption in high places, duplicity in the negotiation of multi-
billion peso government contracts, huge payoffs to government officials, and other
malfeasances@ and perhaps, there is the desire to see some measures put in place to
prevent further abuse. 0o=eHer, ,'3(a('*& u7o* (2e !re+',e*( =2a( :'*':u:
+2are (o &e( ;ro: a* FTAA '+ *o( (2e +o/u('o*. 9t sets a bad precedent since such a
move institutionaliFes the very reduction if not deprivation of the tateRs control.
2he remedy may be worse than the problem it was meant to address. 9n any event,
provisions in such future agreements which may be suspected to be grossly
disadvantageous or detrimental to government may be challenged in court, and the
culprits haled before the bar of justice.
;erily, under the doctrine of separation of powers and due respect for co-e!ual
and coordinate branches of government, this Court must restrain itself from intruding
into policy matters and must allow the ,resident and Congress ma0imum discretion
in using the resources of our country and in securing the assistance of foreign groups
to eradicate the grinding poverty of our people and answer their cry for viable
employment opportunities in the country.
S$he 'udiciar! is loath to interfere with the due e5ercise b! coe#ual branches of
government of their official functions.T
B**C
As aptly spelled out seven decades ago by
6ustice Deorge 8alcolm, SJust as the Supreme *ourt9 as the guardian of
constitutional rights9 should not sanction usurpations b! an! other department of
government9 so should it as strictl! confine its own sphere of influence to the powers
e5pressl! or b! implication conferred on it b! the &rganic %ct .T
B)::C
"et the
development of the mining industry be the responsibility of the political branches of
government. And let not this Court interfere inordinately and unnecessarily.
2he Constitution of the ,hilippines is the supreme law of the land. 9t is the
repository of all the aspirations and hopes of a// the people. ?e fully sympathiFe
with the plight of ,etitioner "a 1ugal 1Rlaan and other tribal groups, and commend
their efforts to uplift their communities. =owever, we cannot justify the invalidation
of an otherwise constitutional statute along with its implementing rules, or the
nullification of an otherwise legal and binding F2AA contract.
?e must never forget that it is not only our less privileged brethren in tribal and
cultural communities who deserve the attention of this Court@ rather, all parties
concerned -- including the tate itself, the contractor 'whether Filipino or foreign+,
and the vast majority of our citiFens -- e!ually deserve the protection of the law and
of this Court. 2o stress, the benefits to be derived by the tate from mining activities
must ultimately serve the great majority of our fellow citiFens. 2hey have as much
right and interest in the proper and well-ordered development and utiliFation of the
countryRs mineral resources as the petitioners.
?hether we consider the near term or ta(e the longer view, we cannot
overemphasiFe the need for an a77ro7r'a(e ba/a*3'*& o; '*(ere+(+ a*, *ee,+ -- the
need to develop our stagnating mining industry and e0tract what NE5A ecretary
4omulo Neri estimates is some EU%/: billion 'appro0. ,h,/$.:/ trillion+ worth of
mineral wealth lying hidden in the ground, in order to jumpstart our floundering
economy on the one hand, and on the other, the need to enhance our nationalistic
aspirations, protect our indigenous communities, and prevent irreversible ecological
damage.
2his Court cannot but be mindful that any decision rendered in this case will
ultimately impact not only the cultural communities which lodged the instant
,etition, and not only the larger community of the Filipino people now struggling to
survive amidst a fiscal3budgetary deficit, ever increasing prices of fuel, food, and
essential commodities and services, the shrin(ing value of the local currency, and a
government hamstrung in its delivery of basic services by a severe lac( of
resources, but also countless future generations of 0ilipinos.
For this latter group of Filipinos yet to be born, their eventual access to
education, health care and basic services, their overall level of well-being, the very
shape of their lives are even now being determined and affected partly by the policies
and directions being adopted and implemented by government today. %nd in part b!
the this Resolution rendered b! this *ourt toda!.
;erily, the mineral wealth and natural resources of this country are meant to
benefit not merely a select group of people living in the areas locally affected by
mining activities, but the entire Filipino nation,present and future, to whom the
mineral wealth really belong. 2his Court has therefore weighed carefully the rights
and interests of all concerned, and decided for the greater good of the greatest
number. 6E29CE F74 A"", not just for some@ 6E29CE F74 2=E ,4EEN2
AN5 2=E FE2E4E, not just for the here and now.
?0EREFORE, the Court R:S&)J:S to 3R%,$ the respondentsR and the
intervenorsR 8otions for 4econsideration@ to R:J:RS: and S:$ %S": this CourtRs
6anuary -$, -::/ 5ecision@ to"SM"SS the ,etition@ and to issue this new judgment
declaring *&,S$"$+$"&,%) ')+ 4epublic Act No. $*/- 'the ,hilippine 8ining
"aw+, '-+ its 9mplementing 4ules and 4egulations contained in 5EN4
Administrative 7rder '5A7+ No. *&/: -- insofar as they relate to financial and
technical assistance agreements referred to in paragraph / of ection - of Article K99
of the Constitution@ and '#+ the Financial and 2echnical Assistance Agreement
'F2AA+ dated 8arch #:, )**. e0ecuted by the government and ?estern 8ining
Corporation ,hilippines 9nc. '?8C,+, e0cept ections $.% and $.* of the subject
F2AA which are hereby 9N;A"95A2E5 for being contrary to public policy and for
being grossly disadvantageous to the government.
SO ORDERED.
G.R. No. L-8-9-> A7r'/ 15, 19>>
RE!"#LI OF T0E !0ILI!!INES FDIRETOR OF FOREST
DEVELO!MENTG, petitioner,
vs.
0ON. O"RT OF A!!EALS FT0IRD DIVISIONG a*, )OSE 1. DE LA
ROSA, respondents.
G.R. No. L-88.>1 A7r'/ 15, 19>>
#ENG"ET ONSOLIDATED, IN., petitioner,
vs.
0ON. O"RT OF A!!EALS, )OSE 1. DE LA ROSA, VITORIA,
#EN)AMIN a*, ED"ARDO, a// +ur*a:e, DE LA ROSA, re7re+e*(e, by (2e'r
;a(2er )OSE 1. DE LA ROSA, respondents.
G.R. No. L-88.92 A7r'/ 15, 19>>
ATOE-#IG ?EDGE MINING OM!AN1, petitioner,
vs.
0ON. O"RT OF A!!EALS, )OSE 1. DE LA ROSA, VITOR/A,
#EN)AMIN a*, ED"ARDO, a// +ur*a:e, DE LA ROSA, re7re+e*(e, by (2e'r
;a(2er, )OSE 1. DE LA ROSA, respondents.

R"$, J.:
2he 4egalian doctrine reserves to the tate all natural wealth that may be found in
the bowels of the earth even if the land where the discovery is made be private.
1
9n
the cases at bar, which have been consolidated because they pose a common issue,
this doctrine was not correctly applied.
2hese cases arose from the application for registration of a parcel of land filed on
February )), )*&., by 6ose de la 4osa on his own behalf and on behalf of his three
children, ;ictoria, 1enjamin and Eduardo. 2he land, situated in 2uding, 9togon,
1enguet ,rovince, was divided into * lots and covered by plan ,su---.::*.
According to the application, "ots )-. were sold to 6ose de la 4osa and "ots &-* to
his children by 8amaya 1albalio and 6aime Alberto, respectively, in )*&/.
2
2he application was separately opposed by 1enguet Consolidated, 9nc. as to "ots )-
., Ato( 1ig ?edge Corporation, as to ,ortions of "ots )-. and all of "ots &-*, and by
the 4epublic of the ,hilippines, through the 1ureau of Forestry 5evelopment, as to
lots )-*.
-
9n support of the application, both 1albalio and Alberto testified that they had
ac!uired the subject land by virtue of prescription 1albalio claimed to have received
"ots )-. from her father shortly after the "iberation. he testified she was born in the
land, which was possessed by her parents under claim of ownership.
8
Alberto said
he received "ots &-* in )*&) from his mother, 1ella Alberto, who declared that the
land was planted by 6aime and his predecessors-in-interest to bananas, avocado,
nang(a and camote, and was enclosed with a barbed-wire fence. he was
corroborated by Feli0 8arcos, &$ years old at the time, who recalled the earlier
possession of the land by Alberto<s father.
5
1albalio presented her ta0 declaration in
)*.& and the realty ta0 receipts from that year to )*&/,
6
Alberto his ta0 declaration
in )*&) and the realty ta0 receipts from that year to )*&/.
7
1enguet opposed on the ground that the 6une 1ug mineral claim covering "ots )-.
was sold to it on eptember --, )*#/, by the successors-in-interest of 6ames Helly,
who located the claim in eptember )*:* and recorded it on 7ctober )/, )*:*. From
the date of its purchase, 1enguet had been in actual, continuous and e0clusive
possession of the land in concept of owner, as evidenced by its construction of adits,
its affidavits of annual assessment, its geological mappings, geological samplings
and trench side cuts, and its payment of ta0es on the land.
>
For its part, Ato( alleged that a portion of "ots )-. and all of "ots &-* were covered
by the Emma and Fredia mineral claims located by =arrison and 4eynolds on
5ecember -., )*#:, and recorded on 6anuary -, )*#), in the office of the mining
recorder of 1aguio. 2hese claims were purchased from these locators on November
-, )*#), by Ato(, which has since then been in open, continuous and e0clusive
possession of the said lots as evidenced by its annual assessment wor( on the claims,
such as the boring of tunnels, and its payment of annual ta0es thereon.
9
2he location of the mineral claims was made in accordance with ection -) of the
,hilippine 1ill of )*:- which provided thatA
EC. -). All valuable mineral deposits in public lands in the
philippine 9slands both surveyed and unsurveyed are hereby
declared to be free and open to e0ploration, occupation and
purchase and the land in which they are found to occupation and
purchase by the citiFens of the Enited tates, or of said islands.
2he 1ureau of Forestry 5evelopment also interposed its objection, arguing that the
land sought to be registered was covered by the Central Cordillera Forest 4eserve
under ,roclamation No. -)$ dated February )&, )*-*. 8oreover, by reason of its
nature, it was not subject to alienation under the Constitutions of )*#. and )*$#.
1.
2he trial court M denied the application, holding that the applicants had failed to
prove their claim of possession and ownership of the land sought to be
registered.
11
2he applicants appealed to the respondent court, M which reversed the
trial court and recogniFed the claims of the applicant, but subject to the rights of
1enguet and Ato( respecting their mining claims.
12
9n other words, the Court of
Appeals affirmed the surface rights of the de la 4osas over the land while at the same
time reserving the sub-surface rights of 1enguet and Ato( by virtue of their mining
claims.
1oth 1enguet and Ato( have appealed to this Court, invo(ing their superior right of
ownership. 2he 4epublic has filed its own petition for review and reiterates its
argument that neither the private respondents nor the two mining companies have
any valid claim to the land because it is not alienable and registerable.
9t is true that the subject property was considered forest land and included in the
Central Cordillera Forest 4eserve, but this did not impair the rights already vested in
1enguet and Ato( at that time. 2he Court of Appeals correctly declared thatA
2here is no !uestion that the * lots applied for are within the 6une
1ug mineral claims of 1enguet and the >Fredia and Emma>
mineral claims of Ato(. 2he 6une 1ug mineral claim of plaintiff
1enguet was one of the )& mining claims of 6ames E. Helly,
American and mining locator. =e filed his declaration of the
location of the 6une 1ug mineral and the same was recorded in the
8ining 4ecorder<s 7ffice on 7ctober )/, )*:*. All of the Helly
claims ha subse!uently been ac!uired by 1enguet Consolidated,
9nc. 1enguet<s evidence is that it had made improvements on the
6une 1ug mineral claim consisting of mine tunnels prior to )*#.. 9t
had submitted the re!uired affidavit of annual assessment. After
?orld ?ar 99, 1enguet introduced improvements on mineral claim
6une 1ug, and also conducted geological mappings, geological
sampling and trench side cuts. 9n )*/%, 1enguet redeclared the
>6une 1ug> for ta0ation and had religiously paid the ta0es.
2he Emma and Fredia claims were two of the several claims of
=arrison registered in )*#), and which Ato( representatives
ac!uired. ,ortions of "ots ) to . and all of "ots & to * are within
the Emma and Fredia mineral claims of Ato( 1ig ?edge 8ining
Company.
2he 6une 1ug mineral claim of 1enguet and the Fredia and Emma
mineral claims of Ato( having been perfected prior to the approval
of the Constitution of the ,hilippines of )*#., they were removed
from the public domain and had become private properties of
1enguet and Ato(.
9t is not disputed that the location of the mining
claim under consideration was perfected prior to
November )., )*#., when the Dovernment of
the Commonwealth was inaugurated@ and
according to the laws e0isting at that time, as
construed and applied by this court in Mcaniel
v. %pacible and *uisia '/- ,hil. $/*+, a valid
location of a mining claim segregated the area
from the public domain. aid the court in that
caseA 2he moment the locator discovered a
valuable mineral deposit on the lands located,
and perfected his location in accordance with
law, the power of the Enited tates Dovernment
to deprive him of the e0clusive right to the
possession and enjoyment of the located claim
was gone, the lands had become mineral lands
and they were e0empted from lands that could be
granted to any other person. 2he reservations of
public lands cannot be made so as to include
prior mineral perfected locations@ and, of course,
if a valid mining location is made upon public
lands afterwards included in a reservation, such
inclusion or reservation does not affect the
validity of the former location. 1y such location
and perfection, the land located is segregated
from the public domain even as against the
Dovernment. 'Enion 7il Co. v. mith, -/* E..
##$@ ;an 8ess v. 4oonet, )&: Cal. )#)@ -$ Cyc.
./&+.
>2he legal effect of a valid location of a mining
claim is not only to segregate the area from the
public domain, but to grant to the locator the
beneficial ownership of the claim and the right to
a patent therefor upon compliance with the terms
and conditions prescribed by law. ?here there is
a valid location of a mining claim, the area
becomes segregated from the public domain and
the property of the locator.> 't. "ouis 8ining Y
8illing Co. v. 8ontana 8ining Co., )$) E..
&.:@ &..@ /# "aw ed., #-:, #--.+ >?hen a
location of a mining claim is perfected it has the
effect of a grant by the Enited tates of the right
of present and e0clusive possession, with the
right to the e5clusive en'o!ment of all the
surface ground as well as of all the minerals
within the lines of the claim, e0cept as limited by
the e0tralateral right of adjoining locators@ and
this is the locator<s right before as well as after
the issuance of the patent. ?hile a lode locator
ac!uires a vested property right by virtue of his
location made in compliance with the mining
laws, the fee remains in the government until
patent issues.>')% 4.C.". )).-+ 'Dold Cree(
8ining Corporation v. =on. Eulogio 4odrigueF,
ec. of Agriculture and Commerce, and Luirico
Abadilla, 5irector of the 1ureau of 8ines, &&
,hil. -.*, -&.--&&+
9t is of no importance whether 1enguet and Ato( had secured a
patent for as held in the Dold Cree( 8ining Corp. Case, for all
physical purposes of ownership, the owner is not re!uired to secure
a patent as long as he complies with the provisions of the mining
laws@ his possessory right, for all practical purposes of ownership,
is as good as though secured by patent.
?e agree li(ewise with the oppositors that having complied with
all the re!uirements of the mining laws, the claims were removed
from the public domain, and not even the government of the
,hilippines can ta(e away this right from them. 2he reason is
obvious. =aving become the private properties of the oppositors,
they cannot be deprived thereof without due process of law.
1-
uch rights were not affected either by the stricture in the Commonwealth
Constitution against the alienation of all lands of the public domain e0cept those
agricultural in nature for this was made subject to e0isting rights. 2hus, in its Article
K999, ection ), it was categorically provided thatA
EC. ). All agricultural, timber and mineral lands of the public
domain, waters, minerals, coal, petroleum and other mineral oils,
all forces of potential energy and other natural resources of the
,hilipppines belong to the tate, and their disposition, e0ploitation,
development, or utiliFation shall be limited to citiFens of the
,hilippines or to corporations or associations at least &:Q of the
capital of which is owned by such citiFens, subject to any e0isting
right, grant, lease or concession at the time of the inauguration of
the government established under this Constitution. Natural
resources with the e0ception of public agricultural lands, shall not
be alienated, and no license, concession, or lease for the
e0ploitation, development or utiliFation of any of the natural
resources shall be granted for a period e0ceeding -. years, e0cept
as to water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, in
which case beneficial use may be the measure and the limit of the
grant.
9mplementing this provision, Act No. /-&%, approved on November %, )*#.,
declaredA
Any provision of e0isting laws, e0ecutive order, proclamation to
the contrary notwithstanding, all locations of mining claim made
prior to February %, )*#. within lands set apart as forest reserve
under ec. )%-& of the 4evised Administrative Code which would
be valid and subsisting location e0cept to the e0istence of said
reserve are hereby declared to be valid and subsisting locations as
of the date of their respective locations.
2he perfection of the mining claim converted the property to mineral land and under
the laws then in force removed it from the public domain.
18
1y such act, the locators
ac!uired e0clusive rights over the land, against even the government, without need
of any further act such as the purchase of the land or the obtention of a patent over
it.
15
As the land had become the private property of the locators, they had the right to
transfer the same, as they did, to 1enguet and Ato(.
9t is true, as the Court of Appeals observed, that such private property was subject to
the >vicissitudes of ownership,> or even to forfeiture by non-user or abandonment or,
as the private respondents aver, by ac!uisitive prescription. =owever, the method
invo(ed by the de la 4osas is not available in the case at bar, for two reasons.
First, the trial court found that the evidence of open, continuous, adverse and
e0clusive possession submitted by the applicants was insufficient to support their
claim of ownership. 2hey themselves had ac!uired the land only in )*&/ and applied
for its registration in )*&., relying on the earlier alleged possession of their
predecessors-in-interest.
16
2he trial judge, who had the opportunity to consider the
evidence first-hand and observe the demeanor of the witnesses and test their
credibility was not convinced. ?e defer to his judgment in the absence of a showing
that it was reached with grave abuse of discretion or without sufficient basis.
17
econd, even if it be assumed that the predecessors-in-interest of the de la 4osas had
really been in possession of the subject property, their possession was not in the
concept of owner of the mining claim but of the property asagricultural land, which
it was not. 2he property was mineral land, and they were claiming it as agricultural
land. 2hey were not disputing the lights of the mining locators nor were they see(ing
to oust them as such and to replace them in the mining of the land. 9n fact, 1albalio
testified that she was aware of the diggings being underta(en >down below>
1>
but
she did not mind, much less protest, the same although she claimed to be the owner
of the said land.
2he Court of Appeals justified this by saying there is >no conflict of interest>
between the owners of the surface rights and the owners of the sub-surface rights.
2his is rather doctrine, for it is a well-(nown principle that the owner of piece of land
has rights not only to its surface but also to everything underneath and the airspace
above it up to a reasonable height.
19
Ender the aforesaid ruling, the land is classified
as mineral underneath and agricultural on the surface, subject to separate claims of
title. 2his is also difficult to understand, especially in its practical application.
Ender the theory of the respondent court, the surface owner will be planting on the
land while the mining locator will be boring tunnels underneath. 2he farmer cannot
dig a well because he may interfere with the operations below and the miner cannot
blast a tunnel lest he destroy the crops above. =ow deep can the farmer, and how
high can the miner, go without encroaching on each other<s rightsO ?here is the
dividing line between the surface and the sub-surface rightsO
2he Court feels that the rights over the land are indivisible and that the land itself
cannot be half agricultural and half mineral. 2he classification must be categorical@
the land must be either completely mineral or completely agricultural. 9n the instant
case, as already observed, the land which was originally classified as forest land
ceased to be so and became mineral M and completely mineral M once the mining
claims were perfected.
2.
As long as mining operations were being underta(en
thereon, or underneath, it did not cease to be so and become agricultural, even if only
partly so, because it was enclosed with a fence and was cultivated by those who were
unlawfully occupying the surface.
?hat must have misled the respondent court is Commonwealth Act No. )#$,
providing as followsA
ec. #. All mineral lands of the public domain and minerals belong
to the tate, and their disposition, e0ploitation, development or
utiliFation, shall be limited to citiFens of the ,hilippines, or to
corporations, or associations, at least &:Q of the capital of which is
owned by such citiFens, subject to any e0isting right, grant, lease
or concession at the time of the inauguration of government
established under the Constitution.
EC. /. 2he ownership of, and the right to the use of land for
agricultural, industrial, commercial, residential, or for any purpose
other than mining does not include the ownership of, nor the right
to e0tract or utiliFe, the minerals which may be found on or under
the surface.
EC. .. 2he ownership of, and the right to e0tract and utiliFe, the
minerals included within all areas for which public agricultural
land patents are granted are e0cluded and e0cepted from all such
patents.
EC. &. 2he ownership of, and the right to e0tract and utiliFe, the
minerals included within all areas for which 2orrens titles are
granted are e0cluded and e0cepted from all such titles.
2his is an application of the 4egalian doctrine which, as its name implies, is intended
for the benefit of the tate, not of private persons. 2he rule simply reserves to the
tate all minerals that may be found in public and even private land devoted to
>agricultural, industrial, commercial, residential or 'for+ any purpose other than
mining.> 2hus, if a person is the owner of agricultural land in which minerals are
discovered, his ownership of such land does not give him the right to e0tract or
utiliFe the said minerals without the permission of the tate to which such minerals
belong.
2he flaw in the reasoning of the respondent court is in supposing that the rights over
the land could be used for both mining and non-mining purposes simultaneousl!. 2he
correct interpretation is that once minerals are discovered in the land, whatever the
use to which it is being devoted at the time, such use may be discontinued by the
tate to enable it to e0tract the minerals therein in the e0ercise of its sovereign
prerogative. 2he land is thus converted to mineral land and may not be used by any
private party, including the registered owner thereof, for any other purpose that will
impede the mining operations to be underta(en therein, For the loss sustained by
such owner, he is of course entitled to just compensation under the 8ining "aws or
in appropriate e0propriation proceedings.
21
7ur holding is that 1enguet and Ato( have e0clusive rights to the property in
!uestion by virtue of their respective mining claims which they validly ac!uired
before the Constitution of )*#. prohibited the alienation of all lands of the public
domain e0cept agricultural lands, subject to vested rights e0isting at the time of its
adoption. 2he land was not and could not have been transferred to the private
respondents by virtue of ac!uisitive prescription, nor could its use be shared
simultaneously by them and the mining companies for agricultural and mineral
purposes.
?=E4EF74E, the decision of the respondent court dated April #:, )*$&, is E2
A95E and that of the trial court dated 8arch )), )*&*, is 4E9N2A2E5, without
any pronouncement as to costs.
7 745E4E5.
@G.R. No. -78-5. NoHe:ber 2>, 19-8.A
N"MERIANO !ADILLA, a77/'3a*(-a77e//ee, H. !A#LO RE1ES a*, T0E
DIRETOR OF LANDS,1ppositors%*ppellants.
A((or*ey-Ge*era/ )ara*'//a a*, )o+e NaHa ;or *ppellants.
S'+o* N S'&u'o* ;or *ppellee.
S1LLA#"S
). 2744EN 4ED924A297N@ 4ED924A1"E 292"E. M 9n order that land may
be registered under the 2orrens system, the applicant must show, even though there is
no opposition to his application, that he is the absolute owner, in fee simple, of such
land. 9n other words, the burden is upon him to show that he is the real and absolute
owner, in fee simple, of such land. '4oman Catholic 1ishop of "ipa v. 8unicipality
of 2aal, #% ,hil., #&$, #$., #$&.+
-. 95.@ 95. M 9t is well-settled that no public land can be ac!uired by private persons
without any grant, e0press or implied, from the government. A grant is conclusively
presumed by law when the claimant, by himself or through his predecessors in
interest, has occupied the land openly, continuously, e0clusively, and under a claim
of title since 6uly -&, )%*/, or prior thereto. '7ngsiaco v. 8agsilang, .: ,hil., #%:.+
D E I S I O N
A#AD SANTOS, J.%
N"MERIANO !ADILLA -Appellee applied for the registration in his name of a
parcel of land containing a little over )&) hectares located in 1oGgabong, Nueva
Ecija. 2he application was opposed by the 5irector of "ands and by nine
homesteaders, on the ground that the property sought to be registered was public
land. 7ne ,ablo 4eyes, who claimed to be the e0clusive owner of the land, also filed
an opposition. After due hearing, the court below dismissed all the oppositions and
decreed the registration of the land in the name of the N"MERIANO !ADILLA-
appellee. From this judgment all the parties who opposed the application appealed,
although ,ablo 4eyesR appeal was dismissed for failure to file his brief on time.
9n support of this appeal the following errors have been assignedA ')+ 2hat the lower
court erred in holding that the appellee has established his title to the property sought
to be registered, and '-+ that the lower court erred in decreeing the registration of the
property in the name of the appellee.
Appellee presented no valid and sufficient title deed showing his ownership of the
land in !uestion. =e, however, tried to prove that he inherited the same from his
ancestors, who had been in possession of the land for many years dating bac( to the
panish regime@ that he as well as his predecessors in interest had partly cultivated
the land and partly used it as a pasture@ that various improvements had been made on
the land ever since the panish regime@ and that upon the death of their father, ,ablo
,adilla, he and his sister Alejandra too( possession of the land. 7n the other hand,
the appellants introduced evidence tending to show that the land in !uestion was
never occupied by ,ablo ,adilla during the panish regime@ that when the several
homesteaders settled upon the land during )*)- to )*)%, the same was unoccupied,
unclaimed, and without any sign of previous cultivation or occupation@ that the
homesteaders were not molested in their possession of portions of the land in
!uestion until )*-$, after they had cleared their holdings and put the same in
cultivation.
9n 4oman Catholic 1ishop of "ipa v. 8unicipality of 2aal '#% ,hil., #&$, #$., #$&+,
this court saidAjgcAchanrobles.com.ph
>\. . . 9n order, however, that the petitioner for registration of his land under the
2orrens system shall be permitted to have the same registered and to have the benefit
resulting from the certificate of title finally issued, the burden is upon him to show
that he is the real and absolute owner, in fee simple, of the lands which he is
attempting to have registered. 2he petitioner is not entitled to have his lands
registered under the 2orrens system simply because no one appears to oppose his
title and to oppose the registration of his lands. 9n order that land may be registered
under the 2orrens system, the petitioner must show, even though there is no
opposition, that he is the absolute owner, in fee simple, of the same. . . .>cralaw
virtua)aw library
7n the other hand, it is well-settled that no public land can be ac!uired by private
persons without any grant, e0press or implied, from the government. A grant is
conclusively presumed by law when the claimant, by himself or through his
predecessors in interest, has occupied the land openly, continuously, e0clusively, and
under a claim of title since 6uly -&, )%*/, or prior thereto. '7ngsiaco v. 8agsilang,
.: ,hil., #%:.+ 9n the case before us, appellee has failed to prove any e0press grant
from the government@ neither has he succeeded in proving possession from which a
constructive grant can be predicated.
9t results that the judgment appealed from must be reversed, and it is hereby decreed
and adjudged that the property sought to be registered in this case is public land.
?ithout any special pronouncement as to costs in this instance. o ordered.
treet, 1utte, Doddard and 5iaF, JJ., concur.
@G.R. No. 156117. May 26, 2..5A
RE!"#LI OF T0E !0ILI!!INES, petitioner. vs. )EREMIAS AND DAVID
0ER#IETO, respondents.
D E I S I O N
0IO-NA$ARIO, J.%
1efore this Court is a ,etition for 4eview on *ertiorari, under 4ule /. of the
)**$ 4ules of Civil ,rocedure, see(ing the reversal of the 5ecision of the Court of
Appeals in CA-D.4. C; No. &$&-., dated -- November -::-,
B)C
which affirmed the
6udgment of the 8unicipal 2rial Court '82C+ of Consolacion, Cebu, dated -)
5ecember )***,
B-C
granting the application for land registration of the respondents.
4espondents in the present ,etition are the =erbieto brothers, 6eremias and
5avid, who filed with the 82C, on -# eptember )**%, a single application for
registration of two parcels of land, "ots No. %/-- and %/-#, located in Cabangahan,
Consolacion, Cebu 'ubject "ots+. 2hey claimed to be owners in fee simple of the
ubject "ots, which they purchased from their parents, spouses Dregorio =erbieto
and 9sabel 7watan, on -. 6une )*$&.
B#C
2ogether with their application for
registration, respondents submitted the following set of documentsA
'a+ Advance urvey ,lan of "ot No. %/--, in the name of respondent
6eremias@ and Advance urvey ,lan of "ot No. %/-#, in the name
of respondent 5avid@
B/C
'b+ 2he technical descriptions of the ubject "ots@
B.C
'c+ Certifications by the 5epartment of Environment and Natural
4esources '5EN4+ dispensing with the need for urveyorRs
Certificates for the ubject "ots@
B&C
'd+ Certifications by the 4egister of 5eeds of Cebu City on the absence
of certificates of title covering the ubject "ots@
B$C
'e+ Certifications by the Community Environment and Natural
4esources 7ffice 'CEN47+ of the 5EN4 on its finding that the
ubject "ots are alienable and disposable, by virtue of Forestry
Administrative 7rder No. /-):&#, dated -. 6une )*&#@
B%C
'f+ Certified 2rue Copies of Assessment of 4eal ,roperty 'A4,+ No.
*/)%::#:)%#), in the name of 6eremias, covering "ot No. %/--,
issued in )**/@ and A4, No. */)%::#:)%##, in the name of
5avid, covering "ot No. %/-#, also issued in )**/@
B*C
and
'g+ 5eed of 5efinite ale e0ecuted on -. 6une )*$& by spouses
Dregorio =erbieto and 9sabel 7watan selling the ubject "ots and
the improvements thereon to their sons and respondents herein,
6eremias and 5avid, for,),:::. "ot No. %/-- was sold to
6eremias, while "ot No. %/-# was sold to 5avid.
B):C
7n )) 5ecember )**%, the petitioner 4epublic of the ,hilippines '4epublic+
filed an 7pposition to the respondentsR application for registration of the ubject
"ots arguing thatA ')+ 4espondents failed to comply with the period of adverse
possession of the ubject "ots re!uired by law@ '-+ 4espondentsR muniments of title
were not genuine and did not constitute competent and sufficient evidence of bona
fideac!uisition of the ubject "ots@ and '#+ 2he ubject "ots were part of the public
domain belonging to the 4epublic and were not subject to private appropriation.
B))C
2he 82C set the initial hearing on :# eptember )*** at %A#: a.m.
B)-C
All
owners of the land adjoining the ubject "ots were sent copies of the Notice of
9nitial =earing.
B)#C
A copy of the Notice was also posted on -$ 6uly )*** in a
conspicuous place on the ubject "ots, as well as on the bulletin board of the
municipal building of Consolacion, Cebu, where the ubject "ots were located.
B)/C
Finally, the Notice was also published in the 7fficial DaFette on :- August
)***
B).C
and $he 0reeman 6anat ,ews on )* 5ecember )***.
B)&C
5uring the initial hearing on :# eptember )***, the 82C issued an 7rder of
pecial 5efault,
B)$C
with only petitioner 4epublic opposing the application for
registration of the ubject "ots. 2he respondents, through their counsel, proceeded
to offer and mar( documentary evidence to prove jurisdictional facts. 2he 82C
commissioned the Cler( of Court to receive further evidence from the respondents
and to submit a 4eport to the 82C after #: days.
7n -) 5ecember )***, the 82C promulgated its 6udgment ordering the
registration and confirmation of the title of respondent 6eremias over "ot No. %/--
and of respondent 5avid over "ot No. %/-#. 9t subse!uently issued an 7rder on :-
February -::: declaring its 6udgment, dated -) 5ecember )***, final and e0ecutory,
and directing the Administrator of the "and 4egistration Authority '"4A+ to issue a
decree of registration for the ubject "ots.
B)%C
,etitioner 4epublic appealed the 82C 6udgment, dated -) 5ecember )***, to
the Court of Appeals.
B)*C
2he Court of Appeals, in its 5ecision, dated -- November
-::-, affirmed the appealed 82C 6udgment reasoning thusA
9n the case at bar, there can be no !uestion that the land sought to be registered has
been classified as within the alienable and disposable Fone since 6une -., )*&#.
Article )))# in relation to Article ))#$ of the Civil Code, respectively provides that
SAll things which are within the commerce of men are susceptible of prescription,
unless otherwise provided. ,roperty of the tate or any of its subdivisions of
patrimonial character shall not be the object of prescriptionT and that S7wnership
and other real rights over immovables also prescribe through uninterrupted adverse
possession thereof for thirty years, without need of title or of good faith.T
As testified to by the appellees in the case at bench, their parents already ac!uired
the subject parcels of lands, subject matter of this application, since )*.: and that
they cultivated the same and planted it with jac(fruits, bamboos, coconuts, and other
trees '6udgment dated 5ecember -), )***, p. &+. 9n short, it is undisputed that herein
appellees or their predecessors-in-interest had occupied and possessed the subject
land openly, continuously, e0clusively, and adversely since )*.:. Conse!uently,
even assuming arguendo that appelleesR possession can be rec(oned only from 6une
-., )*&# or from the time the subject lots had been classified as within the alienable
and disposable Fone, still the argument of the appellant does not hold water.
As earlier stressed, the subject property, being alienable since )*&# as shown by
CEN47 4eport dated 6une -#, )*&#, may now be the object of prescription, thus
susceptible of private ownership. 1y e0press provision of Article ))#$, appellees
are, with much greater right, entitled to apply for its registration, as provided by
ection )/'/+ of ,.5. ).-* which allows individuals to own land in any manner
provided by law. Again, even considering that possession of appelless should only
be rec(oned from )*&#, the year when CEN47 declared the subject lands alienable,
herein appellees have been possessing the subject parcels of land in open,
continuous, and in the concept of an owner, for #. years already when they filed the
instant application for registration of title to the land in )**%. As such, this court
finds no reason to disturb the finding of the court a #uo.
B-:C
2he 4epublic filed the present ,etition for the review and reversal of the
5ecision of the Court of Appeals, dated -- November -::-, on the basis of the
following argumentsA
0irst9 respondents failed to establish that they and their predecessors-in-interest
had been in open, continuous, and adverse possession of the ubject "ots in the
concept of owners since )- 6une )*/. or earlier. According to the petitioner
4epublic, possession of the ubject "ots prior to -. 6une )*&# cannot be considered
in determining compliance with the periods of possession re!uired by law. 2he
ubject "ots were classified as alienable and disposable only on -. 6une )*&#, per
CEN47Rs certification. 9t also alleges that the Court of Appeals, in applying the #:-
year ac!uisitive prescription period, had overloo(ed the ruling in Republic v. oldol,
B-)C
where this Court declared that Commonwealth Act No. )/), otherwise (nown as
the ,ublic "and Act, as amended and as it is presently phrased, re!uires that
possession of land of the public domain must be from )- 6une )*/. or earlier, for the
same to be ac!uired through judicial confirmation of imperfect title.
Second9 the application for registration suffers from fatal infirmity as the
subject of the application consisted of two parcels of land individually and separately
owned by two applicants. ,etitioner 4epublic contends that it is implicit in the
provisions of ,residential 5ecree No. ).-*, otherwise (nown as the ,roperty
4egistration 5ecree, as amended, that the application for registration of title to land
shall be filed by a single applicant@ multiple applicants may file a single application
only in case they are co-owners. ?hile an application may cover two parcels of
land, it is allowed only when the subject parcels of land belong to the same applicant
or applicants 'in case the subject parcels of land are co-owned+ and are situated
within the same province. ?here the authority of the courts to proceed is conferred
by a statute and when the manner of obtaining jurisdiction is mandatory, it must be
strictly complied with or the proceedings will be utterly void. ince the respondents
failed to comply with the procedure for land registration under the ,roperty
4egistration 5ecree, the proceedings held before the 82C is void, as the latter did
not ac!uire jurisdiction over it.
$
Jurisdiction
Addressing first the issue of jurisdiction, this Court finds that the 82C had no
jurisdiction to proceed with and hear the application for registration filed by the
respondents but for reasons different from those presented by petitioner 4epublic.
%. $he mis'oinder of causes of action and parties does not affect the 'urisdiction of
the M$* to hear and proceed with respondentsF application for registration.
4espondents filed a single application for registration of the ubject "ots even
though they were not co-owners. 4espondents 6eremias and 5avid were actually
see(ing the individual and separate registration of "ots No. %/-- and %/-#,
respectively.
,etitioner 4epublic believes that the procedural irregularity committed by the
respondents was fatal to their case, depriving the 82C of jurisdiction to proceed
with and hear their application for registration of the ubject "ots, based on this
CourtRs pronouncement in irector of )ands v. *ourt of %ppeals,
B--C
to witA
. . . 9n view of these multiple omissions which constitute non-compliance with the
above-cited sections of the Act, ?e rule that said defects have not invested the Court
with the authority or jurisdiction to proceed with the case because the manner or
mode of obtaining jurisdiction as prescribed by the statute which is mandatory has
not been strictly followed, thereby rendering all proceedings utterly null and void.
2his Court, however, disagrees with petitioner 4epublic in this regard. 2his
procedural lapse committed by the respondents should not affect the jurisdiction of
the 82C to proceed with and hear their application for registration of the ubject
"ots.
2he ,roperty 4egistration 5ecree
B-#C
recogniFes and e0pressly allows the
following situationsA ')+ the filing of a single application by several applicants for as
long as they are co-owners of the parcel of land sought to be registered@
B-/C
and '-+ the
filing of a single application for registration of several parcels of land provided that
the same are located within the same province.
B-.C
2he ,roperty 4egistration 5ecree
is silent, however, as to the present situation wherein two applicants filed a single
application for two parcels of land, but are see(ing the separate and individual
registration of the parcels of land in their respective names.
ince the ,roperty 4egistration 5ecree failed to provide for such a situation,
then this Court refers to the 4ules of Court to determine the proper course of action.
ection #/ of the ,roperty 4egistration 5ecree itself provides that, SBtChe 4ules of
Court shall, insofar as not inconsistent with the provisions of this 5ecree, be
applicable to land registration and cadastral cases by analogy or in a suppletory
character and whenever practicable and convenient.T
Considering every application for land registration filed in strict accordance
with the ,roperty 4egistration 5ecree as a single cause of action, then the defect in
the joint application for registration filed by the respondents with the 82C
constitutes a misjoinder of causes of action and parties. 9nstead of a single or joint
application for registration, respondents 6eremias and 5avid, more appropriately,
should have filed separate applications for registration of "ots No. %/-- and %/-#,
respectively.
8isjoinder of causes of action and parties do not involve a !uestion of
jurisdiction of the court to hear and proceed with the case.
B-&C
2hey are not even
accepted grounds for dismissal thereof.
B-$C
9nstead, under the 4ules of Court, the
misjoinder of causes of action and parties involve an implied admission of the courtRs
jurisdiction. 9t ac(nowledges the power of the court, acting upon the motion of a
party to the case or on its own initiative, to order the severance of the misjoined
cause of action, to be proceeded with separately 'in case of misjoinder of causes of
action+@ and3or the dropping of a party and the severance of any claim against said
misjoined party, also to be proceeded with separately 'in case of misjoinder of
parties+.
2he misjoinder of causes of action and parties in the present ,etition may have
been corrected by the 82C motu propio or on motion of the petitioner 4epublic. 9t
is regrettable, however, that the 82C failed to detect the misjoinder when the
application for registration was still pending before it@ and more regrettable that the
petitioner 4epublic did not call the attention of the 82C to the fact by filing a
motion for severance of the causes of action and parties, raising the issue of
misjoinder only before this Court.
6. Respondents9 however9 failed to compl! with the publication re#uirements
mandated b! the Propert! Registration ecree9 thus9 the M$* was not
invested with 'urisdiction as a land registration court.
Although the misjoinder of causes of action and parties in the present ,etition
did not affect the jurisdiction of the 82C over the land registration proceeding, this
Court, nonetheless, has discovered a defect in the publication of the Notice of 9nitial
=earing, which bars the 82C from assuming jurisdiction to hear and proceed with
respondentsR application for registration.
A land registration case is a proceeding in rem,
B-%C
and jurisdiction in rem cannot
be ac!uired unless there be constructive seiFure of the land through publication and
service of notice.
B-*C
ection -# of the ,roperty 4egistration 5ecree re!uires that the public be given
Notice of the 9nitial =earing of the application for land registration by means of ')+
publication@ '-+ mailing@ and '#+ posting. ,ublication of the Notice of 9nitial =earing
shall be made in the following mannerA
). 1y publication. N
Epon receipt of the order of the court setting the time for initial hearing, the
Commissioner of "and 4egistration shall cause a notice of initial hearing to be
published once in the 7fficial DaFette and once in a newspaper of general circulation
in the ,hilippinesA Provided, however, that the publication in the 7fficial DaFette
shall be sufficient to confer jurisdiction upon the court. aid notice shall be
addressed to all persons appearing to have an interest in the land involved including
the adjoining owners so far as (nown, and Sto all whom it may concern.T aid
notice shall also re!uire all persons concerned to appear in court at a certain date and
time to show cause why the prayer of said application shall not be granted.
Even as this Court concedes that the afore!uoted ection -#')+ of the ,roperty
4egistration 5ecree e0pressly provides that publication in the 7fficial DaFette shall
be sufficient to confer jurisdiction upon the land registration court, it still affirms its
declaration in irector of )ands v. *ourt of %ppeals
B#:C
that publication in a
newspaper of general circulation is mandatory for the land registration court to
validly confirm and register the title of the applicant or applicants. 2hat ection -#
of the ,roperty 4egistration 5ecree enumerated and described in detail the
re!uirements of publication, mailing, and posting of the Notice of 9nitial =earing,
then all such re!uirements, including publication of the Notice in a newspaper of
general circulation, is essential and imperative, and must be strictly complied with.
9n the same case, this Court e0pounded on the reason behind the compulsory
publication of the Notice of 9nitial =earing in a newspaper of general circulation,
thus N
9t may be as(ed why publication in a newspaper of general circulation should be
deemed mandatory when the law already re!uires notice by publication in the
7fficial DaFette as well as by mailing and posting, all of which have already been
complied with in the case at hand. 2he reason is due process and the reality that the
7fficial DaFette is not as widely read and circulated as newspaper and is oftentimes
delayed in its circulation, such that the notices published therein may not reach the
interested parties on time, if at all. Additionally, such parties may not be owners of
neighboring properties, and may in fact not own any other real estate. 9n sum, the all
encompassing in rem nature of land registration cases, the conse!uences of default
orders issued against the whole world and the objective of disseminating the notice
in as wide a manner as possible demand a mandatory construction of the
re!uirements for publication, mailing and posting.
B#)C
9n the instant ,etition, the initial hearing was set by the 82C, and was in fact
held, on :# eptember )*** at %A#: a.m. ?hile the Notice thereof was printed in the
issue of the 7fficial DaFette, dated :- August )***, and officially released on ):
August )***, it was published in $he 0reeman 6anat ,ews, a daily newspaper
printed in Cebu City and circulated in the province and cities of Cebu and in the rest
of ;isayas and 8indanao, only on )* 5ecember )***, more than three months after
the initial hearing.
9ndubitably, such publication of the Notice, way after the date of the initial
hearing, would already be worthless and ineffective. ?hoever read the Notice as it
was published in $he 0reeman 6anat ,ewsand had a claim to the ubject "ots was
deprived of due process for it was already too late for him to appear before the 82C
on the day of the initial hearing to oppose respondentsR application for registration,
and to present his claim and evidence in support of such claim. ?orse, as the Notice
itself states, should the claimant-oppositor fail to appear before the 82C on the date
of initial hearing, he would be in default and would forever be barred from
contesting respondentsR application for registration and even the registration decree
that may be issued pursuant thereto. 9n fact, the 82C did issue an 7rder of pecial
5efault on :# eptember )***.
2he late publication of the Notice of 9nitial =earing in the newspaper of general
circulation is tantamount to no publication at all, having the same ultimate result.
7wing to such defect in the publication of the Notice, the 82C failed to
constructively seiFe the ubject "ots and to ac!uire jurisdiction over respondentsR
application for registration thereof. 2herefore, the 82C 6udgment, dated -)
5ecember )***, ordering the registration and confirmation of the title of respondents
6eremias and 5avid over "ots No. %/-- and %/-#, respectively@ as well as the 82C
7rder, dated :- February -:::, declaring its 6udgment of -) 5ecember )*** final
and e0ecutory, and directing the "4A Administrator to issue a decree of registration
for the ubject "ots, are both null and void for having been issued by the 82C
without jurisdiction.
$$
Period of Possession
Respondents failed to compl! with the re#uired period of possession of the Sub'ect
)ots for the 'udicial confirmation or legali@ation of imperfect or incomplete title.
?hile this Court has already found that the 82C did not have jurisdiction to
hear and proceed with respondentsR application for registration, this Court
nevertheless deems it necessary to resolve the legal issue on the re!uired period of
possession for ac!uiring title to public land.
4espondentsR application filed with the 82C did not state the statutory basis
for their title to the ubject "ots. 2hey only alleged therein that they obtained title to
the ubject "ots by purchase from their parents, spouses Dregorio =erbieto and
9sabel 7watan, on -. 6une )*$&. 4espondent 6eremias, in his testimony, claimed
that his parents had been in possession of the ubject "ots in the concept of an owner
since )*.:.
B#-C
Iet, according to the 5EN4-CEN47 Certification, submitted by respondents
themselves, the ubject "ots are Swithin Alienable and 5isposable, 1loc( 9, ,roject
No. -% per "C 8ap No. -./. of Consolacion, Cebu certified under Forestry
Administrative 7rder No. /-):&#, dated 6une -., )*&#. "i(ewise, it is outside
Hot(ot-"usaran 8ananga ?atershed Forest 4eservation per ,residential
,roclamation No. *#- dated 6une -*, )**-.T
B##C
2he ubject "ots are thus clearly part
of the public domain, classified as alienable and disposable as of -. 6une )*&#.
As already well-settled in jurisprudence, no public land can be ac!uired by
private persons without any grant, e0press or implied, from the government@
B#/C
and it
is indispensable that the person claiming title to public land should show that his title
was ac!uired from the tate or any other mode of ac!uisition recogniFed by law.
B#.C
2he ,ublic "and Act, as amended, governs lands of the public domain, e0cept
timber and mineral lands, friar lands, and privately-owned lands which reverted to
the tate.
B#&C
9t e0plicitly enumerates the means by which public lands may be
disposed, as followsA
')+ For homestead settlement@
'-+ 1y sale@
'#+ 1y lease@
'/+ 1y confirmation of imperfect or incomplete titles@
'a+ 1y judicial legaliFation@ or
'b+ 1y administrative legaliFation 'free patent+.
B#$C
Each mode of disposition is appropriately covered by separate chapters of the ,ublic
"and Act because there are specific re!uirements and application procedure for every
mode.
B#%C
ince respondents herein filed their application before the 82C,
B#*C
then it
can be reasonably inferred that they are see(ing the judicial confirmation or
legaliFation of their imperfect or incomplete title over the ubject "ots.
6udicial confirmation or legaliFation of imperfect or incomplete title to land,
not e0ceeding )// hectares,
B/:C
may be availed of by persons identified under ection
/% of the ,ublic "and Act, as amended by ,residential 5ecree No. ):$#, which reads
N
ection /%. 2he following-described citiFens of the ,hilippines, occupying lands of
the public domain or claiming to own any such lands or an interest therein, but
whose titles have not been perfected or completed, may apply to the Court of First
9nstance of the province where the land is located for confirmation of their claims
and the issuance of a certificate of title thereafter, under the "and 4egistration Act, to
witA
'a+ B4epealed by ,residential 5ecree No. ):$#C.
'b+ 2hose who by themselves or through their predecessors-in-interest
have been in open, continuous, e0clusive, and notorious possession
and occupation of agricultural lands of the public domain, under
a bona fide claim of ac!uisition of ownership, since 6une )-, )*/., or
earlier, immediately preceding the filing of the applications for
confirmation of title, e0cept when prevented by war or force
ma'eure. 2hese shall be conclusively presumed to have performed
all the conditions essential to a Dovernment grant and shall be
entitled to a certificate of title under the provisions of this chapter.
'c+ 8embers of the national cultural minorities who by themselves or
through their predecessors-in-interest have been in open, continuous,
e0clusive and notorious possession and occupation of lands of the
public domain suitable to agriculture whether disposable or not,
under a bona fide claim of ownership since 6une )-, )*/. shall be
entitled to the rights granted in subsection 'b+ hereof.
Not being members of any national cultural minorities, respondents may only
be entitled to judicial confirmation or legaliFation of their imperfect or incomplete
title under ection /%'b+ of the ,ublic "and Act, as amended. ection /%'b+, as
amended, now re!uires adverse possession of the land since )- 6une )*/. or earlier.
9n the present ,etition, the ubject "ots became alienable and disposable only on -.
6une )*&#. Any period of possession prior to the date when the ubject "ots were
classified as alienable and disposable is inconse!uential and should be e0cluded from
the computation of the period of possession@ such possession can never ripen into
ownership and unless the land had been classified as alienable and disposable, the
rules on confirmation of imperfect title shall not apply thereto.
B/)C
9t is very apparent
then that respondents could not have complied with the period of possession re!uired
by ection /%'b+ of the ,ublic "and Act, as amended, to ac!uire imperfect or
incomplete title to the ubject "ots that may be judicially confirmed or legaliFed.
2he confirmation of respondentsR title by the Court of Appeals was based on the
erroneous supposition that respondents were claiming title to the ubject "ots under
the ,roperty 4egistration 5ecree. According to the 5ecision of the Court of
Appeals, dated -- November -::-, ection )/'/+ of the ,roperty 4egistration
5ecree allows individuals to own land in any other manner provided by law. 9t then
ruled that the respondents, having possessed the ubject "ots, by themselves and
through their predecessors-in-interest, since -. 6une )*&# to -# eptember )**%,
when they filed their application, have ac!uired title to the ubject "ots by
e0traordinary prescription under Article )))#, in relation to Article ))#$, both of the
Civil Code.
B/-C
2he Court of Appeals overloo(ed the difference between the ,roperty
4egistration 5ecree and the ,ublic "and Act. Ender the ,roperty 4egistration
5ecree, there already e0ists a title which is confirmed by the court@ while under the
,ublic "and Act, the presumption always is that the land applied for pertains to the
tate, and that the occupants and possessors only claim an interest in the same by
virtue of their imperfect title or continuous, open, and notorious possession.
B/#C
As
established by this Court in the preceding paragraphs, the ubject "ots respondents
wish to register are undoubtedly alienable and disposable lands of the public domain
and respondents may have ac!uired title thereto only under the provisions of the
,ublic "and Act.
=owever, it must be clarified herein that even though respondents may ac!uire
imperfect or incomplete title to the ubject "ots under the ,ublic "and Act, their
application for judicial confirmation or legaliFation thereof must be in accordance
with the ,roperty 4egistration 5ecree, for ection .: of the ,ublic "and Act reads N
EC. .:. Any person or persons, or their legal representatives or successors in right,
claiming any lands or interest in lands under the provisions of this chapter, must in
every case present an application to the proper Court of First 9nstance, praying that
the validity of the alleged title or claim be in!uired into and that a certificate of title
be issued to them under the provisions of the "and 4egistration Act.
B//C
=ence, respondentsR application for registration of the ubject "ots must have
complied with the substantial re!uirements under ection /%'b+ of the ,ublic "and
Act and the procedural re!uirements under the ,roperty 4egistration 5ecree.
8oreover, provisions of the Civil Code on prescription of ownership and other
real rights apply in general to all types of land, while the ,ublic "and Act
specifically governs lands of the public domain. 4elative to one another, the ,ublic
"and Act may be considered a special law
B/.C
that must ta(e precedence over the Civil
Code, a general law. 9t is an established rule of statutory construction that between a
general law and a special law, the special law prevails N 3eneralia specialibus non
derogant.
B/&C
?0EREFORE, based on the foregoing, the instant ,etition is D4AN2E5.
2he 5ecision of the Court of Appeals in CA-D.4. C; No. &$&-., dated --
November -::-, is 4E;E4E5. 2he 6udgment of the 82C of Consolacion, Cebu
in "4C Case No. N-$., dated -) 5ecember )***, and its 7rder, dated :- February
-::: are declared NE"" AN5 ;795. 4espondentsR application for registration is
5989E5.
SO ORDERED.
@G.R. No. 1-5->5. De3e:ber 6, 2...A
ISAGANI R"$ a*, ESAR E"RO!A, petitioners. vs. SERETAR1 OF
ENVIRONMENT AND NAT"RAL RESO"RES, SERETAR1 OF
#"DGET AND MANAGEMENT a*, 0AIRMAN a*,
OMMISSIONERS OF T0E NATIONAL OMMISSION ON
INDIGENO"S !EO!LES, respondents.
0ON. )"AN M .FLAVIER, 0ON. !ONIANO #ENNAGEN, #A1ANI
ASARRAGA, EDTAMI MANSA1ANGAN, #ASILIO ?ANDAG,
EVEL1N D"N"AN, 1AOM T"GAS, ALFREMO AR!IANO,
LI#ERATO A. GA#IN, MATERNIDAD M. OLAS, NARISA M.
DAL"!INES, #AI EIRAM-ONNIE SAT"RNO, #AE MLOMO-
#EATRI$ T. A#ASALA, DAT" #ALIT"NGT"NG-ANTONIO D.
L"MANDONG, DAT" MANT"M"EA? TEOFISTO SA#ASALES,
DAT" ED"AARDO #ANDA, DAT" )OEL "NAD, DAT" RAMON
#A1AAN, TIM"A1 )OSE ANO1, TIM"A1 MAARIO D.
SALAAO, TIM"A1 ED?IN #. ENDING, DAT" SA0AM!ONG
MALANA? VI, DAT" #EN !ENDAO A#IGON, #AI NANA!NA1-
LI$A SA?A1, #A1 INA1 DA1A-MELINDA S. RE1M"NDO, #AI
TINANG0AGA 0ELINITA T. !ANGAN, DAT" MAEA!"EA?
ADOLINO L. SA?A1, DAT" MA"DA1A?-RIS!EN SA?A1,
VIE1 MAEA1, LO"RDES D. AMOS, GIL#ERT !. 0OGGANG,
TERESA GAS!AR, MAN"EL S. ONALAN, MIA GRAE L. GIRON,
ROSEMARIE G. !E, #ENITO ARINO, )OSE!0 )"DE
ARANTES, L1NETTE ARANTES-VIVAL, LANGLE1
SEG"NDO, SAT"R S. #"GNA1, ARLING DOM"LOT, ANDRES
MENDIOGRIN, LEO!OLDO A#"GAN, VIRGILIO A1ETANO,
ON0ITA G. DESAGA, LEV1 ESTEVES, ODETTE G.
ESTEVE$, RODOLFO . AG"ILAR, MA"RO VALONES, !E!E 0.
ATONG, OFELIA T. DAVI, !ERFETO #. G"INOSAO, ?ALTER N.
TIMOL, MAN"EL T. SELEN, OSAR DAL"N0A1, RIO O.
S"LATAN, RAFF1 MALINDA, ALFREDO A#ILLANOS, )ESSIE
ANDILA#, MIRLANDO 0. MANGE"LINTAS, SAMIE SAT"RNO,
ROMEO A. LINDA0A1, ROEL S. MANSANG-AGAN, !AD"ITO S.
LIESES, FILI!E G. SA?A1, 0ERMINIA S. SA?A1, )"LI"S S.
SA?A1, LEONARDA SA?A1, )IMM1 "G1"#, SALVADOR
TIONGSON, VENANIO A!ANG, MADION MALID, S"EIM
MALID, NENENG MALID, MANGEATADONG A"G"STO DIANO,
)OSE!0INE M. AL#ESO, MORENO MALID, MARIO MANGAL,
FELA1 DIAMILING, SALOME !. SAR$A, FELI!E !. #AGON,
SAMM1 SALN"NGAN, ANTONIO D. EM#A, NORMA
MA!ANSAGONOS, ROMEO SALIGA, SR., )ERSON !. GERADA,
RENATO T. #AGON, )R., SARING MASALONG, SOLEDAD M.
GERARDA, ELI$A#ET0 L. MENDI, MORANTE S. TI?AN,
DANILO M. MAL"DAO, MINORS MARIEL MALID, re7re+e*(e,
by 2er ;a(2er ORNELIO MALID, MARELINO M. LADRA,
re7re+e*(e, by 2er ;a(2er MONIO D. LADRA, )ENN1L1N MALID,
re7re+e*(e, by 2er ;a(2er TON1 MALID, ARIEL M. EVANGELISTA,
re7re+e*(e, by 2er :o(2er LINA1 #AL#"ENA, ED?ARD M. EM"1,
SR., S"SAN #OLANIO, OND, !"LA #ATO #9LAAN TRI#AL
FARMER9S ASSOIATION, INTER-!EO!LE9S EL0ANGE, IN.
a*, GREEN FOR"M-?ESTERN VISA1AS, intervenors.
OMMISSION ON 0"MAN RIG0TS, intervenor.
IEALA0AN INDIGENO"S !EO!LE a*, 0ARI#ON FO"NDATION FOR
T0E ONSERVATION OF NAT"RAL RESO"RES,
IN., intervenor.
R E S O L " T I O N
()4 +J4$*%
,etitioners 9sagani CruF and Cesar Europa brought this suit for prohibition and
mandamus as citiFens and ta0payers, assailing the constitutionality of certain
provisions of 4epublic Act No. %#$) '4.A. %#$)+, otherwise (nown as the
9ndigenous ,eoples 4ights Act of )**$ '9,4A+, and its 9mplementing 4ules and
4egulations '9mplementing 4ules+.
9n its resolution of eptember -*, )**%, the Court re!uired respondents to
comment.
B)C
9n compliance, respondents Chairperson and Commissioners of the
National Commission on 9ndigenous ,eoples 'NC9,+, the government agency
created under the 9,4A to implement its provisions, filed on 7ctober )#, )**% their
Comment to the ,etition, in which they defend the constitutionality of the 9,4A and
pray that the petition be dismissed for lac( of merit.
7n 7ctober )*, )**%, respondents ecretary of the 5epartment of Environment
and Natural 4esources '5EN4+ and ecretary of the 5epartment of 1udget and
8anagement '518+ filed through the olicitor Deneral a consolidated
Comment. 2he olicitor Deneral is of the view that the 9,4A is partly
unconstitutional on the ground that it grants ownership over natural resources to
indigenous peoples and prays that the petition be granted in part.
7n November ):, )**%, a group of intervenors, composed of en. 6uan Flavier,
one of the authors of the 9,4A, 8r. ,onciano 1ennagen, a member of the )*%&
Constitutional Commission, and the leaders and members of ))- groups of
indigenous peoples 'Flavier, et. al+, filed their 8otion for "eave to 9ntervene. 2hey
join the NC9, in defending the constitutionality of 9,4A and praying for the
dismissal of the petition.
7n 8arch --, )***, the Commission on =uman 4ights 'C=4+ li(ewise filed a
8otion to 9ntervene and3or to Appear as Amicus Curiae. 2he C=4 asserts that 9,4A
is an e0pression of the principle of parens patriae and that the tate has the
responsibility to protect and guarantee the rights of those who are at a serious
disadvantage li(e indigenous peoples. For this reason it prays that the petition be
dismissed.
7n 8arch -#, )***, another group, composed of the 9(alahan 9ndigenous
,eople and the =aribon Foundation for the Conservation of Natural 4esources, 9nc.
'=aribon, et al.+, filed a motion to 9ntervene with attached Comment-in-
9ntervention. 2hey agree with the NC9, and Flavier, et al. that 9,4A is consistent
with the Constitution and pray that the petition for prohibition and mandamus be
dismissed.
2he motions for intervention of the aforesaid groups and organiFations were
granted.
7ral arguments were heard on April )#, )***. 2hereafter, the parties and
intervenors filed their respective memoranda in which they reiterate the arguments
adduced in their earlier pleadings and during the hearing.
,etitioners assail the constitutionality of the following provisions of the 9,4A
and its 9mplementing 4ules on the ground that they amount to an unlawful
deprivation of the tateRs ownership over lands of the public domain as well as
minerals and other natural resources therein, in violation of the regalian doctrine
embodied in ection -, Article K99 of the ConstitutionA
S')+ ection #'a+ which defines the e0tent and coverage of ancestral
domains, and ection #'b+ which, in turn, defines ancestral lands@
S'-+ ection ., in relation to section #'a+, which provides that ancestral
domains including inalienable public lands, bodies of water, mineral
and other resources found within ancestral domains are private but
community property of the indigenous peoples@
S'#+ ection & in relation to section #'a+ and #'b+ which defines the
composition of ancestral domains and ancestral lands@
S'/+ ection $ which recogniFes and enumerates the rights of the
indigenous peoples over the ancestral domains@
'.+ ection % which recogniFes and enumerates the rights of the
indigenous peoples over the ancestral lands@
S'&+ ection .$ which provides for priority rights of the indigenous
peoples in the harvesting, e0traction, development or e0ploration of
minerals and other natural resources within the areas claimed to be
their ancestral domains, and the right to enter into agreements with
nonindigenous peoples for the development and utiliFation of natural
resources therein for a period not e0ceeding -. years, renewable for
not more than -. years@ and
S'$+ ection .% which gives the indigenous peoples the responsibility to
maintain, develop, protect and conserve the ancestral domains and
portions thereof which are found to be necessary for critical
watersheds, mangroves, wildlife sanctuaries, wilderness, protected
areas, forest cover or reforestation.T
B-C
,etitioners also content that, by providing for an all-encompassing definition of
Sancestral domainsT and Sancestral landsT which might even include private lands
found within said areas, ections #'a+ and #'b+ violate the rights of private
landowners.
B#C
9n addition, petitioners !uestion the provisions of the 9,4A defining the powers
and jurisdiction of the NC9, and ma(ing customary law applicable to the settlement
of disputes involving ancestral domains and ancestral lands on the ground that these
provisions violate the due process clause of the Constitution.
B/C
2hese provisions areA
S')+ sections .) to .# and .* which detail the process of delineation and
recognition of ancestral domains and which vest on the NC9, the sole
authority to delineate ancestral domains and ancestral lands@
S'-+ ection .-BiC which provides that upon certification by the NC9, that
a particular area is an ancestral domain and upon notification to the
following officials, namely, the ecretary of Environment and Natural
4esources, ecretary of 9nterior and "ocal Dovernments, ecretary of
6ustice and Commissioner of the National 5evelopment Corporation,
the jurisdiction of said officials over said area terminates@
S'#+ ection &# which provides the customary law, traditions and practices
of indigenous peoples shall be applied first with respect to property
rights, claims of ownership, hereditary succession and settlement of
land disputes, and that any doubt or ambiguity in the interpretation
thereof shall be resolved in favor of the indigenous peoples@
S'/+ ection &. which states that customary laws and practices shall be
used to resolve disputes involving indigenous peoples@ and
S'.+ ection && which vests on the NC9, the jurisdiction over all claims
and disputes involving rights of the indigenous peoples.T
B.C
Finally, petitioners assail the validity of 4ule ;99, ,art 99, ection ) of the NC9,
Administrative 7rder No. ), series of )**%, which provides that Sthe administrative
relationship of the NC9, to the 7ffice of the ,resident is characteriFed as a lateral but
autonomous relationship for purposes of policy and program coordination.T 2hey
contend that said 4ule infringes upon the ,residentRs power of control over e0ecutive
departments under ection )$, Article ;99 of the Constitution.
B&C
,etitioners pray for the followingA
S')+ A declaration that ections #, ., &, $, %, .-B9C, .$, .%, .*, &#, &. and
&& and other related provisions of 4.A. %#$) are unconstitutional and
invalid@
S'-+ 2he issuance of a writ of prohibition directing the Chairperson and
Commissioners of the NC9, to cease and desist from implementing the
assailed provisions of 4.A. %#$) and its 9mplementing 4ules@
S'#+ 2he issuance of a writ of prohibition directing the ecretary of the
5epartment of Environment and Natural 4esources to cease and desist
from implementing 5epartment of Environment and Natural
4esources Circular No. -, series of )**%@
S'/+ 2he issuance of a writ of prohibition directing the ecretary of
1udget and 8anagement to cease and desist from disbursing public
funds for the implementation of the assailed provisions of 4.A. %#$)@
and
S'.+ 2he issuance of a writ of mandamus commanding the ecretary of
Environment and Natural 4esources to comply with his duty of
carrying out the tateRs constitutional mandate to control and supervise
the e0ploration, development, utiliFation and conservation of
,hilippine natural resources.T
B$C
After due deliberation on the petition, the members of the Court voted as
followsA
even '$+ voted to dismiss the petition. 6ustice Hapunan filed an opinion,
which the Chief 6ustice and 6ustices 1ellosillo, Luisumbing, and antiago join,
sustaining the validity of the challenged provisions of 4.A. %#$). 6ustice ,uno also
filed a separate opinion sustaining all challenged provisions of the law with the
e0ception of ection ), ,art 99, 4ule 999 of NC9, Administrative 7rder No. ), series
of )**%, the 4ules and 4egulations 9mplementing the 9,4A, and ection .$ of the
9,4A which he contends should be interpreted as dealing with the large-scale
e0ploitation of natural resources and should be read in conjunction with ection -,
Article K99 of the )*%$ Constitution. 7n the other hand, 6ustice 8endoFa voted to
dismiss the petition solely on the ground that it does not raise a justiciable
controversy and petitioners do not have standing to !uestion the constitutionality of
4.A. %#$).
even '$+ other members of the Court voted to grant the petition. 6ustice
,anganiban filed a separate opinion e0pressing the view that ections # 'a+'b+, ., &, $
'a+'b+, %, and related provisions of 4.A. %#$) are unconstitutional. =e reserves
judgment on the constitutionality of ections .%, .*, &., and && of the law, which he
believes must await the filing of specific cases by those whose rights may have been
violated by the 9,4A. 6ustice ;itug also filed a separate opinion e0pressing the view
that ections #'a+, $, and .$ of 4.A. %#$) are unconstitutional. 6ustices 8elo, ,ardo,
1uena, DonFaga-4eyes, and 5e "eon join in the separate opinions of 6ustices
,anganiban and ;itug.
As the votes were e!ually divided '$ to $+ and the necessary majority was not
obtained, the case was redeliberated upon. =owever, after redeliberation, the voting
remained the same. Accordingly, pursuant to 4ule .&, ection $ of the 4ules of
Civil ,rocedure, the petition is 5989E5.
Attached hereto and made integral parts thereof are the separate opinions of
6ustices ,uno, ;itug, Hapunan, 8endoFa, and ,anganiban.
SO ORDERED.
G.R. No. >1568 A7r'/ 26, 199.
ATING REGISTRARS OF LAND TITLES AND DEEDS OF !ASA1 IT1,
!ASIG AND MAEATI, METRO MANILA,petitioners,
vs.
T0E REGIONAL TRIAL O"RT, #RAN0 57, IN MAEATI, METRO
MANILA !RESIDED OVER #1 T0E 0ONORA#LE )"DGE FRANISO
L. VELE$, AND T0E INTESTATE ESTATE OF T0E LATE DELFIN ASAL,
re7re+e*(e, by DOMINGO . !ALOMARES, ADMINISTRATOR, respondents.
G.R. No. 9.176 A7r'/ 26, 199.
T0E INTESTATE ESTATE OF T0E LATE DELFIN ASAL, re7re+e*(e, by
DOMINGO . !ALOMARES, ADMINISTRATOR, petitioner,
vs.
0ONORA#LE ONRADO VASD"E$, )R., !re+','*& )u,&e, #RAN0 11>,
RT, RIARDO !. SANTIAGO, ET AL., respondents.
$a-ada9 Jivo T $an for the "ntestate :state of the )ate elfin *asal.
%ntonio J. alangpan for himself and the heirs of elfin *asal.
Pedro S. Ravelo for 3erardo *asal.
0ilomeno Peralta9 Jr. for omingo *. Palomares.

SARMIENTO, J.:
2he petitioners MM charge =is =onor, 6udge Francisco ;eleF, of the 4egional 2rial
Court, 1ranch .$, 8a(ati, 8etro 8anila, with grave abuse of discretion in issuing an
order authoriFing the private respondent, through 5omingo ,alomares, to perform
acts of ownership over a -,.$/-hectare parcel of land (nown as 1acienda de
Maricaban spread out in various parts of 8a(ati, ,asig, 2aguig, ,asay City, and
,araGa!ue. 2here is no controversy as to the facts.
7n November ., )*%., the private respondent, 5omingo ,alomares, as administrator
of the heirs of 5elfin Casal, commenced suit with the 4egional 2rial Court, 1ranch
)#-, 8a(ati, 8etro 8anila for declaratory relief, !uieting of title, cancellation of
2ransfer Certificate of 2itle No. )*-, and cancellation of entries upon 7riginal
Certificate of 2itle No. -*).
,alomares had earlier come to this Court 'February -$, )*%.+ on a similar petition,
and in addition, to direct the 4egister of 5eeds to issue a duplicate owner<s copy of
7riginal Certificate of 2itle No. -*), embracing allegedly =acienda de 8aricaban, in
lieu of the 'alleged+ lost one. 7n eptember *, )*%., the Court denied the petition for
lac( of merit. 'D.4. No. &*%#/+.
7n 5ecember )*, )*%., the petitioners filed their answer.
7n 6une -, )*%&, the private respondent filed a motion to admit amended complaint
impleading the 4epublic of the ,hilippines and the 4egisters of 5eeds of ,asig,
8a(ati, and ,asay City as parties-respondents, and alleging, among other things,
thatA ')+ on 7ctober ), )*:&, the Court of "and 4egistration '6ames 7strand,
,residing 6udge+ confirmed the title of 5olores ,ascual Casal y 7choa, a native of
8adrid, pain, over the -,.$/-hectare parcel above-mentioned@ '-+ on 7ctober )$,
)*:&, the 4egister of 5eeds of 4iFal issued 7C2 No. -*) in her name@ '#+ upon her
death, and successive deaths of her heirs, the property devolved on Derardo,
4eynaldo, "olita, and Erlinda, all surnamed Casal, great grandchildren of 5olores@
'/+ no conveyances or dispositions of any (ind have been allegedly made upon the
parcel@ '.+ 2C2 No. )*-, which covers the same landholding, is allegedly spurious
and ine0istent@ '&+ the tate itself, by placing -$,-)#,-.. s!uare meters thereof under
a military reservation 'Fort 8cHinley now Fort 1onifacio+, by ,roclamation No.
/-#, and fifty hectares thereof pursuant to ,roclamation No. )*-, had been guilty of
landgrabbing@ '$+ any and all holders of any and all 2C2s emanating therefrom or
from 2C2 No. )*-, are null, void, and of no force and effect@ and '%+ as a
conse!uence thereof, the heirs of 5olores Casal suffered various damages and
attorney<s fees.
7n 6une -&, )*%&, the petitioners filed an answer, stating, among other things, thatA
')+ the estate of 5olores Casal 'or 5elfin Casal, her grandchild+ is not a juridical
person authoriFed by law to bring suit@ '-+ the 4egisters of 5eeds of 8a(ati, ,asig,
and ,asay City are not the real parties in interest, but rather, the registered owners
over which the court had not ac!uired jurisdiction@ '#+ the non-joinder of the real
parties in interest is fatal@ '/+ 7C2 No. -*) has long been cancelled@ '.+ 6udge
Dregorio ,ineda of the then Court of First 9nstance of 4iFal, 1ranch KK9, ,asig, had
earlier denied prayers for the issuance of duplicate owner<s copy of 7C2 No. -*)
because the land embraced therein had been validly delivered to the Dovernment@ '&+
the upreme Court itself had denied the Casals< appeal@ MMM '$+ as a conse!uence, res
'udicata is a bar@ '%+ prescription has also set in@ and '*+ the Casal<s claims can not
validly override the titles of innocent purchasers for value.
7n August -*, )*%&, the respondent judge issued a temporary restraining order,
directing the petitioners to cease and desist from performing the acts complained of.
9n a subse!uent memorandum, the petitioners alleged that 5olores Casal had
conveyed the property to the Dovernment of the Enited tates in )*:& and the
8anila 4ailroad Company on which 6udge 7strand, the ,residing 6udge of the Court
of "and 4egistration, later 6ustice of this Court, had stamped his imprimatur.
7n 7ctober )-, )*%$, the respondent court issued an order in the tenor, as followsA
No other opposition having been registered, this Court hereby
resolves to grant the plaintiffs< prayer in the 78N91E 87297N
in order to safeguard the integrity of the land embraced in 7C2
-*), hereby authoriFing for this purpose the plaintiff 5omingo C.
,alomaresA
). 2o order such subdivision and3or individual
survey or surveys within ,arcel 99, ,arcel 999 and
,arcel 9; under urvey ,lan ,su--:#) by a
licensed geodetic engineer or engineers at
plaintiffs< e0pense in order to facilitate and
simplify the efficient administration of the
property described in 7C2 -*)@ and
-. 2o sell, e0change, lease or otherwise dispose
'of+ any area or areas or portion or portions
thereof, subject to the approval of the 9ntestate
Estate Court, to cover e0penses for the payment
of ta0es to which the property is subject, as well
as e0penses of administration and for the
protection of the integrity of the said lands.
7 745E4E5.
1
Eleven days later, or on 7ctober -#, )*%$ to be precise, it issued another order, as
followsA
Acting on the plaintiffs 87297N dated 7ctober )., )*%$ praying
for the issuance of a ?rit of E0ecution implementing the 7rder of
this Court dated 7ctober )-, )*%$ before the e0piration of the time
to appeal, and after in!uiring from the plaintiff<s counsel for their
reason in see(ing the same, the Court hereby issues this
clarificatory order affirming the power of the plaintiff 5omingo C.
,alomares to e0ecute and perform the acts authoriFed in the said
7rder of 7ctober )-, )*%$ without the need of a ?rit of E0ecution,
where no relief has been sought therefrom by any party, said 7rder
being implementable at the instance of the said plaintiff 5omingo
C. ,alomares, anytime when the said 7rder becomes final ). days
after the said plaintiff received copy of the same 'see ection #*,
Chapter 9;, 1.,. 1lg. )-*+. ,laintiff 5omingo C. ,alomares may
therefore ta(e whatever steps he considers appropriate for the
implementation of the said 7rder without need of further 7rders or
additional authority from this Court.
7 745E4E5.
2
2he petitioners filed a notice of appeal@ the respondent court, however, denied it>
-
>it
being directed against . . . an interlocutory order. . .
8
=ence, this recourse.
2he petitioners interpose the following !uestionsA
A. ?hether or not respondent Court can validly decide before trial
in favor of private respondent the ownership and possession of the
-.,$/#,.)/ s!uare meters 'of+ land (nown as >=acienda de
8aricaban>, which is the main issue in this case@
1. ?hether or not respondent Court can validly allow private
respondent to e0ercise and perform all acts of ownership and
possession over the said land before trial
C. ?hether or not respondent Court has ac!uired jurisdiction to
hear and decide this action@
5. ?hether of not respondent Court committed grave abuse of
discretion amounting to lac( of jurisdiction in not dismissing this
action or allowing petitioners to appeal from the orders in
!uestion.
5
9n their comment, the private respondent averred, among other things, thatA ')+ the
respondent court, contrary to the petitioners< claim, did not decide the case >before
trial>@ '-+ 7C2 No. -*) had not been validly cancelled and that the rubber stamp
impression thereon, >CANCE""E5> is a forgery@ '#+ the act of 6udge ,ineda, in
denying issuance of 7C2 No. -*), duplicate owner<s copy, can not be considered res
'udicata because that case involved purportedly a mere petition for issuance of
duplicate owner<s copy@ '/+ non-joinder of proper parties is not a jurisdictional
defect@ '.+ the 2C2s issued thereafter are a nullity because 7C2 No. -*) had not
been shown to have been duly cancelled@ '&+ 7C2 No. -*) has become
imprescriptible@ and '$+ the private respondent has a valid right of dominion over the
property.
9n the meantime, the private respondent came to this Court on certiorari 'D.4. No.
*:)$&+ alleging that on 5ecember )., )*%$, in connection with p. ,roc. No. ,--**#
of the 4egional 2rial Court, 1ranch ))%, ,asay City, entitled >9n the matter of the
9ntestate Estate of the "ate Fortunato antiago and 8ariano ,antanilla Crisanta ,.
antiago, et al., ,etitioners,> 6udge Conrado ;as!ueF, 6r. issued an order disposing of
certain parcels which the private respondent claims as forming part and parcel
of 1acienda de Maricaban.
7n 6une -:, )*%%, the respondent judge in D.4. No. %).&/ filed his own comment,
asserting, among other things, thatA ')+ what he had sought to bar, by virtue of
injunction, was incursions and forcible entries of trespassers and s!uatters@ '-+ the
petitioners can not rightly claim that he had prematurely adjudicated the case,
because there was allegedly no decision to begin with@ '#+ that he issued the writ of
preliminary injunction in order only to maintain the status #uo ante bellum that is, to
re-place the private respondent, which had been allegedly in prior possession, in
possession@ '/+ he did not allegedly authoriFe unbridled >acts of ownership> to be
e0ercised on the property@ '.+ all rights of dominion given thereon were subject to
the approval of the intestate estate court@ '&+ he denied the notice of appeal because
the order dated 7ctober )-, )*%$, was interlocutory in nature from which no appeal
lies@ '$+ as to jurisdiction, the various motions filed by petitioners, allegedly
accepting the court<s jurisdiction, have clothed the court with jurisdiction, and that
besides, the jurisdictional !uestion was never raised e0cept now.
7n 6uly $, )*%%, the petitioners filed a reply traversing the respondent judge<s
allegations.
7n August -&, )*%%, the respondent judge filed a supplemental comment. =e
reiterated that the writ of injunction was directed only on such spaces not occupied
by the Dovernment 'Fort 1onifacio, "ibingan ng mga 1ayani, Ninoy A!uino
9nternational Airport, Nayong ,ilipino, ,opulation Commission, National cience
and 5evelopment 1oard, and National =ousing Authority+.
8eanwhile, Atty. Antonio 6. 5alangpan for and on behalf purportedly of the >=eirs
of 5elfin Casal> and the private respondent, 5omingo ,alomares, file a
Comment37pposition in 9ntervention>, dated 5ecember -#, )*%% as(ing for the
outright dismissal of the petition.
7n 5ecember )/, )*%*, the private respondent filed a manifestation, stating, among
other things, that assuming 7C2 No. -*) had been cancelled, there was still basis for
the respondent judge to prevent landgrabbers from entering into vacant portions of
the state embraced thereby.
2he Court finds the issues, !uintessentially, to beA
')+ 9s 7C2 No. -*) still valid and subsistingO
'-+ 5id the respondent judge, in issuing the orders, dated 7ctober )- and 7ctober -#,
)*%$, commit a grave abuse of discretion e!uivalent to lac( or e0cess of jurisdictionO
9.
"s &*$ ,o. <91 still valid and subsistingS
2he Court ta(es judicial notice of the fact that the hectarage
embraced by 2C2 No. )*- '7C2 No. -*)+ consists of Dovernment
property. 2hree things persuade the CourtA ')+ the decrees of
,roclamations Nos. )*- and /#.@ '-+ the incontrovertible fact that
7C2 No. -*) has been duly cancelled@ and '#+ the division of the
Court of Appeals in AC-D.4. C; No. ::-*#, affirming the
decision of =on. Dregorio ,ineda, 6udge of the then Court of First
9nstance of 4iFal, 1ranch KK9, in "4C 'D"47+ 4ec. No. -/%/,
Case No. 4-)/&$ thereof, entitled >9n 4eA 9ssuance of 7wner<s
5uplicate of Certificate of 2itle No. -*),> as well as our own
4esolution, in D.4. No. &*%#/, entitled >5omingo ,alomares, et
al., v. 9ntermediate Appellate Court>.
'a+
,roclamation No. )*- '>4EE4;9ND F74 2=E ;E2E4AN CEN2E4 92E
,E4,7E CE42A9N ,A4CE" 7F "AN5 7F 2=E ,E1"9C 578A9N
92EA2E5 9N 2=E ,47;9NCE 7F 49JA", 9"AN5 7F "EJ7N>+ and
,roclamation No. /-# '>4EE4;9ND F74 89"92A4I ,E4,7E CE42A9N
,A4CE" 7F 2=E ,E1"9C 578A9N 92EA2E5 9N 2=E 8EN9C9,A"92I 7F
,A9D, 2ADE9D, AN5 ,A4A]ALEE ,47;9NCE 7F 49JA", AN5 ,AAI
C92I>+ have the character of official assertions of ownership, and the presumption is
that they have been issued by right of sovereignty and in the e0ercise of the tate<s
dominical authority. ?e ta(e not only judicial notice thereof
6
but accept the same as
a valid asseveration of regalian light over property.
?ith respect to the premises occupied by the "ibingan ng mga 1ayani, Ninoy
A!uino 9nternational Airport, Nayong ,ilipino, the ,opulation Commission, National
cience and 5evelopment 1oard, and the National =ousing Authority, we do not
have the slightest doubt that they stand on Dovernment property by sheer
presumption that, unless otherwise shown, what the Dovernment occupies is what
the Dovernment owns.
?hile there is no presumption that property is Dovernment property until otherwise
shown, because the law recogniFes private ownership, thusA
Art. /-.. ,roperty of private ownership, besides the patrimonial
property of the tate, provinces, cities, and municipalities, consists
of all property belonging to private persons, either individually or
collectively.
7
we find hard evidence on record thatA ')+ the property covered by 7C2 No.
-*) had been conveyed to the Enited tates of America@ '-+ it had been
later ceded to the 4epublic of the ,hilippines, and '#+ as a conse!uence,
7C2 No. -*) was cancelled upon final order of 6udge 7strand.
1e that as it may, the private respondent in D.4. No. %).&/ is pressed hard to
establish the fact that portions of the property, especially the open spaces referred to
in the lower court<s writ of injunction and the private respondent<s manifestation of
5ecember )/, )*%*, and which open spaces it claims to be outside Maricaban9
areindeed outside Maricaban 'or 7C2 -*)+. ?ith respect, however, to parts thereof
on which Fort 1onifacio, "ibingan ng mga 1ayani, Ninoy A!uino 9nternational
Airport, Nayong ,ilipino, ,opulation Commission National cience and
5evelopment 1oard, and National =ousing Authority sit, the hands of the private
respondent are tied.
Claims that 6udge 7strand<s decree was a counterfeit is not only self-serving, it finds
no support from the records. 2he presumptions is >that official duty has been
regularly performed,>
>
and the burden is on the private respondent to prove irregular
performance. 2he barren insistence that 6udge 7strands order was a forgery is not
sufficient to overthrow the presumption. 2o begin with, the act of forgery has been
seasonably disputed by the petitioners. econdly, the Acting 4egistrar of 5eeds of
,asig, who supposedly certified to the fa(e character of 6udge 7strand<s order, has
himself joined the other petitioners in opposing the reconveyance sought.
'b+
2he decision in AC-D.4. No. ::-*#, dismissing the private respondent<s petition for
the issuance of a new owner<s copy of 7C2 No. -*), a dismissal affirmed by this
Court in D.4. No. &*%#/, also militates against the return of the property to the heirs
of 5elfin Casal. 2he Appellate Court<s judgment, a judgment sustained by this Court,
operates as, at the very least, the law of the case between the parties, that 7C2 No.
-*) has been cancelled and the land covered has been conveyed and ceded to the
National Dovernment. 2he fact that AC-D.4. C; No. ::-*# dealt with a petition for
issuance of lost owner<s duplicate copy is no argument because be that as it may, the
private respondent can not rightfully say that the heirs of 5elfin Casal still have title
to the land. 9f it can not secure a new owner<s copy, it can mean that they have lost
title thereto.
'c+
2he principle of res 'udicata is also a bar to the instant proceedings. 9t should be
noted that in D.4. No. &*%#/, 8r. 5omingo ,alomares prayedA
?=E4EF74E, premises considered it is most respectfully prayed
to the most =onorable upreme Court, that in the name of law,
justice and fair play, to prevent and frustrate >land-grabbing> by
the government, decision be renderedA
F942, 2hat a thorough review of the
aforementioned resolution of the 9ntermediate
Appellate Court be made@
EC7N5, 2hat after due consideration, the
resolution subject of review be set aside based on
the aforestated assignment of error@
2=945, 2hat the 7rder of the "ower Court dated
6an. )*, )*$$ be affirmed as the lawful and valid
order@
F7E42=, 2o erase all doubts by declaring 7C2
No. -*) as continuously and e0isting validly
against the whole world@
F9F2=, Clearing 7C2 No. -*) of all adverse
claims, since the herein petitioners are the true
and legally declared heirs@ and
9K2=, 7rdering the 4egister of 5eeds of ,asig,
4iFal to issue the 7wner<s 5uplicate Copy of
7C2 No. -*).
,etitioner-Appellant further prays for other just and e!uitable reliefs. MMMM
?hen we therefore denied that petition, we, in effect, held that reconstitution 'of lost
duplicate owner<s copy+ was not possible because the mother title '7C2 No. -*)+
had been duly cancelled. And when we therefore declared 7C2 No. -*) to have been
cancelled, we perished all doubts as to the invalidity of 8r. ,alomares< pretenses of
title to Maricaban. 7ur judgment was conclusive not only as to 8r. ,alomares, but
also as to the e0isting status of the property. As we have heldA
2he lower Court correctly ruled that the present action is barred by
the final judgment rendered in the previous case of 2uason Y Co.
vs. Aguila, Civil Case No. L-/-$., of the Court of First 9nstance of
4iFal. 2he reason is plainA if the herein appellants really had a
preferential right to a conveyance of the land from 6.8. 2uason Y
Co., or if the certificate of '2orrens+ title held by 2uason Y Co.
were truly void and ineffective, then these facts should have been
pleaded by these appellants in the previous case 'L-/-$.+, since
such facts, if true, constituted a defense to the claim of 2uason Y
Co. for recovery of possession. 9f appellants failed to plead such
defenses in that previous case, they are barred from litigating the
same in any subse!uent proceeding, for it is a well established rule
that as between the same parties and on the same subject and cause
of action, a final judgment is conclusive not only on matters
directly adjudicated, but also as to any other matter that could have
been raised in relation thereto.
9
99
id the respondent 'udge9 in issuing the order9 dated &ctober 1<9 19G;9 commit a
grave abuse of discretion e#uivalent to lac2 of e5cess of 'urisdictionS
'a+
2he Court has no doubt that 6udge ;eleF is here guilty of grave abuse of discretion
tantamount to lac( or e0cess of jurisdiction to warrant certiorari. As above-stated,
what he gave away, by virtue of reconveyance, was property that inalienably belongs
to the Dovernment or its successors. ?orse, he gave away property without notice to
the actual possessors, that is, the present registered owner. 9t is beyond debate, as we
have indicated, that the land had been, since the cancellation of 7C2 No. -*),
parcelled out to a succession of buyers and owners. 9n the absence of notice, it
ac!uired no jurisdiction to decree redelivery or reconveyance. 9t is well-established
that owners of property over which reconveyance is asserted are indispensable
parties, without whom no relief is available and without whom the court can render
no valid judgment.
1.
Furthermore, the present holders of the land in !uestion are innocent purchasers for
value, or presumed to be so in the absence of contrary evidence, against whom
reconveyance does not lie.
11
'b+
2he respondent judge can not conceal his faults behind arguments that he did not
intend to convey the premises, but rather, to secure, allegedly, vacant portions thereof
from interlopers. First, this is not stated in his order. econd, that order is clear and
une!uivocal that 5omingo ,alomares has the right >BtCo sell, e0change, lease or
otherwise dispose of any area or areas or portion or portions thereof . . . >
12
2hird
and last, the security of the property is the loo(out of the claimants, and not the
court<s. 9n case the premises the respondent judge<s injunctive writ have been
directed belong to others, let them air their plaints.
'c+
2he Court is also agreed that the challenged order was issued with no benefit of trial
or hearing. 2he private respondent can not validly rely on AC-D.4. No. ::-*# as the
>trial or hearing> to justify the issuance of its said order, in the first place, because it
is a different proceeding. 1ut above all, the private respondent itself says that AC-
D.4. C; No. ::-*# can not be made a basis for denying reconveyance because >the .
. . petition was merely for the issuance of a new owner<s duplicate
copy . . .
1-
Accordingly, it can not invo(e that case and yet, repudiate its effects. 9t is
the height of contradiction.
'd+
9t was also grave error for the lower court to deny the olicitor Deneral<s notice of
appeal. 2he Dovernment had all the right to appeal becauseA ')+ the order of 7ctober
)-, )*%$ was in the nature of a final judgment, as >final judgment> is (nown in law
'however it is captioned+, that is to say, one that >finally disposes of the pending
action so that nothing more can be done with it in the trial court@
18
'-+ it did not
merely maintain the status #uo, but allowed 8r. 5omingo ,alomares to transact on
the property by near right of dominion over it.
6udge ;eleF had therefore no reason, indeed, e0cuse, to deny the Dovernment<s
notice of appeal. ?hat is plain is the fact that 6udge ;eleF was hell-bent, so to spea(,
in bloc(ing the Dovernment<s efforts to defend what rightfully belongs to it.
?hat has obviously been lost on the parties, 6udge ;eleF in particular, is the
established principle that injunction does not lie >to ta(e property out of the
possession or control of one party and place it into that of another.>
15
9n this wise it
has also been heldA
000 000 000
9t is a well established doctrine in this jurisdiction that an
injunction is not the proper remedy for the recovery of possession
of real estate and the improvements thereon, as well as for the
ejectments therefrom of the actual occupants who claim to have
title to or material interest therein. 2he use of said remedy in such
cases has invariably been considered unjustified, in open violation
of the legal presumption that the bona fide possessor of a certain
piece of land and improvements thereon, holds the same under
claim of ownership and with a just title, and as an advanced
concession of the remedy to which the claimant might be entitled.
'Citations omitted+
16
000 000 000
9njunction, moreover, is an e0traordinary remedy. 9t lies only in certain cases, to witA
ec. #. 3rounds for issuance of preliminar! in'unction. M A
preliminary injunction may be granted at any time after the
commencement of the action and before judgment when it is
establishedA
'a+ 2hat the plaintiff is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission
or continuance of the acts complained of, or in the performance of
an act or acts, either for a limited period or perpetually@
'b+ 2hat the commission or continuance of some act complained of
during the litigation or the non-performance thereof would
probably wor( injustice to the plaintiff@ or
'c+ 2hat the defendant is doing, threatens, or is about to do, or is
procuring or suffering to be done, some act probably in violation of
the plaintiffs rights respecting the subject of the action, and tending
to render the judgment ineffectual.
17
000 000 000
2he conspicuous and unusual Feal with which 6udge Francisco ;eleF now defends
his acts
1>
has not escaped us. =is =onor should have borne in mind that in
proceedings under 4ule &. of the 4ules, such as the present cases, the judge is
included only as a nominal party. Enless otherwise ordained by this Court, he is not
called upon to answer or comment on the petition, but rather, the private respondent.
9t is indeed distressing to note that it is the very judge who has ta(en the cudgels for
the latter, in defending its interests, when he, the judge, should have remained a
neutral magistrate. Res ipsa lo#uitor.
19
=e must get his just deserts.
999
2he Court thus closes the long-drawn tale of 1acienda de Maricaban. 9n this
connection, let trial judges be cautioned on the indiscriminate disposition of our
dwindling natural resources to private persons. Accordingly, we grant D.4. No.
%).&/ and dismiss D.4. No. *:)$&, and so also, end what has come down as nearly a
century of uncertainty, doubt, and conflict 8aricaban has left in its trail. 2he Court
has finally spo(en. "et the matter rest.
?=E4EF74EA
). 2he petition in D.4. No. %).&/ is D4AN2E5A
'a+ 2he ?rit of ,reliminary 9njunction issued by our 4esolution,
dated April )#, )*%%, enjoining the respondent judge from
enforcing hisA 'i+ order of 7ctober )-, )*%$ and 'ii+ the follow-up
order of 7ctober -#, )*%$, is made permanent and
'b+ 7riginal Certificate of 2itle No. -*) is declared duly
CANCE""E5@
-. 2he petition in D.4. No. *:)$& is 5989E5@ and
#. 6udge Francisco ;eleF is ordered to =7? CAEE why he should not
be administratively dealt with for giving away, by virtue of reconveyance,
property that inalienably belongs to the Dovernment, without notice to the
registered owner, and without benefit of trial or hearing@ for bloc(ing
Dovernment efforts to defend what rightfully belongs to it@ and for filing his
comment of 6une )$, )*%% and supplemental comment of August -&, )*%%
without e0press leave of court.
Costs against the private respondent.
7 745E4E5.
G.R. No. L--9919 )a*uary -., 19-8
FORT"NATO ORT"A, petitioner-appellant,
vs.
VIENTE SINGSON ENARNAION, Se3re(ary o; A&r'3u/(ure a*,
o::er3e, ET AL., respondents-appellees.
Jillafuerte9 $ible and Jaler for appellant.
&ffice of the Solicitor83eneral 1ilado for appellees.
MALOLM, J.:
in this case the petitioner and appellant see(s the issuance of a writ
of mandamus directed against the ecretary of Agriculture and Commerce and the
5irector of "ands, for the purpose of compelling them to give due course to his sale<s
application for a tract of public land. 2he demurrers interposed to the complaint by
the respondents and appellees were sustained in the trial court, and on the failure of
the petitioner further to amend his complaint, the action was dismissed, without
costs.
2he principal facts admitted by the pleadings may be stated as followsA 9n 6anuary,
)*-:, the petitioner Fortunato 7rtua filed an application with the 1ureau of "ands
for the purchase of a tract of public land situated in the municipality of an 6ose,
,rovince of Camarines ur. Following an investigation conducted by the 1ureau of
"ands, 7rtua<s application was rejected, allowing him, however, to file a sale or lease
application for the portion of the land classified to be suitable for commercial
purposes, within a period of si0ty days from the date of the decision and upon
payment of ,#,::: for accrued rents. 2wo motions for reconsideration of the
decision were filed and denied. 7n appeal to the then ecretary of Agriculture and
Natural 4esources 'Agriculture and Commerce+, the decision was affirmed, e0cept
that the sum of ,#,::: was reduced to ,/::.
9t should be e0plained that one condition for the purchase of a tract of public
agricultural land, provided by the ,ublic "and "aw, Act No. -%$/, in its sections -#
and %%, is that the purchaser shall be a citiFen of lawful age of the ,hilippine 9slands
or of the Enited tates. Fortunato 7rtua in his application stated that he was a
Filipino citiFen, but the 5irector of "ands held that on the contrary, 7rtua was a
Chinese citiFen. 7n this !uestion, the 5irector of "ands found established the
following factsA Fortunato 7rtua was born in )%%. in "agonoy, Camarines ur,
,hilippine 9slands, being the natural son of 9rene 5emesa, a Filipina, and 6oa!uin
7rtua, a Chinese. 9n )%*& Fortunato was sent to China to study. ?hile he was in
China his father and mother were legally married. Fortunato returned to the
,hilippines in )*:&, that is, when he was twenty-one years of age.
9t was conceded by the 5irector of "ands that presumptively Fortunato 7rtua was a
,hilippine citiFen, but certain acts of 7rtua were pointed to as demonstrating that he
had forfeited his ,hilippine citiFenship. 2hus it was stated that 7rtua voluntarily
applied for a landing certificate of residence which was issued by the 9nsular
Collector of Customs and which is only given to Chinese persons. Also, when 7rtua
applied for the registration of a boat, and it was denied by the 9nsular Collector of
Customs on the ground that the appellant was a Chinese citiFen, 7rtua submitted to
the ruling.
2he 5irector of "ands performs his functions pursuant to the provisions of the ,ublic
"and "aw. 9n accordance with this law, the ecretary of Agriculture and Commerce
is made the e0ecutive officer charged with carrying out the provisions of the ,ublic
"and "aw, and he performs this duty through the 5irector of "ands 'sec. #+. ubject
to the control of the e0ecutive head, the 5irector of "ands is by law vested with
direct e0ecutive control over land matters, >and his decisions as to !uestions of fact
shall be conclusive when approved by the ecretary of Agriculture and Commerce.>
'ec. /+.
2he foregoing analysis of the pertinent provisions of the ,ublic "and "aw will show
why in the opening paragraphs of this decision, we accepted the decision of the
5irector of "ands on !uestions of facts as conclusive. ?e would even go farther and
would hold that the 5irector of "ands has been made by law a !uasi-judicial officer.
As such officer he ma(es findings of fact, even passes upon !uestions of mi0ed fact
and law, and considers and decides the !ualifications of applicants for the purchase
of public lands. A discretion is lodged by law in the 5irector of "ands which should
not be interfered with. 2he decisions of the 5irector of "ands on the construction of
the ,ublic "and "aw are entitled to great respect by the courts.
Accordingly, to paraphrase the authorities and decisions coming principally from the
Enited tates upreme Court, we deduce the rule on the subject to be, that a decision
rendered by the 5irector of "ands and approved by the ecretary of Agriculture and
Commerce, upon a !uestion of fact is conclusive and not subject to be reviewed by
the courts, in the absence of a showing that such decision was rendered in
conse!uence of fraud, imposition, or mista(e, other than error of judgment in
estimating the value or effect of evidence, regardless of whether or not it is
consistent with the preponderance of the evidence, so long as there is some evidence
upon which the finding in !uestion could be made. ';argas and 8aGalac, 2he
,hilippine "and 4egistration "aw, pp. $#%-$/:@ 6ulian vs. Apostol B)*-%C, .- ,hil.,
/--@ .: C. 6., ):%* et se#.@ 6ohnson vs. 4iddle B)*)&C, -/: E.., /&$.+
2here is, however, another side to the case. 9t certainly was not intended by the
legislative body to remove from the jurisdiction of courts all right to review
decisions of the 1ureau of "ands, for to do so would be to attempt something which
could not be done legally. Diving force to all possible intendments regarding the
facts as found by the 5irector of "ands, yet so much of the decision of the 5irector
of "ands as relates to a !uestion of law is in no sense conclusive upon the courts, but
is subject to review. 9n other words, any action of the 5irector of "ands which is
based upon a misconstruction of the law can be corrected by the courts. 'hepley vs.
Cowan B)%$&C, *) E.., ##:@ 8oore vs. 4obbins B)%$%C, *& E.., .#:@ 8ar!ueF vs.
Frisbie B)%$*C, ):) E.., /$#@ 1lac( vs. 6ac(son B)*::C, )$$ E.., #/*@ 6ohnson vs.
4iddle, supra.+
=aving adjusted this fundamental matter, it is now for the court to determine if the
!uestion of law arising from the undisputed evidence was correctly decided by the
5irector of "ands. 2his !uestion is, if the petitioner Fortunato 7rtua should be
considered to be a ,hilippine citiFen or a Chinese citiFen. ,resumptively it is
admitted that he is a ,hilippine citiFen. 8ore correctly stated, Fortunato 7rtua had a
sort of a dual citiFenship, and had it within his power either to elect to become a
,hilippine citiFen or a Chinese citiFen. ,redicated on these assumptions, we doubt
very much if it could be found that 7rtua has by his own acts repudiated his
,hilippine citiFenship and chosen Chinese citiFenship. 2he 5irector of "ands gave
too much prominence, we thin(, to two minor facts, susceptible of e0planation.
?hen 7rtua returned from China at the age of twenty-one, it was the most natural
thing in the world for him to land as a Chinese, for this would facilitate entry and
obviate complications. Again, when 7rtua applied for the registration of a boat, there
may have been any number of reasons why he did not care to appeal from the
decision of the 9nsular Collector of Customs. 7n the other hand, some consideration
should be given to the intention of the petitioner, and he vigorously insists that it is
his desire to be considered a ,hilippine citiFen. =e has ta(en a Filipino name. =e has
gone into business and has improved the property here in !uestion to a great e0tent.
2here has been no implied renunciation of citiFenship, because the petitioner has
been domiciled in these 9slands e0cept for a short period during his infancy when he
temporarily sojourned in China for study. 7n the contrary, he states that he has
always considered himself to be a Filipino, and that he has elected to remain as a
,hilippine citiFen. 2herefore, on the facts found by the 5irector of "ands, we hold
that clear error of law resulted in not considering petitioner a ,hilippine citiFen and
so !ualified under the ,ublic "and "aw to purchase public agricultural lands.
ustaining the assigned errors, the order of the trial court will be set aside, and the
record will be remanded to the court of origin for further proceedings in accordance
with law. No pronouncement as to costs in this instance.
Jilla8Real9 1ull9 "mperial9 and 3oddard9 JJ.9 concur.
G.R. No. 95698. O3(ober 9, 1997A
VIENTE VILLLAFLOR, +ub+('(u(e, by 2'+ 2e'r+, petitioner. vs. O"RT OF
A!!EALS a*, NASI!IT L"M#ER O., IN., respondents.
D E I S I O N
!ANGANI#AN .J.%
9n this rather factually complicated case, the Court reiterates the binding force
and effect of findings of specialiFed administrative agencies as well as those of trial
courts when affirmed by the Court of Appeals@ rejects petitionerRs theory of
simulation of contracts@ and passes upon the !ualifications of private respondent
corporation to ac!uire disposable public agricultural lands prior to the effectivity of
the )*$# Constitution.
T2e a+e
1efore us is a petition for review on certiorari see(ing the reversal of the
5ecision
B)C
of the Court of Appeals, dated eptember -$, )**:, in C.A. D.4. C; No.
:*:&-, affirming the dismissal by the trial court of ,etitioner ;icente ;illaflorRs
complaint against ,rivate 4espondent Nasipit "umber Co., 9nc. 2he disposition of
both the trial and the appellate courts are !uoted in the statement of facts below.
T2e Fa3(+
2he facts of this case, as narrated in detail by 4espondent Court of Appeals, are
as followsA
B-C
S2he evidence, testimonial and documentary, presented during the trial show that on
6anuary )&, )*/:, Cirilo ,iencenaves, in a 5eed of Absolute ale 'e0h. A+, sold to
BpetitionerC, a parcel of agricultural land containing an area of .: hectares,
B#C
more or
less, and particularly described and bounded as followsA
\A certain parcel of agricultural land planted to abaca with visible concrete
monuments mar(ing the boundaries and bounded on the N742= by ,ublic "and
now ,rivate 5eeds on the East by erafin ;illaflor, on the 7E2= by ,ublic "and@
and on the ?est by land claimed by =. ,atete, containing an area of &: hectares more
or less, now under 2a0 5ec. -*/.) in the 'sic+ of said ;icente ;illaflor, the whole
parcel of which this particular parcel is only a part, is assessed at ,--,..:.:: under
the above said 2a0 5ec. Number.R
2his deed statesA
\2hat the above described land was sold to the said ;9CEN2E ;9""AF"74, 000 on
6une --, )*#$, but no formal document was then e0ecuted, and since then until the
present time, the said ;icente ;illaflor has been in possession and occupation of 'the
same+@ 'and+
2hat the above described property was before the sale, of my e0clusive property
having inherited from my long dead parents and my ownership to it and that of my
BsicC lasted for more than fifty '.:+ years, possessing and occupying same peacefully,
publicly and continuously without interruption for that length of time.R
Also on 6anuary )&, )*/:, Claudio 7tero, in a 5eed of Absolute ale 'e0h. C+ sold to
;illaflor a parcel of agricultural land, containing an area of -/ hectares, more or less,
and particularly described and bounded as followsA
\A certain land planted to corn with visible concrete measurements mar(ing the
boundaries and bounded on the North by ,ublic "and and 2ungao Cree(@ on the East
by Agusan 4iver@ on the outh by erafin ;illaflor and Cirilo ,iencenaves@ and on
the ?est by land of Fermin 1acobo containing an area of -/ hectares more or less,
under 2a0 5eclaration No. -*/.) in the name already of ;icente ;illaflor, the whole
parcel of which this particular land is only a part, is assessed at ,--,..:.:: under the
above said 2a0 5eclaration No. -*/.).R
2his deed statesA
\2hat the above described land was sold to the said ;9CEN2E ;9""AF"74, 000 on
6une --, )*#$, but no sound document was then e0ecuted, however since then and
until the present time, the said ;icente ;illaflor has been in open and continuous
possession and occupation of said land@ 'and+
2hat the above described land was before the sale, my own e0clusive property, being
inherited from my deceased parents, and my ownership to it and that of my
predecessors lasted more than fifty '.:+ years, possessing and occupying the same,
peacefully, openly and continuously without interruption for that length of time.R
"i(ewise on 6anuary )&, )*/:, =ermogenes ,atete, in a 5eed of Absolute ale 'e0h.
5+, sold to ;illaflor, a parcel of agricultural land, containing an area of -: hectares,
more or less, and particularly described and bounded as followsA
\A certain parcel of agricultural land planted to abaca and corn with visible concrete
monuments mar(ing the boundaries and bounded on the North by ,ublic "and area-
private 4oad@ on the East by land claimed by Cirilo ,iencenaves@ on the outh by
,ublic "and containing an area of -: hectares more or less, now under 2a0
5eclaration No. -*/.) in the name of ;icente ;illaflor the whole parcel of which
this particular parcel, is assessed at ,--,..:.:: for purposes of ta0ation under the
above said 2a0 5eclaration No. -*/.).R
2his deed statesA
\000 '7+n 6une --, )*#$ but the formal document was then e0ecuted, and since then
until the present time, the said ;9CEN2E ;9""AF"74 has been in continuous and
open possession and occupation of the same@ 'and+
2hat the above described property was before the sale, my own and e0clusive
property, being inherited from my deceased parents and my ownership to it and that
of my predecessors lasted more than fifty '.:+ years, possessing and occupying
same, peacefully, openly and continuously without interruption for that length of
time.R
7n February )., )*/:, Fermin 1ocobo, in a 5eed of Absolute ale 'e0h. 1+, sold to
;illaflor, a parcel of agricultural land, containing an area of )% hectares, more or
less, and particularly described and bounded as followsA
\A certain parcel of agricultural land planted with abaca with visible part mar(ing the
corners and bounded on the North by the corners and bounded on the North by
,ublic "and@ on the East by Cirilo ,iencenaves@ on the outh by =ermogenes ,atete
and ?est by ,ublic "and, containing an area of )% hectares more or less now under
2a0 5eclaration No. -*/.) in the name of ;icente ;illaflor. 2he whole parcel of
which this particular parcel is only a part is assessed as ,--,..:.:: for purposes of
ta0ation under the above said 2a0 5eclaration Number '5eed of Absolute ale
e0ecuted by Fermin 1ocobo date Feb. )., )*/:+. 2his document was annotated in
4egistry of 5eeds on February )&, )*/:+.R
2his deed statesA
\2hat the above described property was before the sale of my own e0clusive
property, being inherited from my deceased parents, and my ownership to it and that
of my predecessors lasted more than fifty '.:+ years, possessing and occupying the
same peacefully, openly and continuously without interruption for that length of
time.R
7n November %, )*/&, ;illaflor, in a "ease Agreement 'e0h. L+,
B/C
leased to Nasipit
"umber Co., 9nc. a parcel of land, containing an area of two '-+ hectares, together
with all the improvements e0isting thereon, for a period of five '.+ years from 6une
), )*/& at a rental of ,-::.:: per annum \to cover the annual rental of house and
building sites for thirty three '##+ houses or buildings.R 2his agreement also
providesA
B.C
\#. 5uring the term of this lease, the "essee is authoriFed and empowered to
build and construct additional houses in addition to the ## houses or buildings
mentioned in the ne0t preceding paragraph, provided however, that for every
additional house or building constructed the "essee shall pay unto the "essor an
amount of fifty centavos '^.:+ per month for every house or building. 2he "essee is
empowered and authoriFed by the "essor to sublot 'sic+ the premises hereby leased
or assign the same or any portion of the land hereby leased to any person, firm and
corporation@ 'and+
/. 2he "essee is hereby authoriFed to ma(e any construction and3or
improvement on the premises hereby leased as he may deem necessary and proper
thereon, provided however, that any and all such improvements shall become the
property of the "essor upon the termination of this lease without obligation on the
part of the latter to reimburse the "essee for e0penses incurred in the construction of
the same.R
;illaflor claimed having discovered that after the e0ecution of the lease agreement,
that Nasipit "umber \in bad faith 0 0 0 surreptitiously grabbed and occupied a big
portion of plaintiffRs property 0 0 0R@ that after a confrontation with the corporateRs
'sic+ field manager, the latter, in a letter dated 5ecember #, )*$# 'e0h. 4+,
B&C
stated
recalling having \made some sort of agreement for the occupancy 'of the property at
Acacia, an 8ateo+, but 9 no longer recall the details and 9 had forgotten whether or
not we did occupy your land. 1ut if, as you say, we did occupy it, then 'he is + sure
that the company is obligated to pay the rental.R
7n 6uly $, )*/%, in an \Agreement to ellR 'e0h. -+, ;illaflor conveyed to Nasipit
"umber, two '-+ parcels of land 000 described as followsA
B$C
\,A4CE" 7NE
1ounded on the North by ,ublic "and and 2ungao Cree(@ on the East by Agusan
4iver and erafin ;illaflor@ on the outh by ,ublic "and, on the ?est by ,ublic
"and. 9mprovements thereon consist of abaca, fruit trees, coconuts and thirty houses
of mi0ed materials belonging to the Nasipit "umber Company. 5ivided into "ot
Nos. ./)-, ./)#, ./%%, ./*:, ./*), ./*-, .%.:, .%/*, .%&:, .%.., .%.), .%./,
.%.., .%.*, .%.%, .%.$, .%.#, and .%.-. 1oundaries of this parcel of land are
mar(ed by concrete monuments of the 1ureau of "ands. Containing an area of
))-,::: hectares. Assessed at ,)$,)&:.:: according to 2a0 5eclaration No. ;-#).
dated April )/, )*/&.
,A4CE" 2?7
1ounded on the North by ,agudasan Cree(@ on the East by Agusan 4iver@ on the
outh by 2ungao Cree(@ on the ?est by ,ublic "and. Containing an area of /%,:::
hectares more or less. 5ivided into "ot Nos. ./)), ./):, ./:*, and
.#**. 9mprovements ):: coconut trees, productive, and #:: cacao
trees. 1oundaries of said land are mar(ed by concrete monuments of the 1ureau pf
'sic+ "ands. Assessed value -- ,&,-*:.:: according to 2a0 No. #)$, April )/, )*/&.R
2his Agreement to ell providesA
\#. 2hat beginning today, the ,arty of the econd ,art shall continue to occupy
the property not anymore in concept of lessee but as prospective owners, it being the
sense of the parties hereto that the ,arty of the econd ,art shall not in any manner
be under any obligation to ma(e any compensation to the ,arty of the First ,art, for
the use, and occupation of the property herein before described in such concept of
prospective owner, and it li(ewise being the sense of the parties hereto to terminate
as they do hereby terminate, effective on the date of this present instrument, the
Contract of "ease, otherwise (nown as 5oc. No. /-:, ,age No. #&, 1oo( No. 99,
eries of )*/& of Notary ,ublic Dabriel 4. 1anaag, of the ,rovince of Agusan.
/. 2hat the ,arty of the econd ,art has bound as it does hereby bind itself, its
e0ecutors and administrators, to pay unto the party of the First ,art the sum of Five
2housand ,esos ',.,:::.::+, ,hilippine Currency, upon presentation by the latter to
the former of satisfactory evidence thatA
'a+ 2he 1ureau of "ands will not have any objection to the obtainment by the ,arty
of the First ,art of a Certificate of 2orrens 2itle in his favor, either thru ordinary land
registration proceedings or thru administrative means procedure.
'b+ 2hat there is no other private claimant to the properties hereinbefore described.
.. 2hat the ,arty of the First ,art has bound as he does hereby bind to
underta(e immediately after the e0ecution of these presents to secure and obtain, or
cause to be secured and obtained, a Certificate of 2orrens 2itle in his favor over the
properties described on ,age '7ne+ hereof, and after obtainment of such Certificate
of 2orrens 2itle, the said ,arty of the First ,art shall e0ecute a '5+eed of Absolute
ale unto and in favor of the ,arty of the econd ,art, its e0ecutors, administrators
and assigns, it being the sense of the parties that the ,arty of the econd ,art upon
delivery to it of such deed of absolute sale, shall pay unto the ,arty of the First ,art
in cash, the sum of 2welve 2housand ',)-,:::.::+ ,esos in ,hilippine Currency,
provided, however, that the ,arty of the First ,art, shall be reimbursed by the ,arty
of the econd ,art with one half of the e0penses incurred by the ,arty of the First
,art for survey and attorneyRs fees@ and other incidental e0penses not
e0ceeding ,#::.::.R
7n 5ecember -, )*/%, ;illaflor filed ales Application No. ;-%:$
B%C
'e0h. )+ with the
1ureau of "ands, 8anila, \to purchase under the provisions of Chapter ;, K9 or 9K of
Commonwealth Act. No. )/) '2he ,ublic "ands Act+, as amended, the tract of public
lands 0 0 0 and described as followsA \North by ,ublic "and@ East by Agusan 4iver
and erafin ;illaflor@ outh by ,ublic "and and ?est by public land '"ot Nos. .#$*,
./%*, ./)-, ./*:, ./*), ./*-, .%/*, .%.:, .%.), ./)#, ./%%, ./%*, .%.-, .%.#,
.%./, .%.., .%.&, .%.$, .%.%, .%.* and .%&: 0 0 0 containing an area of )/:
hectares 000.R ,aragraph & of the Application, statesA \9 understand that this
application conveys no right to occupy the land prior to its approval, and 9
recogniFed 'sic+ that the land covered by the same is of public domain and any and
all rights 9 may have with respect thereto by virtue of continuous occupation and
cultivation are hereby relin!uished to the Dovernment.R
B*C
'e0h. )-5+
7n 5ecember $, )*/%, ;illaflor and Nasipit "umber e0ecuted an \AgreementR 'e0h
#+.
B):C
2his contract providesA
\). 2hat the First ,arty is the possessor since )*#: of two '-+ parcels of land
situated in sitio 2ungao, 1arrio of an 8ateo, 8unicipality of 1utuan, ,rovince of
Agusan@
-. 2hat the first parcel of land abovementioned and described in ,lan ,"-*$
filed in the office of the 1ureau of "ands is made up of "ots Nos. ./)-, ./)#, ./%%,
./*:, ./*), ./*-, .%/*, .%.:, .%.), .%.-, .%.#, .%./, .%.., .%.&, .%.$, .%.%,
.%.* and .%&: and the second parcel of land is made of "ots Nos. .#**, ./:*, ./):
and ./))@
#. 2hat on 6uly $, )*/%, a contract of Agreement to ell was e0ecuted between
the contracting parties herein, covering the said two parcels of land, copy of said
Agreement to ell is hereto attached mar(ed as Anne0 SAT and made an integral part
of this document. 2he parties hereto agree that the said Agreement to ell be
maintained in full force and effect with all its terms and conditions of this present
agreement and in no way be considered as modified.
/. 2hat paragraph / of the Contract of Agreement to ell, mar(ed as anne0,
SAT stipulates as followsA
\,ar. /. 2hat the ,arty of the econd ,art has bound as it does hereby bind itself,
its e0ecutors and administrators, to pay unto the ,arty of the First ,art of the sum of
F9;E 2=7EAN5 ,E7 ',.,:::.::+ ,hilippine Currency, upon presentation by
the latter to the former of satisfactory evidence thatA
a+ 2he 1ureau of "ands will have any objection to the obtainment by ,arty of the
First ,art of a favor, either thru ordinary land registration proceedings or thru
administrative means and procedure.
b+ 2hat there is no other private claimant to the properties hereinabove described.R
2hat the First ,arty has on 5ecember -, )*/%, submitted to the 1ureau of "ands, a
ales Application for the twenty-two '--+ lots comprising the two abovementioned
parcels of land, the said ales Application was registered in the said 1ureau under
No. ;-%:$@
&. 2hat in reply to the re!uest made by the First ,arty to the 1ureau of "ands,
in connection with the ales Application No. ;-%:$, the latter informed the former
that action on his re!uest will be e0pedited, as per letter of the Chief, ,ublic "and
5ivision, dated 5ecember -, )*/%, copy of which is hereto attached mar(ed as anne0
\1R and made an integral part of this agreementA
$. 2hat for and in consideration of the premises above stated and the amount
of 2?EN2I F7E4 2=7EAN5 ',-/,:::.::+ ,E7 that the econd ,arty shall
pay to the First ,arty, by these presents, the First ,arty hereby sells, transfers and
conveys unto the econd ,arty, its successors and assigns, his right, interest and
participation under an'd+ by virtue of the ales Application No. ;-%:$, which he has
or may have in the lots mentioned in said ales Application No. ;-%:$@
%. 2hat the amount of 2?EN2I F7E4 2=7EAN5 ',-/,:::.::+ ,E7,
shall be paid by the econd ,arty to the First ,arty, as followsA
a+ 2he amount of E;EN 2=7EAN5 ',$,:::.::+ ,E7, has already been
paid by the econd ,arty to the First ,arty upon the e0ecution of the Agreement to
ell, on 6uly $, )*/%@
b+ 2he amount of F9;E 2=7EAN5 ',.,:::.::+ ,E7 shall be paid upon the
signing of this present agreement@ and
c+ 2he balance of 2?E";E 2=7EAN5 ',)-,:::.::+ ,E7, shall be paid
upon the e0ecution by the First ,arty of the Absolute 5eed of ale of the two parcels
of land in !uestion in favor of the econd ,arty, and upon delivery to the econd
,arty of the Certificate of 7wnership of the said two parcels of land.
*. 9t is specially understood that the mortgage constituted by the First ,arty in
favor of the econd ,arty, as stated in the said contract of Agreement to ell dated
6uly $, )*/%, shall cover not only the amount of E;EN 2=7EAN5 ',$,:::.::+
,E7 as specified in said document, but shall also cover the amount of F9;E
2=7EAN5 ',.,:::.::+ ,E7 to be paid as stipulated in paragraph %, sub-
paragraph 'b+ of this present agreement, if the First ,arty should fail to comply with
the obligations as provided for in paragraphs -, /, and . of the Agreement to ell@
):. 9t is further agreed that the First ,arty obligates himself to sign, e0ecute and
deliver to and in favor of the econd ,arty, its successors and assigns, at anytime
upon demand by the econd ,arty such other instruments as may be necessary in
order to give full effect to this present agreement@R
9n the 4eport dated 5ecember #), )*/* by the public land inspector, 5istrict "and
7ffice, 1ureau of "ands, in 1utuan, the report contains an 9ndorsement of the
aforesaid 5istrict "and 7fficer recommending rejection of the ales Application of
;illaflor for having leased the property to another even before he had ac!uired
transmissible rights thereto.
9n a letter of ;illaflor dated 6anuary -#, )*.:, addressed to the 1ureau of "ands, he
informed the 1ureau 5irector that he was already occupying the property when the
1ureauRs Agusan 4iver ;alley ubdivision ,roject was inaugurated, that the property
was formerly claimed as private properties 'sic+, and that therefore, the property was
segregated or e0cluded from disposition because of the claim of private
ownership. 9n a letter of Nasipit "umber dated February --, )*.: 'e0h. K+
B))C
addressed to the 5irector of "ands, the corporation informed the 1ureau that it
recogniFed ;illaflor as the real owner, claimant and occupant of the land@ that since
6une )*/&, ;illaflor leased two '-+ hectares inside the land to the company@ that it
has no other interest on the land@ and that the ales Application of ;illaflor should be
given favorable consideration.
000 000
000
7n 6uly -/, )*.:, the scheduled date of auction of the property covered by the ales
Application, Nasipit "umber offered the highest bid of ,/).:: per hectare, but since
an applicant under CA )/), is allowed to e!ual the bid of the highest bidder, ;illaflor
tendered an e!ual bid, deposited the e!uivalent of ):Q of the bid price and then paid
the assessment in full.
000 000
000
7n August )&, )*.:, ;illaflor e0ecuted a document, denominated as a \5eed of
4elin!uishment of 4ightsR 'e0h. N+,
B)-C
pertinent portion of which readsA
\.. 2hat in view of my present business in 8anila, and my change in residence from
1utuan, Agusan to the City of 8anila, 9 cannot, therefore, develope 'sic+ or cultivate
the land applied for as projected before@
&. 2hat the Nasipit "umber Company, 9nc., a corporation duly organiFed 000 is very
much interested in ac!uiring the land covered by the aforecited application 000@
$. 2hat 9 believe the said company is !ualified to ac!uire public land, and has the
means to develop 'sic+ the above-mentioned land@
000 000
000
?=E4EF74E, and in consideration of the amount of F9;E 2=7EAN5 ,E7
',.,:::.::+ to be reimbursed to me by the aforementioned Nasipit "umber
Company, 9nc., after its receipt of the order of award, the said amount representing
part of the purchase price of the land aforesaid, the value of the improvements 9
introduced thereon, and the e0penses incurred in the publication of the Notice of
ale, 9, the applicant, ;icente 6. ;illaflor, hereby voluntarily renounce and relin!uish
whatever rights to, and interests 9 have in the land covered by my above-mentioned
application in favor of the Nasipit "umber Company, 9nc.R
Also on August )&, )*.:, Nasipit "umber filed a ales Application over the two '-+
parcels of land, covering an area of )/: hectares, more or less. 2his application was
also numbered ;-%:$ 'e0h. I+.
7n August )$, )*.: the 5irector of "ands issued an \7rder of AwardR
B)#C
in favor of
Nasipit "umber Company, 9nc., pertinent portion of which readsA
\/. 2hat at the auction sale of the land held on 6uly -/, )*.: the highest bid received
was that of Nasipit "umber Company, 9nc. which offered ,/).:: per hectare
or ,.,$/:.:: for the whole tract, which bid was e!ualed by applicant ;icente 6.
;illaflor, who deposited the amount of ,.$/.:: under 7fficial 4eceipt No. 1-
)#$#%-& dated 6uly -/, )*.: which is e!uivalent to ):Q of the bid. ubse!uently,
the said 000 ;illaflor paid the amount of ,.,)&:.:: in full payment of the purchase
price of the above-mentioned land and for some reasons stated in an instrument of
relin!uishment dated August )&, )*.:, he ';icente 6. ;illaflor+ relin!uished his
rights to and interest in the said land in favor of the Nasipit "umber Company, 9nc.
who filed the corresponding application therefore.
9n view of the foregoing, and it appearing that the proceedings had 000 were in
accordance with law and in BsicC e0isting regulations, the land covered thereby is
hereby awarded to Nasipit "umber Company, 9nc. at ,/).:: per hectare or ,.,$/:.::
for the whole tract.
2his application should be entered in the record of this 7ffice as ales Entry No. ;-
/:$.R
9t is ;illaflorRs claim that he only learned of the 7rder of Award on 6anuary )&, )*$/,
or after his arrival to the ,hilippines, coming from 9ndonesia, where he stayed for
more than ten '):+ years@ that he went to 1utuan City in the latter part of )*$# upon
the call of his brother erafin ;illaflor, who was then sic( and learned that Nasipit
"umber 'had+ failed and refused to pay the agreed rentals, although his brother was
able to collect during the early years@ and that erafin died three days after his
';icenteRs+ arrival, and so no accounting of the rentals could be made@ that on
November -$, )*$#, ;illaflor wrote a letter to 8r. D.E.C. 8ears of Nasipit "umber,
reminding him of their verbal agreement in )*.. 000 that 8r. 8ears in a 4eply
dated 5ecember #, )*$#, appears to have referred the matter to 8r. Noriega, the
corporate general manager, but the new set of corporate officers refused to recogniFe
';illaflorRs+ claim, for 8r. Florencio 2amesis, the general manager of Nasipit
"umber, in a letter dated February )*, )*$/, denied ;illaflorRs itemiFed claim dated
6anuary ., )*$/ 'e0h. ;+ to be without valid and legal basis. 9n that .th 6anuary,
)*$/ letter, ;illaflor claimed the total amount of ,/-$,:::.:: 0 0 0.
9n a formal protest dated 6anuary #), )*$/
B)/C
which ;illaflor filed with the 1ureau of
"ands, he protested the ales Application of Nasipit "umber, claiming that the
company has not paid him ,.,:::.:: as provided in the 5eed of 4elin!uishment of
4ights dated August )&, )*.:.
000 000
000
0 0 0 '2+hat in a 5ecision dated August %, )*$$ 'e0h. %+, the 5irector of "ands found
that the payment of the amount of ,.,:::.:: in the 5eed 000 and the consideration
in the Agreement to ell were duly proven, and ordered the dismissal of ;illaflorRs
protest and gave due course to the ales Application of Nasipit "umber. ,ertinent
portion of the 5ecision penned by 5irector of "ands, 4amon Casanova, in the 8atter
of , No. ;-%:$ 'C-;-/:$+ 000 readsA
\000 000
000
5uring the proceedings, ;illaflor presented another claim entirely different from his
previous claim -- this time, for recovery of rentals in arrears arising from a supposed
contract of lease by ;illaflor as lessor in favor of Nasipit as lessee, and indemnity for
damages supposedly caused improvements on his other property 000 in the
staggering amount of eventeen 8illion ',)$,:::,:::.::+ ,esos. Earlier, he had
also demanded from NA9,92 000 ',/-$,:::.::+ 000 also as indemnity for damages
to improvements supposedly caused by NA9,92 on his other real property as well
as for reimbursement of realty ta0es allegedly paid by him thereon.
000 000
000
9t would seem that 000 ;illaflor has sought to inject so many collaterals, if not
e0traneous claims, into this case. 9t is the considered opinion of this 7ffice that any
claim not within the sphere or scope of its adjudicatory authority as an administrative
as well as !uasi-judicial body or any issue which see(s to delve into the merits of
incidents clearly outside of the administrative competence of this 7ffice to decide
may not be entertained.
2here is no merit in the contention of ;illaflor that owing to NasipitRs failure to pay
the amount of 000 ',.,:::.::+ 000 'assuming that Nasipit had failed+ the deed of
relin!uishment became null and void for lac( of consideration. 0000.
000 000
000
0 0 0 2he records clearly show, however, that since the e0ecution of the deed of
relin!uishment 000 ;illaflor has always considered and recogniFed NA9,92 as
having the juridical personality to ac!uire public lands for agricultural
purposes. 0000.
000 000
000
Even this 7ffice had not failed to recogniFe the juridical personality of NA9,92 to
apply for the purchase of public lands 000 when it awarded to it the land so
relin!uished by ;illaflor '7rder of Award dated August )$, )*.:+ and accepted its
application therefor. At any rate, the !uestion whether an applicant is !ualified to
apply for the ac!uisition of public lands is a matter between the applicant and this
7ffice to decide and which a third party li(e ;illaflor has no personality to !uestion
beyond merely calling the attention of this 7ffice thereto.
000 000
000
;illaflor offered no evidence to support his claim of non-payment beyond his own
self-serving assertions and e0pressions that he had not been paid said amount. As
protestant in this case, he has the affirmative of the issue. =e is obliged to prove his
allegations, otherwise his action will fail. For, it is a well settled principle '\+ that if
plaintiff upon whom rests the burden of proving his cause of action fails to show in a
satisfactory manner the facts upon which he bases his claim, the defendant is under
no obligation to prove his e0ceptions or special defenses '1elen vs. 1elen, )# ,hil.
-:-@ 8endoFa vs. Fulgencio, % ,hil. -/#+.
000 000
000
Conse!uently, ;illaflorRs claim that he had not been paid must perforce fail.
7n the other hand, there are strong and compelling reasons to presume that ;illaflor
had already been paid the amount of Five 2housand ',.,:::.::+ ,esos.
First, 000 ?hat is surprising, however, is not so much his claims consisting of
gigantic amounts as his having forgotten to adduce evidence to prove his claim of
non-payment of the Five 2housand ',.,:::.::+ ,esos during the investigation
proceedings when he had all the time and opportunity to do so. 000 2he fact that he
did not adduce or even attempt to adduce evidence in support thereof shows either
that he had no evidence to offer 000 that NA9,92 had already paid him in
fact. ?hat is worse is that ;illaflor did not even bother to command payment, orally
or in writing, of the Five 2housand ',.,:::.::+ ,esos which was supposed to be due
him since August )$, )*.:, the date when the order of award was issued to Nasipit,
and when his cause of action to recover payment had accrued. 2he fact that he only
made a command 'sic+ for payment on 6anuary #), )*$/, when he filed his protest or
twenty-four '-/+ years later is immediately nugatory of his claim for non-payment.
1ut ;illaflor maintains that he had no (nowledge or notice that the order of award
had already been issued to NA9,92 as he had gone to 9ndonesia and he had been
absent from the ,hilippines during all those twenty-four '-/+ years. 2his of course
ta0es credulity. 000.
econd, it should be understood that the condition that NA9,92 should reimburse
;illaflor the amount of Five 2housand ',.,:::.::+ ,esos upon its receipt of the
order of award was fulfilled as said award was issued to NA9,92 on August )$,
)*.:. 2he said deed of relin!uishment was prepared and notariFed in 8anila with
;illaflor and NA9,92 signing the instrument also in 8anila on August )&, )*.:
'p.$$, 'sic++. 2he following day or barely a day after that, or on August )$, )*.:, the
order of award was issued by this 7ffice to NA9,92 also in 8anila. Now,
considering that ;illaflor is presumed to be more assiduous in following up with the
1ureau of "ands the e0peditious issuance of the order of award as the payment of the
Five 2housand ',.,:::.::+ ,esos 'consideration+ would depend on the issuance of
said order to award NA9,92, would it not be reasonable to believe that ;illaflor was
at hand when the award was issued to NA9,92 on August )$, )*.:, or barely a day
which 'sic+ he e0ecuted the deed of relin!uishment on August )&, )*.:, in
8anilaO 000.
2hird, on the other hand, NA9,92 has in his possession a sort of SorderT upon itself
-- 'the deed of relin!uishment wherein he 'sic+ obligated itself to reimburse or pay
;illaflor the 000 consideration of the relin!uishment upon its receipt of the order of
award+ for the payment of the aforesaid amount the moment the order of award is
issued to it. 9t is reasonable to presume that NA9,92 has paid the Five 2housand
',.,:::.::+ ,esos to ;illaflor.
\A person in possession of an order on himself for the payment of money, or the
delivery of anything, has paid the money or delivered the thing accordingly. 'ection
.'(+ 1-)#)-4evised 4ules of Court.R
9t should be noted that NA9,92 did not produce direct evidence as proof of its
payment of the Five 2housand ',.,:::.::+ ,esos to ;illaflor. NasipitRs e0planation
on this point is found satisfactory.
\0 0 0 '9+t was virtually impossible for NA9,92, after the lapse of the intervening -/
years, to be able to cope up with all the records necessary to show that the
consideration for the deed of relin!uishment had been fully paid. 2o e0pect
NA9,92 to (eep intact all records pertinent to the transaction for the whole !uarter
of a century would be to re!uire what even the law does not. 9ndeed, even the
applicable law itself 'ec. ##$, National 9nternal 4evenue Code+ re!uires that all
records of corporations be preserved for only a ma0imum of five years.
NA9,92 may well have added that at any rate while \there are transactions where
the proper evidence is impossible or e0tremely difficult to produce after the lapse of
time 000 the law creates presumptions of regularity in favor of such transactions '-:
Am. 6ur. -#-+ so that when the basic fact is established in an action the e0istence of
the presumed fact must be assumed by force of law. '4ule )#, Eniform 4ules of
Evidence@ * ?igmore, ec. -/*)+.
Anent ;illaflorRs claim that the )/:-hectare land relin!uished and awarded to
NA9,92 is his private property, little 'need+ be said. 0000 2he trac(s of land
referred to therein are not identical to the lands awarded to NA9,92. Even in the
assumption that the lands mentioned in the deeds of transfer are the same as the )/:-
hectare area awarded to NA9,92, their purchase by ;illaflor 'or+ the latterRs
occupation of the same did not change the character of the land from that of public
land to a private property. 2he provision of the law is specific that public lands can
only be ac!uired in the manner provided for therein and not otherwise 'ec. )), C.A.
No. )/), as amended+. 2he records show that ;illaflor had applied for the purchase
of the lands in !uestion with this 7ffice 'ales Application No. ;-%:$+ on 5ecember
-, )*/%. 0000 2here is a condition in the sales application signed by ;illaflor to the
effect that he recogniFes that the land covered by the same is of public domain and
any and all rights he may have with respect thereto by virtue of continuous
occupation and cultivation are relin!uished to the Dovernment 'paragraph &, ales
Application No. ;-%:$ 000+ of which ;illaflor is very much aware. 9t also appears
that ;illaflor had paid for the publication fees appurtenant to the sale of the land. =e
participated in the public auction where he was declared the successful bidder. =e
had fully paid the purchase prive 'sic+ thereof 'sic+. 9t would be a 'sic+ height of
absurdity for ;illaflor to be buying that which is owned by him if his claim of private
ownership thereof is to be believed. 2he most that can be said is that his possession
was merely that of a sales applicant to when it had not been awarded because he
relin!uished his interest therein in favor of NA9,92 who 'sic+ filed a sales
application therefor.
000 000
000
0 0 0 5uring the investigation proceedings, ;illaflor presented as his E0hibit \'sic+R
'which NA9,92 adopted as its own e0hibit and had it mar(ed in evidence as E0hibit
\)R+ a duly notariFed \agreement to ellR dated 6uly $, )*/%, by virtue of which
;illaflor undertoo( to sell to Nasipit the tracts of land mentioned therein, for a
consideration of 2wenty-Four 2housand ',-/,:::.::+ ,esos. aid tracts of land
have been verified to be identical to the parcels of land formerly applied for by
;illaflor and which the latter had relin!uished in favor of NA9,92 under a deed of
relin!uishment e0ecuted by him on August )&, )*.:. 9n another document e0ecuted
on 5ecember $, )*/% 000 ;illaflor as \F942 ,A42IR and NA9,92 as \EC7N5
,A42IR confirmed the \Agreement to ellR of 6uly $, )*/%, which was maintained
\in full force and effect with all its terms and conditions 0 0 0R 'E0h. \#%-AR+@ and that
\for and in consideration of 000 2?EN2I F7E4 2=7EAN5 ',-/,:::.::+
,E7 that the econd ,arty shall pay to the First ,arty 000 the First ,arty hereby
sells, transfers and conveys unto the econd ,arty 000 his right interest and
participation under and by virtue of the ales Application No. ;-%:$R and, in its
paragraph %, it made stipulations as to when part of the said consideration 000 was
paid and when the balance was to be paid, to witA
\a+ the amount of E;EN 2=7EAN5 000 ,E7 has already been paid by the
econd ,arty to the First ,arty upon the e0ecution of the Agreement to ell, on 6uly
)$, )*/%@
b+ the amount of F9;E 2=7EAN5 000 ,E7 shall be paid upon the signing of
this present agreement@ and
c+ the amount of 2?E";E 2=7EAN5 000 ,E7, shall be paid upon the
e0ecution by the First ,arty of the Absolute ale of the 2wo parcels of land in
!uestion in favor of the econd ,arty of the Certificate of 7wnership of the said two
parcels of land.R 'E0h. #%-1+. 'Emphasis ours+
9t is thus clear from this subse!uent document mar(ed E0hibit R#% ANA"C7R that of
the consideration of the \Agreement to ellR dated 6uly$, )*/%, involving the )/:-
hectare area relin!uished by ;illaflor in favor of NA9,92, in the amount of 2wenty-
Four 2housand ',-/,:::.::+ ,esosA
')+ the amount of even 2housand ',$,:::.::+ ,esos was already paid
upon the e0ecution of the \Agreement to ellR on 6uly $, )*/%, receipt of which
incidentally was admitted by ;illaflor in the document of 5ecember $, )*/%@
'-+ the amount of Five 2housand ',.,:::.::+ ,esos was paid when said
document was signed by ;icente 6. ;illaflor as the First ,arty and Nasipit thru its
,resident, as the econd ,arty, on 5ecember $, )*/%@ and
'#+ the balance of 2welve 2housand ',)-,:::.::+ ,esos to be paid upon the
e0ecution by the First ,arty of the Absolute 5eed of ale of the two parcels of land
in favor of the econd ,arty, and upon delivery to the econd ,arty of the Certificate
of 7wnership of the said two parcels of land.
;illaflor contends that NA9,92 could not have paid ;illaflor the balance of 2welve
2housand ',)-,:::.::+ ,esos 0 0 0 consideration in the Agreement to ell will only
be paid to applicant-assignor 'referring to ;illaflor+ upon obtaining a 2orrens 2itle in
his favor over the )/:-hectare of land applied for and upon e0ecution by him of a
5eed of Absolute ale in favor of Nasipit "umber Company, 9nc. 0 0 0. 9nasmuch as
applicant-assignor was not able to obtain a 2orrens 2itle over the land in !uestion he
could not e0ecute an absolute 5eed of 'sic+ Nasipit "umber Co., 9nc. =ence, the
Agreement to ell was not carried out and no 2welve 2housand ',)-,:::.::+ ,esos
was overpaid either to the applicant-assignor, much less to =oward 6. Nell
Company. 'ee 8E874AN5E8 F74 2=E A,,"9CAN2-A9DN74, dated
6anuary ., )*$$+. 000.
000 ;illaflor did not adduce evidence in support of his claim that he had not been
paid the 000 ',)-,:::.::+ 000 consideration of the Agreement to ell dated 6uly $,
)*/% 'E0h. \#% NA"C7R+ beyond his mere uncorroborated assertions. 7n the other
hand, there is strong evidence to show that said 2welve 2housand ',)-,:::.::+
,esos had been paid by 'private respondent+ to Edward 6. Nell Company by virtue of
the 5eed of Assignment of Credit e0ecuted by ;illaflor 'E0h. \/) NA"C7R+ for the
credit of the latter.
Atty. Dabriel 1anaag, resident counsel of NA9,92 who is in a position to (now the
facts, testified for NA9,92. =e described that it was he who notariFed the
\Agreement to ell\ 'E0h. \FR+@ that he (new about the e0ecution of the document of
5ecember $, )*/% 'E0h. \#%R+ confirming the said \Agreement to ellR having been
previously consulted thereon by 6ose FernandeF, who signed said document on
behalf of NA9,92 000 that subse!uently, in 6anuary )*/*, ;illaflor e0ecuted a
5eed of Assignment of credit in favor of Edward 6. Nell Company 'E0h. \/)
NA"C7R+ whereby ;illaflor ceded to the latter his receivable for
NA9,92 corresponding to the remaining balance in the amount of 2welve
2housand 000 ,esos of the total consideration 000 stipulated in both the \Agreement
to ellR 'E0h. \FR+ and the document dated 5ecember $, )*/% 'E0h. \#*R+@ 000. =e
further testified that the said assignment of credit was communicated to 'private
respondent+ under cover letter dated 6anuary -/, )*/* 'E0h. \/)-AR+ and not long
thereafter, by virtue of the said assignment of credit, 'private respondent+ paid the
balance of 2welve 2housand 000 due to ;illaflor to Edward 6. Nell Company 000.
Atty. 1anaagRs aforesaid testimony stand unrebutted@ hence, must be given full
weight and credit. 000 ;illaflor and his counsel were present when Atty. 1anaagRs
foregoing testimony was given. Iet, ;illaflor did not demur, nor did he rebut the
same, despite having been accorded full opportunity to do so.
000 000
000
=aving found that both the Five 2housand 000 consideration of the deed of
4elin!uishment 000 and that the remaining balance of 000 ',)-,:::.::+ to complete
the 2wenty-Four 2housand ',-/,:::.::+ ,esos consideration of both the Agreement
to ell dated 6uly $, )*/%, and the document, dated 5ecember $, )*/%, e0ecuted by
the former in favor of the latter, have been paid ;illaflor the issue on prescription
and laches becomes academic and needs no further discussion.
1ut more than all the !uestions thus far raised and resolved is the !uestion whether a
sales patent can be issued to NA9,92 for the )/:-hectare area awarded to it in the
light of ection )), Article K9; of the new Constitution which provides in its
pertinent portion to witA
\0 0 0 No private corporation or association may hold alienable land of the public
domain e0cept by lease not to e0ceed one thousand hectares in area 000.R
2he ecretary of 6ustice had previous occasion to rule on this point in his opinion
No. )/:, s. )*$/. aid the =onorable 6ustice ecretaryA
\7n the second !uestion, 'referring to the !uestions when may a public land be
considered to have been ac!uired by purchase before the effectivity of the new
Constitution posed by the 5irector of "ands in his !uery on the effect on pending
applications for the issuance of sales patent in the light of ection )), Art. K9; of the
New Constitution aforecited+, you refer to this 7fficeRs 7pinion No. &/ series of
)*$# in which 9 statedA
7n the other hand, with respect to sales applications ready for issuance of sales
patent, it is my opinion that where the applicant had, before the Constitution too(
effect, fully complied with all this obligations under the ,ublic "and Act in order to
entitle him to a ales patent, there would be no legal or e!uitable justification for
refusing to issue or release the sales patent.R
?ith respect to the point as to when the ales applicant has complied with all the
terms and conditions which would entitle him to a sales patent, the herein above
ecretary of 6ustice went onA
\2hat as to when the applicant has complied with all the terms and conditions which
would entitle him to a patent is a !uestioned 'sic+ fact which your office would be in
the best position to determine. =owever, relating this to the procedure for the
processing of applications mentioned above, 9 thin( that as the applicant has
fulfilled the construction3cultivation re!uirements and has fully paid the purchase
price, he should be deemed to have ac!uired by purchase the particular tract of land
and 'sic+ the area 'sic+ in the provision in !uestion of the new constitution would not
apply.R
From the decision of the 5irector of "ands, ;illaflor filed a 8otion for
4econsideration which was considered as an Appeal 8.N.4. Case /#/), to the
8inistry of Natural 4esources.
7n 6une &, )*$*, the 8inister of Natural 4esources rendered a 5ecision 'e0h. *+,
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dismissing the appeal and affirming the decision of the 5irector of "ands,
pertinent portions of which readsA
\After a careful study of the records and the arguments of the parties, we believe that
the appeal is not well ta(en.
Firstly, the area in dispute is not the private property of appellant.
2he evidence adduced by appellant to establish his claim of ownership over the
subject area consists of deeds of absolute sale e0ecuted in his favor on 6anuary )&,
and February )., )*/:, by four '/+ different persons, namely, Cirilo ,iencenaves,
Fermin 1alobo, Claudio 7tero and =ermogenes ,atete.
=owever, an e0amination of the technical descriptions of the tracts of land subject of
the deeds of sale will disclose that said parcels are not identical to, and do not tally
with, the area in controversy.
\9t is a basic assumption of our policy that lands of whatever classification belong to
the state. Enless alienated in accordance with law, it retains its rights over the same
as dominus, 'antiago vs. de los antos, "--:-/), November --, )*$/, &) C4A
).-+.
For, it is well-settled that no public land can be ac!uired by private persons without
any grant, e0press or implied from the government. 9t is indispensable then that
there be showing of title from the state or any other mode of ac!uisition recogniFed
by law.R '"ee =ong =o(, et al. vs. 5avid, et al., "-#:#%*, 5ecember -$, )*$-, /%
C4A #$*.+
9t is well-settled that all lands remain part of the public domain unless severed
therefrom by state grant or unless alienated in accordance with law.
?e, therefore, believe that the aforesaid deeds of sale do not constitute clear and
convincing evidence to establish that the contested area is of private
ownership. =ence, the property must be held to be public domain.
\2here being no evidence whatever that the property in !uestion was ever ac!uired
by the applicants or their ancestors either by composition title from the panish
Dovernment or by possessory information title or by any other means for the
ac!uisition of public lands, the property must be held to be public
domain.R '"ee =ong =o(, et al., vs. 5avid , et al., "-#:#%* 5ecember -$, )*$-, /%
C4A #$%-#$* citing =eirs of 5atu ,endatun vs. 5irector of "ands@ see also
5irector of "ands vs. 4eyes, "--$.*/, November -%, )*$., &% C4A )$$+.
1e that as it may, appellant, by filing a sales application over the controverted land,
ac(nowledged une!uivocably BsicC that the same is not his private property.
\As such sales applicant, appellant manifestly ac(nowledged that he does not own
the land and that the same is a public land under the administration of the 1ureau of
"ands, to which the application was submitted, 000 All of its acts prior thereof,
including its real estate ta0 declarations, characteriFed its possessions of the land as
that of a \sales applicantR and conse!uently, as one who e0pects to buy it, but has not
as yet done so, and is not, therefore, its owner.R ',alawan Agricultural and 9ndustrial
Co., 9nc. vs. 5irector of "ands, "--.*)/, 8arch -), )*$-, // C4A -:, -)+.
econdly, appellantRs alleged failure to pay the consideration stipulated in the deed of
relin!uishment neither converts said deed into one without a cause or consideration
nor ipso facto rescinds the same. Appellant, though, has the right to demand
payment with legal interest for the delay or to demand rescission.
000 000
000
=owever, appellantRs cause of action, either for specific performance or rescission of
contract, with damages, lies within the jurisdiction of civil courts, not with
administrative bodies.
000 000
000
"astly, appellee has ac!uired a vested right to the subject area and, therefore, is
deemed not affected by the new constitutional provision that no private corporation
may hold alienable land of the public domain e0cept by lease.
000 000
000
9mplementing the aforesaid 7pinion No. &/ of the ecretary of 6ustice, the then
ecretary of Agriculture and Natural 4esources issued a memorandum, dated
February )%, )*$/, which pertinently reads as followsA
\9n the implementation of the foregoing opinion, sales application of private
individuals covering areas in e0cess of -/ hectares and those of corporations,
associations, or partnership which fall under any of the following categories shall be
given due course and issued patents, to witA
). ales application for fishponds and for agricultural purposes 'FA, A and
9D,A+ wherein prior to 6anuary )$, )*$#@
a. the land covered thereby was awarded@
b. cultivation re!uirements of law were complied with as shown by investigation
reports submitted prior to 6anuary )$, )*$#@
c. land was surveyed and survey returns already submitted to the 5irector of "ands
for verification and approval@ and
d. purchase price was fully paid.R
From the records, it is evident that the aforestated re!uisites have been complied
with by appellee long before 6anuary )$, )*$#, the effectivity of the New
Constitution. 2o restate, the disputed area was awarded to appellee on August )$,
)*.:, the purchase price was fully paid on 6uly -&, )*.), the cultivation
re!uirements were complied with as per investigation report dated 5ecember #),
)*/*, and the land was surveyed under ,ls-*$.RT
7n 6uly &, )*$%, petitioner filed a complaint
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in the trial court for
S5eclaration of Nullity of Contract '5eed of 4elin!uishment of 4ights+, 4ecovery of
,ossession 'of two parcels of land subject of the contract+, and 5amagesT at about
the same time that he appealed the decision of the 8inister of Natural 4esources to
the 7ffice of the ,resident.
7n 6anuary -%, )*%#, petitioner died. 2he trial court ordered his widow,
"ourdes 5. ;illaflor, to be substituted as petitioner. After trial in due course, the
then Court of First 9nstance of Agusan del Norte and 1utuan City, 1ranch 999,
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dismissed the complaint on the grounds thatA ')+ petitioner admitted the due
e0ecution and genuineness of the contract and was estopped from proving its nullity,
'-+ the verbal lease agreements were unenforceable under Article )/:# '-+'e+ of the
Civil Code, and '#+ his causes of action were barred by e0tinctive prescription and3or
laches. 9t ruled that there was prescription and3or laches because the alleged verbal
lease ended in )*&&, but the action was filed only on 6anuary &, )*$%. 2he si0-year
period within which to file an action on an oral contract per Article ))/. ')+ of the
Civil Code e0pired in )*$-. 2he decretal portion
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of the trial courtRs decision
readsA
S?=E4EF74E, the foregoing premises duly considered, judgment is hereby
rendered in favor of the defendant and against the plaintiff. Conse!uently, this case
is hereby ordered 5989E5. 2he defendant is hereby declared the lawful actual
physical possessor-occupant and having a better right of possession over the two '-+
parcels of land in litigation described in par. ).- of the complaint as ,arcel 9 and
,arcel 99, containing a total area of 7ne =undred i0ty ')&:+ hectares, and was then
the subject of the ales Application No. ;-%:$ of the plaintiff 'E0hibits ), )-A, )-1,
pp. /-) to /-)-A, 4ecord+, and now of the ales Application No. %:$, Entry No. ;-
/:$ of the defendant Nasipit "umber Company 'E0hibit I, pp. #.$-#.%,
4ecord+. 2he Agreements to ell 4eal 4ights, E0hibits - to --C, # to #-1, and the
5eed of 4elin!uishment of 4ights, E0hibits N to N-), over the two parcels of land in
litigation are hereby declared binding between the plaintiff and the defendant, their
successors and assigns.
5ouble the costs against the plaintiff.T
2he heirs of petitioner appealed to 4espondent Court of Appeals
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which,
however, rendered judgment against petitioner via the assailed 5ecision dated
eptember -$, )**: finding petitionerRs prayers -- ')+ for the declaration of nullity of
the deed of relin!uishment, '-+ for the eviction of private respondent from the
property and '#+ for the declaration of petitionerRs heirs as owners N to be without
basis. 2he decretal portion
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of the assailed /*-page, single-spaced 5ecision curtly
readsA
S?=E4EF74E, the 5ecision appealed from, is hereby AFF948E5, with costs
against plaintiff-appellants.T
Not satisfied, petitionerRs heirs filed the instant .$-page petition for review
dated 5ecember $, )**:. 9n a 4esolution dated 6une -#, )**), the Court denied this
petition Sfor being late.T 7n reconsideration -- upon plea of counsel that petitioners
were SpoorT and that a full decision on the merits should be rendered -- the Court
reinstated the petition and re!uired comment from private respondent. Eventually,
the petition was granted due course and the parties thus filed their respective
memoranda.
T2e I++ue+
,etitioner, through his heirs, attributes the following errors to the Court of
AppealsA
S9. Are the findings of the Court of Appeals conclusive and binding upon the
upreme CourtO
99. Are the findings of the Court of Appeals fortified by the similar findings made by
the 5irector of "ands and the 8inister of Natural 4esources 'as well as by the 7ffice
of the ,resident+O
999. ?as there \forum shoppingOR
9;. Are the findings of facts of the Court of Appeals and the trial court supported by
the evidence and the lawO
;. Are the findings of the Court of Appeals supported by the very terms of the
contracts which were under consideration by the said courtO
;9. 5id the Court of Appeals, in construing the subject contracts, consider the
contemporaneous and subse!uent act of the parties pursuant to article )#$) of the
Civil CodeO
;99. 5id the Court of Appeals consider the fact and the unrefuted claim of ;illaflor
that he never (new of the award in favor of NasipitO
;999. 5id the Court of Appeals correctly apply the rules on evidence in its findings
that ;illaflor was paid the ,.,:::.:: consideration because ;illaflor did not adduce
any proof that he was not paidO
9K. 9s the Court of Appeals\ conclusion that the contract is not simulated or fictitious
simply because it is genuine and duly e0ecuted by the parties, supported by logic or
the lawO
K. 8ay the prestations in a contract agreeing to transfer certain rights
constitute estoppel when this very contract is the subject of an action for annulment
on the ground that it is fictitiousO
K9. 9s the Court of Appeals\ conclusion that the lease agreement between ;illaflor is
verbal and therefore, unenforceable supported by the evidence and the lawOT
After a review of the various submissions of the parties, particularly those of
petitioner, this Court believes and holds that the issues can be condensed into three
as followsA
')+ 5id the Court of Appeals err in adopting or relying on the factual findings of
the 1ureau of "ands, especially those affirmed by the 8inister 'now ecretary+ of
Natural 4esources and the trial courtO
'-+ 5id the Court of Appeals err in upholding the validity of the contracts to sell
and the deed of relin!uishmentO 7therwise stated, did the Court of Appeals err in
finding the deed of relin!uishment of rights and the contracts to sell valid, and not
simulated or fictitiousO
'#+ 9s the private respondent !ualified to ac!uire title over the disputed propertyO
T2e our(9+ Ru/'*&
2he petition is bereft of merit. 9t basically !uestions the sufficiency of the
evidence relied upon by the Court of Appeals, alleging that public respondentRs
factual findings were based on speculations, surmises and conjectures. ,etitioner
insists that a review of those findings is in order because they were allegedly ')+
rooted, not on specific evidence, but on conclusions and inferences of the 5irector of
"ands which were, in turn, based on misapprehension of the applicable law on
simulated contracts@ '-+ arrived at whimsically -- totally ignoring the substantial and
admitted fact that petitioner was not notified of the award in favor of private
respondent@ and '#+ grounded on errors and misapprehensions, particularly those
relating to the identity of the disputed area.
F'r+( I++ue: (rimary Jurisdiction of the 5irector of 6ands and Finality of Factual
Findings of the +ourt of *ppeals
Enderlying the rulings of the trial and appellate courts is the doctrine of
primary jurisdiction@ i.e.9 courts cannot and will not resolve a controversy involving a
!uestion which is within the jurisdiction of an administrative tribunal, especially
where the !uestion demands the e0ercise of sound administrative discretion re!uiring
the special (nowledge, e0perience and services of the administrative tribunal to
determine technical and intricate matters of fact.
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9n recent years, it has been the jurisprudential trend to apply this doctrine to
cases involving matters that demand the special competence of administrative
agencies even if the !uestion involved is also judicial in character. 9t applies Swhere
a claim is originally cogniFable in the courts, and comes into play whenever
enforcement of the claim re!uires the resolution of issues which, under a regulatory
scheme, have been placed within the special competence of an administrative body@
in such case, the judicial process is suspended pending referral of such issues to the
administrative body for its view.T
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9n cases where the doctrine of primary jurisdiction is clearly applicable, the
court cannot arrogate unto itself the authority to resolve a controversy, the
jurisdiction over which is initially lodged with an administrative body of special
competence.
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9n Machete vs. *ourt of %ppeals, the Court upheld the primary
jurisdiction of the 5epartment of Agrarian 4eform Adjudicatory 1oard '5A4A1+ in
an agrarian dispute over the payment of bac( rentals under a leasehold contract.
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9n *oncerned &fficials of the Metropolitan (aterwor2s and Sewerage S!stem vs.
Jas#ue@9
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the Court recogniFed that the 8? was in the best position to evaluate
and to decide which bid for a waterwor(s project was compatible with its
development plan.
2he rationale underl!ing the doctrine of primary jurisdiction finds application
in this case, since the !uestions on the identity of the land in dispute and the factual
!ualification of private respondent as an awardee of a sales application re!uire a
technical determination by the 1ureau of "ands as the administrative agency with the
e0pertise to determine such matters. 1ecause these issues preclude prior judicial
determination, it behooves the courts to stand aside even when they apparently have
statutory power to proceed, in recognition of the primary jurisdiction of the
administrative agency.
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S7ne thrust of the multiplication of administrative agencies is that the interpretation
of contracts and the determination of private rights thereunder is no longer a
uni!uely judicial function, e0ercisable only by our regular courtsT
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,etitioner initiated his action with a protest before the 1ureau of "ands and
followed it through in the 8inistry of Natural 4esources and thereafter in the 7ffice
of the ,resident. Consistent with the doctrine of primary jurisdiction, the trial and
the appellate courts had reason to rely on the findings of these specialiFed
administrative bodies.
2he primary jurisdiction of the director of lands and the minister of natural
resources over the issues regarding the identity of the disputed land and the
!ualification of an awardee of a sales patent is established by ections # and / of
Commonwealth Act No. )/), also (nown as the ,ublic "and ActA
Section #. 2he ecretary of Agriculture and Commerce 'now ecretary of Natural
4esources+ shall be the e0ecutive officer charged with carrying out the provisions of
this Act through the 5irector of "ands, who shall act under his immediate control.T
Section /. ubject to said control, the 5irector of "ands shall have direct e0ecutive
control of the survey, classification, lease, sale or any other form of concession or
disposition and management of the lands of the public domain, and his decision as to
!uestions of fact shall be conclusive when approved by the ecretary of Agriculture
and Commerce.T
2hus, the 5irector of "ands, in his decision, saidA
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S0 0 0 9t is merely whether or not ;illaflor has been paid the Five 2housand
',.,:::.::+ ,esos stipulated consideration of the deed of relin!uishment made by
him without touching on the nature of the deed of relin!uishment. 2he
administration and disposition of public lands is primarily vested in the 5irector of
"ands and ultimately with the ecretary of Agriculture and Natural 4esources 'now
ecretary of Natural 4esources+, and to this end--
\7ur upreme Court has recogniFed that the 5irector of "ands is a !uasi-judicial
officer who passes on issues of mi0ed facts and law '7rtua vs. 1ingson Encarnacion,
.* ,hil //:+. ections # and / of the ,ublic "and "aw thus mean that the ecretary
of Agriculture and Natural 4esources shall be the final arbiter on !uestions of fact in
public land conflicts '=eirs of ;arela vs. A!uino, $) ,hil &*@ 6ulian vs. Apostol, .-
,hil //-+.\
2he ruling of this 7ffice in its order dated eptember ):, )*$., is worth reiterating,
thusA
\0 0 0 it is our opinion that in the e0ercise of his power of e0ecutive control,
administrative disposition and allegation of public land, the 5irector of "ands should
entertain the protest of ;illaflor and conduct formal investigation 000 to determine
the following pointsA 'a+ whether or not the Nasipit "umber Company, 9nc. paid or
reimbursed to ;illaflor the consideration of the rights in the amount of ,.,:::.:: and
what evidence the company has to prove payment, the relin!uishment of rights being
part of the administrative process in the disposition of the land in !uestion 000.
0000 1esides, the authority of the 5irector of "ands to pass upon and determine
!uestions considered inherent in or essential to the efficient e0ercise of his powers
li(e the incident at issue, i.e. , whether ;illaflor had been paid or not, is conceded by
law.\T
4eliance by the trial and the appellate courts on the factual findings of the
5irector of "ands and the 8inister of Natural 4esources is not misplaced. 1y reason
of the special (nowledge and e0pertise of said administrative agencies over matters
falling under their jurisdiction, they are in a better position to pass judgment thereon@
thus, their findings of fact in that regard are generally accorded great respect, if not
finality,
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by the courts.
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2he findings of fact of an administrative agency must be
respected as long as they are supported by substantial evidence, even if such
evidence might not be overwhelming or even preponderant. 9t is not the tas( of an
appellate court to weigh once more the evidence submitted before the administrative
body and to substitute its own judgment for that of the administrative agency in
respect of sufficiency of evidence.
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=owever, the rule that factual findings of an administrative agency are
accorded respect and even finality by courts admits of e0ceptions. 2his is true also
in assessing factual findings of lower courts.
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9t is incumbent on the petitioner to
show that the resolution of the factual issues by the administrative agency and3or by
the trial court falls under any of the e0ceptions. 7therwise, this Court will not
disturb such findings.
B##C
?e mention and !uote e0tensively from the rulings of the 1ureau of "ands and
the 8inister of Natural 4esources because the points, !uestions and issues raised by
petitioner before the trial court, the appellate court and now before this Court are
basically the same as those brought up before the aforesaid specialiFed
administrative agencies. As held by the Court of AppealsA
B#/C
S?e find that the contentious points raised by appellant in this action, are
substantially the same matters he raised in 1" Claim No. %$# 'N+. 9n both actions,
he claimed private ownership over the land in !uestion, assailed the validity and
effectiveness of the 5eed of 4elin!uishment of 4ights he e0ecuted in August )&,
)*.:, that he had not been paid the ,.,:::.:: consideration, the value of the
improvements he introduced on the land and other e0penses incurred by him.T
9n this instance, both the principle of primary jurisdiction of administrative
agencies and the doctrine of finality of factual findings of the trial courts, particularly
when affirmed by the Court of Appeals as in this case, militate against petitionerRs
cause. 9ndeed, petitioner has not given us sufficient reason to deviate from them.
La*, '* D'+7u(e I+ !ub/'3 La*,
,etitioner argues that even if the technical description in the deeds of sale and
those in the sales application were not identical, the area in dispute remains his
private property. =e alleges that the deeds did not contain any technical description,
as they were e0ecuted prior to the survey conducted by the 1ureau of "ands@ thus,
the properties sold were merely described by reference to natural boundaries. =is
private ownership thereof was also allegedly attested to by private respondentRs
former field manager in the latterRs February --, )*.: letter, which contained an
admission that the land leased by private respondent was covered by the sales
application.
2his contention is specious. 2he lac( of technical description did not prove
that the finding of the 5irector of "ands lac(ed substantial evidence. =ere, the issue
is not so much whether the subject land is identical with the property purchased by
petitioner. 2he issue, rather, is whether the land covered by the sales application is
private or public land. 9n his sales application, petitioner e0pressly admitted that said
property was public land. 2his is formidable evidence as it amounts to an
admission against interest.
9n the e0ercise of his primary jurisdiction over the issue, 5irector of "ands
Casanova ruled that the land was publicA
B#.C
S0 0 0 Even 'o+n the assumption that the lands mentioned in the deeds of transfer are
the same as the )/:-hectare area awarded to Nasipit, their purchase by ;illaflor 'or+
the latterRs occupation of the same did not change the character of the land from that
of public land to a private property. 2he provision of the law is specific that public
lands can only be ac!uired in the manner provided for therein and not otherwise
'ec. )), C.A. No. )/), as amended+. 2he records show that ;illaflor had applied for
the purchase of lands in !uestion with this 7ffice 'ales Application No. ;-%:$+ on
5ecember -, )*/%. 000 2here is a condition in the sales application 000 to the effect
that he recogniFes that the land covered by the same is of public domain and any and
all rights he may have with respect thereto by virtue of continuous occupation and
cultivation are relin!uished to the Dovernment 'paragraph &, ales Application No.
;-%:$ of ;icente 6. ;illaflor, p. -), carpeta+ of which ;illaflor is very much
aware. 9t also appears that ;illaflor had paid for the publication fees appurtenant to
the sale of the land. =e participated in the public auction where he was declared the
successful bidder. =e had fully paid the purchase prive 'sic+ thereor 'sic+. 9t would
be a 'sic+ height of absurdity for ;illaflor to be buying that which is owned by him if
his claim of private ownership thereof is to be believed. 000.T
2his finding was affirmed by the 8inister of Natural 4esourcesA
B#&C
SFirstly, the area in dispute is not the private property of appellant 'herein petitioner+.
2he evidence adduced by 'petitioner+ to establish his claim of ownership over the
subject area consists of deeds of absolute sale e0ecuted in his favor 000.
=owever, an e0amination of the technical descriptions of the tracts of land subject of
the deeds of sale will disclose that said parcels are not identical to, and do not tally
with, the area in controversy.
\9t is a basic assumption of our policy that lands of whatever classification belong to
the state. Enless alienated in accordance with law, it retains its rights over the same
as dominus. 'antiago vs. de los antos, "--:-/), November --, )*$/, &) C4A
).-+.
For it is well-settled that no public land can be ac!uired by private persons without
any grant, e0press or implied from the government. 9t is indispensable then that
there be showing of title from the state or any other mode of ac!uisition recogniFed
by law. '"ee =ong =o(, et al. vs. 5avid, et al., "-#:#%*, 5ecember -$, )*$-, /%
C4A #$*+.R
000 000
000 000
?e, therefore, believe that the aforesaid deeds of sale do not constitute clear and
convincing evidence to establish that the contested area is of private
ownership. =ence, the property must be held to be public domain.
\2here being no evidence whatever that the property in !uestion was ever ac!uired
by the applicants or their ancestors either by composition title from the panish
Dovernment or by possessory information title or by any other means for the
ac!uisition of public lands, the property must be held to be public domain.R
1e that as it may, BpetitionerC, by filing a sales application over the controverted land,
ac(nowledged une!uivocably BsicC that the same is not his private property.
\As such sales applicant manifestly ac(nowledged that he does not own the land and
that the same is a public land under the administration of the 1ureau of "ands, to
which the application was submitted, 000 All of its acts prior thereof, including its
real estate ta0 declarations, characteriFed its possessions of the land as that of a \sales
applicantR. And conse!uently, as one who e0pects to buy it, but has not as yet done
so, and is not, therefore, its owner.R',alawan Agricultural and 9ndustrial Co., 9nc. vs.
5irector of "ands, "--.*)/, 8arch -), )*$-, // C4A ).+.T
Clearly, this issue falls under the primary jurisdiction of the 5irector of "ands
because its resolution re!uires Ssurvey, classification, 000 disposition and
management of the lands of the public domain.T 9t follows that his rulings deserve
great respect. As petitioner failed to show that this factual finding of the 5irector of
"ands was unsupported by substantial evidence, it assumes finality. 2hus, both the
trial and the appellate courts correctly relied on such finding.
B#$C
?e can do no less.
Se3o*, I++ue% ;o &imulation of +ontracts (roven
,etitioner insists that contrary to Article )#$)
B#%C
of the Civil Code, 4espondent
Court erroneously ignored the contemporaneous and subse!uent acts of the parties@
hence, it failed to ascertain their true intentions. =owever, the rule on the
interpretation of contracts that was alluded to by petitioner is used in affirming, not
negating, their validity. 2hus, Article )#$#,
B#*C
which is a conjunct of Article )#$),
provides that, if the instrument is susceptible of two or more interpretations, the
interpretation which will ma(e it valid and effectual should be adopted. 9n this light,
it is not difficult to understand that the legal basis urged by petitioner does not
support his allegation that the contracts to sell and the deed of relin!uishment are
simulated and fictitious. ,roperly understood, such rules on interpretation even
negate petitionerRs thesis.
1ut let us indulge the petitioner awhile and determine whether the cited
contemporaneous and subse!uent acts of the parties support his allegation of
simulation. ,etitioner asserts that the relin!uishment of rights and the agreements to
sell were simulated because, first, the language and terms of said contracts negated
private respondentRs ac!uisition of ownership of the land in issue@ andsecond,
contemporaneous and subse!uent communications between him and private
respondent allegedly showed that the latter admitted that petitioner owned and
occupied the two parcels@ i.e.9 that private respondent was not applying for said
parcels but was interested only in the two hectares it had leased, and that private
respondent supported petitionerRs application for a patent.
,etitioner e0plains that the Agreement to ell dated 5ecember $, )*/% did not
and could not transfer ownership because paragraph % 'c+ thereof stipulates that the
Sbalance of twelve thousand pesos ',)-,:::.::+ shall be paid upon the e0ecution by
the First ,arty BpetitionerC of the Absolute 5eed of ale of the two parcels of land in
!uestion in favor of the econd ,arty, and upon delivery to the econd ,arty Bprivate
respondentC of the Certificate of 7wnership of the said two parcels of land.T 2he
mortgage provisions in paragraphs & and $ of the agreement state that the ,$,:::.::
and ,.,:::.:: were Searnest money or a loan with antichresis by the free occupancy
and use given to Nasipit of the )/: hectares of land not anymore as a lessee.T 9f the
agreement to sell transferred ownership to Nasipit, then why was it necessary to
re!uire petitioner, in a second agreement, to mortgage his property in the event of
nonfulfillment of the prestations in the first agreementO
2rue, the agreement to sell did not absolutely transfer ownership of the land to
private respondent. 2his fact, however, does not show that the agreement was
simulated. ,etitionerRs delivery of the Certificate of 7wnership and e0ecution of the
deed of absolute sale were suspensive conditions, which gave rise to a corresponding
obligation on the part of the private respondent, i.e.9 the payment of the last
installment of the consideration mentioned in the 5ecember $, )*/%
Agreement. uch conditions did not affect the perfection of the contract or prove
simulation. Neither did the mortgage.
imulation occurs when an apparent contract is a declaration of a fictitious will,
deliberately made by agreement of the parties, in order to produce, for the purpose of
deception, the appearance of a juridical act which does not e0ist or is different from
that which was really e0ecuted.
B/:C
uch an intention is not apparent in the
agreements. 2he intent to sell, on the other hand, is as clear as daylight.
,etitioner alleges further that the deed of relin!uishment of right did not give
full effect to the two agreements to sell, because the preliminary clauses of the deed
allegedly served only to give private respondent an interest in the property as a future
owner thereof and to enable respondent to follow up petitionerRs sales application.
?e disagree. uch an intention is not indicated in the deed. 7n the contrary, a
real and factual sale is evident in paragraph & thereof, which statesA S2hat the Nasipit
"umber Co., 9nc., 000 is very much interested in ac!uiring the land covered by the
aforecited application to be used for purposes of mechaniFed farmingT and the
penultimate paragraph statingA S000 ;9CEN2E 6. ;9""AF"74, hereby voluntarily
renounce and relin!uish whatever rights to, and interests 9 have in the land covered
by my above-mentioned application in favor of the Nasipit "umber Co., 9nc.T
?e also hold that no simulation is shown either in the letter, dated 5ecember #,
)*$#, of the former field manager of private respondent, Deorge 8ear. A pertinent
portion of the letter readsA
S'a+s regards your property at Acacia, an 8ateo, 9 recall that we made some sort of
agreement for the occupancy, but 9 no longer recall the details and 9 had forgotten
whether or not we actually did occupy your land. 1ut if, as you say, we did occupy
it, then 9 am sure that the Company is obligated to pay a rental.T
2he letter did not contain any e0press admission that private respondent was
still leasing the land from petitioner as of that date. According to 8ear, he could no
longer recall the details of his agreement with petitioner. 2his cannot be read as
evidence of the simulation of either the deed of relin!uishment or the agreements to
sell. 9t is evidence merely of an honest lac( of recollection.
,etitioner also alleges that he continued to pay realty ta0es on the land even
after the e0ecution of said contracts. 2his is immaterial because payment of realty
ta0es does not necessarily prove ownership, much less simulation of said contracts.
B/)C
;onpayment of the +onsideration
5id ;ot (rove &imulation
,etitioner insists that nonpayment of the consideration in the contracts proves
their simulation. ?e disagree. Nonpayment, at most, gives him only the right to sue
for collection. Denerally, in a contract of sale, payment of the price is a resolutory
condition and the remedy of the seller is to e0act fulfillment or, in case of a
substantial breach, to rescind the contract under Article ))*) of the Civil Code.
B/-C
=owever, failure to pay is not even a breach, but merely an event which prevents
the vendorRs obligation to convey title from ac!uiring binding force.
B/#C
,etitioner also argues that 4espondent Court violated evidentiary rules in
upholding the ruling of the 5irector of "ands that petitioner did not present evidence
to show private respondentRs failure to pay him. ?e disagree. ,rior to the
amendment of the rules on evidence on 8arch )/, )*%*, ection ), 4ule )#), states
that each party must prove his or her own affirmative allegations.
B//C
2hus, the burden
of proof in any cause rested upon the party who, as determined by the pleadings or
the nature of the case, asserts the affirmative of an issue and remains there until the
termination of the action.
B/.C
Although nonpayment is a negative fact which need not
be proved, the party see(ing payment is still re!uired to prove the e0istence of the
debt and the fact that it is already due.
B/&C
,etitioner showed the e0istence of the obligation with the presentation of the
contracts, but did not present any evidence that he demanded payment from private
respondent. 2he demand letters dated 6anuary - and ., )*$/ 'E0hs. S6T and SET+,
adduced in evidence by petitioner, were for the payment of bac( rentals, damages to
improvements and reimbursement of ac!uisition costs and realty ta0es, not payment
arising from the contract to sell.
2hus, we cannot fault 4espondent Court for adopting the finding of the
5irector of "ands that petitioner Soffered no evidence to support his claim of
nonpayment beyond his own self-serving assertions,T as he did not even demand
Spayment, orally or in writing, of the five thousand ',.,:::.::+ pesos which was
supposed to be due him since August )$, )*.:, the date when the order of award was
issued to Nasipit, and when his cause of action to recover payment had
accrued.T Nonpayment of the consideration in the contracts to sell or the deed of
relin!uishment was raised for the first time in the protest filed with the 1ureau of
"ands on 6anuary #), )*$/. 1ut this protest letter was not the demand letter re!uired
by law.
,etitioner alleges that the assignment of credit and the letter of the former field
manager of private respondent are contemporaneous and subse!uent acts revealing
the nonpayment of the consideration. =e maintains that the ,)-,:::.:: credit
assigned pertains to the ,.,:::.:: and ,$,:::.:: initial payments in the 5ecember $,
)*/% Agreement, because the balance of ,)-,:::.:: was not yet Sdue and
accruing.T 2his is consistent, he argues, with the representation that private
respondent was not interested in filing a sales application over the land in issue and
that Nasipit was instead supporting petitionerRs application thereto in 8earRs letter
to the 5irector of "ands dated February --, )*.: 'E0h. SKT+.
B/$C
2his argument is too strained to be acceptable. 2he assignment of credit did
not establish the nondelivery of these initial payments of the total
consideration. 0irst, the assignment of credit happened on 6anuary )*, )*/*, or a
month after the signing of the 5ecember $, )*/% Agreement and almost si0 months
after the 6uly $, )*/% Agreement to ell. Second, it does not overcome the recitation
in the Agreement of 5ecember $, )*/%A S000 a+ 2he amount of E;EN
2=7EAN5 ',$,:::.::+ ,E7 has already been paid by the econd ,arty to the
First ,arty upon the e0ecution of the Agreement to ell, on 6uly $, )*/%@ b+ 2he
amount of F9;E 2=7EAN5 ',.,:::.::+ ,E7 shall be paid upon the signing of
this present agreement@ 000.T
Aside from these facts, the 5irector of "ands found evidence of greater weight
showing that payment was actually madeA
B/%C
S0 0 0 '2+here is strong evidence to show that said 000 ',)-,:::.::+ had been paid
by NA9,92 to Edward 6. Nell Company by virtue of the 5eed of Assignment of
Credit e0ecuted by ;illaflor 'E0h. S/) NA"C7T+ for the credit of the latter.
Atty. Dabriel 1anaag, resident counsel of NA9,92 000 declared that it was he who
notariFed the \Agreement to ellR 'E0h. SFT+@ 0000 that subse!uently, in 6anuary
)*/*, ;illaflor e0ecuted a 5eed of Assignment of credit in favor of Edward 6. Nell
Company 'E0h. S/) NA"C7T+ whereby ;illaflor ceded to the latter his receivable
for NA9,92 corresponding to the remaining balance in the amount of 000
',)-,:::.::+ 000 of the total consideration 0000@ =e further testified that the said
assignment 000 was communicated to NA9,92 under cover letter dated 6anuary -/,
)*/* 'E0h. S/)-AT+ and not long thereafter, by virtue of the said assignment of
credit, NA9,92 paid the balance 000 to Edward 6. Nell Company 'p. .%, bid+. Atty.
1anaagRs aforesaid testimony stand unrebutted@ hence, must be given full weight and
credit.
000 000
000.T
2he 5irector of "ands also found that there had been payment of the
consideration in the relin!uishment of rightsA
B/*C
S7n the other hand, there are strong and compelling reasons to presume that ;illaflor
had already been paid the amount of Five 2housand ',.,:::.::+ ,esos.
First, 0 0 0 ?hat is surprising, however, is not so much his claims consisting of
gigantic amounts as his having forgotten to adduce evidence to prove his claim of
non-payment of the Five 2housand ',.,:::.::+ ,esos during the investigation
proceedings when he had all the time and opportunity to do so. 0000 2he fact that he
did not adduce or even attempt to adduce evidence in support thereof shows either
that he had no evidence to offer of that NA9,92 had already paid him in fact. ?hat
is worse is that ;illaflor did not even bother to command payment, orally or in
writing, of the Five 2housand ',.,:::.::+ ,esos which was supposed to be due him
since August )$, )*.:, the date when the order of award was issued to Nasipit, and
when his cause of action to recover payment had accrued. 2he fact that he only
made a command for payment on 6anuary #), )*$/, when he filed his protest or
twenty-four '-/+ years later is immediately nugatory of his claim for non-payment.
1ut ;illaflor maintains that he had no (nowledge or notice that the order of award
had already been issued to NA9,92 as he had gone to 9ndonesia and he had been
absent from the ,hilippines during all those twenty-four '-/+ years. 2his of course
ta0es credulity.0000
\ 0 0 0 9t is more in (eeping with the ordinary course of things that he should have
ac!uired information as to what was transpiring in his affairs in 8anila 0 0 0.\
econd, it should be understood that the condition that NA9,92 should reimburse
;illaflor the amount of Five 2housand ',.,:::.::+ ,esos upon its receipt of the
order of award was fulfilled as said award was issued to NA9,92 on August )$,
)*.:. 2he said deed of relin!uishment was prepared and notariFed in 8anila with
;illaflor and NA9,92 signing the instrument also in 8anila. Now, considering that
;illaflor is presumed to be more assiduous in following up with the 1ureau of "ands
the e0peditious issuance of the order of award as the 'consideration+ would depend
on the issuance of said order to award NA9,92, would it not be reasonable to
believe that ;illaflor was at hand when the award was issued to NA9,92 on August
)$, )*.:, or barely a day which he e0ecuted the deed of relin!uishment on August
)&, )*.:, in 8anilaO 0000.
2hird, on the other hand, NA9,92 has in his possession a sort of SorderT upon itself
-- 'the deed of relin!uishment wherein he'sic+ obligated itself to reimburse or pay
;illaflor the 000 consideration of the relin!uishment upon its receipt of the order of
award+ for the payment of the aforesaid amount the moment the order of award is
issued to it. 9t is reasonable to presume that NA9,92 has paid the 'consideration+ to
;illaflor.
000 000
000
0 0 0 '9+t was virtually impossible for NA9,92, after the lapse of the intervening -/
years, to be able to cope up with all the records necessary to show that the
consideration for the deed of relin!uishment had been fully paid. 2o e0pect
NA9,92 to (eep intact all records pertinent to the transaction for the whole !uarter
of a century would be to re!uire what even the law does not. 9ndeed, even the
applicable law itself 'ec. ##$, National 9nternal 4evenue Code+ re!uires that all
records of corporations be preserved for only a ma0imum of five years.
NA9,92 may well have added that at any rate while there are transactions where the
proper evidence is impossible or e0tremely difficult to produce after the lapse of time
000 the law creates presumptions of regularity in favor of such transactions '-: Am.
6ur. -#-+ so that when the basic fact is established in an action the e0istence of the
presumed fact must be assumed by force of law. '4ule )#, Eniform 4ules of
Evidence@ * ?igmore, ec. -/*)+.T
2he Court also notes that 8earRs letter of February --, )*.: was sent si0
months prior to the e0ecution of the deed of relin!uishment of right. At the time of
its writing, private respondent had not perfected its ownership of the land to be able
to !ualify as a sales applicant. 1esides, although he was a party to the 6uly $, )*/%
Agreement to ell, 8ear was not a signatory to the 5eed of 4elin!uishment or to the
5ecember $, )*/% Agreement to ell. 2hus, he cannot be e0pected to (now the
e0istence of and the amendments to the later contracts. 2hese circumstances e0plain
the mista(en representations, not misrepresentations, in said letter.
6acB of ;otice of the *ward
,etitioner insists that private respondent suppressed evidence, pointing to his
not having been notified of the 7rder of Award dated August )$, )*.:.
B.:C
At the
bottom of page - of the order, petitioner was not listed as one of the parties who were
to be furnished a copy by 5irector of "ands 6ose ,. 5ans. ,etitioner also posits that
,ublic "and 9nspector ulpicio A. 2aeFa irregularly received the copies for both
private respondent and the city treasurer of 1utuan City. 2he lac( of notice for
petitioner can be easily e0plained. ,lainly, petitioner was not entitled to said notice
of award from the 5irector of "ands, because by then, he had already relin!uished
his rights to the disputed land in favor of private respondent. 9n the heading of the
order, he was referred to as sales applicant-assignor. 9n paragraph number /, the
order stated that, on August )&, )*.:, he relin!uished his rights to the land subject of
the award to private respondent. From such date, the sales application was
considered to be a matter between the 1ureau of "ands and private respondent
only. Considering these facts, the failure to give petitioner a copy of the notice of the
award cannot be considered as suppression of evidence.
B.)C
Furthermore, this order
was in fact available to petitioner and had been referred to by him since 6anuary #),
)*$/ when he filed his protest with the 1ureau of "ands.
B.-C
T2'r, I++ue% (rivate 4espondent Kualified
for an *ward of (ublic 6and
,etitioner asserts that private respondent was legally dis!ualified from
ac!uiring the parcels of land in !uestion because it was not authoriFed by its charter
to ac!uire disposable public agricultural lands under ections )-), )-- and )-# of
the ,ublic "and Act, prior to its amendment by ,.5. No. $&#. ?e disagree. 2he
re!uirements for a sales application under the ,ublic "and Act areA ')+ the possession
of the !ualifications re!uired by said Act 'under ection -*+ and '-+ the lac( of the
dis!ualifications mentioned therein 'under ections )-), )--, and )-#+. =owever,
the transfer of ownership via the two agreements dated 6uly $ and 5ecember $, )*/%
and the relin!uishment of rights, being private contracts, were binding only between
petitioner and private respondent. 2he ,ublic "and Act finds no relevance because
the disputed land was covered by said Act only after the issuance of the order of
award in favor of private respondent. 2hus, the possession of any dis!ualification by
private respondent under said Act is immaterial to the private contracts between the
parties thereto. '?e are not, however, suggesting a departure from the rule that laws
are deemed written in contracts.+ Consideration of said provisions of the Act will
further show their inapplicability to these contracts. ection )-) of the Act pertains
to ac!uisitions of public land by a corporation from a grantee, but petitioner never
became a grantee of the disputed land. 7n the other hand, private respondent itself
was the direct grantee. ections )-- and )-# dis!ualify corporations, which are not
authoriFed by their charter, from ac!uiring public land@ the records do not show that
private respondent was not so authoriFed under its charter.
Also, the determination by the 5irector of "ands and the 8inister of Natural
4esources of the !ualification of private respondent to become an awardee or grantee
under the Act is persuasive on 4espondent Court. 9n :spinosa vs. Ma2alintal,
B.#C
the
Court ruled that, by law, the powers of the ecretary of Agriculture and Natural
4esources regarding the disposition of public lands -- including the approval,
rejection, and reinstatement of applications N are of e0ecutive and administrative
nature. 'uch powers, however, do not include the judicial power to decide
controversies arising from disagreements in civil or contractual relations between the
litigants.+ Conse!uently, the determination of whether private respondent is
!ualified to become an awardee of public land under C.A. )/) by sales application is
included therein.
All told, the only dis!ualification that can be imputed to private respondent is
the prohibition in the )*$# Constitution against the holding of alienable lands of the
public domain by corporations.
B./C
=owever, this Court earlier settled the matter,
ruling that said constitutional prohibition had no retroactive effect and could not
prevail over a vested right to the land. 9n %!og vs. *usi9 Jr.9
B..C
this Court declaredA
S?e hold that the said constitutional prohibition has no retroactive application to the
sales application of 1iGan 5evelopment Co., 9nc. because it had already ac!uired a
vested right to the land applied for at the time the )*$# Constitution too( effect.
2hat vested right has to be respected. 9t could not be abrogated by the new
Constitution. ection -, Article K999 of the )*#. Constitution allows private
corporations to purchase public agricultural lands not e0ceeding one thousand and
twenty-four hectares. ,etitionerRs prohibition action is barred by the doctrine of
vested rights in constitutional law.
\A right is vested when the right to enjoyment has become the property of some
particular person or persons as a present interest.R ')& C.6.. ))$#+. 9t is \the
privilege to enjoy property legally vested, to enforce contracts, and enjoy the rights
of property conferred by e0isting lawR ')- C.6. *.., Note /&, No. &+ or \some right or
interest in property which has become fi0ed and established and is no longer open to
doubt or controversyR '5owns vs. 1lount, )$: Fed. )., -:, cited in 1alboa vs.
Farrales, .) ,hil. /*%, .:-+.
2he due process clause prohibits the annihilation of vested rights. \A state may not
impair vested rights by legislative enactment, by the enactment or by the subse!uent
repeal of a municipal ordinance, or by a change in the constitution of the tate,
e0cept in a legitimate e0ercise of the police powerR ')& C.6.. ))$$-$%+.
9t has been observed that, generally, the term \vested rightR e0presses the concept of
present fi0ed interest, which in right reason and natural justice should be protected
against arbitrary tate action, or an innately just an imperative right which an
enlightened free society, sensitive to inherent and irrefragable individual rights,
cannot deny ')& C.6.. ))$/, Note $), No. ., citing ,ennsylvania Dreyhound "ines,
9nc. vs. 4osenthal, )*- Atl. -
nd
.%$+.
ecretary of 6ustice Abad antos in his )*$# opinion ruled that where the applicant,
before the Constitution too( effect, had fully complied with all his obligations under
the ,ublic "and Act in order to entitle him to a sales patent, there would seem to be
no legal or e!uitable justification for refusing to issue or release the sales patent 'p.
-./, 4ollo+.
9n 7pinion No. )/:, series of )*$/, he held that as soon as the applicant had fulfilled
the construction or cultivation re!uirements and has fully paid the purchase price, he
should be deemed to have ac!uired by purchase the particular tract of land and to
him the area limitation in the new Constitution would not apply.
9n 7pinion No. )%., series of )*$&, ecretary Abad antos held that where the
cultivation re!uirements were fulfilled before the new Constitution too( effect but
the full payment of the price was completed after 6anuary )$, )*$#, the applicant
was, nevertheless, entitled to a sales patent 'p. -.&, 4ollo+.
uch a contemporaneous construction of the constitutional prohibition by a high
e0ecutive official carries great weight and should be accorded much respect. 9t is a
correct interpretation of section )) of Article K9;.
9n the instant case, it is incontestable that prior to the effectivity of the )*$#
Constitution the right of the corporation to purchase the land in !uestion had become
fi0ed and established and was no longer open to doubt or controversy.
9ts compliance with the re!uirements of the ,ublic "and "aw for the issuance of a
patent had the effect of segregating the said land from the public domain. 2he
corporationRs right to obtain a patent for that land is protected by law. 9t cannot be
deprived of that right without due process '5irector of "ands vs. CA, )-# ,hil.
*)*+.T
2he 8inister of Natural 4esources ruled, and we agree, that private respondent
was similarly !ualified to become an awardee of the disputed land because its rights
to it vested prior to the effectivity of the )*$# ConstitutionA
B.&C
S"astly, appellee has ac!uired a vested right to the subject area and, therefore, is
deemed not affected by the new constitutional provision that no private corporation
may hold alienable land of the public domain e0cept by lease.
9t may be recalled that the ecretary of 6ustice in his 7pinion No. &/, series of )*$#,
had declared, to witA
\7n the other hand, with respect to sales application ready for issuance of sales
patent, it is my opinion that where the applicant had, before, the constitution too(
effect, fully complied with all his obligations under the ,ublic "and act in order to
entitle him to sales patent, there would seem to be not legal or e!uitable justification
for refusing to issue or release the sales patent.R
9mplementing the aforesaid 7pinion No. &/ 000, the then ecretary of Agriculture
and Natural 4esources issued a memorandum, dated February )%, )*$/, which
pertinently reads as followsA
\9n the implementation of the foregoing opinion, sales application of private
individuals covering areas in e0cess of -/ hectares and those of corporations,
associations, or partnership which fall under any of the following categories shall be
given due course and issued patents, to witA
ales application for fishponds and for agricultural purposes 'FA, A and 9D,A+
wherein prior to 6anuary )$, )*$#,
a. the land covered thereby was awarded@
b. cultivation re!uirements of law were complied with as shown by investigation
reports submitted prior to 6anuary )$, )*$#@
c. land was surveyed and survey returns already submitted to the 5irector of "ands
for verification and approval@ and
d. purchase price was fully paid.\
From the records, it is evident that the aforestated re!uisites have been complied
with by appellee long before 6anuary )$, )*$#, the effectivity of the New
Constitution. 2o restate, the disputed area was awarded to appellee on August )$,
)*.:, the purchase price was fully paid on 6uly -&, )*.), the cultivation
re!uirements were complied with as per investigation report dated 5ecember #),
)*/*, and the land was surveyed under ,ls-*$.T
2he same finding was earlier made by the 5irector of "andsA
B.$C
S9t is further contended by ;illaflor that Nasipit has no juridical personality to apply
for the purchase of public lands for agricultural purposes. 2he records clearly show,
however, that since the e0ecution of the deed of relin!uishment of August )&, )*.:,
in favor of Nasipit, ;illaflor has always considered and recogniFed Nasipit as having
the juridical personality to ac!uire public lands for agricultural purposes. 9n the deed
of relin!uishment 000, it is statedA
\&. 2hat the Nasipit "umber Co., 9nc., a corporation duly organiFed in accordance
with the laws of the ,hilippines, 0 0 0.R
Even this 7ffice had not failed to recogniFe the juridical personality of Nasipit to
apply for the purchase of public lands 000 when it awarded to it the land so
relin!uished by ;illaflor '7rder of Award dated August )$, )*.:+ and accepted its
application therefor. At any rate, the !uestion whether an applicant is !ualified to
apply for the ac!uisition of public lands is a matter between the applicant and this
7ffice to decide and which a third party li(e ;illaflor has no personality to !uestion
beyond merely calling the attention of this 7ffice thereto.T
Needless to say, we also agree that the November %, )*/& "ease Agreement
between petitioner and private respondent had been terminated by the agreements to
sell and the relin!uishment of rights. 1y the time the verbal leases were allegedly
made in )*.) and )*..,
B.%C
the disputed land had already been ac!uired and awarded
to private respondent. 9n any event, petitionerRs cause of action on these alleged
lease agreements prescribed long before he filed Civil Case No. -:$--999, as
correctly found by the trial and appellate courts.
B.*C
2hus, it is no longer important, in
this case, to pass upon the issue of whether or not amendments to a lease contract can
be proven by parol evidence. 2he same holds true as regards the issue of forum-
shopping.
All in all, petitioner has not provided us sufficient reason to disturb the cogent
findings of the 5irector of "ands, the 8inister of Natural 4esources, the trial court
and the Court of Appeals.
?0EREFORE, the petition is hereby "SM"SS:.
7 745E4E5.
@G.R. No. 1111.7. )a*uary 1., 1997A
LEONARDO A. !AAT, '* 2'+ 3a7a3'(y a+ O;;'3er-'*-2ar&e FOIG, Re&'o*a/
EIe3u('He D're3(or FREDG, Re&'o* 2 a*, )OVITO LA1"GAN, )R., '*
2'+ 3a7a3'(y a+ o::u*'(y E*H'ro*:e*( a*, Na(ura/ Re+our3e+
O;;'3er FENROG, bo(2 o; (2e De7ar(:e*( o; E*H'ro*:e*( a*, Na(ura/
Re+our3e+ FDENRG,petitioners.
vs. O"RT OF A!!EALS, 0ON. RIARDO A. #A"LI '* 2'+ 3a7a3'(y a+
!re+','*& )u,&e o; #ra*32 2, Re&'o*a/ Tr'a/ our( a( Tu&ue&arao,
a&aya*, a*, S!O"SES #IENVENIDO a*, VITORIA DE
G"$MAN, respondents.
D E I S I O N
TORRES, )R., J.%
?ithout violating the principle of e0haustion of administrative remedies, may
an action for replevin prosper to recover a movable property which is the subject
matter of an administrative forfeiture proceeding in the 5epartment of Environment
and Natural 4esources pursuant to ection &%-A of ,. 5. $:., as amended, entitled
2he 4evised Forestry Code of the ,hilippinesO
Are the ecretary of 5EN4 and his representatives empowered to confiscate
and forfeit conveyances used in transporting illegal forest products in favor of the
governmentO
2hese are two fundamental !uestions presented before us for our resolution.
2he controversy on hand had its incipiency on 8ay )*, )*%* when the truc( of
private respondent ;ictoria de DuFman while on its way to 1ulacan from an 6ose,
1aggao, Cagayan, was seiFed by the 5epartment of Environment and Natural
4esources '5EN4, for brevity+ personnel in Aritao, Nueva ;iFcaya because the
driver could not produce the re!uired documents for the forest products found
concealed in the truc(. ,etitioner 6ovito "ayugan, the Community Environment and
Natural 4esources 7fficer 'CEN47+ in Aritao, Cagayan, issued on 8ay -#, )*%* an
order of confiscation of the truc( and gave the owner thereof fifteen ').+ days within
which to submit an e0planation why the truc( should not be forfeited. ,rivate
respondents, however, failed to submit the re!uired e0planation. 7n 6une --, )*%*,
B)C
4egional E0ecutive 5irector 4ogelio 1aggayan of 5EN4 sustained petitioner
"ayuganRs action of confiscation and ordered the forfeiture of the truc(
invo(ing ection &%-A of ,residential 5ecree No. $:. as amended by E0ecutive
7rder No. -$$. ,rivate respondents filed a letter of reconsideration dated 6une -%,
)*%* of the 6une --, )*%* order of E0ecutive 5irector 1aggayan, which was,
however, denied in a subse!uent order of 6uly )-, )*%*.
B-C
ubse!uently, the case was
brought by the petitioners to the ecretary of 5EN4 pursuant to private respondentsR
statement in their letter dated 6une -%, )*%* that in case their letter for
reconsideration would be denied then Sthis letter should be considered as an appeal
to the ecretary.T
B#C
,ending resolution however of the appeal, a suit for replevin,
doc(eted as Civil Case /:#), was filed by the private respondents against petitioner
"ayugan and E0ecutive 5irector 1aggayan
B/C
with the 4egional 2rial Court, 1ranch -
of Cagayan,
B.C
which issued a writ ordering the return of the truc( to private
respondents.
B&C
,etitioner "ayugan and E0ecutive 5irector 1aggayan filed a motion
to dismiss with the trial court contending, inter alia, that private respondents had no
cause of action for their failure to e0haust administrative remedies. 2he trial court
denied the motion to dismiss in an order dated 5ecember -%, )*%*.
B$C
2heir motion
for reconsideration having been li(ewise denied, a petition for certiorari was filed by
the petitioners with the respondent Court of Appeals which sustained the trial courtRs
order ruling that the !uestion involved is purely a legal !uestion.
B%C
=ence, this
present petition,
B*C
with prayer for temporary restraining order and3or preliminary
injunction, see(ing to reverse the decision of the respondent Court of Appeals was
filed by the petitioners on eptember *, )**#. 1y virtue of the 4esolution dated
eptember -$, )**#,
B):C
the prayer for the issuance of temporary restraining order of
petitioners was granted by this Court.
9nvo(ing the doctrine of e0haustion of administrative remedies, petitioners aver
that the trial court could not legally entertain the suit for replevin because the truc(
was under administrative seiFure proceedings pursuant to ection &%-A of ,.5. $:.,
as amended by E.7. -$$. ,rivate respondents, on the other hand, would see( to avoid
the operation of this principle asserting that the instant case falls within the e0ception
of the doctrine upon the justification that ')+ due process was violated because they
were not given the chance to be heard, and '-+ the seiFure and forfeiture was
unlawful on the groundsA 'a+ that the ecretary of 5EN4 and his representatives
have no authority to confiscate and forfeit conveyances utiliFed in transporting
illegal forest products, and 'b+ that the truc( as admitted by petitioners was not used
in the commission of the crime.
Epon a thorough and delicate scrutiny of the records and relevant jurisprudence
on the matter, we are of the opinion that the plea of petitioners for reversal is in
order.
2his Court in a long line of cases has consistently held that before a party is
allowed to see( the intervention of the court, it is a pre-condition that he should have
availed of all the means of administrative processes afforded him. =ence, if a
remedy within the administrative machinery can still be resorted to by giving the
administrative officer concerned every opportunity to decide on a matter that comes
within his jurisdiction then such remedy should be e0hausted first before courtRs
judicial power can be sought. 2he premature invocation of courtRs intervention is
fatal to oneRs cause of action.
B))C
Accordingly, absent any finding of waiver
or estoppel the case is susceptible of dismissal for lac( of cause of action.
B)-C
2his
doctrine of e0haustion of administrative remedies was not without its practical and
legal reasons, for one thing, availment of administrative remedy entails lesser
e0penses and provides for a speedier disposition of controversies. 9t is no less true to
state that the courts of justice for reasons of comity and convenience will shy away
from a dispute until the system of administrative redress has been completed and
complied with so as to give the administrative agency concerned every opportunity
to correct its error and to dispose of the case. =owever, we are not amiss to reiterate
that the principle of e0haustion of administrative remedies as tested by a battery of
cases is not an ironclad rule. 2his doctrine is a relative one and its fle0ibility is
called upon by the peculiarity and uni!ueness of the factual and circumstantial
settings of a case. =ence, it is disregarded ')+ when there is a violation of due
process,
B)#C
'-+ when the issue involved is purely a legal !uestion,
B)/C
'#+ when the
administrative action is patently illegal amounting to lac( or e0cess of jurisdiction,
B).C
'/+ when there is estoppel on the part of the administrative agency concerned,
B)&C
'.+ when there is irreparable injury,
B)$C
'&+ when the respondent is a department
secretary whose acts as an alter ego of the ,resident bears the implied and assumed
approval of the latter,
B)%C
'$+ when to re!uire e0haustion of administrative remedies
would be unreasonable,
B)*C
'%+ when it would amount to a nullification of a claim,
B-:C
'*+ when the subject matter is a private land in land case proceedings,
B-)C
'):+
when the rule does not provide a plain, speedy and ade!uate remedy, and '))+ when
there are circumstances indicating the urgency of judicial intervention.
B--C
9n the case at bar, there is no !uestion that the controversy was pending before
the ecretary of 5EN4 when it was forwarded to him following the denial by the
petitioners of the motion for reconsideration of private respondents through the order
of 6uly )-, )*%*. 9n their letter of reconsideration dated 6une -%, )*%*,
B-#C
private
respondents clearly recogniFe the presence of an administrative forum to which they
see( to avail, as they did avail, in the resolution of their case. 2he letter, reads, thusA
S000
9f this motion for reconsideration does not merit your favorable action, then this
letter should be considered as an appeal to the ecretary.T
B-/C
9t was easy to perceive then that the private respondents loo(ed up to the
ecretary for the review and disposition of their case. 1y appealing to him, they
ac(nowledged the e0istence of an ade!uate and plain remedy still available and open
to them in the ordinary course of the law. 2hus, they cannot now, without violating
the principle of e0haustion of administrative remedies, see( courtRs intervention by
filing an action for replevin for the grant of their relief during the pendency of an
administrative proceedings.
8oreover, it is important to point out that the enforcement of forestry laws,
rules and regulations and the protection, development and management of forest
lands fall within the primary and special responsibilities of the 5epartment of
Environment and Natural 4esources. 1y the very nature of its function, the 5EN4
should be given a free hand unperturbed by judicial intrusion to determine a
controversy which is well within its jurisdiction. 2he assumption by the trial court,
therefore, of the replevin suit filed by private respondents constitutes an unjustified
encroachment into the domain of the administrative agencyRs prerogative. 2he
doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the
authority to resolve a controversy the jurisdiction over which is initially lodged with
an administrative body of special competence.
B-.C
9n Felipe 9smael, 6r. and Co. vs.
5eputy E0ecutive ecretary,
B-&C
which was reiterated in the recent case of Concerned
7fficials of 8? vs. ;as!ueF,
B-$C
this Court heldA
S2hus, while the administration grapples with the comple0 and multifarious
problems caused by unbriddled e0ploitation of these resources, the judiciary will
stand clear. A long line of cases establish the basic rule that the courts will not
interfere in matters which are addressed to the sound discretion of government
agencies entrusted with the regulation of activities coming under the special
technical (nowledge and training of such agencies.T
2o sustain the claim of private respondents would in effect bring the instant
controversy beyond the pale of the principle of e0haustion of administrative
remedies and fall within the ambit of e0cepted cases heretofore stated. =owever,
considering the circumstances prevailing in this case, we can not but rule out these
assertions of private respondents to be without merit. First, they argued that there
was violation of due process because they did not receive the 8ay -#, )*%* order of
confiscation of petitioner "ayugan. 2his contention has no leg to stand on. 5ue
process does not necessarily mean or re!uire a hearing, but simply an opportunity or
right to be heard.
B-%C
7ne may be heard , not solely by verbal presentation but also,
and perhaps many times more creditably and practicable than oral argument, through
pleadings.
B-*C
9n administrative proceedings moreover, technical rules of procedure
and evidence are not strictly applied@ administrative process cannot be fully e!uated
with due process in its strict judicial sense.
B#:C
9ndeed, deprivation of due process
cannot be successfully invo(ed where a party was given the chance to be heard on
his motion for reconsideration,
B#)C
as in the instant case, when private respondents
were undisputedly given the opportunity to present their side when they filed a letter
of reconsideration dated 6une -%, )*%* which was, however, denied in an order of
6uly )-, )*%* of E0ecutive 5irector 1aggayan. 9n Navarro 999 vs. 5amasco,
B#-C
we
ruled that A
S2he essence of due process is simply an opportunity to be heard, or as applied to
administrative proceedings, an opportunity to e0plain oneRs side or an opportunity to
see( a reconsideration of the action or ruling complained of. A formal or trial type
hearing is not at all times and in all instances essential. 2he re!uirements are
satisfied when the parties are afforded fair and reasonable opportunity to e0plain
their side of the controversy at hand. ?hat is frowned upon is the absolute lac( of
notice or hearing.T
econd, private respondents imputed the patent illegality of seiFure and
forfeiture of the truc( because the administrative officers of the 5EN4 allegedly
have no power to perform these acts under the law. 2hey insisted that only the court
is authoriFed to confiscate and forfeit conveyances used in transporting illegal forest
products as can be gleaned from the second paragraph of ection &% of ,.5. $:., as
amended by E.7. -$$. 2he pertinent provision reads as followsA
SEC297N &%. 000
000
2he court shall further order the confiscation in favor of the government of
the timber or any forest products cut, gathered, collected, removed, or possessed, as
well as the machinery, e!uipments, implements and tools illegaly BsicC used in the
area where the timber or forest products are found.T 'Enderline ours+
A reading, however, of the law persuades us not to go along with private
respondentsR thin(ing not only because the afore!uoted provision apparently does not
mention nor include SconveyancesT that can be the subject of confiscation by the
courts, but to a large e0tent, due to the fact that private respondentsR interpretation of
the subject provision unduly restricts the clear intention of the law and inevitably
reduces the other provision of ection &%-A , which is !uoted herein belowA
SEC297N &%-A. %dministrative %uthorit! of the epartment or 1is ul!
%uthori@ed Representative $o &rder *onfiscation. 9n all cases of violation of this
Code or other forest laws, rules and regulations, the 5epartment =ead or his duly
authoriFed representative, may order the confiscation of any forest products illegally
cut, gathered, removed, or possessed or abandoned, and all conveyances used either
by land, water or air in the commission of the offense and to dispose of the same in
accordance with pertinent laws, regulations and policies on the matter.T 'Enderline
ours+
9t is, thus, clear from the foregoing provision that the ecretary and his duly
authoriFed representatives are given the authority to confiscate and forfeit
any conveyances utiliFed in violating the Code or other forest laws, rules and
regulations. 2he phrase Sto dispose of the sameT is broad enough to cover the act of
forfeiting conveyances in favor of the government. 2he only limitation is that it
should be made Sin accordance with pertinent laws, regulations or policies on the
matter.T 9n the construction of statutes, it must be read in such a way as to give
effect to the purpose projected in the statute.
B##C
tatutes should be construed in the
light of the object to be achieved and the evil or mischief to be suppressed, and they
should be given such construction as will advance the object, suppress the mischief,
and secure the benefits intended.
B#/C
9n this wise, the observation of the olicitor
Deneral is significant, thusA
S1ut precisely because of the need to ma(e forestry laws \more responsive to present
situations and realitiesR and in view of the \urgency to conserve the remaining
resources of the country,R that the government opted to add ection &%-A. 2his
amendatory provision is an administrative remedy totally separate and distinct from
criminal proceedings. 8ore than anything else, it is intended to supplant the
inade!uacies that characteriFe enforcement of forestry laws through criminal actions.
2he preamble of E7 -$$-the law that added ection &%-A to ,5 $:.-is most
revealingA
\?=E4EA, there is an urgency to conserve the remaining forest resources of the
country for the benefit and welfare of the present and future generations of Filipinos@
?=E4EA, our forest resources may be effectively conserved and protected
through the vigilant enforcement and implementation of our forestry laws, rules and
regulations@
?=E4EA, the implementation of our forestry laws suffers from technical
difficulties, due to certain inade!uacies in the penal provisions of the 4evised
Forestry Code of the ,hilippines@ and
?=E4EA, to overcome this difficulties, there is a need to penaliFe certain acts
more responsive to present situations and realities@R
9t is interesting to note that ection &%-A is a new provision authoriFing the 5EN4 to
confiscate, not only \conveyances,R but forest products as well. 7n the other
hand, confiscation of forest products by the \courtR in a criminal action has long been
provided for in ection &%. 9f as private respondents insist, the power on confiscation
cannot be e0ercised e0cept only through the court under ection &%, then ection &%-
A would have no purpose at all. imply put, ection &%-A would not have provided
any solution to the problem perceived in E7 -$$, supra.T
B#.C
,rivate respondents, li(ewise, contend that the seiFure was illegal because the
petitioners themselves admitted in the 7rder dated 6uly )-, )*%* of E0ecutive
5irector 1aggayan that the truc( of private respondents was not used in the
commission of the crime. 2his order, a copy of which was given to and received by
the counsel of private respondents, reads in part , vi@. A
S000 while it is true that the truc( of your client was not used by her in the
commission of the crime, we uphold your claim that the truc( owner is not liable for
the crime and in no case could a criminal case be filed against her as provided under
Article #:* and #): of the 4evised ,enal Code. 000T
B#&C
?e observed that private respondents misread the content of the aforestated
order and obviously misinterpreted the intention of petitioners. ?hat
is contemplated by the petitioners when they stated that the truc( >was not used in
the commission of the crime> is that it was not used in the commission of the crime
of theft, hence, in no case can a criminal action be filed against the owner thereof for
violation of Article #:* and #): of the 4evised ,enal Code. ,etitioners did not
eliminate the possibility that the truc( was being used in the commission of another
crime, that is, the breach of ection &% of ,.5.$:. as amended by E.7. -$$. 9n the
same order of 6uly )-, )*%*, petitioners pointed out%
S000 =owever, under ection &% of ,.5.$:. as amended and further amended by
E0ecutive 7rder No.-$$ specifically provides for the confiscation of the conveyance
used in the transport of forest products not covered by the re!uired legal documents.
he may not have been involved in the cutting and gathering of the product in
!uestion but the fact that she accepted the goods for a fee or fare the same is therefor
liable. 000T
B#$C
,rivate respondents, however, contended that there is no crime defined and
punishable under ection &% other than !ualified theft, so that, when petitioners
admitted in the 6uly )-, )*%* order that private respondents could not be charged for
theft as provided for under Articles #:* and #): of the 4evised ,enal Code, then
necessarily private respondents could not have committed an act constituting a crime
under ection &%. ?e disagree. For clarity, the provision of ection &% of ,.5. $:.
before its amendment by E.7. -$$ and the provision of ection ) of E.7. No.-$$
amending the aforementioned ection &% are reproduced herein, thusA
SEC297N &%. *utting9 gathering andUor collecting timber or other products
without license. 8 Any person who shall cut , gather , collect , or remove timber or
other forest products from any forest land, or timber from alienable and disposable
public lands, or from private lands, without any authority under a license agreement,
lease, license or permit, shall be guilty of !ualified theft as defined and punished
under Articles #:* and #): of the 4evised ,enal Code 000.T 'Enderscoring ours@
ection &%, ,.5.$:. before its amendment by E.7.-$$ +
SEC297N ). ection &% of ,residential 5ecree No.$:., as amended, is hereby
amended to read as followsA
\ection &%. *utting9 gathering andUor collecting timber or other forest products
without license. 8Any person who shall cut, gather, collect, remove timber or other
forest products from any forest land, or timber from alienable or disposable public
land, or from private land, without any authority, or possess timber or other forest
products without the legal documents as re!uired under e0isting forest laws and
regulations, shall be punished with the penalties imposed under Articles #:* and #):
of the 4evised ,enal Code 000.> 'Enderscoring ours@ ection ), E.7 No. -$$
amending ection &%, ,.5. $:. as amended+
?ith the introduction of E0ecutive 7rder No. -$$ amending ection &% of ,.5.
$:., the act of cutting, gathering, collecting, removing, or possessing forest products
without authority constitutes a distinct offense independent now from the crime of
theft under Articles #:* and #): of the 4evised ,enal Code, but the penalty to be
imposed is that provided for under Article #:* and #): of the 4evised ,enal Code.
2his is clear from the language of E0ecutive 7rder No. -$$ when it eliminated the
phrase S shall be guilty of !ualified theft as defined and punished under Articles #:*
and #): of the 4evised ,enal Code T and inserted the words S shall be punished with
the penalties imposed under Article #:* and #): of the 4evised ,enal Code T. ?hen
the statute is clear and e0plicit, there is hardly room for any e0tended court
ratiocination or rationaliFation of the law.
B#%C
From the foregoing dis!uisition, it is clear that a suit for replevin can not be
sustained against the petitioners for the subject truc( ta(en and retained by them for
administrative forfeiture proceedings in pursuant to ection &%-A of the ,. 5. $:., as
amended. 5ismissal of the replevin suit for lac( of cause of action in view of the
private respondentsR failure to e0haust administrative remedies should have been the
proper course of action by the lower court instead of assuming jurisdiction over the
case and conse!uently issuing the writ ordering the return of the truc(. E0haustion of
the remedies in the administrative forum, being a condition precedent prior to oneRs
recourse to the courts and more importantly, being an element of private respondentsR
right of action, is too significant to be waylaid by the lower court.
9t is worth stressing at this point, that a suit for replevin is founded solely on the
claim that the defendant wrongfully withholds the property sought to be recovered. 9t
lies to recover possession of personal chattels that are unlawfully detained.
B#*C
S2o
detainT is defined as to mean Sto hold or (eep in custody,T
B/:C
and it has been held
that there is tortuous ta(ing whenever there is an unlawful meddling with the
property, or an e0ercise or claim of dominion over it, without any pretense of
authority or right@ this, without manual seiFing of the property is sufficient.
B/)C
Ender
the 4ules of Court, it is indispensable in replevin proceedings, that the plaintiff must
show by his own affidavit that he is entitled to the possession of property, that the
property is wrongfully detained by the defendant, alleging the cause of detention,
that the same has not been ta(en for ta0 assessment, or seiFed under e0ecution, or
attachment, or if so seiFed, that it is e0empt from such seiFure, and the actual value
of the property.
B/-C
,rivate respondents miserably failed to convince this Court that a
wrongful detention of the subject truc( obtains in the instant case. 9t should be noted
that the truc( was seiFed by the petitioners because it was transporting forest
products with out the re!uired permit of the 5EN4 in manifest contravention of
ection &% of ,.5. $:. as amended by E.7 -$$. ection &%-A of ,.5. $:., as
amended, un!uestionably warrants the confiscation as well as the disposition by the
ecretary of 5EN4 or his duly authoriFed representatives of the conveyances used in
violating the provision of forestry laws. Evidently, the continued possession or
detention of the truc( by the petitioners for administrative forfeiture proceeding is
legally permissible, hence , no wrongful detention e0ists in the case at bar.
8oreover, the suit for replevin is never intended as a procedural tool to
!uestion the orders of confiscation and forfeiture issued by the 5EN4 in pursuance
to the authority given under ,.5.$:., as amended. ection % of the said law is
e0plicit that actions ta(en by the 5irector of the 1ureau of Forest 5evelopment
concerning the enforcement of the provisions of the said law are subject to review
by the ecretary of 5EN4 and that courts may not review the decisions of the
ecretary e0cept through a special civil action for certiorari or prohibition. 9t reads A
EC297N % . 4E;9E? - All actions and decisions of the 5irector are subject to
review, motu propio or upon appeal of any person aggrieved thereby, by the
5epartment =ead whose decision shall be final and e0ecutory after the lapse of thirty
'#:+ days from the receipt of the aggrieved party of said decision, unless appealed to
the ,resident in accordance with E0ecutive 7rder No. )*, eries of )*&&. 2he
5ecision of the 5epartment =ead may not be reviewed by the courts e0cept through
a special civil action for certiorari or prohibition.
?0EREFORE, the ,etition is D4AN2E5@ the 5ecision of the respondent
Court of Appeals dated 7ctober )&, )**) and its 4esolution dated 6uly )/, )**- are
hereby E2 A95E AN5 4E;E4E5@ the 4estraining 7rder promulgated on
eptember -$, )**# is hereby made permanent@ and the ecretary of 5EN4 is
directed to resolve the controversy with utmost dispatch.
SO ORDERED.
@G.R. No. 12..66. Se7(e:ber 9, 1999A
OTA#ELA AL#A /da. 5e RA$, S7ou+e+ MAN"EL a*, S"SANA #RA"LIO,
RODOLFO, LO"RDES a*, #EATRI$ a// +ur*a:e,
AL#A, petitioners. vs. O"RT OF A!!EALS a*, )OSE
LA0IA, respondents.
D E I S I O N
1NARES-SANTIAGO, J.%
1efore us is an appeal by certiorari from a decision rendered by the Court of
Appeals dated August )%, )**- affirming in toto the decision of the 4egional 2rial
Court of Halibo, A(lan, 1ranch 9, in "and 4egistration Case No. H-):), "4C
4ecord No. H. ).):/, the dispositive portion of which reads as followsA
S?=E4EF74E, judgment is hereby rendered as followsA
). 2he parcel of land described in ,lan ,su-)&)-$$ and the improvements
thereon situated in the ,oblacion of the 8unicipality of 1anga, ,rovince of
A(lan, ,hilippines, with an area of /,%/. s!uare meters is brought under the
operation of the property registration decree ',5 No. ).-*+ and the title thereto
is registered and confirmed in the name of applicant 6ose "achica, married to
Adela 4aF of Halibo, A(lan, ,hilippines@
-. A ten '):+ meter road width along the national road mentioned in the
application be segregated for future road widening program upon payment of
just compensation to be annotated at the bac( of the title@
#. For lac( of merit, the opposition filed by the spouses 8anuel and
usana 1raulio, 7ctabela Alba ;da. 5e 4aF, 4odolfo Alba, "ourdes Alba and
1eatriF Alba are hereby 5989E5.
7 745E4E5.T
B)C
2he factual antecedents of the case as summed by the trial court and adopted by
the Court of Appeals are as followsA
SApplicant 6ose "achica filed this application for title to land on April -%, )*.% with
the claim that the land applied for was purchased by him and his wife, Adela 4aF
from, from one Eulalio 4aF. 2he documents attached to the application areA
technical description, surveyorRs certificate, certification by the chief deputy assessor
of A(lan and the blue print of ,su-)&)-$$.
2he initial hearing was scheduled for 7ctober #), )*.% and the certificate of
publication in the 7fficial DaFette was issued on eptember -#, )*.%. 2he
certification of posting of the notice of initial hearing was issued on 7ctober )#,
)*.%.
2he land applied for is residential, situated in the ,oblacion of 1anga, A(lan, with an
area of /,%/. s!uare meters, bounded on the northeast by the property of the
8unicipality of 1anga '(etch, E0h. SFT+.
2he initial hearing was held on 7ctober #), )*.%. An order of general default was
issued but those who presented their opposition, namely, 7ctabela Alba ;da. 5e 4aF,
8anuel and usana 1raulio, 6ose 4ago, representing Apolonia 4ebeco, the 5irector
of "ands and the 8unicipality of 1anga represented by the ,rovincial Fiscal, were
given thirty '#:+ days to file their written opposition.
8anuel C. 1raulio and usana ,. 1raulio filed their opposition on 7ctober #),
)*.%. 2hey opposed the registration of the southeastern portion of the -/: s!uare
meters of the land applied for alleging that they are the owners in fee simple and
possessors of said portion and all the improvements thereon for not less than $:
years together with their predecessor-in-interest deriving their title by purchase from
the original owners. 2hey prayed for the Court to declare them the true and absolute
owners of the disputed portion of the same in their names.
7n 7ctober #), )*.%, 7ctabela ;da. de 4aF filed her opposition.
6ose 4ago filed his opposition on November -*, )*.% as the duly constituted
attorney-in-fact of Apolonia 4ebeco although no special power of attorney was
attached. =e opposed the registration of the northeastern portion of the land applied
for, with an area of /#.%# s!uare meters. =e alleged that his principal is the owner
by right of succession and is in the possession of said portion with all its
improvements for more than %: years together with his predecessor-in-interest,
continuously, peacefully and openly under claim of ownership. =e prayed that his
principal be declared the true and absolute owner of the disputed portion of /#.%#
s!uare meters.
7n 8arch --, )*&&, the Court issued an 7rder allowing the applicant to hire another
surveyor to segregate the non-controversial portion of the land applied for and to
notify the oppositors and their counsels.
7n 6anuary )-, )*$:, a motion to lift the order of general default and to admit the
attached opposition of 4odolfo Alba, "ourdes Alba and 1eatriF Alba, as well as a
motion to admit the attached amended petition of 7ctabela ;da. de 4aF were
filed. 2he Court in its order dated 8arch -), )*$: admitted said opposition and set
aside the order of default.
9n their opposition, 4odolfo Alba, "ourdes Alba, represented by their attorney-in-
fact, 7ctabela Alba ;da. de 4aF, alleged that they are the co-owners of a portion of
the land applied for with an area of -,-&- s!uare meters bounded on the north by
6anuario 8asigon, Nicolas 4ealtor, Agustina 4ebeldia and Apolonia 4ebeco, on the
south by Eulalio 4aF and on the west by the public mar(et of 1anga. 2hey claimed
to have inherited the above-mentioned portion from their late father, Eufrosino 8.
Alba, who purchased the same from 5ionisia 4egado in )*)%. =ence, they have
been in possession continuously, openly and peacefully under claim of ownership of
the above-mentioned portion for not less $: years. 2hey prayed that the disputed
portion of -,-&- s!uare meters be registered as their pro8indiviso property.
9n her amended opposition, 7ctabela Alba ;da. de 4aF opposed the registration of
the southeastern portion of the land applied for with an area of ##).// s!uare
meters. he claimed to have been in peaceful, continuous and open possession
together with her deceased husband, Eulalio 4aF, under claim of ownership of the
above-mentioned portion for not less than $: years, by purchase from its
owners. he li(ewise opposed the registration of the western portion of the land
applied for, with an area of &$& s!uare meters, having purchased the same from its
original owners on 'sic+ her predecessor-in-interest has been open, peaceful and
continuous under claim of ownership for a period of not less than $: years. he
prayed that the portion of ##).// s!uare meters be registered in her name and that of
the heirs of Eulalio 4aF, pro indiviso.9 and the other portion of &$& s!uare meters be
registered solely in her name.
7n February -., )*$:, the applicant 5r. 6ose "achica filed his consolidated
opposition and reply to the motion to lift order of default stating that there is no
reason to do so under the 4ules of Court, and that the opposition of 4odolfo Alba,
"ourdes Alba and 1eatriF Alba, as well as the amended opposition of 7ctabela Alba
;da. de 4aF are without merit in law and in fact.
7n 8arch -), )*$:, the motion to lift the order of general default was granted and
the opposition of 4odolfo Alba, "ourdes Alba and 1eatriF Alba, as well as the
opposition of 7ctabela Alba ;da. de 4aF were all admitted.
9n the hearing of 8arch #, )*$-, applicant offered for admission e0hibits \AR to \9R
and the testimonies of ,edro 4uiF 'April -:, )*$)+, 6ose 4ago '7ct. -#, )*$:+ and
5r. 6ose "achica '6uly )&, )*$)@ Feb. ):, )*$-+. 2he Court admitted the same.
7n 8arch )#, )*$/, the Court issued an order appointing Engr. Angeles 4elor to act
as Commissioner and delimit the portions claimed by the three sets of oppositors and
submit an amended approved plan together with the technical description for each
portion.
2he CommissionerRs report and s(etch was submitted on 5ecember /, )*$/. 2he
applicant filed his opposition to the CommissionerRs report on 5ecember )-,
)*$/. 2he Court in its order of 5ecember )#, )*$/ re!uired the Commissioner to
submit an amended report and amended s(etch.
2he CommissionerRs corrected report and s(etch was submitted on February -/,
)*$. which the Court approved on February -., )*$. there being no objection from
the parties.
7n 8arch )., )*$$, the Court issued an order whereby the testimony of oppositor
7ctabela Alba ;da. de 4aF was stric(en off the record for her failure to appear in the
scheduled hearing on 8arch )., )*$$.
Again, in its order dated 8ay -$, )*$$ the testimony of 7ctabela Alba ;da. de 4aF
was stric(en off record because the latter was bedridden and can not possibly appear
for cross-e0amination.
7ppositor 7ctabela Alba ;da. de 4aF substituted by her heirs filed a formal offer of
e0hibits on August -/, )*%%. Applicant filed his comments thereto on August -*,
)*%%. 2he Court admitted said e0hibits and the testimony of their witness on 8arch
), )*%*.
9n this applicaton for title to land filed by applicant 6ose "achica, four oppositions
were filed by the followingA
). 6ose 4ago, in representation of Apolonia 4ebeco@
-. 8anuel C. 1raulio and usana 1raulio@
#. 4odolfo, "ourdes and 1eatriF, all surnamed Alba, represented by
7ctabela Alba ;da. de 4aF@ and
/. 7ctabela Alba ;da. de 4aF.
9n the hearing of 7ctober -#, )*$:, counsel for oppositor 6ose 4ago manifested that
he would file a motion for withdrawal of opposition and 6ose 4ago himself declared
his conformity '2sn, 7ct. -#, )*$:, p. .+. Although no formal motion to withdraw
was actually filed, oppositor 4ago has not presented evidence on his behalf@ hence,
his opposition must be disregarded.
As regards oppositor 8anuel C. 1raulio ans usana 1raulio, a deed of sale
supposedly e0ecuted by usana 1raulio and 7ctabela Alba ;da. de 4aF in )*.& was
identified by Felimon 4aF, a witness for the oppositors '2sn, ept. -*, )*$$, pp. # to
/+. =owever, said deed cannot be found in the records. Even so, the 1raulios have
not presented evidence to show that by the time this application was filed, they and
their predecessors-in-interest have been in actual, open, public, peaceful and
continuous possession of the land claimed, in concept of owner, for at least ): years
sufficient to ac!uire title thereto 'Arts. )))$, )))%, ))#/, Civil Code of the
,hilippines+. As such, the opposition of 8anuel C. 1raulio and usana 1raulio must
be dismissed.T
B-C
7n the basis of the testimonial and documentary evidence presented by the
applicant and the oppositor 4aF, the court a #uo rendered judgment in favor of the
applicant as stated at the outset. 9n dismissing the claim of the remaining oppositors
4odolfo, "ourdes and 1eatriF, all surnamed Alba, represented by 7ctabela Alba ;da.
de 4aF and 7ctabela Alba ;da. de 4aF herself, the trial court in sum noted that said
oppositors have never offered any e0planation as to the non-payment of realty ta0es
for the disputed portions of the subject property from )*/) to )*.% while the
respondent3applicant continuously paid ta0es under 2a0 5eclaration No. )/)%)
covering said property from )*/.-)*.% when the case was filed per certification
issued by the 8unicipal 2reasurerRs 7ffice of 1anga.
B#C
9n rendering judgment in
favor of respondent3applicant, the trial court stressed that while it is true that ta0
receipts and declarations of ownership for ta0 purposes are not incontrovertible
evidence of ownership, they become strong evidence of ownership ac!uired by
prescription when accompanied by proof of actual possession.
5issatisfied, petitioners interposed an appeal to the Court of Appeals which
affirmed the decision of the trial court.
EnfaFed, petitioners now come to this Court arguing that N
). 2he Civil law provisions on prescription are inapplicable.
-. 2he applicable law is ection /% BaC of the ,ublic "and "aw or Act )/),
as amended.
#. ,rivate respondent has not ac!uired ownership in fee simple, much less
has he met the conditions for judicial confirmation of imperfect title
under ection /% BaC of Act )/), as amended, e0cept perhaps for a &-:
s!uare meter portion of the land applied for becauseA
#.). 2here is absolutely no proof of the alleged sales made by 4aF
and Alba.
#.-. 2here is absolutely no reliable proof of the alleged theft of the
deeds of sale.
#.#. 2he identity of the land has not been established.
#./. 2he Court of Appeals misapplied the basic rules governing the
introduction of secondary evidence.
#... 2he applicant3respondentRs 2a0 5eclaration No. )/)%) is a
\doctoredR ta0 declaration.
#.&. Applicant3respondentRs ta0 declarations have no probative
value.
#.$. Applicant3respondent has not satisfied the re!uired !uantum of
evidence in land registration cases.
#.%. ,etitioners-oppositors have proven their right over the subject
property.
9n rendering judgment in favor of private respondent, the Court of Appeals
reasoned, inter alia9 as followsA
S7n the basis of the testimonial and documentary evidence presented by the
applicant, the trial court did not err in confirming that the applicant is the absolute
owner in fee simple of the property subject of the application for registration
entitling him to register the same in his name under the operation of ,5 ).-*.
9t is of no moment that the applicant failed to produce the originals of those other
deeds3documents of conveyances, for he was able to present sufficient substantial
secondary evidence, in accordance with the re!uirements of ection /, 4ule )#: of
the 4evised 4ules of Court, now ection ., same 4ule of the 4evised 4ules on
Evidence, and the doctrines in point.
2hus, 3overnment vs. Martine@9 // ,hil. %)$, e0plained that when the original
writing is not available for one reason or another which is the best or primary
evidence, to prove its contents is the testimony of some one who has read or (nown
about it. Republic vs. *ourt of %ppeals9 $# C4A )/%, laid out the foundation before
secondary evidence is introduced, that the due e0ecution, delivery and reason for
non-production of the original writing must first be produced. Ra!lago vs Jarabe9 --
C4A )-/$, ruled that it is not necessary to prove the loss of the original document
beyond all possibility of mista(e. A reasonable probability of its loss is sufficient
and this may be shown by abonafide 'sic+ and diligent search, fruitlessly made, for it
in places where it is li(ely to be found. After proving the due e0ecution and delivery
of the document, together with the fact that the same has been lost or destroyed, its
contents may be proved, among others, by the recollection of witnesses. And 6eall
vs. earing9 $ ala. )-&@ and 6ogardas vs. $rinit! *hurch9 / andf. Ch. 'Nn.y.+ &#*,
are of the view that that where the lost documents are more than thirty '#:+ years old
and would thus prove themselves if produced, secondary evidence of their contents is
admissible without proof of their e0ecution.
9n the case at bar, petitioner ac!uired the property in )*/:-)*/). =e presented the
5eed 'E0h. D+ e0ecuted by the vendor Faustino 8artireF. ?hile he failed to present
the other deeds of sale covering the other portions of the property, he has sufficiently
established that they were notariFed documents and were ta(en by his mother-in-law
sometime in )*.&. =e reported the loss to the authorities and even filed a case of
theft. =e further e0erted efforts and made a diligent search of those documents from
the notary public but in vain. =e presented the cler( of the 8unicipal 2reasurerRs
7ffice of 1anga, who testified having seen those deeds as they were presented to him
by the applicant and which were used as basis for the preparation and issuance of
2a0 5eclaration No. )/)%) in the name of the ta0 declarant. 2a0 5eclaration No.
)/)%) 'E0h. =+ was presented in Court, proving that the land was declared for ta0
purposes in the name of the applicant and his wife. 2he applicant has been paying
the realty ta0 covering the property since )*/. and beyond )*.%, when the
application for registration was filed in court, per certification of the 8unicipal
2reasurer of 1anga 'E0h. )+.
9n resume, ?e find and so hold as did the trial court that 5r. 6ose "achica is the
abolute owner in fee simple of the land described in his application for its original
registration in his name. 2he land contains an area of /,%/. s!uare meters, more or
less, situated in 1anga, A(lan, and
S1ounded on the NE., along line)--, by property of Apolonia 4imate@ on the E.,
along line --#, by National road@ on the ?., along line #-/, by property of the 8pl.
Dovernment of 1anga ',ublic 8ar(et+@ and on the N?., along line /-), by property
of the 8unicipal Dovernment of 1anga ',ublic 8ar(et+. 1eginning at a point
mar(ed ) on plan, being N. /. deg. :-R E., /-#.#% m. from 1.".".8. ), 8p. of
1anga, A(lan@
thence, . ## deg. /&R E., %$.&& m. to point S-T
thence, . .& deg. /-R ?., &#.%) m. to point S#T
thence, N. #$ deg. --R ?., .*.-& m. to point S/T
thence, N. ## deg. /-R E., $#.:% m. to the point of
beginning, 000 All points referred to are indicated on the plan and are mar(ed on
the ground by ,.".. Cyl. Conc. 8ons. 1earings true date of the survey, 6anuary -.,
)*.$, and that of the approval, 7ctober #, )*.$.T
2he applicant has been in public, open, continuous and adverse possession of the
property since )*/:-/) up to the present to the e0clusion of all, and thereby also
ac!uired the property by ac!uisitive prescription, in accordance with ections /: and
/# of Act )*:, otherwise (nown as the SCode of Civil ,rocedureT, having been in
actual and adverse possession under claim of ownership for over ten '):+ years, and
thus in whatever way his occupancy might have commenced or continued under a
claim of title e0clusive of any other right and adverse to all other claimants, resulted
in the ac!uisition of title to the land by ac!uisitive prescription 'Jda. de elima vs.
$io, #- C4A .)&+.
9ndeed, to borrow the apt words of the ponente in the elima case, such proof of
ownership of, and the adverse, continuous possession of the applicant since )*/:,
strongly S000 militate against any judicial cogniFance of a matter that could have
been withheld in its (en,T hence, whatever right oppositors may have had over the
property or any portion thereof was thereby also lost through e0tinctive prescription
in favor of the applicant who had been in actual, open, adverse and continuous
possession of the land applied for in the concept of owner for over ): years when the
application for registration was filed in court.T
B/C
9t is a fundamental and settled rule that findings of fact by the trial court and the
Court of Appeals are final, binding or conclusive on the parties and upon this Court,
B.C
which will not be reviewed
B&C
or disturbed on appeal unless these findings are not
supported by evidence
B$C
or unless strong and cogent reasons dictate otherwise.
B%C
8ore e0plicitly, the findings of fact of the Court of Appeals, which are as a
general rule deemed conclusive, may be reviewed by this Court in the following
instancesA
).C ?hen the factual findings of the Court of Appeals and the trial court
are contradictory@
B*C
-.C ?hen the conclusion is a finding grounded entirely on speculation,
surmises and conjectures@
B):C
#.C ?hen the inference made by the Court of Appeals from its findings of
fact is manifestly mista(en, absurd
B))C
or impossible@
/.C ?here there is a grave abuse of discretion in the appreciation of facts@
B)-C
..C ?hen the appellate court in ma(ing its findings went beyond the issues
of the case, and such findings are contrary to the submission of both
appellant and appellee@
&.C ?hen the judgment of the Court of Appeals is premised on a
misapprehension of facts@
B)#C
$.C ?hen the Court of Appeals manifestly overloo(ed certain relevant
facts not disputed by the parties which, if properly considered, would
justify a different conclusion@
B)/C
%.C ?hen the findings of fact are themselves conflicting@
*.C ?hen the findings of fact are conclusions without citation of specific
evidence on which they are based@ and
):.C ?hen the findings of fact of the Court of Appeals are premised
on the absence of evidence but such findings are contradicted by the
evidence on record.
B).C
2he primordial issue to be resolved is whether or not the private
respondent3applicant is entitled to the confirmation of his ownership in fee simple for
the /, %/. s!uare meter parcel of land he applied for.
9n sum, both the trial court and the Court of Appeals adjudicated and confirmed
private respondent3applicantRs title to the land on the basis of the findings thatA ).C the
private respondent3applicant purchased the land from Faustino 8artireF@ -.C the
subject land is covered by 2a0 5eclaration No. )/)%)@ #.C the private
respondent3applicant has paid the realty ta0es on the land from )*/. up to the filing
of his application in )*.%@ /.C the private respondent3applicant has been in actual,
open and continuous possession of the subject land in the concept of owner since
)*/., and ..C the private respondent3applicant has ac!uired the land by prescription.
As stated earlier, a review of the findings of fact of the Court of Appeals is not
a function that this Court normally underta(es
B)&C
unless the appellate courtRs findings
are palpably unsupported by the evidence on record or unless the judgment itself is
based on a misapprehension of facts.
B)$C
A thorough review of the record convinces
this Court that the general rule with regard to the conclusiveness of the trial courtRs
and appellate tribunalRs factual findings should not be applied because there
are material circumstances which, when properly considered, would have altered the
result of the case.
First, a circumspect scrutiny of the evidence e0tant on record reveals that with
the e0ception of &-: s!uare meters, there has been no satisfactory showing of how
private respondent3applicant ac!uired the remainder of the subject land.
As can be gathered from the discussion of the appellate court, as well as the
arguments proffered by private respondent, he ac!uired the land in !uestion from
three '#+ sources, namelyA a.C A 5eed of ale dated August )#, )*/) allegedly
e0ecuted by Faustino 8artireF covering %/: s!uare meters@ b.C #:: s!uare meters
allegedly purchased from private respondentRs father-in-law Eulalio 4aF, and c.C
#,$-. s!uare meters private respondent allegedly bought in )*/: from Eufrocino
Alba.
2he sale involving the first parcel of land covering %/: s!uare meters, was not
!uestioned by petitioners as its technical description delineated in the :scritura e
Jenta %bsoluta dated August )#, )*/),
B)%C
to witA
SEn terreno solar residencia antes palayero regado, actuado en el casco central del
municipio de 1anga, CapiF. in ninguna mejora, de una e0tension superficial de
ochocientos cuarenta metros cuadrados '%/: mts. cds.+ & sean cuarenta metros de
frente por otros veinte y unmetrode fondo, cuyos linderos por el Norte con
propiedad de Eufrosino Alba y con Eulalio 4aF@ por Este con Eulalio 4aF y con la
carretera provincial de Halibo a 1anga@ por ur con la misma carretera provincial y
con terreno del municipio para mercado@ y por al 7este con al terreno del mercado
municipal de 1anga y con propiedad de Eufrosino Alba y al terreno tienes sus
mojones de cemento en todos sus cuatro cantos de linderia y sin otro limite visible de
linderia mas !ue dichos mojones y esta amillarado a mi nombre en una sola hoja
declaratoria de propiedad 2a0 No. )-#$/ en la 7ficina del 2asador ,rovincial de
CapiF, cuyo valor amilarado actual es veinte pesos ',-:.::+ 000T
leaves no room for doubt as to its identity, total area of %/: s!uare meters as well as
its dimensions of /: meters in front and -) meters at the base. =ow this parcel was
further reduced to &-: s!uare meters is e0plained by the fact that the 8unicipal
Dovernment of 1anga appropriated --: s!uare meters thereof for the 1anga ,ublic
8ar(et 4oad.
?hat, however, is seriously contested are the alleged purchases of the other two
parcels from Eulalio 4aF measuring #:: s!uare meters and from Eufrocino Alba
measuring #,$-. s!uare meters owing to the !uestionable circumstances surrounding
their ac!uisition.
2he records disclose that the subject land was originally owned by 5ionisia
4egado under 2a0 5eclaration No. %:-.
B)*C
2he records further reveal that 5ionisia
4egado soldA B).C ),%.: s!uare meters of the land to the 8unicipality of 1anga
evidenced by a panish document denominated as a deed of sale dated April -*,
)*)/@
B-:C
B-.C ),#-: s!uare meters to Eulalio 4aF evidenced by a document
entitled :scritura de Jenta %bsoluta dated eptember &, )*)%,
B-)C
and B#.C -,*#%
s!uare meters to Eufrocino Alba evidenced by a deed of conveyance dated
eptember &, )*)% written in panish.
B--C
Faustino 8artireF ac!uired a portion of %/: s!uare meters from Eulalio 4aF on
6anuary )., )*##.
B-#C
4aF retained /%: s!uare meters, however, he and his wife
7ctabela Alba conveyed a -/: s!uare meter portion thereof to usana 1raulio on
November ., )*.&.
B-/C
ubse!uently on 8ay -*, )*&*, the heirs of Eufrocino Alba
sold a &$& s!uare meter portion of the parcel purchased by Eufrocino to 7ctabela
Alba ;da. de 4aF.
B-.C
2he deed of conveyance was duly registered with the 4egistry
of 5eeds of A(lan pursuant to Act No. ##/ on 6une )$, )*&*
B-&C
and is covered by 2a0
5eclaration No. ##- in the name of Eulalio 4aF, her husband.
B-$C
7ther than the foregoing transactions involving the subject land which are
borne out by the documentary evidence on record, private respondent3applicant did
not produce the alleged deeds of conveyances evidencing the purported transfers
made by Eulalio 4aF and Eufrocino Alba in his favor. 9nstead he relied chiefly on
secondary evidence to prove the e0istence thereof which was sustained by both the
trial and the appellate courts. uch reliance on secondary evidence vis8V8vis the
peculiar facts prevailing in this case rests on infirm legal bases much more so in the
face of the overwhelming documentary evidence of petitioners arrayed against it
because N
S. . . BaC contract of sale of realty cannot be proven by means of witnesses, but must
necessarily be evidenced by a written instrument, duly subscribed by the party
charged, or by his agent, or by secondary evidence of their contents. No other
evidence, therefore, can be received e0cept the documentary evidence referred to, in
so far as regards such contracts, and these are valueless as evidence unless they are
drawn up in writing in the manner aforesaid.T
B-%C
S%n applicant for registration of land9 if he relies on a document evidencing his title
thereto, must prove not only the genuineness of his title but the identit! of the land
therein referred to. $he document in such a case is either a basis of his claim for
registration or not at all. 9f , as in this case, he only claims a portion of what is
included in his title, he must clearly prove that the property sought to be registered is
included in that title.T
B-*C
econd, there are glaring variances in the identities and technical descriptions
of the land applied for by private respondent3applicant and the land he purportedly
purchased from Eufrocino Alba.
,rivate respondent3applicant alleged that he purchased the remainder of the
subject land measuring #,$-. s!uare meters from Eufrocino Alba sometime in )*/:
averring that this parcel is listed as 9tem No. . of his E0hibit S9T which is
denominated as an S9nventory And Appraisal 7f 2he ,roperties 7f 2he pouses
Adela 4aF 5e "achica '5eceased+ and 5r. 6ose "achica.T 9tem No. .
B#:C
of the said
inventory described the parcel of land mentioned therein as followsA
S.. Ena parcela de terreno cocal secano, amillarado en nombre de Eufrocino Alba
bajo el 2a0 No. )-$*- por valor de ,#*:.::, situado en el municipio de 1anga,
CapiF, !ue linda el Norte con "orenFo 4etiro, y ilverio 4elis@ al Este con la
carretera provincial 1anga-"ibacao@ al sur con 1ienvenido 8. Alba y al 7este con
Cirilo rala y Adela 4aF@ con una e0tension apro0imada de una ')+ hectarea '-:+ areas
y '#.+ centiareas poco mas o menos. 'NoteA aid property was purchased by the
spouses 6ose "achica and Adela 4aF "achica from Eufrocino 8. Alba in the amount
of ,.::.:: as evidenced by a :scritura de *ompraventa e0ecuted on November -.,
)*/:, at =imamaylan, Negros 7ccidental and notariFed by Atty. Conrado Densiano,
as 4eg. Not. )--, ,ag. &$, "ibro ;999, erie )*/:+.
7n the other hand, the land applied for is described technically per ,su )&)-$$
as N
SA parcel of land 'as shown on ,lan ,su-)&)-$$+, situated in ,oblacion,
8unicipality of 1anga, ,rovince of A(lan. 1ounded on the NE., along line )--, by
property of Apolonia 4imate@ on the E., along line --#, by National 4oad@ on the
?., along line #-/, by property of the 8pl. Dovernment of 1anga ',ublic 8ar(et+@
and on the N?., along line /-), by property of the 8unicipal Dovernment of 1anga
',ublic 8ar(et+. 1eginning at a point mar(ed S)T on plan, being N. /. deg. :-R E.,
/-#.#% m. from 1.".".8. ), 8p. of 1anga, A(lan@
thence . ## deg. /&R E. %$.&& m. to point S-T
thence . .& deg. /-T ?., &#.%) m. to point S#T
thence N. #$ deg. --R ?., .*.-& m. to point S/T
thence N. ## deg. /-R E., $#.:% m. to the point of
beginning, containing an area of F7E4 2=7EAN5 E9D=2 =EN54E5 AN5
F742I F9;E '/,%/.+ LEA4E 8E2E4. All points referred to are indicated on
the plan and are mar(ed on the ground by ,.".. Cyl. Conc. 8ons. 1earings true date
of survey, 6anuary -., )*.$, and that of the approval, 7ctober #, )*.$.T
B#)C
9t will be readily noted vis8V8vis the foregoing thatA a.C the land applied for is
covered by 2a0 5eclaration No. )/)%) while the parcel allegedly purchased from
Eufrocino Alba is covered by 2a0 5eclaration No. ).$*-@ b.C the land applied for
is pala!ero whereas the land allegedly ac!uired from Eufrocino Alba is cocal
secano. Pala! is unhus(ed rice,
B#-C
thus, the term pala!ero refers to land devoted to
the planting of rice@ cocal, on the other hand, means coconut tree
plantation
B##C
while secano denotes unwatered land or a dry sand ban(@
B#/C
c.C the land
applied for has an area of /,%/. s!uare meters whereas the land supposedly sold by
Eufrocino Alba measures )-,:#. s!uare meters@ d.C the land applied for is bounded
on the NE by the 1anga ,ublic 8ar(et, on the E by Apolonia 4imate, on the ? by
the 1anga-Halibo National 4oad@ and on the N? by the 1anga ,ublic 8ar(et
whereas the land allegedly obtained from Eufrocino Alba is bounded on the N by
Ernesto 4etino and ilverio 4elis, on the E by the 1anga-"ibacao *arretera
Provincial, on the by 1ienvenido Alba and on the ? by Cirilo 4ala and Adela
4aF. 9t needs be stressed in this regard that a person who claims that he has better
right to real property must prove not only his ownership of the same but also must
satisfactorily prove the identity thereof.
B#.C
2hird, both trial and appellate courts placed undue reliance on 2a0 5eclaration
No. )/)%) considering that there is no satisfactory e0planation of how the area of
land covered by 2a0 5eclaration No. )/)%) geometrically ballooned from a modest
&-: s!uare meter lot to a huge parcel measuring /, %/. s!uare meters.
As pointed out by petitioners, 2a0 5eclaration No. )/)%) was preceded by
)*./ 2a0 5eclaration No. )#.$% in the name of private respondent3applicant and his
spouse which shows that the land declared therein for ta0ation purposes covers an
area of &-: s!uare meters. 2a0 5eclaration No. )#.$% was preceded by )*.# 2a0
5eclaration No. )#:/: in the name of Adela 4aF, private respondentRs wife. 2he
land declared for ta0ation purposes therein also has an area of &-: s!uare
meters. 2a0 5eclaration No. )#/:/: was preceded by )*/$ 2a0 5eclaration No.
&.-% in the name of private respondentRs wife, Adela 4aF. 2he land declared therein
for ta0ation purposes li(ewise measures &-: s!uare meters.
9t appears that the !uantum leap from &-: s!uare meters in )*/$ to /,%/.
s!uare meters in )*.& came about on account of an affidavit dated November )$,
)*.& wherein private respondent3applicant re!uested
B#&C
the 8unicipal Assessor of
1anga to issue a revised ta0 declaration covering /,%/. s!uare meters on the bare
claim that Sthe area has been decreasedT to only &-: s!uare meters. 2he timing of
the revision and its pro0imity to the date of filing of the application can not but
engender serious doubts on the application more so considering that prior thereto
realty ta0 payments covering the period )*/. to )*.& covered an area measuring &-:
s!uare meters and private respondent3applicant is ban(ing on said payments to claim
possession and ownership over the same period for an infinitely larger area of /,%/.
s!uare meters.
A ta0 declaration, by itself, is not conclusive evidence of ownership.
B#$C
2a0
declarations for a certain number of years, although constituting proof of claim of
title to land,
B#%C
is not incontrovertible evidence of ownership unless they are
supported by other effective proof.
B#*C
9t was, thus, held in one case
B/:C
that where
realty ta0es covering thirty-one '#)+ years were paid only a few months prior to the
filing of an application, such payment does not constitute sufficient proof that the
applicant had a bona fide claim of ownership prior to the filing of the
application. till in another case,
B/)C
the claim that the applicant had been in
continuous and uninterrupted possession of the disputed land was not given credence
because it was negated by the fact that he declared the land for ta0ation purposes in
7ctober )*.* when he filed his application for registration although he could have
done so in )*#$ when he allegedly purchased the land. A belated declaration is,
furthermore, indicative that the applicant had no real claim of ownership over the
subject land prior to the declaration
B/-C
and where there are serious discrepancies in
the ta0 declarations as in this case, registration must be denied.
B/#C
9f at all, the
foregoing facts only serves to underscore private respondent3applicantRs crafty
attempt to cloa( with judicial color his underhanded scheme to seiFe the adjoining
parcels of land and to enrich himself at the e0pense of its rightful owners.
Fourth, the lower courtRs reliance on prescription is not well-ta(en given the
peculiar facts prevailing in this case.
2he law in force at the time an action accrues is what governs the proceeding
consistent with the fundamental dictum that laws shall have no retroactive effect,
unless the contrary is proved.
B//C
1asic is the rule that no statute, decree, ordinance,
rule, regulation or policy shall be given retrospective effect unless e0plicitly stated
so.
B/.C
Along the same vein, a courtRs jurisdiction depends on the law e0isting at the
time an action is filed
B/&C
and a law continues to be in force with regard to all rights
which accrued prior to the amendment thereof.
B/$C
9n this case, the controlling statute when the private respondent3applicant filed
his application for registration on April -%, )*.% is ection /% of Commonwealth Act
)/), as amended by 4A Nos. )*/- and &-#&,
B/%C
which states thatA
SEC. /%. 2he following-described citiFens of the ,hilippines, occupying lands of
the public domain or claiming to own any such lands or an interest therein, but
whose titles have not been perfected or completed, may apply to the Court of First
9nstance of the province where the land is located for confirmation of their claims
and the issuance of a certificate of title therefor, under the "and 4egistration Act, to
witA
'a+ 2hose who prior to the transfer of sovereignty from pain to the Enited tates
have applied for the purchase, composition or other form of grant of lands of the
public domain under the laws and royal decrees then in force and have instituted and
prosecuted the proceedings in connection therewith, but have with or without default
upon their part, or for any other cause, not received title therefor, if such applicants
or grantees and their heirs have occupied and cultivated said lands continuously
since the filing of their applications.
B/*C
'b+ 2hose who by themselves or through their predecessors in interest have been in
open, continuous, e0clusive and notorious possession and occupation of agricultural
lands of the public domain under a bona fide claim of ownership, for at least thirty
years immediately preceding the filing of the application for confirmation of title
e0cept when prevented by war or force ma'eure. 2hese shall be conclusively
presumed to have performed all the conditions essential to a Dovernment grant and
shall be entitled to a certificate of title under the provisions of this chapter.
B.:C
'c+ 8embers of the national cultural minorities who by themselves or through their
predecessors-in-interest have been in open, continuous, e0clusive and notorious
possession and occupation of lands of the public domain suitable to agriculture,
whether disposable or not, under a bona fide claim of ownership for at least #: years
shall be entitled to the rights granted in subsection 'b+ hereof.
B.)C
A circumspect scrutiny of the assailed 5ecision readily shows that in affirming
the ruling of the trial court, the Court of Appeals relied on the provisions of ection
)* of Act /*&
B.-C
in relation to the Civil CodeRs provisions on prescription on the
assumption that the subject land is private land. 2herein lies the flaw in the appellate
courtRs postulate. 2he application for registration of private respondent is for the
judicial confirmation of an imperfect title considering that the land is presumed
under the 4egalian 5octrine to be part of the public domain.
,ublic lands are broadly classified into ).C Alienable or disposable lands@
and, -.C 9nalienable or non-disposable public lands. Non-disposable public lands or
those not susceptible of private appropriation include a.C 2imber lands@ and, b.C
8ineral lands.
B.#C
For purposes of administration and disposition, the lands of the
public domain classified as \disposableR or \alienableR are further sub-classified into
a.C Agricultural@ b.C 4esidential, commercial, industrial or for similar productive
purposes@ c.C Educational, charitable or other similar purposes, and d.C 4eservations
for town sites and for public and !uasi-public purposes.
B./C
From the foregoing classifications, public agricultural land may be defined as
those alienable portions of the public domain which are neither timber nor mineral
lands. 2hus the term includes residential, commercial and industrial lands for the
reason that these lands are neither timber nor mineral lands.
B..C
7n the other hand, ection )* of Act No. /*&, as amended, permits the
registration of private lands claimed to be owned by the applicant in fee simple
which refer toA
).C "ands ac!uired by various types of titles from the government during
the panish 4egime by way of grants by the panish crown namely
theA a.C $itulo real or royal grant@ b.C *oncession especial or special grant@ c.C
Composicion con el estado title or adjustment title@ d.C $itulo de compra or title
by purchase and@ e.C "nformacion posesoria or possessory information title,
which could become a $itulo gratuito or a gratuitous title@
B.&C
-.C "ands that are claimed to be owned by accession, i.e. accretion,
avulsion, formation of islands, abandoned river beds, as provided for in Articles
/.$, /&) and /&/ of the Civil Code@ and
#.C "ands which have been ac!uired in any other manner provided by law.
uffice it to state that the land sought to be registered by private respondent
hardly falls under any of the latter classifications of land referred to by Act No. /*&,
as amended. Diven the foregoing facts, prescription in the manner invo(ed by both
courts can not be pleaded to bolster private respondent3applicantRs claim because N
S. . . BNCo public land can be ac!uired by private persons without any grant, e0press
or implied from the government@ it is indispensable that there be a showing of title
from the state . . . .
B.$C
0 0 0 0 0 0 0 0 0
9ndeed, the possession of public agricultural land, however, long the period may
have e0tended, never confers title thereto upon the possessor.
B.%C
2he reason, to
reiterate our ruling, is because the statute of limitations with regard to public
agricultural land does not operate against the tate, unless the occupant can prove
possession and occupation of the same under claim of ownership for the re!uired
number of years to constitute a grant from the tate.T
B.*C
Fifth, even assuming e5 gratia argumenti that prescription can be applied in
the manner invo(ed by the trial court and the appellate court, it must be pointed out
that N
S. . . B?Chile Art. ))#/ of the Civil Code provides that \'o+wnership and other real
rights over immovable property are ac!uired by ordinary prescription through
possession of ten years,R this provision of law must be read in conjunction with Art.
)))$ of the same Code. 2his article states that \000 'o+rdinary ac!uisitive
prescription of things re!uires possession in good faith and with just title for the time
fi0ed by law.R 1ence9 a prescriptive title to real estate is not ac#uired b! mere
possession thereof under claim of ownership for a period of ten !ears unless such
possession was ac#uired con "usto titulo y buena fe 'with color of title and good
faith+.
B&:C
2he good faith of the possessor consists in the reasonable belief that the
person from whom he received the thing was the owner thereof, and could transmit
his ownership.
B&)C
For purposes of prescription, there is just title when the adverse
claimant came into possession of the property through one of the recogniFed modes
of ac!uisition of ownership or other real rights but the grantor was not the owner or
could not transmit any right.T
B&-C
9t can not be said that private respondentRs possession was con 'usto titulo !
buena fe. 7n the contrary, private respondent3applicantRs act of appropriating for
himself the entire area of /,%/. s!uare meters to the e0clusion of petitioners who
have been occupying portions of the disputed land constituted acts of deprivation of
the latterRs rights which is tantamount to bad faith. 9ndeed this Court has ruled that
the N
S. . . BcConcealment and misrepresentation in the application that no other persons
had any claim or interest in the said land, constitute specific allegations of e0trinsic
fraud supported by competent proof. Failure and intentional omission of the
applicants to disclose the fact of actual physical possession by another person
constitutes an allegation of actual fraud.
B&#C
"i(ewise, it is fraud to (nowingly omit or
conceal a fact, upon which benefit is obtained to the prejudice of a third person.T
B&/C
uffice it to state in this regard that to allow private respondent3applicant to
benefit from his own wrong would run counter to the ma0im e5 dolo malo non oritur
actio 8 no man can be allowed to found a claim upon his own wrongdoing.
B&.C
9t need not be overemphasiFed that e0traordinary ac!uisitive prescription can
not similarly vest ownership over the property upon private respondent3applicant
because Article ))#$ of the Civil Code states in no uncertain terms that N
SA42. ))#$. 7wnership and other real rights over immovables also prescribe
through uninterrupted adverse possession thereof for thirt! !ears, without need of
good faith.T
Needless to state, private respondent3applicantRs possession of thirteen ')#+
years falls way below the thirty-year re!uirement mandated by Article ))#$.
i0th, petitioners3oppositors have, in star( contrast to the secondary proof of
private respondent, adduced overwhelming evidence to prove their ownership of the
portions they claim in the subject land. 2he evidence on record clearly points to the
fact that private respondent3applicantRs right, if at all, is confined to only &-: s!uare
meters or what has been left of the %/: s!uare meters he purchased from Faustino
8artireF after --: s!uare meters thereof were appropriated by the 8unicipality of
1anga for the ,ublic 8ar(et 4oad.
B&&C
2he records further bear out that the original owner of the whole area was one
5ionisia 4egado who e0ecuted three '#+ deeds of sale covering certain portions of
the disputed lands, namelyA ).C the 5eed of ale dated April -*, )*)/ covering ),%.:
s!uare meters e0ecuted in favor of the 8unicipality of 1anga@
B&$C
-.C the 5eed of ale
dated 6uly ):, )*). covering ),#-: s!uare meters e0ecuted in favor of Eulalio 4aF@
B&%C
and, #.C the 5eed of ale dated eptember &, )*)% covering the balance with an
area of -,*#% s!uare meters in favor of Eufrocino Alba.
B&*C
Faustino 8artireF ac!uired only an %/: s!uare meter portion of the land by
purchase from Eulalio 4aF on 6anuary )., )*## as confirmed in paragraph - of
the :scritura e Jenta %bsoluta e0ecuted by him on August )#, )*/).
B$:C
After
selling %/: s!uare meters to Faustino 8artireF, Eulalio 4aF retained /%: s!uare
meters but on November ., )*.& Eulalio 4aF and his wife 7ctabela Alba conveyed
-/: s!uare meters to usana 1raulio
B$)C
leaving a balance of -/: s!uare meters which
remained undisposed.
7n 8ay -*, )*&*, ;irginia Alba, 9nocentes Alba and Estrella Alba, children of
the deceased Eufrocino Alba, sold a &$& s!uare meter portion of the -,*#% s!uare
meter lot purchased by their father from 5ionisia 4egado to petitioner3oppositor
7ctabela alba ;da. 5e 4aF.
B$-C
2his 5eed was duly registered with the 4egistry of
5eeds of A(lan in accordance with Act No. ##// on 6une )$, )*&*.
B$#C
2he land is
covered by 2a0 5eclaration No. ##- in the name of 7ctabela Alba ;da. 5e 4aFRs
husband.
B$/C
,etitioner3oppositor 7ctabela Alba ;da. 5e 4aFRs ownership of the remaining
-/: s!uare meter portion which she and her husband Eulalio 4aF bought from
5ionisia 4egado
B$.C
and the &$& s!uare meter portion which they bought from the
heirs of Eufrocino Alba
B$&C
is fully substantiated by documentary proof.
B$$C
4odolfo
Alba, "ourdes Alba and 1eatriF AlbaRs ownership of a portion measuring ),##.
s!uare meters
B$%C
and another portion measuring -,-&- s!uare meters
B$*C
is li(ewise
bac(ed by documentary evidence. usana 1raulioRs ownership of a -/: s!uare meter
portion
B%:C
which she ac!uired from 7ctabela Alba ;da. 5e 4aF on November )),
)*.&
B%)C
is also documented, her predecessor-in-interest having ac!uired the same
from 5ionisia 4egado on eptember &, )*)%.
B%-C
2he foregoing only serves to underscore the paucity of the proof of private
respondent3applicant to support his claim of ownership over the entire /, %/. s!uare
meter area. =e has not adduced evidence to show how and when he was able to
ac!uire, with the e0ception of %/: s!uare meters further reduced to &-: s!uare
meters on account of --: s!uare meters appropriated for the mar(et road, the bigger
area of #,$.. s!uare meters from anybody let alone the ancestral owner, 5ionisia
4egado.
=is claim is anchored mainly on 4evised 2a0 5eclaration No. )/)%) which he
was able to procure from the 8unicipal Assessor of 1anga in )*.& on the basis of a
self-serving affidavit which proffered the lame e0cuse that there was error in the
statement of the area of the land which he claimed to be /,%/. s!uare meters instead
of &-: s!uare meters N which was the area reflected in earlier ta0 declarations
namely, )*./ 2a0 5eclaration No. )#.$%@ )*.# 2a0 5eclaration No. )#:/#@ and
)*/$ 2a0 5eclaration No. &.-%.
1e that as it may, the Court has reservations on the propriety of adjudicating to
petitioners the contested portions of the subject land, in view of their failure to
present the technical descriptions of these areas. Furthermore, there is no sufficient
evidence showing that petitioners have been in open, adverse, e0clusive, peaceful
and continuous possession thereof in the concept of owner, considering that the
testimony of 7ctabela Alba vda. 5e 4aF was stric(en off the record.
?0EREFORE, based on foregoing premises, the 5ecision of the 4egional
2rial Court of Halibo, A(lan, 1ranch ) dated August )%, )**- in "and 4egistration
Case No. H-):), "4C 4ecord No. H-).):/ is hereby 8759F9E5 as followsA
).C 2he &-: s!uare meter portion on which private respondent 6ose N.
"achicaRs house is situated, clearly delineating its metes and bounds, is hereby
745E4E5 segregated from the parcel of land described in ,su-)&)-$$
situated in the Poblacion of the 8unicipality of 1anga, ,rovince of A(lan,
,hilippines with an area of /,/%/ s!uare meters, to be registered and confirmed
in the name of private respondent@
-.C A ten '):+ meter road width along the National road mentioned in the
application be segregated for future road widening programs upon the payment
of just compensation to be annotated at the bac( of the title.
#.C 9nsofar as the ownership of the remainder of the subject land is
concerned, the case is hereby 4E8AN5E5 to the court of origin for the
reception of further evidence for the petitioners to establish the other re!uisites
for the confirmation of title and registration in their names of the areas they
respectively claim.
SO ORDERED.
G.R. No. L-5>>67 )u*e 22, 19>8
DIRETOR OF LANDS a*, DIRETOR OF FOREST
DEVELO!MENT, petitioners,
vs.
0ON. O"RT OF A!!EALS a*, ANTONIO VALERIANO, GA#RIELA
VALERIANO VDA. DE LA R"$, LETIIA A. VALERIANO a*, MARISSA
VALERIANO DE LA ROSA, respondents.
$he Solicitor 3eneral for petitioners.
*arlos *. Serapio for private respondents.

MELENIO-0ERRERA, J.:
,etitioners-public officials, through the olicitor Deneral, see( a review of the
5ecision and 4esolution of the then Court of Appeals affirming the judgment of the
former Court of First 9nstance of 1ulacan, 1ranch 999, decreeing registration of a
parcel of land in private respondents< favor. 2he land in !uestion, 9dentified as "ot
-#/$, Cad-#:--5, Case #, 7bando Cadastre, under ,lan Ap-:#-:::.#., is situated in
7bando, 1ulacan, and has an area of appro0imately *.# hectares. 9t adjoins the
Hailogan 4iver and private respondents have converted it into a fishpond.
9n their application for registration filed on 8ay ):, )*$&, private respondents
'Applicants, for brevity+ claimed that they are the co-owners in fee simple of the land
applied for partly through inheritance in )*)% and partly by purchase on 8ay -,
)*.%@ that it is not within any forest Fone or military reservation@ and that the same is
assessed for ta0ation purposes in their names.
2he 4epublic of the ,hilippines, represented by the 5irector of the 1ureau of Forest
5evelopment opposed the application on the principal ground that the land applied
for is within the unclassified region of 7bando, 1ulacan, per 1F 8ap "C No. &#$
dated 8arch ), )*-$@ and that areas within the unclassified region are denominated
as forest lands and do not form part of the disposable and alienable portion of the
public domain.
After hearing, the 2rial Court ordered registration of the subject land in favor of the
Applicants. 2his was affirmed on appeal by respondent Appellate Court, which
found that >through indubitable evidence 'Applicants+ and their predecessors-in-
interest have been in open, public, continuous, peaceful and adverse possession of
the subject parcel of land under a bona fide claim of ownership for more than #:
years prior to the filing of the application> and are, therefore, entitled to registration.
9t further opined that >since the subject property is entirely devoted to fishpond
purposes, it cannot be categoriFed as part of forest lands. >
1efore this instance, the principal issues posed areA ')+ whether or not Courts can
reclassify the subject public land@ and '-+ whether or not applicants are entitled to
judicial confirmation of title.
2he parties, through their respective counsel, stipulated that the land is within an
unclassified region of 7bando, 1ulacan, as shown by 1F 8ap "C No. &#$, dated
8arch ), )*-$. 1 No evidence has been submitted that the land has been released or
subse!uently classified despite an 9ndorsement, dated November )$, )*$&, of the
5istrict Forester, to the 5irector of Forest 5evelopment, containing the following
recommendationA
ubject area re!uested for release was verified and found to be
within the Enclassified 4egion of 7bando, 1ulacan per 1F "C
8ap No. &#$, certified 8arch ), )*-$. =owever, on-the-spot
inspection conducted by a representative of this 7ffice, it disclosed
that the same was devoid of any forest growth and forms part of a
well-developed and ):: percent producing fishponds. 2wo houses
of light materials were erected within the area for the careta(ers
temporary dwelling.
9n view thereof, and in fairness to the applicant considering the
investment introduced therein this 7ffice believes that the release
is in order,
4ecommended for approval and be disposed of in accordance with
the ,ublic "and "aw.
2
2he Dovernment<s case is meritorious.
9n effect, what the Courts a #uo have done is to release the subject property from the
unclassified category, which is beyond their competence and jurisdiction. 2he
classification of public lands is an e0clusive prerogative of the E0ecutive 5epartment
of the Dovernment and not of the Courts. 9n the absence of such classification, the
land remains as unclassified land until it is released therefrom and rendered open to
disposition.
-
2his should be so under time-honored Constitutional precepts. 2his is
also in consonance with the 4egalian doctrine that all lands of the public domain
belong to the tate,
8
and that the tate is the source of any asserted right to
ownership in land and charged with the conservation of such patrimony.
5
2he recommendation of the 5istrict Forester for release of subject property from the
unclassified region is not the ultimate word on the matter. And the fact that 1F 8ap
"C No. &#$ dated 8arch ), )*-$ showing subject property to be within the
unclassified region was not presented in evidence will not operate against the tate
considering the stipulation between the parties and under the well-settled rule that
the tate cannot be estopped by the omission, mista(e or error of its officials or
agents,
6
if omission there was, in fact.
?hile it may be that the 8unicipality of 7bando has been cadastrally surveyed in
)*&), it does not follow that an lands comprised therein are automatically released as
alienable. A survey made in a cadastral proceeding merely 9dentifies each lot
preparatory to a judicial proceeding for adjudication of title to any of the lands upon
claim of interested parties. 1esides, if land is within the jurisdiction of the 1ureau of
Forest 5evelopment, it would be beyond the jurisdiction of the Cadastral Court to
register it under the 2orrens ystem.
ince the subject property is still unclassified, whatever possession Applicants may
have had, and, however long, cannot ripen into private ownership.
7
2he conversion of subject property into a fishpond by Applicants, or the alleged
titling of properties around it, does not automatically render the property as alienable
and disposable. Applicants< remedy lies in the release of the property from its present
classification. 9n fairness to Applicants, and it appearing that there are titled lands
around the subject property, petitioners-officials should give serious consideration to
the matter of classification of the land in !uestion.
?=E4EF74E, the appealed 5ecision is reversed and the application for registration
in "and 4egistration Case No. N-**-;-$& of the former Court of First 9nstance of
1ulacan, 1ranch 999, is hereby dismissed, without prejudice to the availment by the
applicants of the proper administrative remedy. No costs.
7 745E4E5.