1

[G.R. No. 149927. March 30, 2004]

REPUBLIC OF THE PHILIPPINES, Represented by the Department of Environment and Natural
Resources (DENR) Under then Minister ERNESTO R. MACEDA; and Former Government Officials
CATALINO MACARAIG, FULGENCIO S. FACTORAN, ANGEL C. ALCALA, BEN MALAYANG, ROBERTO
PAGDANGANAN, MARIANO Z. VALERA and ROMULO SAN JUAN, petitioners, vs. ROSEMOOR MINING
AND DEVELOPMENT CORPORATION, PEDRO DEL CONCHA, and ALEJANDRO and RUFO DE GUZMAN,
respondents.
DECISION
PANGANIBAN, J.:
A mining license that contravenes a mandatory provision of the law under which it is granted is void. Being a
mere privilege, a license does not vest absolute rights in the holder. Thus, without offending the due process and
the non-impairment clauses of the Constitution, it can be revoked by the State in the public interest.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify the May 29, 2001
Decision[2] and the September 6, 2001 Resolution[3] of the Court of Appeals (CA) in CA-GR SP No. 46878. The
CA disposed as follows:
WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED in toto.[4]
The questioned Resolution denied petitioners Motion for Reconsideration.
On the other hand, trial courts Decision, which was affirmed by the CA, had disposed as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring that the cancellation of License No. 33 was done without jurisdiction and in gross violation of the
Constitutional right of the petitioners against deprivation of their property rights without due process of law and is
hereby set aside.
2. Declaring that the petitioners right to continue the exploitation of the marble deposits in the area covered by
License No. 33 is maintained for the duration of the period of its life of twenty-five (25) years, less three (3) years
of continuous operation before License No. 33 was cancelled, unless sooner terminated for violation of any of
the conditions specified therein, with due process.
3. Making the Writ of preliminary injunction and the Writ of Preliminary Mandatory Injunction issued as
permanent.
4. Ordering the cancellation of the bond filed by the Petitioners in the sum of 1 Million.
5. Allowing the petitioners to present evidence in support of the damages they claim to have suffered from, as a
consequence of the summary cancellation of License No. 33 pursuant to the agreement of the parties on such
dates as maybe set by the Court; and
6. Denying for lack of merit the motions for contempt, it appearing that actuations of the respondents were not
contumacious and intended to delay the proceedings or undermine the integrity of the Court.
No pronouncement yet as to costs.[5]
The Facts
The CA narrated the facts as follows:
The four (4) petitioners, namely, Dr. Lourdes S. Pascual, Dr. Pedro De la Concha, Alejandro De La Concha, and
Rufo De Guzman, after having been granted permission to prospect for marble deposits in the mountains of
Biak-na-Bato, San Miguel, Bulacan, succeeded in discovering marble deposits of high quality and in commercial
quantities in Mount Mabio which forms part of the Biak-na-Bato mountain range.
Having succeeded in discovering said marble deposits, and as a result of their tedious efforts and substantial

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expenses, the petitioners applied with the Bureau of Mines, now Mines and Geosciences Bureau, for the
issuance of the corresponding license to exploit said marble deposits.
xxxxxxxxx
After compliance with numerous required conditions, License No. 33 was issued by the Bureau of Mines in favor
of the herein petitioners.
xxxxxxxxx
Shortly after Respondent Ernesto R. Maceda was appointed Minister of the Department of Energy and Natural
Resources (DENR), petitioners License No. 33 was cancelled by him through his letter to ROSEMOOR MINING
AND DEVELOPMENT CORPORATION dated September 6, 1986 for the reasons stated therein. Because of the
aforesaid cancellation, the original petition was filed and later substituted by the petitioners AMENDED
PETITION dated August 21, 1991 to assail the same.
Also after due hearing, the prayer for injunctive relief was granted in the Order of this Court dated February 28,
1992. Accordingly, the corresponding preliminary writs were issued after the petitioners filed their injunction bond
in the amount of ONE MILLION PESOS (P1,000,000.00).
xxxxxxxxx
On September 27, 1996, the trial court rendered the herein questioned decision.[6]
The trial court ruled that the privilege granted under respondents license had already ripened into a property
right, which was protected under the due process clause of the Constitution. Such right was supposedly violated
when the license was cancelled without notice and hearing. The cancellation was said to be unjustified, because
the area that could be covered by the four separate applications of respondents was 400 hectares. Finally,
according to the RTC, Proclamation No. 84, which confirmed the cancellation of the license, was an ex post
facto law; as such, it violated Section 3 of Article XVIII of the 1987 Constitution.
On appeal to the Court of Appeals, herein petitioners asked whether PD 463 or the Mineral Resources
Development Decree of 1974 had been violated by the award of the 330.3062 hectares to respondents in
accordance with Proclamation No. 2204. They also questioned the validity of the cancellation of respondents
Quarry License/Permit (QLP) No. 33.
Ruling of the Court of Appeals
Sustaining the trial court in toto, the CA held that the grant of the quarry license covering 330.3062 hectares to
respondents was authorized by law, because the license was embraced by four (4) separate applications -- each
for an area of 81 hectares. Moreover, it held that the limitation under Presidential Decree No. 463 -- that a quarry
license should cover not more than 100 hectares in any given province -- was supplanted by Republic Act No.
7942,[7] which increased the mining areas allowed under PD 463.
It also ruled that the cancellation of respondents license without notice and hearing was tantamount to a
deprivation of property without due process of law. It added that under the clause in the Constitution dealing with
the non-impairment of obligations and contracts, respondents license must be respected by the State.
Hence, this Petition.[8]
Issues
Petitioners submit the following issues for the Courts consideration:
(1) [W]hether or not QLP No. 33 was issued in blatant contravention of Section 69, P.D. No. 463; and (2) whether
or not Proclamation No. 84 issued by then President Corazon Aquino is valid. The corollary issue is whether or
not the Constitutional prohibition against ex post facto law applies to Proclamation No. 84[9]
The Courts Ruling
The Petition has merit.
First Issue:
Validity of License

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Respondents contend that the Petition has no legal basis, because PD 463 has already been repealed.[10] In
effect, they ask for the dismissal of the Petition on the ground of mootness.
PD 463, as amended, pertained to the old system of exploration, development and utilization of natural
resources through licenses, concessions or leases.[11] While these arrangements were provided under the
1935[12] and the 1973[13] Constitutions, they have been omitted by Section 2 of Article XII of the 1987
Constitution.[14]
With the shift of constitutional policy toward full control and supervision of the State over natural resources, the
Court in Miners Association of the Philippines v. Factoran Jr. [15] declared the provisions of PD 463 as contrary
to or violative of the express mandate of the 1987 Constitution. The said provisions dealt with the lease of mining
claims; quarry permits or licenses covering privately owned or public lands; and other related provisions on
lease, licenses and permits.
RA 7942 or the Philippine Mining Act of 1995 embodies the new constitutional mandate. It has repealed or
amended all laws, executive orders, presidential decrees, rules and regulations -- or parts thereof -- that are
inconsistent with any of its provisions.[16]
It is relevant to state, however, that Section 2 of Article XII of the 1987 Constitution does not apply retroactively
to a license, concession or lease granted by the government under the 1973 Constitution or before the effectivity
of the 1987 Constitution on February 2, 1987.[17] As noted in Miners Association of the Philippines v. Factoran
Jr., the deliberations of the Constitutional Commission[18] emphasized the intent to apply the said constitutional
provision prospectively.
While RA 7942 has expressly repealed provisions of mining laws that are inconsistent with its own, it
nonetheless respects previously issued valid and existing licenses, as follows:
SECTION 5. Mineral Reservations. When the national interest so requires, such as when there is a need to
preserve strategic raw materials for industries critical to national development, or certain minerals for scientific,
cultural or ecological value, the President may establish mineral reservations upon the recommendation of the
Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as
may thereafter be established, shall be undertaken by the Department or through a contractor: Provided, That a
small scale-mining cooperative covered by Republic Act No. 7076 shall be given preferential right to apply for a
small-scale mining agreement for a maximum aggregate area of twenty-five percent (25%) of such mineral
reservation, subject to valid existing mining/quarrying rights as provided under Section 112 Chapter XX hereof.
All submerged lands within the contiguous zone and in the exclusive economic zone of the Philippines are
hereby declared to be mineral reservations.
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SECTION 7. Periodic Review of Existing Mineral Reservations. The Secretary shall periodically review existing
mineral reservations for the purpose of determining whether their continued existence is consistent with the
national interest, and upon his recommendation, the President may, by proclamation, alter or modify the
boundaries thereof or revert the same to the public domain without prejudice to prior existing rights.
SECTION 18. Areas Open to Mining Operations. Subject to any existing rights or reservations and prior
agreements of all parties, all mineral resources in public or private lands, including timber or forestlands as
defined in existing laws, shall be open to mineral agreements or financial or technical assistance agreement
applications. Any conflict that may arise under this provision shall be heard and resolved by the panel of
arbitrators.
SECTION 19. Areas Closed to Mining Applications. -- Mineral agreement or financial or technical assistance
agreement applications shall not be allowed:
(a) In military and other government reservations, except upon prior written clearance by the government agency
concerned;
(b) Near or under public or private buildings, cemeteries, archeological and historic sites, bridges, highways,
waterways, railroads, reservoirs, dams or other infrastructure projects, public or private works including
plantations or valuable crops, except upon written consent of the government agency or private entity
concerned;

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(c) In areas covered by valid and existing mining rights;
(d) In areas expressly prohibited by law;
(e) In areas covered by small-scale miners as defined by law unless with prior consent of the small-scale miners,
in which case a royalty payment upon the utilization of minerals shall be agreed upon by the parties, said royalty
forming a trust fund for the socioeconomic development of the community concerned; and
(f) Old growth or virgin forests, proclaimed watershed forest reserves, wilderness areas, mangrove forests,
mossy forests, national parks, provincial/municipal forests, parks, greenbelts, game refuge and bird sanctuaries
as defined by law and in areas expressly prohibited under the National Integrated Protected Areas System
(NIPAS) under Republic Act No. 7586, Department Administrative Order No. 25, series of 1992 and other laws.
SECTION 112. Non-impairment of Existing Mining/ Quarrying Rights. All valid and existing mining lease
contracts, permits/licenses, leases pending renewal, mineral production-sharing agreements granted under
Executive Order No. 279, at the date of effectivity of this Act, shall remain valid, shall not be impaired, and shall
be recognized by the Government: Provided, That the provisions of Chapter XIV on government share in mineral
production-sharing agreement and of Chapter XVI on incentives of this Act shall immediately govern and apply to
a mining lessee or contractor unless the mining lessee or contractor indicates his intention to the secretary, in
writing, not to avail of said provisions: Provided, further, That no renewal of mining lease contracts shall be made
after the expiration of its term: Provided, finally, That such leases, production-sharing agreements, financial or
technical assistance agreements shall comply with the applicable provisions of this Act and its implementing
rules and regulations.
SECTION 113. Recognition of Valid and Existing Mining Claims and Lease/Quarry Application. Holders of valid
and existing mining claims, lease/quarry applications shall be given preferential rights to enter into any mode of
mineral agreement with the government within two (2) years from the promulgation of the rules and regulations
implementing this Act. (Underscoring supplied)
Section 3(p) of RA 7942 defines an existing mining/quarrying right as a valid and subsisting mining claim or
permit or quarry permit or any mining lease contract or agreement covering a mineralized area granted/issued
under pertinent mining laws. Consequently, determining whether the license of respondents falls under this
definition would be relevant to fixing their entitlement to the rights and/or preferences under RA 7942. Hence, the
present Petition has not been mooted.
Petitioners submit that the license clearly contravenes Section 69 of PD 463, because it exceeds the maximum
area that may be granted. This incipient violation, according to them, renders the license void ab initio.
Respondents, on the other hand, argue that the license was validly granted, because it was covered by four
separate applications for areas of 81 hectares each.
The license in question, QLP No. 33,[19] is dated August 3, 1982, and it was issued in the name of Rosemoor
Mining Development Corporation. The terms of the license allowed the corporation to extract and dispose of
marbleized limestone from a 330.3062-hectare land in San Miguel, Bulacan. The license is, however, subject to
the terms and conditions of PD 463, the governing law at the time it was granted; as well as to the rules and
regulations promulgated thereunder.[20] By the same token, Proclamation No. 2204 -- which awarded to
Rosemoor the right of development, exploitation, and utilization of the mineral site -- expressly cautioned that the
grant was subject to existing policies, laws, rules and regulations.[21]
The license was thus subject to Section 69 of PD 463, which reads:
Section 69. Maximum Area of Quarry License Notwithstanding the provisions of Section 14 hereof, a quarry
license shall cover an area of not more than one hundred (100) hectares in any one province and not more than
one thousand (1,000) hectares in the entire Philippines. (Italics supplied)
The language of PD 463 is clear. It states in categorical and mandatory terms that a quarry license, like that of
respondents, should cover a maximum of 100 hectares in any given province. This law neither provides any
exception nor makes any reference to the number of applications for a license. Section 69 of PD 463 must be
taken to mean exactly what it says. Where the law is clear, plain, and free from ambiguity, it must be given its
literal meaning and applied without attempted interpretation.[22]

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Moreover, the lower courts ruling is evidently inconsistent with the fact that QLP No. 33 was issued solely in the
name of Rosemoor Mining and Development Corporation, rather than in the names of the four individual
stockholders who are respondents herein. It likewise brushes aside a basic postulate that a corporation has a
separate personality from that of its stockholders.[23]
The interpretation adopted by the lower courts is contrary to the purpose of Section 69 of PD 463. Such intent to
limit, without qualification, the area of a quarry license strictly to 100 hectares in any one province is shown by
the opening proviso that reads: Notwithstanding the provisions of Section 14 hereof x x x. The mandatory nature
of the provision is also underscored by the use of the word shall. Hence, in the application of the 100-hectareper-province limit, no regard is given to the size or the number of mining claims under Section 14, which we
quote:
SECTION 14. Size of Mining Claim. -- For purposes of registration of a mining claim under this Decree, the
Philippine territory and its shelf are hereby divided into meridional blocks or quadrangles of one-half minute (1/2)
of latitude and longitude, each block or quadrangle containing area of eighty-one (81) hectares, more or less.
A mining claim shall cover one such block although a lesser area may be allowed if warranted by attendant
circumstances, such as geographical and other justifiable considerations as may be determined by the Director:
Provided, That in no case shall the locator be allowed to register twice the area allowed for lease under Section
43 hereof. (Italics supplied)
Clearly, the intent of the law would be brazenly circumvented by ruling that a license may cover an area
exceeding the maximum by the mere expediency of filing several applications. Such ruling would indirectly
permit an act that is directly prohibited by the law.
Second Issue:
Validity of Proclamation No. 84
Petitioners also argue that the license was validly declared a nullity and consequently withdrawn or terminated.
In a letter dated September 15, 1986, respondents were informed by then Minister Ernesto M. Maceda that their
license had illegally been issued, because it violated Section 69 of PD 463; and that there was no more public
interest served by the continued existence or renewal of the license. The latter reason, they added, was
confirmed by the language of Proclamation No. 84. According to this law, public interest would be served by
reverting the parcel of land that was excluded by Proclamation No. 2204 to the former status of that land as part
of the Biak-na-Bato national park.
They also contend that Section 74 of PD 463 would not apply, because Minister Macedas letter did not cancel or
revoke QLP No. 33, but merely declared the latters nullity. They further argue that respondents waived notice
and hearing in their application for the license.
On the other hand, respondents submit that, as provided for in Section 74 of PD 463, their right to due process
was violated when their license was cancelled without notice and hearing. They likewise contend that
Proclamation No. 84 is not valid for the following reasons: 1) it violates the clause on the non-impairment of
contracts; 2) it is an ex post facto law and/or a bill of attainder; and 3) it was issued by the President after the
effectivity of the 1987 Constitution.
This Court ruled on the nature of a natural resource exploration permit, which was akin to the present
respondents license, in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative,[24]
which held:
x x x. As correctly held by the Court of Appeals in its challenged decision, EP No. 133 merely evidences a
privilege granted by the State, which may be amended, modified or rescinded when the national interest so
requires. This is necessarily so since the exploration, development and utilization of the countrys natural mineral
resources are matters impressed with great public interest. Like timber permits, mining exploration permits do
not vest in the grantee any permanent or irrevocable right within the purview of the non-impairment of contract
and due process clauses of the Constitution, since the State, under its all-encompassing police power, may alter,
modify or amend the same, in accordance with the demands of the general welfare.[25]
This same ruling had been made earlier in Tan v. Director of Forestry[26] with regard to a timber license, a
pronouncement that was reiterated in Ysmael v. Deputy Executive Secretary,[27] the pertinent portion of which

6
reads:
x x x. Timber licenses, permits and license agreements are the principal instruments by which the State
regulates the utilization and disposition of forest resources to the end that public welfare is promoted. And it can
hardly be gainsaid that they merely evidence a privilege granted by the State to qualified entities, and do not vest
in the latter a permanent or irrevocable right to the particular concession area and the forest products therein.
They may be validly amended, modified, replaced or rescinded by the Chief Executive when national interests so
require. Thus, they are not deemed contracts within the purview of the due process of law clause [See Sections
3(ee) and 20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October
27, 1983, 125 SCRA 302].[28] (Italics supplied)
In line with the foregoing jurisprudence, respondents license may be revoked or rescinded by executive action
when the national interest so requires, because it is not a contract, property or a property right protected by the
due process clause of the Constitution.[29] Respondents themselves acknowledge this condition of the grant
under paragraph 7 of QLP No. 33, which we quote:
7. This permit/license may be revoked or cancelled at any time by the Director of Mines and Geo-Sciences
when, in his opinion public interests so require or, upon failure of the permittee/licensee to comply with the
provisions of Presidential Decree No. 463, as amended, and the rules and regulations promulgated thereunder,
as well as with the terms and conditions specified herein; Provided, That if a permit/license is cancelled, or
otherwise terminated, the permittee/licensee shall be liable for all unpaid rentals and royalties due up to the time
of the termination or cancellation of the permit/license[.][30] (Italics supplied)
The determination of what is in the public interest is necessarily vested in the State as owner of all mineral
resources. That determination was based on policy considerations formally enunciated in the letter dated
September 15, 1986, issued by then Minister Maceda and, subsequently, by the President through Proclamation
No. 84. As to the exercise of prerogative by Maceda, suffice it to say that while the cancellation or revocation of
the license is vested in the director of mines and geo-sciences, the latter is subject to the formers control as the
department head. We also stress the clear prerogative of the Executive Department in the evaluation and the
consequent cancellation of licenses in the process of its formulation of policies with regard to their utilization.
Courts will not interfere with the exercise of that discretion without any clear showing of grave abuse of
discretion.[31]
Moreover, granting that respondents license is valid, it can still be validly revoked by the State in the exercise of
police power.[32] The exercise of such power through Proclamation No. 84 is clearly in accord with jura regalia,
which reserves to the State ownership of all natural resources.[33] This Regalian doctrine is an exercise of its
sovereign power as owner of lands of the public domain and of the patrimony of the nation, the mineral deposits
of which are a valuable asset.[34]
Proclamation No. 84 cannot be stigmatized as a violation of the non-impairment clause. As pointed out earlier,
respondents license is not a contract to which the protection accorded by the non-impairment clause may
extend.[35] Even if the license were, it is settled that provisions of existing laws and a reservation of police power
are deemed read into it, because it concerns a subject impressed with public welfare.[36] As it is, the nonimpairment clause must yield to the police power of the state.[37]
We cannot sustain the argument that Proclamation No. 84 is a bill of attainder; that is, a legislative act which
inflicts punishment without judicial trial.[38] Its declaration that QLP No. 33 is a patent nullity[39] is certainly not a
declaration of guilt. Neither is the cancellation of the license a punishment within the purview of the constitutional
proscription against bills of attainder.
Too, there is no merit in the argument that the proclamation is an ex post facto law. There are six recognized
instances when a law is considered as such: 1) it criminalizes and punishes an action that was done before the
passing of the law and that was innocent when it was done; 2) it aggravates a crime or makes it greater than it
was when it was committed; 3) it changes the punishment and inflicts one that is greater than that imposed by
the law annexed to the crime when it was committed; 4) it alters the legal rules of evidence and authorizes
conviction upon a less or different testimony than that required by the law at the time of the commission of the
offense; 5) it assumes the regulation of civil rights and remedies only, but in effect imposes a penalty or a
deprivation of a right as a consequence of something that was considered lawful when it was done; and 6) it
deprives a person accused of a crime of some lawful protection to which he or she become entitled, such as the

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protection of a former conviction or an acquittal or the proclamation of an amnesty.[40] Proclamation No. 84 does
not fall under any of the enumerated categories; hence, it is not an ex post facto law.
It is settled that an ex post facto law is limited in its scope only to matters criminal in nature.[41] Proclamation 84,
which merely restored the area excluded from the Biak-na-Bato national park by canceling respondents license,
is clearly not penal in character.
Finally, it is stressed that at the time President Aquino issued Proclamation No. 84 on March 9, 1987, she was
still validly exercising legislative powers under the Provisional Constitution of 1986.[42] Section 1 of Article II of
Proclamation No. 3, which promulgated the Provisional Constitution, granted her legislative power until a
legislature is elected and convened under a new Constitution. The grant of such power is also explicitly
recognized and provided for in Section 6 of Article XVII of the 1987 Constitution.[43]
WHEREFORE, this Petition is hereby GRANTED and the appealed Decision of the Court of Appeals SET
ASIDE. No costs.
SO ORDERED.

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[G.R. No. 160701. February 9, 2004]
BAYLON vs. AMADOR
Petitioner assails the July 30, 2001 decision of the Court of Appeals in CA-G.R. CV No. 54363 which modified
the January 22, 1996 consolidated decision of the Regional Trial Court (RTC) of Sorsogon, Branch 52 in Civil
Cases 91-5653 (specific performance) and 92-5747 (certiorari).
On August 26, 1987, private respondent filed an ejectment case against petitioner at the Municipal Trial Court
(MTC) of Bacon, Sorsogon, alleging that the latter defaulted in payment of rentals and refused to vacate the
subject property owned by private respondent despite repeated demands.
On December 28, 1990, after the parties submitted their respective position papers, the MTC decided in favor of
private respondent and ordered petitioner to vacate the subject premises.
In retaliation, petitioner filed Civil Case No. 91-5663 before the Sorsogon RTC for specific performance alleging
that their contract of lease also contained an option to buy through which private respondent gave petitioner the
preferential right to purchase the subject property in the event the same was put on sale.
In the meantime, private respondent's ex parte motion for execution of judgment in the ejectment case was
granted and on April 19, 1992, the MTC issued an alias writ of execution.
To prevent imminent ejectment, petitioner filed a petition for certiorari, prohibition and mandamus with prayer for
issuance of temporary restraining order (TRO) at the Sorsogon RTC, docketed as Civil Case No. 92-5747.
Meanwhile, without notice to private respondent, petitioner acquired a "3/9 portion" of the subject property from
one of the co-owners.
Trial of both Civil Case Nos. 91-5653 and 92-5747 ensued. Thereafter the Sorsogon RTC, Branch 52 rendered
the January 22, 1996 decision. The dispositive portion stated:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiff (Civil Case No.
5633), the petitioner in Civil Case No. 5747 and against the defendant in (Civil Case No. 5633) and the
respondent in (Civil Case No. 5747).
1.Finding that the plaintiff has .the preferential right to acquire the property in question in the event defendant
sells/alienate the remaining portion of the property in question.
2.To permanently enjoin the lower court from enforcing the alias writ of execution in Civil Case 183.
3.Declaring plaintiff to be co-owner of the house and lot in question for having acquired by purchase at least 3/9
portion of the questioned property.
4.Ordering the defendant to pay plaintiff the sum of P10,000.00 as attorney's fees and the sum of P5,000.00 as
litigation expenses.
5. The counterclaim of defendant is hereby dismissed.
6.Defendant shall pay the cost of the suit.[2]
Private respondent appealed to the Court of Appeals.
On July 30, 2001, the appellate court modified the decision of the Sorsogon RTC:
WHEREFORE, in view of the foregoing, the appealed decision dated January 22, 1996 of the Regional Trial
Court (Branch 52) in Sorsogon, Sorsogon in Civil Cases Nos. 91-5653 and 92-5747, is hereby MODIFIED in
that:
(1)The plaintiff-appellee has lost his preferential right to buy the property in question; and
(2)The defendant-appellant be given a period of thirty (30) days from finality of this judgment within which to
redeem that portion which had been acquired by the plaintiff-appellee;
but AFFIRMED in all other respects. No costs. Let the records be remanded to the court a quo for appropriate

9
action.[3]
Petitioner's motion for reconsideration was denied on November 6, 2003.
Petitioner argues that the appellate court committed reversible error when it declared him to have lost his
preferential right to buy the subject property and gave private respondent 30 days from finality of judgment to
redeem the "3/9 portion" of the disputed property acquired by petitioner from private respondent's co-owner.
The petition is without merit.
As correctly ruled by the appellate court, even if the parties originally had a contract of lease with option to buy,
when the lease contract expired, the tacit renewal of the contract was limited only to those terms of the contract
which were germane to the petitioner's right of continued lease over the property and did not extend to alien
matters like the option to buy the leased premises.[4]
The Court has ruled that, in case of implicit renewal of a contract of lease on a monthly basis, the terms of the
original lease contract which are revived in the implied new lease under Article 1670 of the New Civil Code are
only those terms germane to the lessee's right of continued possession and enjoyment of the property leased.
Therefore, in this case, the implied new lease did not ipso facto carry with it the revival of petitioner's option to
buy the leased premises because said option was alien to the lease. Stated differently, petitioner's right to
exercise the option to purchase expired with the termination of the original contract of lease.[5]
Regarding private respondent's right of redemption, Article 1088 of the New Civil Code explicitly states that,
should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may
be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so
within the period of one month from the time they were notified in writing by the vendor.
The requirement of a written notice is mandatory. This Court has long established the rule that, notwithstanding
actual knowledge of a co-owner, the latter is still entitled to a written notice from the selling co-owner in order to
remove all uncertainties about the sale, its terms and conditions as well as its efficacy and status.[6]
Private respondent was never given such written notice. He thus still has the right to redeem said one-third
portion of the subject property. On account of the lack of written notice of the sale by the other co-heirs, the 30day period never commenced.
All told, the Court finds no reversible error committed by the appellate court in rendering the assailed decision.
WHEREFORE, petition is hereby denied due course. SO ORDERED.

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[G.R. No. 170314 : November 17, 2010]
NATIONAL POWER CORPORATION VS. FELINO B. LUCERO
Sirs/Mesdames:
Please take notice that the Court, Second Division, issued a Resolution dated 17 November 2010 which reads
as follows:
G.R. No. 170314- (National Power Corporation v. Felino B. Lucero)
This resolves the petition for review[1] of the Decision[2] of the Court of Appeals ordering the National Power
Corporation to pay compensation with interest for obtaining an easement of right of way.
Petitioner National Power Corporation (petitioner) is a government corporation tasked under its franchise,
Republic Act No. 6395 (RA 6395), as amended by Presidential Decree No. 938 (PD 938), to generate and
transmit electric power and, for this purpose, to obtain easement of right of way to string transmission lines
across private property. Petitioner obtained such easement from respondent Feiino B. Lucero (respondent) in
1993 and strung 138 kilovolts transmission lines across 7,572 square meters of respondent's 64,477 squaremeter land in Badian, Cebu. For petitioner's alleged failure to pay damages for the creation of the easement,
respondent, in December 1999, sued petitioner in the Regional Trial Court of Barili, Cebu (trial court), for
payment of damages, attorney's fees and costs.
In its Answer, petitioner admitted the fact of routing transmission lines over respondent's property but raised the
defense of prescription, contending that respondent's suit was barred by the five-year prescriptive period for
filing compensation claims under Section 3(i) of RA 6395. Alternatively, petitioner admitted liability only for the
payment of an easement fee equivalent to 10% of the value of the 7,572 square meters traversed by its
transmission lines, following Section 3(A)[3] of RA 6395, as amended by PD 938.
On respondent's motion, the trial court rendered summary judgment ordering petitioner to pay to respondent
actual damages of P16,000,000 subject to 12% annual interest, moral damages of P3,000,000 and attorney's
fees of P915,000. On appeal by petitioner, the Court of Appeals (CA) affirmed the trial court's ruling but lowered,
the amount of compensation to P3,505,836 with 6% annual interest, to cover only the 7,572 square-meter
portion traversed by the transmission wires, valued at P463 per square meter. The CA also deleted the award of
moral damages and attorney's fees for lack of basis.
The parties sought reconsideration but the CA found no basis to alter its ruling save for the annual rate of
interest on the compensation which it Increased to 12% following this Court's ruling in Republic v. Court of
Appeals.[4]
Hence this petition, questioning the amount of compensation and rate of interest the CA awarded to respondent.
Petitioner submits that the compensation should be limited to 10% of the value of the area traversed by its
transmission lines and its annual rate of interest should only be 6%.
We find no reversible error in the CAs ruling hence, we deny the petition.
First. This Court has consistently rejected as untenable petitioner's reliance on Section 3(A) of RA 6395, as
amended, to lower its liability to 10% of the value of the property subjected to its easement of right of way in light
of the perpetual and hazardous burden the stringing of high-voltage transmission wires imposes on private
property.[5] Legally, this type of easement is akin to taking within the contemplation of eminent domain
proceedings, thus compensation, as the CA correctly ruled, covers the full amount of the property burdened by
the easement.[6]
Second. The legal rate of 6% interest per annum applies to the breach of an obligation to pay a sum of money
not constituting a loan or forbearance of money.[7] However, in expropriation proceedings marked by the
government's failure to pay compensation for an unreasonable length of time, the obligation to pay becomes an

11
"effective forbearance," earning an interest rate of 12% per annum to "help eliminate the issue of the constant
fluctuation x x x of the value of currency over time."[8] Thus, we imposed an annual interest rate of 12% in cases
where the government failed to pay compensation decades after taking private property.[9] Here, respondent
remains unpaid nearly two decades after petitioner subjected his property to a perpetual and hazardous
easement in 1993, a period which saw numerous fluctuations of the value of the peso. Hence, the CA did not err
in amending its ruling to order payment of interest on the compensation at the rate of 12% per year.
WHEREFORE, we RESOLVED to DENY the petition.
SO ORDERED. (Nachura, J., no part; Leonardo-De Castro, J., designated additional member per Raffle dated 8
November 2010)

12
G.R. No. 166102, August 05, 2015
MANILA ELECTRIC COMPANY, Petitioner, v. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA
CITY, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by Manila Electric
Company (MERALCO), seeking the reversal of the Decision1 dated May 13, 2004 and Resolution2 dated
November 18, 2004 of the Court of Appeals in CA-G.R. SP No. 67027. The appellate court affirmed the
Decision3 dated May 3, 2001 of the Central Board of Assessment Appeals (CBAA) in CBAA Case No. L-20-98,
which, in turn, affirmed with modification the Decision4 dated June 17, 19985 of the Local Board of Assessment
Appeals (LBAA) of Lucena City, Quezon Province, as regards Tax Declaration Nos. 019-6500 and 019-7394,
ruling that MERALCO is liable for real property tax on its transformers, electric posts (or poles), transmission
lines, insulators, and electric meters, beginning 1992.
MERALCO is a private corporation organized and existing under Philippine laws to operate as a public utility
engaged in electric distribution. MERALCO has been successively granted franchises to operate in Lucena City
beginning 1922 until present time, particularly, by: (1) Resolution No. 366 dated May 15, 1922 of the Municipal
Council of Lucena; (2) Resolution No. 1087 dated July 1, 1957 of the Municipal Council of Lucena; (3)
Resolution No. 26798 dated June 13, 1972 of the Municipal Board of Lucena City;9 (4) Certificate of
Franchise10 dated October 28, 1993 issued by the National Electrification Commission; and (5) Republic Act No.
920911 approved on June 9, 2003 by Congress.12
On February 20, 1989, MERALCO received from the City Assessor of Lucena a copy of Tax Declaration No.
019-650013 covering the following electric facilities, classified as capital investment, of the company: (a)
transformer and electric post; (b) transmission line; (c) insulator; and (d) electric meter, located in Quezon Ave.
Ext., Brgy. Gulang-Gulang, Lucena City. Under Tax Declaration No. 019-6500, these electric facilities had a
market value of P81,811,000.00 and an assessed value of P65,448,800.00, and were subjected to real property
tax as of 1985.
MERALCO appealed Tax Declaration No. 019-6500 before the LBAA of Lucena City, which was docketed as
LBAA-89-2. MERALCO claimed that its capital investment consisted only of its substation facilities, the true and
correct value of which was only P9,454,400.00; and that MERALCO was exempted from payment of real
property tax on said substation facilities.
The LBAA rendered a Decision14 in LBAA-89-2 on July 5, 1989, finding that under its franchise, MERALCO was
required to pay the City Government of Lucena a tax equal to 5% of its gross earnings, and "[s]aid tax shall be
due and payable quarterly and shall be in lieu of any and all taxes of any kind, nature, or description levied,
established, or collected x x x, on its poles, wires, insulators, transformers and structures, installations,
conductors, and accessories, x x x, from which taxes the grantee (MERALCO) is hereby expressly exempted."15
As regards the issue of whether or not the poles, wires, insulators, transformers, and electric meters of
MERALCO were real properties, the LBAA cited the 1964 case of Board of Assessment Appeals v. Manila
Electric Company16 (1964 MERALCO case) in which the Court held that: (1) the steel towers fell within the term
"poles" expressly exempted from taxes under the franchise of MERALCO; and (2) the steel towers were
personal properties under the provisions of the Civil Code and, hence, not subject to real property tax. The LBAA
lastly ordered that Tax Declaration No. 019-6500 would remain and the poles, wires, insulators, transformers,

13
and electric meters of MERALCO would be continuously assessed, but the City Assessor would stamp on the
said Tax Declaration the word "exempt." The LBAA decreed in the end:
WHEREFORE, from the evidence adduced by the parties, the Board overrules the claim of the [City Assessor of
Lucena] and sustain the claim of [MERALCO].
Further, the Appellant (Meralco) is hereby ordered to render an accounting to the City Treasurer of Lucena and
to pay the City Government of Lucena the amount corresponding to the Five (5%) per centum of the gross
earnings in compliance with paragraph 13 both Resolutions 108 and 2679, respectively, retroactive from
November 9, 1957 to date, if said tax has not yet been paid.17
The City Assessor of Lucena filed an appeal with the CBAA, which was docketed as CBAA Case No. 248. In its
Decision18 dated April 10, 1991, the CBAA affirmed the assailed LBAA judgment. Apparently, the City Assessor
of Lucena no longer appealed said CBAA Decision and it became final and executory.
Six years later, on October 29, 1997, MERALCO received a letter19 dated October 16, 1997 from the City
Treasurer of Lucena, which stated that the company was being assessed real property tax delinquency on its
machineries beginning 1990, in the total amount of P17,925,117.34, computed as follows:
TAX
DEC. #

ASSESSED
VALUE

COVERED
PERIOD

TAX DUE

PENALTY

TOTAL

019-6500
019-7394

P65,448,800.00
78,538,560.00

1990-94
1995
1996
lst-3rd/1997
4th 1997

P3,272,440.00
785,385.60
785,385.60
589,039.20
196,346.40

P2,356,156.80
534,062.21
345,569.66
117,807.84
(19,634.64)
BASIC---SEF----

P5,628,596.80
1,319,447.81
1,130,955.26
706,847.04
176,711.76
P8,962,558.67
8,962,558.67
P17,925,117.34

TOTAL TAX DELINQUENCY----

The City Treasurer of Lucena requested that MERALCO settle the payable amount soon to avoid accumulation
of penalties. Attached to the letter were the following documents: (a) Notice of Assessment20 dated October 20,
1997 issued by the City Assessor of Lucena, pertaining to Tax Declaration No. 019-7394, which increased the
market value and assessed value of the machinery; (b) Property Record Form;21 and (c) Tax Declaration No.
019-6500.22
MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 before the LBAA of Lucena City on
December 23, 1997 and posted a surety bond23 dated December 10, 1997 to guarantee payment of its real
property tax delinquency. MERALCO asked the LBAA to cancel and nullify the Notice of Assessment dated
October 20, 1997 and declare the properties covered by Tax Declaration Nos. 019-6500 and 019-7394 exempt
from real property tax.
In its Decision dated June 17, 1998 regarding Tax Declaration Nos. 019-6500 and 019-7394, the LBAA declared
that Sections 234 and 534(f) of the Local Government Code repealed the provisions in the franchise of
MERALCO and Presidential Decree No. 55124 pertaining to the exemption of MERALCO from payment of real
property tax on its poles, wires, insulators, transformers, and meters. The LBAA refused to apply as res judicata
its earlier judgment in LBAA-89-2, as affirmed by the CBAA, because it involved collection of taxes from 1985 to
1989, while the present case concerned the collection of taxes from 1989 to 1997; and LBAA is only an
administrative body, not a court or quasi-judicial body. The LBAA though instructed that the computation of the

14
real property tax for the machineries should be based on the prevailing 1991 Schedule of Market Values, less
the depreciation cost allowed by law. The LBAA ultimately disposed:
WHEREFORE, in view of the foregoing, it is hereby ordered that:
1) MERALCO's appeal be dismissed for lack of merit;
2) MERALCO be required to pay the realty tax on the questioned properties, because they are not exempt by
law, same to be based on the 1991 level of assessment, less depreciation cost allowed by law.25
MERALCO went before the CBAA on appeal, which was docketed as CBAA Case No. L-20-98. The CBAA, in its
Decision dated May 3, 2001, agreed with the LBAA that MERALCO could no longer claim exemption from real
property tax on its machineries with the enactment of Republic Act No. 7160, otherwise known as the Local
Government Code of 1991, thus:
Indeed, the Central Board of Assessment Appeals has had the opportunity of ruling in [MERALCO's] favor in
connection with this very same issue. The matter was settled on April 10, 1991 where this Authority ruled that
"wires, insulators, transformers and electric meters which are mounted on poles and can be separated from the
poles and moved from place to place without breaking the material or causing [the] deterioration of the object,
are deemed movable or personal property". The same position of MERALCO would have been tenable and that
decision may have stood firm prior to the enactment of R.A. 7160 but not anymore in this jurisdiction. The Code
provides and now sets a more stringent yet broadened concept of machinery, x x x:
xxxx
The pivotal point where the difference lie between the former and the current case is that by the very wordings of
[Section 199(0)], the ground being anchored upon by MERALCO concerning the properties in question being
personal in nature does not hold anymore for the sole reason that these come now within the purview and new
concept of Machineries. The new law has treated these in an unequivocal manner as machineries in the sense
that they are instruments, mechanical contrivances or apparatus though not attached permanently to the real
properties of [MERALCO] are actually, directly and exclusively used to meet their business of distributing
electricity.
xxxx
Clearly, [Section 234 of the Local Government Code] lists down the instances of exemption in real property
taxation and very apparent is the fact that the enumeration is exclusive in character in view of the wordings in the
last paragraph. Applying the maxim "Expressio Unius est Exclusio Alterius", we can say that "Where the statute
enumerates those who can avail of the exemption, it is construed as excluding all others not mentioned therein".
Therefore, the above-named company [had] lost its previous exemptions under its franchise because of noninclusion in the enumeration in Section 234. Furthermore, all tax exemptions being enjoyed by all persons,
whether natural or juridical, including all government-owned or controlled corporations are expressly withdrawn,
upon effectivity of R.A. 7160.
In the given facts, it has been manifested that the Municipal Board of Lucena passed Resolution No. 108 on July
1, 1957 extending the franchise of MERALCO to operate in Lucena city an electric light system for thirty-five
years, which should have expired on November 9, 1992 and under Resolution No. 2679 passed on June 13,
1972 by the City Council of Lucena City awarding [MERALCO] a franchise to operate for twenty years an electric

15
light, heat and power system in Lucena City, also to expire in the year 1992. Under those franchises, they were
only bound to pay franchise taxes and nothing more.
Now, granting arguendo that there is no express revocation of the exemption under the franchise of [MERALCO]
since, unquestionably [MERALCO] is a recipient of another franchise granted this time by the National
Electrification Commission as evidenced by a certificate issued on October 28, 1993, such conferment does not
automatically include and/or award exemption from taxes, nor does it impliedly give the franchisee the right to
continue the privileges like exemption granted under its previous franchise. It is just a plain and simple franchise.
In countless times, the Supreme Court has ruled that exemption must be clear in the language of the law
granting such exemption for it is strictly construed and favored against the person invoking it. In addition, a
franchise though in the form of a contract is also a privilege that must yield to the sublime yet inherent powers of
the state, one of these is the power of taxation.
Looking into the law creating the National Electrification Administration (Commission), P.D. 269 as amended by
P.D. 1645, nowhere in those laws can we find such authority to bestow upon the grantee any tax exemption of
whatever nature except those of cooperatives. This we believe is basically in consonance with the provisions of
the Local Government Code more particularly Section 234.
Furthermore, Section 534(f) of R.A. 7160 which is taken in relation to Section 234 thereof states that "All general
and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations or
part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or
modified accordingly". Anent this unambiguous mandate, P.D. 551 is mandatorily repealed due to its
contradictory and irreconcilable provisions with R.A. 7160.26
Yet, the CBAA modified the ruling of the LBAA by excluding from the real property tax deficiency assessment the
years 1990 to 1991, considering that:
In the years 1990 and 1991, the exemption granted to MERALCO under its franchise which incidentally expired
upon the effectivity of the Local Government Code of 1991 was very much in effect and the decision rendered by
the Central Board of Assessment Appeals (CBAA) classifying its poles, wires, insulators, transformers and
electric meters as personal property was still controlling as the law of the case. So, from 1990 to 1991, it would
be inappropriate and illegal to make the necessary assessment on those properties, much more to impose any
penalty for nonpayment of such.
But, assessments made beginning 1992 until 1997 by the City Government of Lucena is legal, both procedurally
and substantially. When R.A. 7160, which incorporated amended provisions of the Real Property Tax Code, took
effect on January 1, 1992, as already discussed, the nature of the aforecited questioned properties considered
formerly as personal metamorphosed to machineries and the exemption being invoked by [MERALCO] was
automatically withdrawn pursuant to the letter and spirit of the law. x x x.27
Resultantly, the decretal portion of said CBAA Decision reads:
WHEREFORE, in view of the foregoing, the Decision appealed from is hereby modified. The City Assessor of
Lucena City is hereby directed to make a new assessment on the subject properties to retroact from the year
1992 and the City Treasurer to collect the tax liabilities in accordance with the provisions of the cited Section 222
of the Local Government Code.28
The CBAA denied the Motion for Reconsideration of MERALCO in a Resolution29 dated August 16, 2001.

16
Disgruntled, MERALCO sought recourse from the Court of Appeals by filing a Petition for Review under Rule 43
of the Rules of Court, which was docketed as CA-G.R. SP No. 67027.
The Court of Appeals rendered a Decision on May 13, 2004 rejecting all arguments proffered by MERALCO. The
appellate court found no deficiency in the Notice of Assessment issued by the City Assessor of Lucena:
It was not disputed that [MERALCO] failed to provide the [City Assessor and City Treasurer of Lucena] with a
sworn statement declaring the true value of each of the subject transformer and electric post, transmission line,
insulator and electric meter which should have been made the basis of the fair and current market value of the
aforesaid property and which would enable the assessor to identify the same for assessment purposes.
[MERALCO] merely claims that the assessment made by the [City Assessor and City Treasurer of Lucena] was
incorrect but did not even mention in their pleading the true and correct assessment of the said properties.
Absent any sworn statement given by [MERALCO], [the City Assessor and City Treasurer of Lucena] were
constrained to make an assessment based on the materials within [their reach].30
The Court of Appeals further ruled that there was no more basis for the real property tax exemption of
MERALCO under the Local Government Code and that the withdrawal of said exemption did not violate the nonimpairment clause of the Constitution, thus:
Although it could not be denied that [MERALCO] was previously granted a Certificate of Franchise by the
National Electrification Commission on October 28, 1993 x x x, such conferment does not automatically include
an exemption from the payment of realty tax, nor does it impliedly give the franchisee the right to continue the
privileges granted under its previous franchise considering that Sec. 534(f) of the Local Government Code of
1991 expressly repealed those provisions which are inconsistent with the Code.
At the outset, the Supreme Court has held that "Section 193 of the LGC prescribes the general rule, viz., tax
exemptions or incentives granted to or presently enjoyed by natural or juridical persons are withdrawn upon the
effectivity of the LGC except with respect to those entities expressly enumerated. In the same vein, We must
hold that the express withdrawal upon effectivity of the LGC of all exemptions except only as provided therein,
can no longer be invoked by MERALCO to disclaim liability for the local tax." (City Government of San Pablo,
Laguna vs. Reyes, 305 SCRA 353, 362-363)
In fine, [MERALCO's] invocation of the non-impairment clause of the Constitution is accordingly unavailing. The
LGC was enacted in pursuance of the constitutional policy to ensure autonomy to local governments and to
enable them to attain fullest development as self-reliant communities. The power to tax is primarily vested in
Congress. However, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue
of a valid delegation as before, but pursuant to [a] direct authority conferred by Section 5, Article X of the
Constitution. The important legal effect of Section 5 is that henceforth, in interpreting statutory provisions on
municipal fiscal powers, doubts will be resolved in favor of the municipal corporations. (Ibid. pp. 363-365)31
MERALCO similarly failed to persuade the Court of Appeals that the transformers, transmission lines, insulators,
and electric meters mounted on the electric posts of MERALCO were not real properties. The appellate court
invoked the definition of "machinery" under Section 199(o) of the Local Government Code and then wrote that:
We firmly believe and so hold that the wires, insulators, transformers and electric meters mounted on the poles
of [MERALCO] may nevertheless be considered as improvements on the land, enhancing its utility and rendering
it useful in distributing electricity. The said properties are actually, directly and exclusively used to meet the
needs of [MERALCO] in the distribution of electricity.

17
In addition, "improvements on land are commonly taxed as realty even though for some purposes they might be
considered personalty. It is a familiar personalty phenomenon to see things classed as real property for purposes
of taxation which on general principle might be considered personal property." (Caltex (Phil) Inc. vs. Central
Board of Assessment Appeals, 114 SCRA 296, 301-302)32
Lastly, the Court of Appeals agreed with the CBAA that the new assessment of the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO shall retroact to 1992.
Hence, the Court of Appeals adjudged:
WHEREFORE, premises considered, the assailed Decision [dated] May 3, 2001 and Resolution dated August
16, 2001 are hereby AFFIRMED in toto and the present petition is hereby DENIED DUE COURSE and
accordingly DISMISSED for lack of merit.33
In a Resolution dated November 18, 2004, the Court of Appeals denied the Motion for Reconsideration of
MERALCO.
MERALCO is presently before the Court via the instant Petition for Review on Certiorari grounded on the
following lone assignment of error:
THE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN AFFIRMING IN TOTO THE
DECISION OF THE CENTRAL BOARD OF ASSESSMENT APPEALS WHICH HELD THAT THE SUBJECT
PROPERTIES ARE REAL PROPERTIES SUBJECT TO REAL PROPERTY TAX; AND THAT ASSESSMENT ON
THE SUBJECT PROPERTIES SHOULD BE MADE TO TAKE EFFECT RETROACTIVELY FROM 1992 UNTIL
1997, WITH PENALTIES; THE SAME BEING UNJUST, WHIMSICAL AND NOT IN ACCORD WITH THE LOCAL
GOVERNMENT CODE.34
MERALCO argues that its transformers, electric posts, transmission lines, insulators, and electric meters are not
subject to real property tax, given that: (1) the definition of "machinery" under Section 199(o) of the Local
Government Code, on which real property tax is imposed, must still be within the contemplation of real or
immovable property under Article 415 of the Civil Code because it is axiomatic that a statute should be construed
to harmonize with other laws on the same subject matter as to form a complete, coherent, and intelligible
system; (2) the Decision dated April 10, 1991 of the CBAA in CBAA Case No. 248, which affirmed the Decision
dated July 5, 1989 of the LBAA in LBAA-89-2, ruling that the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO are movable or personal properties, is conclusive and binding; and
(3) the electric poles are not exclusively used to meet the needs of MERALCO alone since these are also being
utilized by other entities such as cable and telephone companies.
MERALCO further asserts that even if it is assumed for the sake of argument that the transformers, electric
posts, transmission lines, insulators, and electric meters are real properties, the assessment of said properties
by the City Assessor in 1997 is a patent nullity. The collection letter dated October 16, 1997 of the City Treasurer
of Lucena, Notice of Assessment dated October 20, 1997 of the City Assessor of Lucena, the Property Record
Form dated October 20, 1997, and Tax Declaration No. 019-6500 simply state a lump sum market value for all
the transformers, electric posts, transmission lines, insulators, and electric meters covered and did not provide
an inventory/list showing the actual number of said properties, or a schedule of values presenting the fair market
value of each property or type of property, which would have enabled MERALCO to verify the correctness and
reasonableness of the valuation of its properties. MERALCO was not furnished at all with a copy of Tax
Declaration No. 019-7394, and while it received a copy of Tax Declaration No. 019-6500, said tax declaration did
not contain the requisite information regarding the date of operation of MERALCO and the original cost,

18
depreciation, and market value for each property covered. For the foregoing reasons, the assessment of the
properties of MERALCO in 1997 was arbitrary, whimsical, and without factual basis - in patent violation of the
right to due process of MERALCO. MERALCO additionally explains that it cannot be expected to make a
declaration of its transformers, electric posts, transmission lines, insulators, and electric meters, because all the
while, it was of the impression that the said properties were personal properties by virtue of the Decision dated
July 5, 1989 of the LBAA in LBAA-89-2 and the Decision dated April 10, 1991 of the CBAA in CBAA Case No.
248.
Granting that the assessment of its transformers, electric posts, transmission lines, insulators, and electric
meters by the City Assessor of Lucena in 1997 is valid, MERALCO alternatively contends that: (1) under
Sections 22135 and 22236 of the Local Government Code, the assessment should take effect only on January
1, 1998 and not retroact to 1992; (2) MERALCO should not be held liable for penalties and interests since its
nonpayment of real property tax on its properties was in good faith; and (3) if interest may be legally imposed on
MERALCO, it should only begin to run on the date it received the Notice of Assessment on October 29, 1997
and not all the way back to 1992.
At the end of its Petition, MERALCO prays:
WHEREFORE, it is respectfully prayed of this Honorable Court that the appealed Decision dated May 13, 2004
of the Court of Appeals, together with its Resolution dated November 18, 2004 be reversed and set aside, and
judgment be rendered x x x nullifying and cancel[l]ing the Notice of Assessment, dated October 20, 1997, issued
by respondent City Assessor, and the collection letter dated October 16, 1997 of respondent City Treasurer.
Petitioner also prays for such other relief as may be deemed just and equitable in the premises.37
The City Assessor and City Treasurer of Lucena counter that: (1) MERALCO was obliged to pay the real
property tax due, instead of posting a surety bond, while its appeal was pending, because Section 231 of the
Local Government Code provides that the appeal of an assessment shall not suspend the collection of the real
property taxes; (2) the cases cited by MERALCO can no longer be applied to the case at bar since they had
been decided when Presidential Decree No. 464, otherwise known as the Real Property Tax Code, was still in
effect; (3) under the now prevailing Local Government Code, which expressly repealed the Real Property Tax
Code, the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO fall within
the new definition of "machineries," deemed as real properties subject to real property tax; and (4) the Notice of
Assessment dated October 20, 1997 covering the transformers, electric posts, transmission lines, insulators, and
electric meters of MERALCO only retroacts to 1992, which is less than 10 years prior to the date of initial
assessment, so it is in compliance with Section 222 of the Local Government Code, and since MERALCO has
yet to pay the real property taxes due on said assessment, then it is just right and appropriate that it also be held
liable to pay for penalties and interests from 1992 to present time. Ultimately, the City Assessor and City
Treasurer of Lucena seek judgment denying the instant Petition and ordering MERALCO to pay the real property
taxes due.
The Petition is partly meritorious.
The Court finds that the transformers, electric posts, transmission lines, insulators, and electric meters of
MERALCO are no longer exempted from real property tax and may qualify as "machinery" subject to real
property tax under the Local Government Code. Nevertheless, the Court declares null and void the appraisal and
assessment of said properties of MERALCO by the City Assessor in 1997 for failure to comply with the

19
requirements of the Local Government Code and, thus, violating the right of MERALCO to due process.
By posting a surety bond before
filing its appeal of the assessment with
the LBAA, MERALCO substantially complied
with the requirement of payment under
protest in Section 252 of the Local
Government Code.
Section 252 of the Local Government Code mandates that "[n]o protest shall be entertained unless the taxpayer
first pays the tax." It is settled that the requirement of "payment under protest" is a condition sine qua non before
an appeal may be entertained.38 Section 231 of the same Code also dictates that "[a]ppeal on assessments of
real property x x x shall, in no case, suspend the collection of the corresponding realty taxes on the property
involved as assessed by the provincial or city assessor, without prejudice to subsequent adjustment depending
upon the final outcome of the appeal." Clearly, under the Local Government Code, even when the assessment of
the real property is appealed, the real property tax due on the basis thereof should be paid to and/or collected by
the local government unit concerned.
In the case at bar, the City Treasurer of Lucena, in his letter dated October 16, 1997, sought to collect from
MERALCO the amount of P17,925,l 17.34 as real property taxes on its machineries, plus penalties, for the
period of 1990 to 1997, based on Tax Declaration Nos. 019-6500 and 019-7394 issued by the City Assessor of
Lucena. MERALCO appealed Tax Declaration Nos. 019-6500 and 019-7394 with the LBAA, but instead of
paying the real property taxes and penalties due, it posted a surety bond in the amount of PI 7,925,117.34.
By posting the surety bond, MERALCO may be considered to have substantially complied with Section 252 of
the Local Government Code for the said bond already guarantees the payment to the Office of the City Treasurer
of Lucena of the total amount of real property taxes and penalties due on Tax Declaration Nos. 019-6500 and
019-7394. This is not the first time that the Court allowed a surety bond as an alternative to cash payment of the
real property tax before protest/appeal as required by Section 252 of the Local Government Code. In Camp John
Hay Development Corporation v. Central Board of Assessment Appeals39 the Court affirmed the ruling of the
CBAA and the Court of Tax Appeals en bane applying the "payment under protest" requirement in Section 252 of
the Local Government Code and remanding the case to the LBAA for "further proceedings subject to a full and
up-to-date payment, either in cash or surety, of realty tax on the subject properties x x x."
Accordingly, the LBAA herein correctly took cognizance of and gave due course to the appeal of Tax Declaration
Nos. 019-6500 and 019-7394 filed by MERALCO.
Beginning January 1, 1992,
MERALCO can no longer claim
exemption from real property tax of
its transformers, electric posts,
transmission lines, insulators, and
electric meters based on its
franchise.
MERALCO relies heavily on the Decision dated April 10, 1991 of the CBAA in CBAA Case No. 248, which
affirmed the Decision dated July 5, 1989 of the LBAA in LBAA-89-2. Said decisions of the CBAA and the LBAA,

20
in turn, cited Board of Assessment Appeals v. Manila Electric Co.,40 which was decided by the Court way back
in 1964 (1964 MERALCO case). The decisions in CBAA Case No. 248 and the 1964 MERALCO case
recognizing the exemption from real property tax of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO are no longer applicable because of subsequent developments that
changed the factual and legal milieu for MERALCO in the present case.
In the 1964 MERALCO case, the City Assessor of Quezon City considered the steel towers of MERALCO as real
property and required MERALCO to pay real property taxes for the said steel towers for the years 1952 to 1956.
MERALCO was operating pursuant to the franchise granted under Ordinance No. 44 dated March 24, 1903 of
the Municipal Board of Manila, which it acquired from the original grantee, Charles M. Swift. Under its franchise,
MERALCO was expressly granted the following tax exemption privilege:
Par 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles,
wires, transformers, and insulators), machinery and personal property as other persons are or may be hereafter
required by law to pay. x x x Said percentage shall be due and payable at the times stated in paragraph nineteen
of Part One hereof, x x x and shall be in lieu of all taxes and assessments of whatsoever nature, and by
whatsoever authority upon the privileges, earnings, income, franchise, and poles, wires, transformers, and
insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted, x x x.41
Given the express exemption from taxes and assessments of the "poles, wires, transformers, and insulators" of
MERALCO in the aforequoted paragraph, the sole issue in the 1964 MERALCO case was whether or not the
steel towers of MERALCO qualified as "poles" which were exempted from real property tax. The Court ruled in
the affirmative, ratiocinating that:
Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete poles, and poles of
the PLDT Co. which are made of two steel bars joined together by an interlacing metal rod. They are called
"poles" notwithstanding the fact that they are not made of wood. It must be noted from paragraph 9, above
quoted, that the concept of the "poles" for which exemption is granted, is not determined by their place or
location, nor by the character of the electric current it carries, nor the material or form of which it is made, but the
use to which they are dedicated. In accordance with the definitions, a pole is not restricted to a long cylindrical
piece of wood or metal, but includes "upright standards to the top of which something is affixed or by which
something is supported." As heretofore described, respondent's steel supports consist of a framework of four
steel bars or strips which are bound by steel cross-arms atop of which are cross-arms supporting five high
voltage transmission wires (See Annex A) and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a novelty.
Several courts of last resort in the United States have called these steel supports "steel towers", and they have
denominated these supports or towers, as electric poles. In their decisions the words "towers" and "poles" were
used interchangeably, and it is well understood in that jurisdiction that a transmission tower or pole means the
same thing.
xxxx
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the
franchise was granted. The poles as contemplated thereon, should be understood and taken as a part of the
electric power system of the respondent Meralco, for the conveyance of electric current from the source thereof
to its consumers, x x x.42

21
Similarly, it was clear that under the 20-year franchise granted to MERALCO by the Municipal Board of Lucena
City through Resolution No. 2679 dated June 13, 1972, the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO were exempt from real property tax. Paragraph 13 of Resolution
No. 2679 is quoted in full below:
13. The grantee shall be liable to pay the same taxes upon its real estate, building, machinery, and personal
property (not including poles, wires, transformers, and insulators) as other persons are now or may hereafter be
required by law to pay. In consideration of the franchise and rights hereby granted, the grantee shall pay into the
City Treasury of Lucena a tax equal to FIVE (5%) PER CENTUM of the gross earnings received from electric
current sold or supplied under this franchise. Said tax shall be due and payable quarterly and shall be in lieu of
any and all taxes of any kind, nature or description levied, established, or collected by any authority whatsoever,
municipal, provincial, or national, now or in the future, on its poles, wires, insulators, switches, transformers and
structures, installations, conductors, and accessories, placed in and over and under all the private and/or public
property, including public streets and highways, provincial roads, bridges, and public squares, and on its
franchise rights, privileges, receipts, revenues and profits, from which taxes the grantee is hereby expressly
exempted. (Emphases supplied.)
In CBAA Case No. 248 (and LBAA-89-2), the City Assessor assessed the transformers, electric posts,
transmission lines, insulators, and electric meters of MERALCO located in Lucena City beginning 1985 under
Tax Declaration No. 019-6500. The CBAA in its Decision dated April 10, 1991 in CBAA Case No. 248 sustained
the exemption of the said properties of MERALCO from real property tax on the basis of paragraph 13 of
Resolution No. 2679 and the 1964 MERALCO case.
Just when the franchise of MERALCO in Lucena City was about to expire, the Local Government Code took
effect on January 1, 1992, Sections 193 and 234 of which provide:
Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax exemptions
or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including governmentowned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938,
non-stock and nonprofit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this
Code.
Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real
property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit or
religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for
religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and
government-owned or controlled corporations engaged in the supply and distribution of water and/or generation
and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

22
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations
are hereby withdrawn upon the effectivity of this Code.
The Local Government Code, in addition, contains a general repealing clause under Section 534(f) which states
that "[a]ll general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code
are hereby repealed or modified accordingly."
Taking into account the above-mentioned provisions, the evident intent of the Local Government Code is to
withdraw/repeal all exemptions from local taxes, unless otherwise provided by the Code. The limited and
restrictive nature of the tax exemption privileges under the Local Government Code is consistent with the State
policy to ensure autonomy of local governments and the objective of the Local Government Code to grant
genuine and meaningful autonomy to enable local government units to attain their fullest development as selfreliant communities and make them effective partners in the attainment of national goals. The obvious intention
of the law is to broaden the tax base of local government units to assure them of substantial sources of
revenue.43
Section 234 of the Local Government Code particularly identifies the exemptions from payment of real property
tax, based on the ownership, character, and use of the property, viz.:
(a) Ownership Exemptions. Exemptions from real property taxes on the basis of ownership are real properties
owned by: (i) the Republic, (ii) a province, (iii) a city, (iv) a municipality, (v) a barangay, and (vi) registered
cooperatives.
(b) Character Exemptions. Exempted from real property taxes on the basis of their character are: (i) charitable
institutions, (ii) houses and temples of prayer like churches, parsonages or convents appurtenant thereto,
mosques, and (iii) nonprofit or religious cemeteries.
(c) Usage exemptions. Exempted from real property taxes on the basis of the actual, direct and exclusive use to
which they are devoted are: (i) all lands, buildings and improvements which are actually directly and exclusively
used for religious, charitable or educational purposes; (ii) all machineries and equipment actually, directly and
exclusively used by local water districts or by government-owned or controlled corporations engaged in the
supply and distribution of water and/or generation and transmission of electric power; and (iii) all machinery and
equipment used for pollution control and environmental protection.
To help provide a healthy environment in the midst of the modernization of the country, all machinery and
equipment for pollution control and environmental protection may not be taxed by local governments.
2. Other Exemptions Withdrawn. All other exemptions previously granted to natural or juridical persons including
government-owned or controlled corporations are withdrawn upon the effectivity of the Code.44
The last paragraph of Section 234 had unequivocally withdrawn, upon the effectivity of the Local Government
Code, exemptions from payment of real property taxes granted to natural or juridical persons, including
government-owned or controlled corporations, except as provided in the same section.
MERALCO, a private corporation engaged in electric distribution, and its transformers, electric posts,

23
transmission lines, insulators, and electric meters used commercially do not qualify under any of the ownership,
character, and usage exemptions enumerated in Section 234 of the Local Government Code. It is a basic
precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all
others as expressed in the familiar maxim expressio unius est exclusio alterius.45 Not being among the
recognized exemptions from real property tax in Section 234 of the Local Government Code, then the exemption
of the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO from real
property tax granted under its franchise was among the exemptions withdrawn upon the effectivity of the Local
Government Code on January 1, 1998.
It is worthy to note that the subsequent franchises for operation granted to MERALCO, i.e., under the Certificate
of Franchise dated October 28, 1993 issued by the National Electrification Commission and Republic Act No.
9209 enacted on June 9, 2003 by Congress, are completely silent on the matter of exemption from real property
tax of MERALCO or any of its properties.
It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point
to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common
burden. Any doubt whether a tax exemption exists is resolved against the taxpayer.46 MERALCO has failed to
present herein any express grant of exemption from real property tax of its transformers, electric posts,
transmission lines, insulators, and electric meters that is valid and binding even under the Local Government
Code.
The transformers, electric posts,
transmission lines, insulators, and electric
meters of MERALCO may qualify as
"machinery" under the Local Government
Code subject to real property tax.
Through the years, the relevant laws have consistently considered "machinery" as real property subject to real
property tax. It is the definition of "machinery" that has been changing and expanding, as the following table will
show:
Real Property
Tax Law
The Assessment Law
(Commonwealth Act
No. 470)

Incidence of Real Property Tax

Section 2. Incidence of real property tax. Except in chartered cities, there shall be
levied, assessed, and collected, an annual
ad valorem tax on real property, including
Effectivity: January 1, land, buildings, machinery, and other
1940
improvements not hereinafter specifically
exempted.

Real Property
Tax Code
Effectivity: June 1,
1974

Definition of Machinery47

Section 3. Property exempt from tax. - The

exemptions shall be as follows:
xxxx
(f) Machinery, which term shall embrace
machines, mechanical contrivances,
instruments, appliances, and apparatus
attached to the real estate, used for
industrial agricultural or manufacturing
purposes, during the first five years of the
operation of the machinery.
Section 38. Incidence of Real Property Tax. Section 3. Definition of Terms. - There shall be levied, assessed and
When used in this Code collected in all provinces, cities and
municipalities an annual ad valorem tax on x x x x
real property, such as land, buildings,
machinery and other improvements affixed (m) Machinery - shall embrace machines,
or attached to real property not hereinafter mechanical contrivances, instruments,

24
specifically exempted.

Real Property
Tax Code, as
amended by
Presidential
Decree No. 1383
Effectivity: May 25,
1978

Local
Government
Code
Effectivity:
January 1, 1992

appliances and apparatus attached to the

real estate. It includes the physical facilities
available for production, as well as the
installations and appurtenant service
facilities, together with all other equipment
designed for or essential to its
manufacturing, industrial or agricultural
purposes.
Section 38. Incidence of Real Property Tax. Section 3. Definition of Terms.
- There shall be levied, assessed and
When used in this Code collected in all provinces, cities and
xxxx
municipalities an annual ad valorem tax on
real property, such as land, buildings,
(m) Machinery - shall embrace machines,
machinery and other improvements affixed equipment, mechanical contrivances,
or attached to real property not hereinafter instruments, appliances and apparatus
specifically exempted.
attached to the real estate. It shall include
the physical facilities available for
production, as well as the installations and
appurtenant service facilities, together with
all those not permanently attached to the
real estate but are actually, directly and
essentially used to meet the needs of the
particular industry, business, or works,
which by their very nature and purpose are
designed for, or essential to manufacturing,
commercial, mining, industrial or agricultural
purposes.
Section 232. Power to Levy Real Property Section 199. Definitions. - When used in this
Tax. A province or city or a municipality
Title:
within the Metropolitan Manila Area may
xxxx
levy an annual ad valorem tax on real
property such as land, building, machinery, (o) "Machinery" embraces machines,
and other improvement not hereinafter
equipment, mechanical contrivances,
specifically exempted.
instruments, appliances or apparatus which
may or may not be attached, permanently or
temporarily, to the real property. It includes
the physical facilities for production, the
installations and appurtenant service
facilities, those which are mobile, selfpowered or self- propelled, and those not
permanently attached to the real property
which are actually, directly, and exclusively
used to meet the needs of the particular
industry, business or activity and which by
their very nature and purpose are designed
for, or necessary to its manufacturing,
mining, logging, commercial, industrial or
agricultural purposes[.]

MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts, transmission
lines, insulators, and electric meters constitute the physical facilities through which MERALCO delivers electricity
to its consumers. Each may be considered as one or more of the following: a "machine,"48 "equipment,"49
"contrivance,"50 "instrument,"51 "appliance,"52 "apparatus,"53 or "installation."54

25
The Court highlights that under Section 199(o) of the Local Government Code, machinery, to be deemed real
property subject to real property tax, need no longer be annexed to the land or building as these "may or may
not be attached, permanently or temporarily to the real property," and in fact, such machinery may even be
"mobile."55 The same provision though requires that to be machinery subject to real property tax, the physical
facilities for production, installations, and appurtenant service facilities, those which are mobile, self-powered or
self-propelled, or not permanently attached to the real property (a) must be actually, directly, and exclusively
used to meet the needs of the particular industry, business, or activity; and (2) by their very nature and purpose,
are designed for, or necessary for manufacturing, mining, logging, commercial, industrial, or agricultural
purposes. Thus, Article 290(o) of the Rules and Regulations Implementing the Local Government Code of 1991
recognizes the following exemption:
Machinery which are of general purpose use including but not limited to office equipment, typewriters, telephone
equipment, breakable or easily damaged containers (glass or cartons), microcomputers, facsimile machines,
telex machines, cash dispensers, furnitures and fixtures, freezers, refrigerators, display cases or racks, fruit juice
or beverage automatic dispensing machines which are not directly and exclusively used to meet the needs of a
particular industry, business or activity shall not be considered within the definition of machinery under this Rule.
(Emphasis supplied.)
The 1964 MERALCO case was decided when The Assessment Law was still in effect and Section 3(f) of said
law still required that the machinery be attached to the real property. Moreover, as the Court pointed out earlier,
the ruling in the 1964 MERALCO case - that the electric poles (including the steel towers) of MERALCO are not
subject to real property tax - was primarily based on the express exemption granted to MERALCO under its
previous franchise. The reference in said case to the Civil Code definition of real property was only an alternative
argument:
Granting for the purpose of argument that the steel supports or towers in question are not embraced within the
term poles, the logical question posited is whether they constitute real properties, so that they can be subject to
a real property tax. The tax law does not provide for a definition of real property; but Article 415 of the Civil Code
does, by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom
without breaking the material or deterioration of the object;
xxxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried in a building or on a piece of land, and which tends directly to meet the needs of the
said industry or works;
x x x xThe steel towers or supports in question, do not come within the objects mentioned in paragraph 1,
because they do not constitute buildings or constructions adhered to the soil. They are not constructions
analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are removable
and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be

26
dismantled and moved from place to place. They can not be included under paragraph 3, as they are not
attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing
deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel
bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and
reassembled by screwing the same. These steel towers or supports do not also fall under paragraph 5, for they
are not machineries or receptacles, instruments or implements, and even if they were, they are not intended for
industry or works on the land. Petitioner is not engaged in an industry or works on the land in which the steel
supports or towers are constructed.56 (Emphases supplied.)
The aforequoted conclusions of the Court in the 1964 MERALCO case do not hold true anymore under the Local
Government Code.
While the Local Government Code still does not provide for a specific definition of "real property," Sections
199(o) and 232 of the said Code, respectively, gives an extensive definition of what constitutes "machinery" and
unequivocally subjects such machinery to real property tax. The Court reiterates that the machinery subject to
real property tax under the Local Government Code "may or may not be attached, permanently or temporarily to
the real property;" and the physical facilities for production, installations, and appurtenant service facilities, those
which are mobile, self-powered or self-propelled, or are not permanently attached must (a) be actually, directly,
and exclusively used to meet the needs of the particular industry, business, or activity; and (2) by their very
nature and purpose, be designed for, or necessary for manufacturing, mining, logging, commercial, industrial, or
agricultural purposes.
Article 415, paragraph (1) of the Civil Code declares as immovables or real properties "[l]and, buildings, roads
and constructions of all kinds adhered to the soil." The land, buildings, and roads are immovables by nature
"which cannot be moved from place to place," whereas the constructions adhered to the soil are immovables by
incorporation "which are essentially movables, but are attached to an immovable in such manner as to be an
integral part thereof."57 Article 415, paragraph (3) of the Civil Code, referring to "[ejverything attached to an
immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material
or deterioration of the object," are likewise immovables by incorporation. In contrast, the Local Government
Code considers as real property machinery which "may or may not be attached, permanently or temporarily to
the real property," and even those which are "mobile."
Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[machinery, receptacles,
instruments or implements intended by the owner of the tenement for an industry or works which may be carried
on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works."
The Civil Code, however, does not define "machinery."
The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which
are essentially movables, but by the purpose for which they have been placed in an immovable, partake of the
nature of the latter because of the added utility derived therefrom."58 These properties, including machinery,
become immobilized if the following requisites concur: (a) they are placed in the tenement by the owner of such
tenement; (b) they are destined for use in the industry or work in the tenement; and (c) they tend to directly meet
the needs of said industry or works.59 The first two requisites are not found anywhere in the Local Government
Code.
MERALCO insists on harmonizing the aforementioned provisions of the Civil Code and the Local Government
Code. The Court disagrees, however, for this would necessarily mean imposing additional requirements for
classifying machinery as real property for real property tax purposes not provided for, or even in direct conflict

27
with, the provisions of the Local Government Code.
As between the Civil Code, a general law governing property and property relations, and the Local Government
Code, a special law granting local government units the power to impose real property tax, then the latter shall
prevail. As the Court pronounced in Disomangcop v. The Secretary of the Department of Public Works and
Highways Simeon A. Datumanong60:
It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general
one. Lex specialis derogant generali. As this Court expressed in the case of Leveriza v. Intermediate Appellate
Court, "another basic principle of statutory construction mandates that general legislation must give way to
special legislation on the same subject, and generally be so interpreted as to embrace only cases in which the
special provisions are not applicable, that specific statute prevails over a general statute and that where two
statutes are of equal theoretical application to a particular case, the one designed therefor specially should
prevail." (Citations omitted.)
The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporation61 that:
A general law and a special law on the same subject are statutes in pah materia and should, accordingly, be
read together and harmonized, if possible, with a view to giving effect to both. The rule is that where there are
two acts, one of which is special and particular and the other general which, if standing alone, would include the
same matter and thus conflict with the special act, the special law must prevail since it evinces the legislative
intent more clearly than that of a general statute and must not be taken as intended to affect the more particular
and specific provisions of the earlier act, unless it is absolutely necessary so to construe it in order to give its
words any meaning at all.
The circumstance that the special law is passed before or after the general act does not change the principle.
Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act;
and where the general act is later, the special statute will be construed as remaining an exception to its terms,
unless repealed expressly or by necessary implication. (Citations omitted.)
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals,62 the Court acknowledged
that "[i]t is a familiar phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property[.]"
Therefore, for determining whether machinery is real property subject to real property tax, the definition and
requirements under the Local Government Code are controlling.
MERALCO maintains that its electric posts are not machinery subject to real property tax because said posts are
not being exclusively used by MERALCO; these are also being utilized by cable and telephone companies. This,
however, is a factual issue which the Court cannot take cognizance of in the Petition at bar as it is not a trier of
facts. Whether or not the electric posts of MERALCO are actually being used by other companies or industries is
best left to the determination of the City Assessor or his deputy, who has been granted the authority to take
evidence under Article 304 of the Rules and Regulations Implementing the Local Government Code of 1991.
Nevertheless, the appraisal and
assessment of the transformers, electric
posts, transmission lines, insulators, and
electric meters of MERALCO as machinery
under Tax Declaration Nos. 019-6500 and

28
019-7394 were not in accordance with the
Local Government Code and in violation of
the right to due process of MERALCO and,
therefore, null and void.
The Local Government Code defines "appraisal" as the "act or process of determining the value of property as of
a specific date for a specific purpose." "Assessment" is "the act or process of determining the value of a property,
or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of the
properties[.]"63 When it comes to machinery, its appraisal and assessment are particularly governed by Sections
224 and 225 of the Local Government Code, which read:
Section 224. Appraisal and Assessment of Machinery. - (a) The fair market value of a brand-new machinery shall
be the acquisition cost. In all other cases, the fair market value shall be determined by dividing the remaining
economic life of the machinery by its estimated economic life and multiplied by the replacement or reproduction
cost.
(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation, handling, and installation
charges at the present site. The cost in foreign currency of imported machinery shall be converted to peso cost
on the basis of foreign currency exchange rates as fixed by the Central Bank.
Section 225. Depreciation Allowance for Machinery. - For purposes of assessment, a depreciation allowance
shall be made for machinery at a rate not exceeding five percent (5%) of its original cost or its replacement or
reproduction cost, as the case may be, for each year of use: Provided, however, That the remaining value for all
kinds of machinery shall be fixed at not less than twenty percent (20%) of such original, replacement, or
reproduction cost for so long as the machinery is useful and in operation.
It is apparent from these two provisions that every machinery must be individually appraised and assessed
depending on its acquisition cost, remaining economic life, estimated economic life, replacement or reproduction
cost, and depreciation.
Article 304 of the Rules and Regulations Implementing the Local Government Code of 1991 expressly
authorizes the local assessor or his deputy to receive evidence for the proper appraisal and assessment of the
real property:
Article 304. Authority of Local Assessors to Take Evidence. - For the purpose of obtaining information on which
to base the market value of any real property, the assessor of the province, city, or municipality or his deputy
may summon the owners of the properties to be affected or persons having legal interest therein and witnesses,
administer oaths, and take deposition concerning the property, its ownership, amount, nature, and value.
The Local Government Code further mandates that the taxpayer be given a notice of the assessment of real
property in the following manner:
Section 223. Notification of New or Revised Assessment. - When real property is assessed for the first time or
when an existing assessment is increased or decreased, the provincial, city or municipal assessor shall within
thirty (30) days give written notice of such new or revised assessment to the person in whose name the property
is declared. The notice may be delivered personally or by registered mail or through the assistance of the
punong barangay to the last known address of the person to served.

29
A notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending
tax liability, should be sufficiently informative to apprise the taxpayer the legal basis of the tax.64 In Manila
Electric Company v. Barlis,65 the Court described the contents of a valid notice of assessment of real property
and differentiated the same from a notice of collection:
A notice of assessment as provided for in the Real Property Tax Code should effectively inform the taxpayer of
the value of a specific property, or proportion thereof subject to tax, including the discovery, listing, classification,
and appraisal of properties. The September 3, 1986 and October 31, 1989 notices do not contain the essential
information that a notice of assessment must specify, namely, the value of a specific property or proportion
thereof which is being taxed, nor does it state the discovery, listing, classification and appraisal of the property
subject to taxation. In fact, the tenor of the notices bespeaks an intention to collect unpaid taxes, thus the
reminder to the taxpayer that the failure to pay the taxes shall authorize the government to auction off the
properties subject to taxes x x x.
Although the ruling quoted above was rendered under the Real Property Tax Code, the requirement of a notice
of assessment has not changed under the Local Government Code.
A perusal of the documents received by MERALCO on October 29, 1997 reveals that none of them constitutes a
valid notice of assessment of the transformers, electric posts, transmission lines, insulators, and electric meters
of MERALCO.
The letter dated October 16, 1997 of the City Treasurer of Lucena (which interestingly precedes the purported
Notice of Assessment dated October 20, 1997 of the City Assessor of Lucena) is a notice of collection, ending
with the request for MERALCO to settle the payable amount soon in order to avoid accumulation of penalties. It
only presented in table form the tax declarations covering the machinery, assessed values in the tax declarations
in lump sums for all the machinery, the periods covered, and the taxes and penalties due again in lump sums for
all the machinery.
The Notice of Assessment dated October 20, 1997 issued by the City Assessor gave a summary of the
new/revised assessment of the "machinery" located in "Quezon Avenue Ext., Brgy. Gulang-Gulang, Lucena
City," covered by Tax Declaration No. 019-7394, with total market value of P98,173,200.00 and total assessed
value of P78,538,560.00. The Property Record Form basically contained the same information. Without specific
description or identification of the machinery covered by said tax declaration, said Notice of Assessment and
Property Record Form give the false impression that there is only one piece of machinery covered.
In Tax Declaration No. 019-6500, the City Assessor reported its findings under "Building and Improvements" and
not "Machinery." Said tax declaration covered "capital investment-commercial," specifically: (a) Transformer and
Electric Post; (b) Transmission Line, (c) Insulator, and (d) Electric Meter, with a total market value of
P81,811,000.00, assessment level of 80%, and assessed value of 65,448,800.00. Conspicuously, the table for
"Machinery" - requiring the description, date of operation, replacement cost, depreciation, and market value of
the machinery - is totally blank.
MERALCO avers, and the City Assessor and the City Treasurer of Lucena do not refute at all, that MERALCO
has not been furnished the Owner's Copy of Tax Declaration No. 019-7394, in which the total market value of the
machinery of MERALCO was increased by PI6,632,200.00, compared to that in Tax Declaration No. 019-6500.
The Court cannot help but attribute the lack of a valid notice of assessment to the apparent lack of a valid
appraisal and assessment conducted by the City Assessor of Lucena in the first place. It appears that the City

30
Assessor of Lucena simply lumped together all the transformers, electric posts, transmission lines, insulators,
and electric meters of MERALCO located in Lucena City under Tax Declaration Nos. 019-6500 and 019-7394,
contrary to the specificity demanded under Sections 224 and 225 of the Local Government Code for appraisal
and assessment of machinery. The City Assessor and the City Treasurer of Lucena did not even provide the
most basic information such as the number of transformers, electric posts, insulators, and electric meters or the
length of the transmission lines appraised and assessed under Tax Declaration Nos. 019-6500 and 019-7394.
There is utter lack of factual basis for the assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO.
The Court of Appeals laid the blame on MERALCO for the lack of information regarding its transformers, electric
posts, transmission lines, insulators, and electric meters for appraisal and assessment purposes because
MERALCO failed to file a sworn declaration of said properties as required by Section 202 of the Local
Government Code. As MERALCO explained, it cannot be expected to file such a declaration when all the while it
believed that said properties were personal or movable properties not subject to real property tax. More
importantly, Section 204 of the Local Government Code exactly covers such a situation, thus:
Section 204. Declaration of Real Property by the Assessor. -When any person, natural or juridical, by whom real
property is required to be declared under Section 202 hereof, refuses or fails for any reason to make such
declaration within the time prescribed, the provincial, city or municipal assessor shall himself declare the
property in the name of the defaulting owner, if known, or against an unknown owner, as the case may be, and
shall assess the property for taxation in accordance with the provision of this Title. No oath shall be required of a
declaration thus made by the provincial, city or municipal assessor.
Note that the only difference between the declarations of property made by the taxpayer, on one hand, and the
provincial/city/municipal assessor, on the other, is that the former must be made under oath. After making the
declaration of the property himself for the owner, the provincial/city/municipal assessor is still required to assess
the property for taxation in accordance with the provisions of the Local Government Code.
It is true that tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer
having the burden of proving otherwise.66 In this case, MERALCO was able to overcome the presumption
because it has clearly shown that the assessment of its properties by the City Assessor was baselessly and
arbitrarily done, without regard for the requirements of the Local Government Code.
The exercise of the power of taxation constitutes a deprivation of property under the due process clause, and the
taxpayer's right to due process is violated when arbitrary or oppressive methods are used in assessing and
collecting taxes. 67 The Court applies by analogy its pronouncements in Commissioner of Internal Revenue v.
United Salvage and Towage (Phils.), Inc.,68 concerning an assessment that did not comply with the
requirements of the National Internal Revenue Code:
On the strength of the foregoing observations, we ought to reiterate our earlier teachings that "in balancing the
scales between the power of the State to tax and its inherent right to prosecute perceived transgressors of the
law on one side, and the constitutional rights of a citizen to due process of law and the equal protection of the
laws on the other, the scales must tilt in favor of the individual, for a citizen's right is amply protected by the Bill of
Rights under the Constitution." Thus, while "taxes are the lifeblood of the government," the power to tax has its
limits, in spite of all its plenitude. Even as we concede the inevitability and indispensability of taxation, it is a
requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. (Citations omitted.)
The appraisal and assessment of the transformers, electric posts, transmission lines, insulators, and electric

31
meters of MERALCO under Tax Declaration Nos. 019-6500 and 019-7394, not being in compliance with the
Local Government Code, are attempts at deprivation of property without due process of law and, therefore, null
and void.
WHEREFORE, premises considered, the Court PARTLY GRANTS the instant Petition and AFFIRMS with
MODIFICATION the Decision dated May 13, 2004 of the Court of Appeals in CA-G.R. SP No. 67027, affirming in
toto the Decision dated May 3, 2001 of the Central Board of Assessment Appeals in CBAA Case No. L-20-98.
The Court DECLARES that the transformers, electric posts, transmission lines, insulators, and electric meters of
Manila Electric Company are NOT EXEMPTED from real property tax under the Local Government Code.
However, the Court also DECLARES the appraisal and assessment of the said properties under Tax Declaration
Nos. 019-6500 and 019-7394 as NULL and VOID for not complying with the requirements of the Local
Government Code and violating the right to due process of Manila Electric Company, and ORDERS the
CANCELLATION of the collection letter dated October 16, 1997 of the City Treasurer of Lucena and the Notice
of Assessment dated October 20, 1997 of the City Assessor of Lucena, but WITHOUT PREJUDICE to the
conduct of a new appraisal and assessment of the same properties by the City Assessor of Lucena in accord
with the provisions of the Local Government Code and guidelines issued by the Bureau of Local Government
Financing.
SO ORDERED.

32
G.R. No. 158385

February 12, 2010

MODESTO PALALI, Petitioner,

vs.
JULIET AWISAN, represented by her Attorney-in-Fact GREGORIO AWISAN, Respondent.
DECISION
DEL CASTILLO, J.:
A person occupying a parcel of land, by himself and through his predecessors-in-interest, enjoys the
presumption of ownership. Anyone who desires to remove him from the property must overcome such
presumption by relying solely on the strength of his claims rather than on the weakness of the defense.
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the September 27, 2002
Decision2 and the April 25, 2003 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 52942. The
challenged Decision disposed as follows:
WHEREFORE, premises considered, the assailed decision of the trial court dated May 24, 1996 is hereby
REVERSED AND SET ASIDE and a new one is entered:
1. Awarding the subject land in favor of the [respondent] with the exclusion of the area where the
residential house of the [petitioner] is erected.
2. Ordering the [petitioner] to vacate the rootcrop land and surrender its possession in favor of the
[respondent], and enjoining the [petitioner] to refrain from doing any act disturbing the [respondents]
peaceful possession and enjoyment of the same.
3. Cancelling Tax Declaration No. 31297 of the [petitioner] insofar as the rootcrop land of .0648 hectares
is concerned, with the exclusion of his residential land. All other reliefs and remedies prayed for are
DENIED, there being no sufficient evidence to warrant granting them.
SO ORDERED.4
Factual Antecedents
Respondent Juliet Awisan claimed to be the owner5 of a parcel of land in Sitio Camambaey, Tapapan, Bauko,
Mountain Province, allegedly consisting of 6.6698 hectares 6 and covered by Tax Declaration No. 147 in her
name.7 On March 7, 1994, she filed an action for quieting of title against petitioner Modesto Palali, alleging that
the latter occupied and encroached on the northern portion of her property and surreptitiously declared it in his
name for tax purposes.8 We shall refer to this land occupied by petitioner, which allegedly encroached on the
northern portion of respondents 6.6698-hectare land, as the "subject property". Respondent prayed to be
declared the rightful owner of the northern portion, for the cancellation of petitioners tax declaration, and for the
removal of petitioner and his improvements from the property.9
Respondents (Plaintiffs) Allegations
According to respondent, the 6.6698 hectare land was originally owned by her father, Cresencio Cadwising. The
latter testified that he and his wife were able to consolidate ownership over the land by declaring them from
public land as well as by purchasing from adjoining landowners. He admitted including in his tax declaration a
communal sacred lot (patpatayan) even if he did not acquire free patent title over the same. As for the properties

33
he bought, these were generally purchased without any documentation, save for two. 10
Cadwising also claimed having introduced improvements on the subject property as early as the 1960s. 11 The
6.6698 hectare land was mortgaged to the Development Bank of the Philippines (DBP), which acquired it in the
foreclosure sale. DBP then sold the land to one Tico Tibong, who eventually donated the same to respondent.
Petitioners (Defendants) Allegations
In his defense, petitioner denied the encroachment and asserted ownership over the subject property. He
maintained that he and his ancestors or predecessors-in-interest have openly and continuously possessed the
subject land since time immemorial. He and his siblings were born on that land and, at that time, the area around
the house was already planted with bananas, alnos, and coffee.12 When his mother died, he buried her in the lot
beside the house in 1975; while his father was buried near the same plot in 1993. 13 His own home had been
standing on the property for the past 20 years. Petitioner insisted that during this entire time, no one disturbed
his ownership and possession thereof.14
Sometime in 1974, petitioner declared the said land in his name for taxation purposes. 15 The said Tax
Declaration indicates that the property consists of 200 square meters of residential lot and 648 square meters of
rootcrop land (or a total of 848 square meters).
Proceedings before the Regional Trial Court
It is worth mentioning that both the complaint16 and the pre-trial brief17 of respondent alleged encroachment
only on the northern portion of her 6.6698-hectare land. During trial, however, respondents attorney-in-fact,
Gregorio Awisan,18 and respondents predecessor-in-interest, Cresencio Cadwising,19 both alleged that there
was an encroachment in the southern portion also. This was done without amending the allegations of the
complaint.
Confronted with this new allegation of encroachment on the southern portion, petitioner tried to introduce his tax
declaration over the same (in the name of his deceased father), but was objected to by respondent on the
ground of immateriality.20 After such objection, however, respondent surprisingly and inconsistently insisted that
the ownership of the southern portion was included in the complaint and was an issue in the case. The ensuing
confusion over the subject of the case is revealed in the following exchange between the parties lawyers: 21
Atty. Awisan: Where is the land in question located?
Palali: In Tapapan, Bauko, sir.
Atty. Awisan: Where is that situated in relation to your house?
Palali: It is near my house which is enclosed with fence.
Atty. Awisan: How about the land in question situated in the southern portion, do you know that?
Palali: That is the land our parents gave to us as inheritance. There are terraces there.
Atty. Awisan: So, the land in question [is] located below your house and on the southern portion?
Atty. Bayogan: As far as the southern portion is concerned, it is not included in the complaint.
Atty. Awisan: It is included.

34
Atty. Bayogan: The southern portion refer[s] to Lot 3 and it is not included in the complaint. In fact when I
started asking question regarding this land, the counsel objected.
Atty. Awisan: This land indicated as Lot 3 is the southern portion.
The trial court, apparently relying on the allegations of the complaint, ruled on the northern portion as the subject
property of the case.
Ruling of the Regional Trial Court
After due trial, the Regional Trial Court of Bontoc, Mountain Province, Branch 35, dismissed 22 the complaint. It
based its decision on respondents failure to prove her allegation of physical possession of the land. Going by
the results of its ocular inspection23 of the land in question, the trial court noted that Cadwising (respondents
predecessor-in-interest) could not pinpoint and the court did not see any of the improvements that Cadwising
had allegedly introduced to the land.24 Thus, the trial court held that respondents claim of ownership was
supported solely by her tax declarations and tax payment receipts which, by themselves, are not conclusive
proof of ownership.25
In contrast, the trial court duly verified during the ocular inspection the existence of the improvements introduced
by petitioner and his predecessors on the subject property.26 Moreover, the trial court observed that the
witnesses for the petitioner all lived continuously since their births within or near Sitio Camambaey in Tapapan
and that they knew the land very well. They knew petitioner and his predecessors, as well as the improvements
introduced by them to the land. Thus, the trial court found that the petitioner presented overwhelming proof of
actual, open, continuous and physical possession of the property since time immemorial. Petitioners
possession, coupled with his tax declarations, is strong evidence of ownership which convinced the court of his
better right to the property.27
For purposes of clarity, we cite the dispositive portion of the trial courts Decision thus:
Wherefore, premises considered, judgment is hereby rendered in favor of the defendant Modesto Palali and
against the plaintiff Juliet C. Awisan, represented by her Attorney-in-Fact, Gregorio B. Awisan, as follows:
a) Ordering the dismissal of the complaint and costs against the plaintiff;
b) Adjudging the defendant Modesto Palali as the owner and lawful possessor of the subject property;
and
c) The court cannot however grant the counterclaim of defendant for lack of evidence to prove the same.
SO ORDERED.28
Ruling of the Court of Appeals
Respondent appealed the trial courts decision to the CA, which reversed the same. The CA found that petitioner
failed to prove actual possession of the entire 6.6698 hectare land, which the CA believed to be the subject of
the case. According to the appellate court, petitioner was only able to prove actual occupation of the portion
where his house was located and the area below where he had planted fruit-bearing plants. 29
The CA also ruled that based on the ocular inspection report of the trial
court, petitioners possession did not extend to the entire 6.6698 hectares. In its own words:

35
Likewise, the report on the ocular inspection of the land in question divulges that the alleged possession of the
land by [petitioner] Modesto Palali does not extend to the entire 6.6698 hectares of the subject land. Not even in
the sketch plan of the land does it illustrate that the possession of the [petitioner] refers to the entire subject land.
Instead, the possession of [petitioner] merely points to certain portions of the subject land as drawn and
prepared by the tax mappers.
From the foregoing testimony, no sufficient indicia could be inferred that the possession of the [petitioner] refers
to the entire portion of the land.30
The appellate court also refused to give credence to petitioners tax declaration. The CA held that petitioners Tax
Declaration No. 31793, which covers only an 848-square meter property, is incongruous with his purported claim
of ownership over the entire 6.6698-hectare land.
Proceeding from this premise, the CA gave greater weight to the documentary and testimonial evidence of
respondent. The presumption of regularity was given to the public documents from which respondent traced her
title to the subject property.
Thus, the CA awarded the entire 6.6698-hectare property to respondent and ordered the cancellation of
petitioners tax declaration (except for the 200-square meter residential lot thereof which was not being claimed
by respondent).31
Petitioner moved for a reconsideration of the unfavorable Decision, but his motion was denied for lack of merit.
Hence, this petition.
Preliminary Matter
The CA Decision is based on a mistaken understanding of the subject property
It is apparent that the CA Decision proceeded from an erroneous understanding of what the subject property
actually is and what the trial court actually ruled upon. The CA was under the mistaken impression that the
subject property was the entire 6.6698 hectares of land allegedly owned by respondent under her Tax
Declaration No. 147. Because of this, the CA ruled against petitioner on the ground that he failed to prove
possession of the entire 6.6698 hectares. The CA also disregarded petitioners Tax Declaration No. 31793
(despite being coupled with actual possession) because the said tax declaration covered only an 848-square
meter property and did not cover the entire 6.6698 hectare property. This is clear from the following text lifted
from the CA Decision:
The trial courts finding that the defendant-appellee had acquired the subject land by virtue of acquisitive
prescription cannot be countenanced. At the outset, the subject land being claimed by the plaintiff-appellant as
described in the complaint is the 6.6698 hectares land [boundaries omitted]. The said description is with the
exclusion of the portion of land where the residential house of the defendant-appellee is erected. However, the
adverse and exclusive possession offered by the defendant-appellee, which includes his tax receipt, does not
refer to the entire land consisting of 6.6698 hectares being claimed by the plaintiff-appellant. x x x The witnesses
for the defendant-appellee testified that indeed Modesto Palalis predecessors-in-interest have once built a
house in Camambaey, Tapapan, Bauko, Mt. Province, but whether or not the defendant-appellee or his
predecessor-in-interest have actually, exclusively, notoriously, and adversely possessed the entire 6.6698
hectares of land could not be deduced from their testimonies. It could be gleaned from the testimony of
Consigno Saligen, that what the defendant-appellee actually possessed and claim as their own is merely that
portion where the house is erected and that portion of land below the house where Modesto Palali planted fruitbearing plants. x x x

36
Likewise, the report on ocular inspection of the land in question divulges that the alleged possession of the land
by defendant-appellee Modesto Palali does not extend to the entire 6.6698 hectares of the subject land. Not
even in the sketch plan of the land does it illustrate that the possession of the defendant-appellee refers to the
entire subject land. Instead, the possession of the defendant-appellee merely points to certain portions of the
subject land as drawn and prepared by the "tax mappers".
From the foregoing testimony, no sufficient indicia could be inferred that the possession of the defendantappellee refers to the entire portion of the land.32
This was perhaps not entirely the appellate courts fault, because a reading of the issues presented by
respondent to the CA gives the wrong impression that the subject property is the entire 6.6698 hectares:
x x x [T]he plaintiff-appellant elevated the matter on appeal assigning the following errors committed by the trial
court:
I
The trial court erred in failing to consider the overwhelming superior documentary and oral evidence
of the plaintiff Juliet C. Awisan showing her ownership on (sic) the land in question consisting of
6.6698 hectares described in her complaint
II
The trial court erred in adjudicating the land in question to the defendant Modesto Palali who is a
squatter on the land whose tax declaration merely overlapped or duplicated that of the plaintiff and
which covered only a small portion of 200 square meters of residential portion [sic] and 648 square
meter of rootcrop land.
x x x x33
The foregoing formulation of the issues presented by respondent before the CA erroneously described "the land
in question" as "consisting of 6.6698 hectares" and erroneously stated that the trial court "adjudicated the land in
question to [petitioner]". Said formulation is very misleading because the case before the trial court did not
involve the ownership of the entire 6.6698 hectares, but merely the northern portion thereof the property
actually occupied by petitioner and much smaller than 6.6698 hectares. Even if we go back to the respondents
complaint, we would find there that respondent is claiming encroachment merely of the "northern portion" of her
6.6698-hectare property, and not of the entire 6.6698 property.34
Neither did the trial court adjudicate to petitioner the entire 6.6698-hectare land; it simply upheld petitioners right
to the property he is actually occupying. It only declared petitioner as the lawful owner and possessor of the
"subject property", which is the property to the north of the 6.6698-hectare land and occupied by petitioner. This
is evident from the trial courts summary of the facts established by the respondent and her witnesses, to wit:
During the hearing of the case, plaintiff and her witnesses established and disclosed: x x x that only a portion of
the entire 6.6 hectares in its northern portion located below and above the residential house of the defendant
Modesto Palali is now the land in question as properly shown in the sketch of the land covered by Tax
Declaration No. 147 in the name of Juliet Awisan x x x. 35
Proceeding from a wrong premise as to what is the subject property, the CA utterly failed to appreciate the
evidence as they relate to the parties claims. Thus, while the general rule is that this Court is not a trier of facts,
and that in a petition for review under Rule 45, only questions of law may be raised, the Court is behooved to

37
admit the instant case as an exception.36
Issue
The issue in this case is who between the parties has the better right to the subject property.
Our Ruling
Having gone over the parties evidence before the trial court, we find adequate support for the trial courts ruling
in favor of petitioner. The CA erred in reversing the trial courts findings, particularly because, as discussed
above, such reversal was premised on the CAs erroneous understanding of the subject property.
As found by the trial court, petitioner was able to prove his and his predecessors actual, open, continuous and
physical possession of the subject property dating at least to the pre-war era (aside from petitioners tax
declaration over the subject property). Petitioners witnesses were long time residents of Sitio Camambaey. They
lived on the land, knew their neighbors and were familiar with the terrain. They were witnesses to the
introduction of improvements made by petitioner and his predecessors-in-interest.
From their consistent, unwavering, and candid testimonies, we find that petitioners grandfather Mocnangan
occupied the land during the pre-war era. He planted camote on the property because this was the staple food at
that time. He then gave the subject property to his daughter Tammam, while he gave a separate one to his son
Pacolan Mocnangan. In the 1960s, Tammam and her husband Palalag cultivated the land, built a cogon home,
and started a family there. Palalag introduced terraces and, together with his sons, built earth fences around the
property. Palalags family initially planted bananas, coffee, and oranges; they later added avocadoes,
persimmons, and pineapples. When Tammam and Palalag died, their son, petitioner herein, buried them in the
subject property and continued cultivating the land. He also constructed a new home.
On the other hand, respondent relied merely on her tax declaration, but failed to prove actual possession insofar
as the subject property is concerned. To be sure, respondent attempted to prove possession of the subject
property. Her predecessor-in-interest, Cadwising, had allegedly introduced improvements like a piggery, poultry,
terracing, plantings, and a barbed wire fence. However, not one of these alleged improvements was found during
the ocular inspection conducted by the trial court. The absence of all his alleged improvements on the property is
suspicious in light of his assertion that he has a caretaker living near the subject property for 20 years.
Cadwising did not even bother to explain the absence of the improvements. The trial courts rejection of
Cadwisings assertions regarding the introduction of improvements is therefore not baseless.1avvphi1
Thus, respondent having failed to prove possession, her claim rests solely on her tax declaration. But tax
declarations, by themselves, are not conclusive evidence of ownership of real property. In the absence of actual,
public, and adverse possession, the declaration of the land for tax purposes does not prove ownership. 37
Respondents tax declaration, therefore, cannot serve as basis to oust petitioner who has been in possession (by
himself and his predecessors) of the subject property since before the war.
Neither can respondent rely on the public instruments dealing with the 6.6698-hectare property covered by her
tax declaration. Such public documents merely show the successive transfers of the property covered by said
documents. They do not conclusively prove that the transferor actually owns the property purportedly being
transferred, especially as far as third parties are concerned. For it may very well be that the transferor does not
actually own the property he has transferred, in which case he transfers no better right to his transferee. No one
can give what he does not have nemo dat quod non habet.38 Thus, since respondents predecessor-in-interest
Cadwising appeared not to have any right to the subject property, he transferred no better right to his
transferees, including respondent.

38
All told, we hold that as between the petitioner and the respondent, it is the petitioner who has the better claim or
title to the subject property. While the respondent merely relied on her tax declaration, petitioner was able to
prove actual possession of the subject property coupled with his tax declaration. We have ruled in several cases
that possession, when coupled with a tax declaration, is a weighty evidence of ownership. 39 It certainly is more
weighty and preponderant than a tax declaration alone.
The preponderance of evidence is therefore clearly in favor of petitioner, particularly considering that, as the
actual possessor under claim of ownership, he enjoys the presumption of ownership. 40 Moreover, settled is the
principle that a party seeking to recover real property must rely on the strength of her case rather than on the
weakness of the defense.41 The burden of proof rests on the party who asserts the affirmative of an issue. For
he who relies upon the existence of a fact should be called upon to prove that fact. Having failed to discharge
her burden to prove her affirmative allegations, we find that the trial court rightfully dismissed respondents
complaint.
A final note. Like the trial court, we make no ruling regarding the southern portion of the property (or Lot 3, as
referred to by the parties), because this property was not included in respondents complaint. Although the Rules
of Court provide that "when issues not raised by the pleadings are tried with the express or implied consent of
the parties, they shall be treated in all respects as if they had been raised in the pleadings," 42 such rule does not
apply here. Respondent objected43 when petitioner tried to prove his ownership of Lot 3 on the ground of
immateriality, arguing that ownership of Lot 3 was not an issue. Respondent cannot now insist otherwise.
WHEREFORE, the petition is GRANTED. The September 27, 2002 Decision as well as the April 25, 2003
Resolution of the Court of Appeals in CA-G.R. CV No. 52942 are REVERSED and SET ASIDE. The May 24,
1996 Decision of the Regional Trial Court of Bontoc, Mountain Province, Branch 35 is REINSTATED and
AFFIRMED. Costs against respondent.
SO ORDERED.

39
REPUBLIC OF THE PHILIPPINES, -versus- T.A.N. PROPERTIES, INC.
G.R. No. 154953
June 26, 2008
DECISION
CARPIO, J.:

The Case
Before the Court is a petition for review[1] assailing the 21 August 2002 Decision[2] of the Court of Appeals in
CA-G.R. CV No. 66658. The Court of Appeals affirmed in toto the 16 December 1999 Decision[3] of the Regional
Trial Court of Tanauan, Batangas, Branch 6 (trial court) in Land Registration Case No. T-635.
The Antecedent Facts
This case originated from an Application for Original Registration of Title filed by T.A.N. Properties, Inc. covering
Lot 10705-B of the subdivision plan Csd-04-019741 which is a portion of the consolidated Lot 10705, Cad-424,
Sto. Tomas Cadastre. The land, with an area of 564,007 square meters, or 56.4007 hectares, is located at San
Bartolome, Sto. Tomas, Batangas.
On 31 August 1999, the trial court set the case for initial hearing at 9:30 a.m. on 11 November 1999. The Notice
of Initial Hearing was published in the Official Gazette, 20 September 1999 issue, Volume 95, No. 38, pages
6793 to 6794,[4] and in the 18 October 1999 issue of Peoples Journal Taliba,[5] a newspaper of general
circulation in the Philippines. The Notice of Initial Hearing was also posted in a conspicuous place on the bulletin
board of the Municipal Building of Sto. Tomas, Batangas, as well as in a conspicuous place on the land.[6] All
adjoining owners and all government agencies and offices concerned were notified of the initial hearing.[7]
On 11 November 1999, when the trial court called the case for initial hearing, there was no oppositor other than
the Opposition dated 7 October 1999 of the Republic of the Philippines represented by the Director of Lands
(petitioner). On 15 November 1999, the trial court issued an Order[8] of General Default against the whole world
except as against petitioner.
During the hearing on 19 November 1999, Ceferino Carandang (Carandang) appeared as oppositor. The trial
court gave Carandang until 29 November 1999 within which to file his written opposition.[9] Carandang failed to
file his written opposition and to appear in the succeeding hearings. In an Order[10] dated 13 December 1999,
the trial court reinstated the Order of General Default.
During the hearings conducted on 13 and 14 December 1999, respondent presented three witnesses: Anthony
Dimayuga Torres (Torres), respondents Operations Manager and its authorized representative in the case;
Primitivo Evangelista (Evangelista), a 72-year old resident of San Bartolome, Sto. Tomas, Batangas since birth;
and Regalado Marquez, Records Officer II of the Land Registration Authority (LRA), Quezon City.
The testimonies of respondents witnesses showed that Prospero Dimayuga (Kabesang Puroy) had peaceful,

40
adverse, open, and continuous possession of the land in the concept of an owner since 1942. Upon his death,
Kabesang Puroy was succeeded by his son Antonio Dimayuga (Antonio). On 27 September 1960, Antonio
executed a Deed of Donation covering the land in favor of one of his children, Fortunato Dimayuga (Fortunato).
Later, however, Antonio gave Fortunato another piece of land. Hence, on 26 April 1961, Antonio executed a
Partial Revocation of Donation, and the land was adjudicated to one of Antonios children, Prospero Dimayuga
(Porting).[11] On 8 August 1997, Porting sold the land to respondent.
The Ruling of the Trial Court
In its 16 December 1999 Decision, the trial court adjudicated the land in favor of respondent.
The trial court ruled that a juridical person or a corporation could apply for registration of land provided such
entity and its predecessors-in-interest have possessed the land for 30 years or more. The trial court ruled that
the facts showed that respondents predecessors-in-interest possessed the land in the concept of an owner prior
to 12 June 1945, which possession converted the land to private property.
The dispositive portion of the trial courts Decision reads:
WHEREFORE, and upon previous confirmation of the Order of General Default, the Court hereby adjudicates
and decrees 10705-B, identical to 13637, Cad-424, Sto. Tomas Cadastre, on plan Csd-04-019741, situated in
Barangay of San Bartolome, of . Tomas, Province of Batangas, with an area of 564,007 square meters, in favor
of and in the name of T.A.N. Properties, Inc., a domestic corporation duly organized and existing under
Philippine laws with principal office at 19th Floor, PDCP Bank Building, 8737 Paseo de Roxas, Makati City.
Once this Decision shall have become final, let the corresponding decree of registration be issued.
SO ORDERED.[12]
Petitioner appealed from the trial courts Decision. Petitioner alleged that the trial court erred in granting the
application for registration absent clear evidence that the applicant and its predecessors-in-interest have
complied with the period of possession and occupation as required by law. Petitioner alleged that the testimonies
of Evangelista and Torres are general in nature. Considering the area involved, petitioner argued that additional
witnesses should have been presented to corroborate Evangelistas testimony.
The Ruling of the Court of Appeals
In its 21 August 2002 Decision, the Court of Appeals affirmed in toto the trial courts Decision.
The Court of Appeals ruled that Evangelistas knowledge of the possession and occupation of the land stemmed
not only from the fact that he worked there for three years but also because he and Kabesang Puroy were
practically neighbors. On Evangelistas failure to mention the name of his uncle who continuously worked on the
land, the Court of Appeals ruled that Evangelista should not be faulted as he was not asked to name his uncle
when he testified. The Court of Appeals also ruled that at the outset, Evangelista disclaimed knowledge of
Fortunatos relation to Kabesang Puroy, but this did not affect Evangelistas statement that Fortunato took over
the possession and cultivation of the land after Kabesang Puroys death. The Court of Appeals further ruled that

41
the events regarding the acquisition and disposition of the land became public knowledge because San
Bartolome was a small community. On the matter of additional witnesses, the Court of Appeals ruled that
petitioner failed to cite any law requiring the corroboration of the sole witness testimony.
The Court of Appeals further ruled that Torres was a competent witness since he was only testifying on the fact
that he had caused the filing of the application for registration and that respondent acquired the land from
Porting.
Petitioner comes to this Court assailing the Court of Appeals Decision. Petitioner raises the following grounds in
its Memorandum:
The Court of Appeals erred on a question of law in allowing the grant of title to applicant
corporation despite the following:
1. Absence of showing that it or its predecessors-in-interest had open, continuous,
exclusive, and notorious possession and occupation in the concept of an owner since
12 June 1945 or earlier; and
2. Disqualification of applicant corporation to acquire the subject tract of land.[13]

The Issues
The issues may be summarized as follows:
1.

Whether the land is alienable and disposable;

2. Whether respondent or its predecessors-in-interest had open, continuous, exclusive, and

notorious possession and occupation of the land in the concept of an owner since June 1945 or
earlier; and
3.

Whether respondent is qualified to apply for registration of the land under the Public Land Act.

The Ruling of this Court

The petition has merit.
Respondent Failed to Prove
that the Land is Alienable and Disposable
Petitioner argues that anyone who applies for registration has the burden of overcoming the presumption that the
land forms part of the public domain. Petitioner insists that respondent failed to prove that the land is no longer
part of the public domain.
The well-entrenched rule is that all lands not appearing to be clearly of private dominion presumably belong to
the State.[14] The onus to overturn, by incontrovertible evidence, the presumption that the land subject of an
application for registration is alienable and disposable rests with the applicant.[15]
In this case, respondent submitted two certifications issued by the Department of Environment and Natural

42
Resources (DENR). The 3 June 1997 Certification by the Community Environment and Natural Resources
Offices (CENRO), Batangas City,[16] certified that lot 10705, Cad-424, Sto. Tomas Cadastre situated at
Barangay San Bartolome, Sto. Tomas, Batangas with an area of 596,116 square meters falls within the
ALIENABLE AND DISPOSABLE ZONE under Project No. 30, Land Classification Map No. 582 certified [on] 31
December 1925. The second certification[17] in the form of a memorandum to the trial court, which was issued
by the Regional Technical Director, Forest Management Services of the DENR (FMS-DENR), stated that the
subject area falls within an alienable and disposable land, Project No. 30 of Sto. Tomas, Batangas certified on
Dec. 31, 1925 per LC No. 582.
The certifications are not sufficient. DENR Administrative Order (DAO) No. 20,[18] dated 30 May 1988,
delineated the functions and authorities of the offices within the DENR. Under DAO No. 20, series of 1988, the
CENRO issues certificates of land classification status for areas below 50 hectares. The Provincial Environment
and Natural Resources Offices (PENRO) issues certificate of land classification status for lands covering over 50
hectares. DAO No. 38,[19] dated 19 April 1990, amended DAO No. 20, series of 1988. DAO No. 38, series of
1990 retained the authority of the CENRO to issue certificates of land classification status for areas below 50
hectares, as well as the authority of the PENRO to issue certificates of land classification status for lands
covering over 50 hectares.[20] In this case, respondent applied for registration of Lot 10705-B. The area covered
by Lot 10705-B is over 50 hectares (564,007 square meters). The CENRO certificate covered the entire Lot
10705 with an area of 596,116 square meters which, as per DAO No. 38, series of 1990, is beyond the authority
of the CENRO to certify as alienable and disposable.
The Regional Technical Director, FMS-DENR, has no authority under DAO Nos. 20 and 38 to issue certificates of
land classification. Under DAO No. 20, the Regional Technical Director, FMS-DENR:
1.

Issues original and renewal of ordinary minor products (OM) permits except rattan;

2.

Approves renewal of resaw/mini-sawmill permits;

3. Approves renewal of special use permits covering over five hectares for public infrastructure
projects; and
4.

Issues renewal of certificates of registration for logs, poles, piles, and lumber dealers.

Under DAO No. 38, the Regional Technical Director, FMS-DENR:

1.

Issues original and renewal of ordinary minor [products] (OM) permits except rattan;

2.

Issues renewal of certificate of registration for logs, poles, and piles and lumber dealers;

3.

Approves renewal of resaw/mini-sawmill permits;

4. Issues public gratuitous permits for 20 to 50 cubic meters within calamity declared areas for
public infrastructure projects; and
5. Approves original and renewal of special use permits covering over five hectares for public
infrastructure projects.
Hence, the certification issued by the Regional Technical Director, FMS-DENR, in the form of a memorandum

43
to the trial court, has no probative value.
Further, it is not enough for the PENRO or CENRO to certify that a land is alienable and disposable. The
applicant for land registration must prove that the DENR Secretary had approved the land classification and
released the land of the public domain as alienable and disposable, and that the land subject of the application
for registration falls within the approved area per verification through survey by the PENRO or CENRO. In
addition, the applicant for land registration must present a copy of the original classification approved by the
DENR Secretary and certified as a true copy by the legal custodian of the official records. These facts must be
established to prove that the land is alienable and disposable. Respondent failed to do so because the
certifications presented by respondent do not, by themselves, prove that the land is alienable and disposable.
Only Torres, respondents Operations Manager, identified the certifications submitted by respondent. The
government officials who issued the certifications were not presented before the trial court to testify on their
contents. The trial court should not have accepted the contents of the certifications as proof of the facts stated
therein. Even if the certifications are presumed duly issued and admissible in evidence, they have no probative
value in establishing that the land is alienable and disposable.
Public documents are defined under Section 19, Rule 132 of the Revised Rules on Evidence as follows:
(a) The written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals,
and public officers, whether of the Philippines, or of a foreign country;
(b) Documents acknowledged before a notary public except last wills and testaments; and
(c) Public records, kept in the Philippines, of private documents required by law to be entered therein.
Applying Section 24 of Rule 132, the record of public documents referred to in Section 19(a), when admissible
for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer
having legal custody of the record, or by his deputy x x x. The CENRO is not the official repository or legal
custodian of the issuances of the DENR Secretary declaring public lands as alienable and disposable. The
CENRO should have attached an official publication[21] of the DENR Secretarys issuance declaring the land
alienable and disposable.
Section 23, Rule 132 of the Revised Rules on Evidence provides:
Sec. 23. Public documents as evidence. Documents consisting of entries in public records made in the
performance of a duty by a public officer are prima facie evidence of the facts stated therein. All other public
documents are evidence, even against a third person, of the fact which gave rise to their execution and of the
date of the latter.
The CENRO and Regional Technical Director, FMS-DENR, certifications do not fall within the class of public
documents contemplated in the first sentence of Section 23 of Rule 132. The certifications do not reflect entries
in public records made in the performance of a duty by a public officer, such as entries made by the Civil
Registrar[22] in the books of registries, or by a ship captain in the ships logbook.[23] The certifications are not
the certified copies or authenticated reproductions of original official records in the legal custody of a government

44
office. The certifications are not even records of public documents.[24] The certifications are conclusions
unsupported by adequate proof, and thus have no probative value.[25] Certainly, the certifications cannot be
considered prima facie evidence of the facts stated therein.
The CENRO and Regional Technical Director, FMS-DENR, certifications do not prove that Lot 10705-B falls
within the alienable and disposable land as proclaimed by the DENR Secretary. Such government certifications
do not, by their mere issuance, prove the facts stated therein.[26] Such government certifications may fall under
the class of documents contemplated in the second sentence of Section 23 of Rule 132. As such, the
certifications are prima facie evidence of their due execution and date of issuance but they do not constitute
prima facie evidence of the facts stated therein.
The Court has also ruled that a document or writing admitted as part of the testimony of a witness does not
constitute proof of the facts stated therein.[27] Here, Torres, a private individual and respondents representative,
identified the certifications but the government officials who issued the certifications did not testify on the
contents of the certifications. As such, the certifications cannot be given probative value.[28] The contents of the
certifications are hearsay because Torres was incompetent to testify on the veracity of the contents of the
certifications.[29] Torres did not prepare the certifications, he was not an officer of CENRO or FMS-DENR, and
he did not conduct any verification survey whether the land falls within the area classified by the DENR
Secretary as alienable and disposable.
Petitioner also points out the discrepancy as to when the land allegedly became alienable and disposable. The
DENR Secretary certified that based on Land Classification Map No. 582, the land became alienable and
disposable on 31 December 1925. However, the certificate on the blue print plan states that it became alienable
and disposable on 31 December 1985.
We agree with petitioner that while the certifications submitted by respondent show that under the Land
Classification Map No. 582, the land became alienable and disposable on 31 December 1925, the blue print plan
states that it became alienable and disposable on 31 December 1985. Respondent alleged that the blue print
plan merely serves to prove the precise location and the metes and bounds of the land described therein x x x
and does not in any way certify the nature and classification of the land involved.[30] It is true that the notation by
a surveyor-geodetic engineer on the survey plan that the land formed part of the alienable and disposable land
of the public domain is not sufficient proof of the lands classification.[31] However, respondent should have at
least presented proof that would explain the discrepancy in the dates of classification. Marquez, LRA Records
Officer II, testified that the documents submitted to the court consisting of the tracing cloth plan, the technical
description of Lot 10705-B, the approved subdivision plan, and the Geodetic Engineers certification were faithful
reproductions of the original documents in the LRA office. He did not explain the discrepancy in the dates.
Neither was the Geodetic Engineer presented to explain why the date of classification on the blue print plan was
different from the other certifications submitted by respondent.
There was No Open, Continuous, Exclusive, and Notorious

45
Possession and Occupation in the Concept of an Owner
Petitioner alleges that the trial courts reliance on the testimonies of Evangelista and Torres was misplaced.
Petitioner alleges that Evangelistas statement that the possession of respondents predecessors-in-interest was
open, public, continuous, peaceful, and adverse to the whole world was a general conclusion of law rather than
factual evidence of possession of title. Petitioner alleges that respondent failed to establish that its predecessorsin-interest had held the land openly, continuously, and exclusively for at least 30 years after it was declared
alienable and disposable.
We agree with petitioner.
Evangelista testified that Kabesang Puroy had been in possession of the land before 1945. Yet, Evangelista only
worked on the land for three years. Evangelista testified that his family owned a lot near Kabesang Puroys land.
The Court of Appeals took note of this and ruled that Evangelistas knowledge of Kabesang Puroys possession of
the land stemmed not only from the fact that he had worked thereat but more so that they were practically
neighbors.[32] The Court of Appeals observed:
In a small community such as that of San Bartolome, Sto. Tomas, Batangas, it is not difficult to
understand that people in the said community knows each and everyone. And, because of such
familiarity with each other, news or events regarding the acquisition or disposition for that matter, of a
vast tract of land spreads like wildfire, thus, the reason why such an event became of public knowledge
to them.[33]
Evangelista testified that Kabesang Puroy was succeeded by Fortunato. However, he admitted that he did not
know the exact relationship between Kabesang Puroy and Fortunato, which is rather unusual for neighbors in a
small community. He did not also know the relationship between Fortunato and Porting. In fact, Evangelistas
testimony is contrary to the factual finding of the trial court that Kabesang Puroy was succeeded by his son
Antonio, not by Fortunato who was one of Antonios children. Antonio was not even mentioned in Evangelistas
testimony.
The Court of Appeals ruled that there is no law that requires that the testimony of a single witness needs
corroboration. However, in this case, we find Evangelistas uncorroborated testimony insufficient to prove that
respondents predecessors-in-interest had been in possession of the land in the concept of an owner for more
than 30 years. We cannot consider the testimony of Torres as sufficient corroboration. Torres testified primarily
on the fact of respondents acquisition of the land. While he claimed to be related to the Dimayugas, his
knowledge of their possession of the land was hearsay. He did not even tell the trial court where he obtained his
information.
The tax declarations presented were only for the years starting 1955. While tax declarations are not conclusive
evidence of ownership, they constitute proof of claim of ownership.[34] Respondent did not present any credible
explanation why the realty taxes were only paid starting 1955 considering the claim that the Dimayugas were
allegedly in possession of the land before 1945. The payment of the realty taxes starting 1955 gives rise to the
presumption that the Dimayugas claimed ownership or possession of the land only in that year.

46
Land Application by a Corporation
Petitioner asserts that respondent, a private corporation, cannot apply for registration of the land of the public
domain in this case.
We agree with petitioner.
Section 3, Article XII of the 1987 Constitution provides:
Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and
national parks. Agricultural lands of the public domain may be further classified by law according to the
uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable lands of the public domain
except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more
than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead
or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public
domain which may be acquired, developed, held, or leased and the conditions therefor.
The 1987 Constitution absolutely prohibits private corporations from acquiring any kind of alienable land of the
public domain. In Chavez v. Public Estates Authority,[35] the Court traced the law on disposition of lands of the
public domain. Under the 1935 Constitution, there was no prohibition against private corporations from acquiring
agricultural land. The 1973 Constitution limited the alienation of lands of the public domain to individuals who
were citizens of the Philippines. Under the 1973 Constitution, private corporations, even if wholly owned by
Filipino citizens, were no longer allowed to acquire alienable lands of the public domain. The present 1987
Constitution continues the prohibition against private corporations from acquiring any kind of alienable land of
the public domain.[36] The Court explained in Chavez:
The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations from acquiring any kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the
public domain only through lease. x x x x
[I]f the constitutional intent is to prevent huge landholdings, the Constitution could have simply
limited the size of alienable lands of the public domain that corporations could acquire. The
Constitution could have followed the limitations on individuals, who could acquire not more than
24 hectares of alienable lands of the public domain under the 1973 Constitution, and not more
than 12 hectares under the 1987 Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in the
name of a corporation would be more effective in preventing the break-up of farmlands. If 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. This would
prevent the continuing break-up of farmlands into smaller and smaller plots from one generation
to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on individuals
from acquiring more than the allowed area of alienable lands of the public domain. Without the

47
constitutional ban, individuals who already acquired the maximum area of alienable lands of the
public domain could easily set up corporations to acquire 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 stockholders of the
corporation. The corporation is a convenient vehicle to circumvent the constitutional limitation on
acquisition by individuals of alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a
limited area of alienable land of the public domain to a qualified individual. This constitutional intent is
safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public
domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable
public lands are gradually decreasing in the face of an ever-growing population. The 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. This, it would seem, is the practical benefit arising from the constitutional ban.
[37]
In Director of Lands v. IAC,[38] the Court allowed the land registration proceeding filed by Acme Plywood &
Veneer Co., Inc. (Acme) for five parcels of land with an area of 481,390 square meters, or 48.139 hectares,
which Acme acquired from members of the Dumagat tribe. The issue in that case was whether the title could be
confirmed in favor of Acme when the proceeding was instituted after the effectivity of the 1973 Constitution which
prohibited private corporations or associations from holding alienable lands of the public domain except by lease
not to exceed 1,000 hectares. The Court ruled that the land was already private land when Acme acquired it
from its owners in 1962, and thus Acme acquired a registrable title. Under the 1935 Constitution, private
corporations could acquire public agricultural lands not exceeding 1,024 hectares while individuals could acquire
not more than 144 hectares.[39]
In Director of Lands, the Court further ruled that open, exclusive, and undisputed possession of alienable land for
the period prescribed by law created the legal fiction whereby the land, upon completion of the requisite period,
ipso jure and without the need of judicial or other sanction ceases to be public land and becomes private
property. The Court ruled:
Nothing can more clearly demonstrate the logical inevitability of considering possession of public land which is of
the character and duration prescribed by statute as the equivalent of an express grant from the State than the
dictum of the statute itself that the possessor(s) x x x shall be conclusively presumed to have performed all the
conditions essential to a Government grant and shall be entitled to a certificate of title x x x. No proof being
admissible to overcome a conclusive presumption, confirmation proceedings would, in truth be little more than a
formality, at the most limited to ascertaining whether the possession claimed is of the required character and
length of time; and registration thereunder would not confer title, but simply recognize a title already vested. The
proceedings would not originally convert the land from public to private land, but only confirm such a conversion
already effected by operation of law from the moment the required period of possession became complete.
x x x [A]lienable public land held by a possessor, personally or through his predecessors-in-interest,
openly, continuously and exclusively for the prescribed statutory period of (30 years under The Public
Land Act, as amended) is converted to private property by the mere lapse or completion of said period,
ipso jure. Following that rule and on the basis of the undisputed facts, the land subject of this appeal
was already private property at the time it was acquired from the Infiels by Acme. Acme thereby
acquired a registrable title, there being at the time no prohibition against said corporations holding or

48
owning private land. x x x.[40] (Emphasis supplied)
Director of Lands is not applicable to the present case. In Director of Lands, the land x x x was already private
property at the time it was acquired x x x by Acme. In this case, respondent acquired the land on 8 August
1997 from Porting, who, along with his predecessors-in-interest, has not shown to have been, as of that date, in
open, continuous, and adverse possession of the land for 30 years since 12 June 1945. In short, when
respondent acquired the land from Porting, the land was not yet private property.
For Director of Lands to apply and enable a corporation to file for registration of alienable and disposable land,
the corporation must have acquired the land when its transferor had already a vested right to a judicial
confirmation of title to the land by virtue of his open, continuous and adverse possession of the land in the
concept of an owner for at least 30 years since 12 June 1945. Thus, in Natividad v. Court of Appeals,[41] the
Court declared:
Under the facts of this case and pursuant to the above rulings, the parcels of land in question had
already been converted to private ownership through acquisitive prescription by the predecessors-ininterest of TCMC when the latter purchased them in 1979. All that was needed was the confirmation of
the titles of the previous owners or predecessors-in-interest of TCMC.
Being already private land when TCMC bought them in 1979, the prohibition in the 1973 Constitution
against corporations acquiring alienable lands of the public domain except through lease (Article XIV,
Section 11, 1973 Constitution) did not apply to them for they were no longer alienable lands of the public
domain but private property.
What is determinative for the doctrine in Director of Lands to apply is for the corporate applicant for land
registration to establish that when it acquired the land, the same was already private land by operation of law
because the statutory acquisitive prescriptive period of 30 years had already lapsed. The length of possession of
the land by the corporation cannot be tacked on to complete the statutory 30 years acquisitive prescriptive
period. Only an individual can avail of such acquisitive prescription since both the 1973 and 1987 Constitutions
prohibit corporations from acquiring lands of the public domain.
Admittedly, a corporation can at present still apply for original registration of land under the doctrine in Director of
Lands. Republic Act No. 9176[42] (RA 9176) further amended the Public Land Act[43] and extended the period
for the filing of applications for judicial confirmation of imperfect and incomplete titles to alienable and disposable
lands of the public domain until 31 December 2020. Thus:
Sec. 2. Section 47, Chapter VIII of the same Act, as amended, is hereby further amended to read as
follows:
Sec. 47. The persons specified in the next following section are hereby granted time, not to
extend beyond December 31, 2020 within which to avail of the benefits of this Chapter:
Provided, That this period shall apply only where the area applied for does not exceed twelve
(12) hectares: Provided, further, That the several periods of time designated by the President
in accordance with Section Forty-five of this Act shall apply also to the lands comprised in the
provisions of this Chapter, but this Section shall not be construed as prohibiting any of said
persons from acting under this Chapter at any time prior to the period fixed by the President.
Sec. 3. All pending applications filed before the effectivity of this amendatory Act shall be treated
as having been filed in accordance with the provisions of this Act.

49
Under RA 9176, the application for judicial confirmation is limited only to 12 hectares, consistent with Section 3,
Article XII of the 1987 Constitution that a private individual may only acquire not more than 12 hectares of
alienable and disposable land. Hence, respondent, as successor-in-interest of an individual owner of the land,
cannot apply for registration of land in excess of 12 hectares. Since respondent applied for 56.4007 hectares,
the application for the excess area of 44.4007 hectares is contrary to law, and thus void ab initio. In applying for
land registration, a private corporation cannot have any right higher than its predecessor-in-interest from whom it
derived its right. This assumes, of course, that the corporation acquired the land, not exceeding 12 hectares,
when the land had already become private land by operation of law. In the present case, respondent has failed
to prove that any portion of the land was already private land when respondent acquired it from Porting in 1997.
WHEREFORE, we SET ASIDE the 21 August 2002 Decision of the Court of Appeals in CA-G.R. CV No. 66658
and the 16 December 1999 Decision of the Regional Trial Court of Tanauan, Batangas, Branch 6 in Land
Registration Case No. T-635. We DENY the application for registration filed by T.A.N. Properties, Inc.
SO ORDERED.

50
G.R. No. 197058, October 14, 2015
GREGORY BALUYO Y GAMORA, FOR AND IN BEHALF OF EMMANUEL GAMORA BALUYO, Petitioner, v.
SPOUSES JOAQUIN AND REBECCA DE LA CRUZ, Respondents.
DECISION
BRION, J.:*
We resolve the present petition for review on certiorari 1 assailing the October 22, 2010 decision2 and May 9,
2011 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 111755. The CA reversed and set aside the
decision of the Regional Trial Court (RTC), Calabanga, Camarines Sur, that in turn affirmed the Municipal Trial
Court (MTC)'s ruling in a forcible entry case filed by the petitioner against the respondents. The CA held that the
petitioner failed to establish his 'prior physical possession' of the subject property - which is an indispensable
element in a forcible entry action.
Statement of Facts
In May 2008, Gregory G. Baluyo, for and on behalf of his brother Emmanuel Baluyo, filed a complaint4 for
forcible entry, with prayer for preliminary mandatory injunction and damages, against respondents-spouses
Joaquin and Rebecca De La Cruz. The complaint alleged that he was the caretaker of a residential house and
lot in Barangay San Pablo, Calabanga, Camarines Sur, owned by his brother Emmanuel, who bought the
property from Bonifacio and Consolacion Dimaano (spouses Dimaano) on November 30, 1999;5 that the house
was leased to Lourdes Perico since March 2008;6 and, that on April 23, 2008, the respondents, through force,
intimidation, threat, strategy or stealth, demolished the house on the property, forcibly ejecting the lessee Perico
and depriving the petitioner of his possession thereof.7
The respondents, on the other hand, denied the petitioner's claim of ownership and contended that the subject
property was owned by Bonifacio Dimaano, the father of respondent Rebecca Dela Cruz nee Dimaano, as
evidenced by Original Certificate of Title No. 31756;8 and that Rebecca, as the sole heir of the deceased
Bonifacio, is now the property's absolute owner.9 Also, they belied the petitioner's claim that the subject
residential house was leased to Perico,10 as the latter never paid any rent during her stay in the premises.11
They claimed that the supposed lessee was not forcibly ejected from, and in fact had voluntarily vacated the
premises prior to the demolition on April 23, 2008.12
In a decision13 dated February 26, 2009, the MTC of Calabanga, Camarines Sur, ruled in the petitioner's favor
and ordered the respondents to turn over the possession of the subject property, and to pay the petitioner one
hundred thousand pesos (P100,000.00) as damages and twenty thousand pesos (P20.000.00) as attorney's
fees.14
On appeal, the RTC affirmed in toto the MTC's decision. Finding for the petitioner, the RTC gave credence to the
Deed of Absolute Sale executed by the spouses Dimaano conveying the subject property to Emmanuel Baluyo.
In a decision15 dated October 22, 2009, the RTC held:
"In a nutshell, the plaintiff-appellee (referring to Emmanuel Baluyo) further contends that he has been in physical
and material possession of the subject residential house and lot because he was raised and resided therein
since childhood, together with his brother Gregorio Baluyo and mother, Crisanta Baluyo (sister of Consolacion
Dimaano) until he purchased the same from the spouses Bonifacio and Consolacion on November 30, 1999 as
evidenced by the Deed of Absolute Sale. In support thereof, he presented the alleged Deed of Absolute (sic) as

51
a source of his right to claim such prior physical and material possession, which was executed by the said
spouses in favor of the plaintiff-appellee on November 30, 1999; xxx.
xxx

xxx

xxx

Section 9 of Rule 130 of the Rules of Court finds application in the case at bar, which provides that: "When the
terms of an agreement have been reduced into writing, it is considered as containing all the terms agreed upon
and there can be, between the parties and their successors in interest, no evidence of such terms other that the
contents of the written agreement. In this case, there is no other evidence to contain their agreement of sale,
except the said Deed of Absolute Sale, which under the law is accorded the presumption of its (sic) regularity.
Thus, the general rule would apply that the subject property is now owned by the plaintiff-appellee by virtue of
the sale on November 30, 1999, unless the defendants-appellants can present countervailing evidence
questioning the validity of their written agreement.
According to the defendants-appellants, they only came to know about it (referring to the Deed of Absolute Sale)
sometime on October 2002 when their father, Bonifacio Dimaano discovered that (sic) the existence of the said
Deed of Sale conveying the subject property to the plaintiff-appellant. Just the same, the best evidence rule will
apply and that is, the Deed of Absolute Sale itself is presumed that it contains all the terms and conditions of the
agreement of the parties."16 (emphasis supplied)y
The respondents appealed the RTC's decision to the CA through a Petition for Review under Rule 42 of the
Rules of Court.
In a decision17 dated October 22, 2010, the CA reversed the RTC's decision upon finding that the petitioner
failed to establish, by preponderance of evidence, his prior physical possession of the subject property. The CA
held:
"In the instant case, the RTC found that Baluyo had sufficiently established by preponderance of evidence that
he was in prior possession of the subject property, xxx
xxx

xxx

xxx

However, an examination of the Deed of Absolute Sale which Baluyo presented in evidence, shows that what
was conveyed to Baluyo, representing the heirs of Crisanta Baluyo as vendees, was "1/2 po[r]tion of the parcel
of residential land," or an area of 214.135 square meters of the 428.27 square meter residential land described
under TD No. (035-0398) R-035-085, Cad No. 15." Baluyo, therefore, had not sufficiently established which
portion of the undivided residential land was conveyed to him. Worse, he failed to establish that he specifically
owned that portion of property where the residential house was erected. Baluyo was not, therefore, able to prove
his basis for his claimed lawful possession of the property."18 (emphases supplied)
The petitioner moved to reconsider the CA's decision. With the denial of his motion for reconsideration with the
CA,19 the petitioner filed the present petition for review on certiorari under Rule 45 before this Court.
The Petition
The petitioner argues' that the CA misapprehended the facts of the case in ruling that he failed to establish his
prior physical possession of the residential house and lot in question, and to identify the specific portion of land
conveyed to him under the November 30, 1999 Deed of Absolute Sale.

52
He contends that his family moved into the subject property, together with the spouses Dimaano and respondent
Rebecca, in 1970, and had since resided therein,20 and later acquired ownership after buying the property from
the spouses Dimaano in November 1999.21
The petitioner also contends that the identity of the "half-portion of the 428.27 square meter residential land"
conveyed to him by the spouses Dimaano has been established, as the respondents have already bought the
other half-portion of the land from their parents (spouses Dimaano).22
In a resolution23 dated August 3, 2001, this Court required the respondents to file their comment to the petition.
The respondents counter-argue in their comment that the CA did not err in reversing the RTC's decision because
the evidence submitted by the petitioner to prove his possession and ownership of the subject property were
self-serving and uncorroborated, particularly the deed of absolute sale allegedly executed by the spouses
Dimaano in the petitioner's favor and the handwritten receipts supposedly issued by the petitioner to his lessee.
OUR RULING
We find the petition meritorious.
Proof of prior physical possession is an indispensable element in a forcible entry case.24 Section 1, Rule 7025
of the Revised Rules of Court requires that, in actions for forcible entry, the plaintiff must allege that he has been
deprived of the possession of any land or building by force, intimidation, threat, strategy, or stealth. This
requirement implies that the defendant's possession of the property is unlawful from the beginning, as he
acquires possession by unlawful means. The plaintiff must prove that he was in prior physical possession of the
property in litigation until he was deprived thereof by the defendant.26
We have ruled that a party who has prior physical possession, regardless of the character of his possession, can
recover possession even against the owner of the property.27 The law protects the party in peaceful, quiet
possession from being thrown out by a strong hand, terror or violence;28 such party is entitled to remain on the
property until he is lawfully ejected by a person having a better right.29
In ejectment cases, such as in forcible entry, the only question to be resolved is who between the contending
parties is entitled to the physical or material possession of the property involved, independent of any claim of
ownership set forth by the parties-litigants.30 In ejectment cases, possession means nothing more than actual
physical possession (possession de facto),31 it is not juridical possession (possession de jure), which gives the
transferee a right over the thing that he may set up even against the owner.32 Thus, "an ejectment case will not
necessarily be decided in favor of one who has presented proof of ownership of the subject property."33
Issues regarding the validity of title to property can be assailed only in an action expressly instituted for that
specific purpose,34 either in an accion publiciana or accion reivindicatoria. A forcible entry action such as the
present case, which by nature is an accion interdictal, is merely a quieting process and never determines actual
title to an estate.35
However, where the issue of ownership is raised by any of the parties to an ejectment case, the courts may
provisionally pass upon the same in order to determine who has the better right to possess the property. We
stress that the adjudication of the issue of ownership is merely provisional and would not bar or prejudice an
action between the same parties involving title to the property.36

53
The parties in this case anchor their right of physical or material possession on their respective claims of
ownership. The petitioner asserts ownership over the subject property based on the Deed of Absolute Sale
executed in his favor on November 30, 1999. On the other hand, the respondents claim ownership of the subject
property based on the fact that respondent Rebecca is the sole heir of her father Bonifacio, who was the holder
of a certificate of title over the property. Bonifacio died in July 2007.37
To defeat the petitioner's claim, the respondents attack the validity and due execution of the deed of absolute
sale. They suggest that the subject deed is most likely a forgery because, in another deed of absolute sale
between Bonifacio Dimaano and Emmanuel Baluyo involving a different property, the National Bureau of
Investigation has found Bonifacio's signature therein as forged. They question why the subject deed only
surfaced nine (9) years after its alleged execution. Also, they allege that the subject deed was not notarized.38
After a careful review of the records, however, we find that the subject deed of sale was apparently notarized.
Attached to the records of the case is a copy of the November 30, 1999 Deed of Sale, notarized by a certain
Atty. Leoncio F. Elopre.39
We find that the respondents' evidence and arguments fail to overcome the presumption of regularity accorded
to the petitioner's notarized deed of absolute sale.40 The settled rule is that a notarized document enjoys the
presumption of regularity and is conclusive as to the truthfulness of its contents.41
While there is evidence to suggest that the petitioner had allegedly been involved in a past forgery, we cannot
consider such evidence to nullify the present deed of absolute sale between the petitioner and the spouses
Dimaano, as it refers to a different sale transaction for another property, albeit involving the same parties. Thus,
in the absence of clear and convincing proof to the contrary, the subject notarized deed of absolute sale is
presumed to be valid and duly executed.
The presence of the subject deed of absolute sale well supports the claim that the petitioner has had physical
possession of the subject property since the date of its execution for beginning November 30, 1999. The
petitioner's claim is further strengthened by affidavits of witnesses attesting to the fact that Emmanuel Baluyo
and his caretaker Gregory Baluyo had previously possessed and occupied the subject residential house which
was leased to a certain Kagawad Edzel Severo and subsequently, to Lourdes Perico. The petitioner, therefore,
enjoys priority in time of possession compared to the respondents who have never been in actual possession,
and based on their claim, would have inherited the subject property only upon Bonifacio's death in July 2007.
On the issue that the identity of the actual portion of land conveyed to the petitioner was not established, we find
that the CA committed a reversible error in ruling that the property involved in this case had not been sufficiently
identified by the petitioner.
We note that the respondents never questioned before the lower courts the identity of the half-portion of the land
claimed by the petitioner. From the very start, the parties were clear as to the identity of the property involved in
the forcible entry case.
We discern from the records that the spouses Bonifacio and Consolacion Dimaano were the original owners of
the 428.27 sq.m. residential house and lot in Barangay San Pablo, Calabanga, Camarines Sur. The petitioner,
his brother Gregory and mother Crisanta who is Consolacion's sister, moved into the property together with the
spouses Dimaano and respondent Rebecca. When the spouses separated in 1999, a fence was built separating

54
the property in half. Since then, Bonifacio, during his lifetime, had lived and resided on his half of the property.
It is undisputed that the respondents now occupy half of the 428.27-sq.m. property and in fact are title-holders to
this half. Thus, the half-portion conveyed to the petitioner under the subject deed of absolute sale could only
refer to the remaining half-portion of the lot covered by OCT No. 31756 that is still under Bonifacio's name.
We reiterate that our pronouncement in this case on the issue of ownership is merely provisional and only for the
purpose of resolving the issue of who between the parties has the right of possession of the subject property.
The petitioner or the respondents may still question the validity of the documents used by the other party to
support their claim of ownership, and to recover possession and ownership of the subject property in a proper
suit.
WHEREFORE, we GRANT the petition for review on certiorari and REVERSE and SET ASIDE the October 22,
2010 decision and May 9, 2011 resolution of the Court of Appeals in CA-G.R. SP No. 111755.
Accordingly, the October 22, 2009 decision of the Regional Trial Court of Calabanga, Camarines Sur, in Civil
Case No. RTC 09-239, which affirmed the February 26, 2009 decision of the Municipal Trial Court of Calabanga,
Camarines Sur, is hereby REINSTATED.
Costs against the respondents.
SO ORDERED.

55
G.R. No. 207791, July 15, 2015
THE CITY OF DAVAO, REPRESENTED BY THE CITY TREASURER OF DAVAO CITY, Petitioner, v. THE
INTESTATE ESTATE OF AMADO S. DALISAY, REPRESENTED BY SPECIAL ADMINISTRATOR ATTY.
NICASIO B. PADERNA, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the January 24, 2013
Decision1 and the May 15, 2013 Resolution2 of the Court of Appeals (CA), in CA-G.R. CV No. 01903-MIN,
which affirmed the June 6, 2008 Decision of the Regional Trial Court, Branch 17, Davao City (RTC), ordering the
City of Davao to, among others, receive the amount of P5,000,000.00 as full payment of the redemption price of
the forfeited properties of the Intestate Estate of Amado S. Dalisay.
The Facts
The Estate of Amado S. Dalisay (the Estate) owned the following properties, all situated in Davao City:y
1. Lot 1, Pcs-11-001298, covered by Transfer Certificate of Title (TCT) No. T-202211 with Tax Declaration No. E1-34-10484;
2. Lot 6, Pcs-11-001298, covered by TCT No. T-202215 with Tax Declaration No. E-1-34-10488;
3. Lot 7, Pcs-11-001298, covered by TCT No. T-202216 with Tax Declaration No. E-1-34-10489;
4. Lot 2, Pcs-11-001298, covered by TCT No. T-202212 with Tax Declaration No. E-1-34-10492; and
5. Building erected in Lot No. 26-B and covered by Tax Declaration No. E-1-34-10480.
These properties were advertised for sale at a public auction for nonpayment of real estate taxes. The public
auction was scheduled on July 19, 2004. No bidders appeared on the date of the public auction, thus, the
aforesaid properties were acquired by the City Government of Davao (the City) pursuant to Section 263 of
Republic Act (R.A.) No. 7160 of the Local Government Code of 1991 (LGC) which provides:
Section 263. Purchase of Property By the Local Government Units for Want of Bidder. - In case there is no
bidder for the real property advertised for sale as provided herein, the real property tax and the related interest
and costs of sale, the local treasurer conducting the sale shall purchase the property in behalf of the local
government unit concerned to satisfy the claim and within two (2) days thereafter shall make a report of his
proceedings which shall be reflected upon the records of his office. It shall be the duty of the Registrar of Deeds
concerned upon registration with his office of any such declaration of forfeiture to transfer the title of the forfeited
property to the local government unit concerned without the necessity of an order from a competent court.
Within one (1) year from the date of such forfeiture, the taxpayer or any of his representative, may redeem the
property by paying to the local treasurer the full amount of the real property tax and the related interest and the
costs of sale. If the property is not redeemed as provided herein, the ownership thereof shall be vested on the
local government unit concerned.
On September 13, 2005, or more than a year after the public auction, the Declarations of Forfeiture for the five
(5) properties were separately issued by the City Treasurer. The common provisions of the declarations read:

56
WHEREAS, the delinquent taxpayer or his authorized representative, has within a period of one (1) year from
said date of Declaration of Forfeiture as herein specified, to redeem the property sold by paying to the City
Treasurer the full amount of the real property tax and related interest and cost of sale as authorized under R.A.
7160. If the property is not redeemed as herein provided, the ownership of the above described property shall be
fully vested to the City Government of Davao in accordance with Section 263 of R.A. 7160.
NOW, THEREFORE, for and in accordance of the foregoing, I RODRIGO S. RIOLA, in my capacity as the Acting
City Treasurer of Davao City, and pursuant to the provision of Section 262 of Republic Act 7160 otherwise known
as the Local Government Code of 1991 hereby DECLARE AS IT HEREBY DECLARED the above described
property FORFEITED in favor of the City Government of Davao.
EXECUTED in Davao City, Philippines this 13th day of September 2005.
[Emphases Supplied]
On October 3, 2005, the City caused the annotation of the five (5) Declarations of Forfeiture on the
corresponding TCTs of the properties.
Subsequently, the Estate inquired from the City Treasurer's Office regarding the amount of the redemption price
of the properties. On September 11, 2006, the Real Property Tax Division of the City furnished the Estate copies
of the billing statements containing a handwritten summary of the amount showing the aggregate total of
P4,996,534.67.
Thus, on September 13, 2006, the Estate delivered a written tender of payment to the City Treasurer and, at the
same time, tendered the amount of P5,000,000.00. The City, however, refused to accept the same. This
constrained the Estate to file the Notice to Deposit the P5,000,000.00 with the Office of the Clerk of Court, RTC,
at the disposal of the City Treasurer. In doing so, the Estate was made to pay legal fees amounting to
P75,200.00. An action for redemption, consignation and damages against the City was consequently filed by the
Estate with the RTC.
For its part, the City admitted the existence of the billing statements, but it posited that their issuance was not an
admission that the Estate still had the right to redeem the properties. The period of redemption had long expired
on July 19, 2005, a year after the subject properties were acquired by the City during the public auction for want
of a bidder. Hence, its refusal to accept the tendered amount was valid and for a lawful cause.
On June 6, 2008, the RTC ruled in favor of the Estate, finding the latter's evidence as preponderantly acceptable
in establishing its right of redemption. The City was ordered to: 1) receive the P5,000,000.00 deposited with the
Clerk of Court, as full payment of the redemption price of the forfeited properties; and 2) issue a certificate of
redemption in favor of the Estate. Further, actual damages and attorneys fees in the amount of P75,200.00 and
P50,000.00, respectively, were awarded in favor of the Estate.3
Aggrieved, the City appealed the RTC decision to the CA, arguing that the one (1) year period should be
reckoned from the date of forfeiture, that is, when the properties of the Estate were purchased by the City for
want of a bidder during the public auction on July 19, 2004. In the same vein, the RTC erred in holding that the
City was estopped from disclaiming and denying the erroneous statement made by the City Treasurer when the
Estate was inadvertently informed that the one year redemption period started from the date of the issued
Declaration of Forfeiture.

57
To this, the Estate countered that the reckoning date should be the one stated in the Declarations of Forfeiture
which corresponded to their date of issuance, to wit, on September 13, 2005.
In the assailed decision, the CA affirmed the ruling of the RTC. It observed that the City had been remiss in its
duty to immediately issue the Declaration of Forfeiture within two (2) days from purchase of the property as
required under Section 263 of the LGC. The CA then explained that "redemption should be looked upon with
favor, and where no injury would follow, a liberal construction will be given to redemption laws, specifically on the
exercise of the right to redeem." In the words of the CA:
In the case at bench, We have come to the conclusion upon inquiry into the equities of this case to liberally apply
the redemption provision of the law in favor of the Estate of Amado Dalisay and give them another opportunity to
recover the properties.
It must be stressed that the delinquent taxpayer may within one (1) year from the date of such forfeiture, redeem
the property by paying to the local treasurer the full amount of the real property tax and the related interest and
the costs of sale. The City, by its own inefficiency, belatedly issued the DECLARATIONS OF FORFEITURE on
September 13, 2005. Such is no fault of the plaintiff-appellee.4
[Emphasis and Underscoring in the Original]
As regards the issue on damages, the CA found the award of attorney's fees proper, in accordance with Article
2208 of the Civil Code which allowed an award of the said fees and expenses of litigation, other than judicial
costs, when by the act or omission of one party, compelled the other to litigate and incur expenses of litigation to
protect his interest.5 In this case, the City's refusal to accept the Estate's tendered payment for the redemption
of the lots had effectively constrained it to file suit. Lastly, the actual damages in the amount of P75,200.00 as
consignation fees had been proven with the corresponding receipt.
Hence, this petition.
ASSIGNMENT OF ERRORS:
1. THAT THE HONORABLE COURT ERRED IN HOLDING THAT THE ONE YEAR REDEMPTION PERIOD
BEGINS FROM THE DATE OF DECLARATION OF FORFEITURE ISSUED BY THE CITY TREASURER ON
SEPTEMBER 13, 2006, INSTEAD OF JULY 19, 2004, WHEN THE SUBJECT DELINQUENT PROPERTIES
WERE FORFEITED BY THE CITY GOVERNMENT FOR WANT OF BIDDER DURING THE PUBLIC AUCTION
SALE;
2. THAT THE HONORABLE COURT ERRED IN HOLDING THAT THE CITY GOVERNMENT IS ESTOPPED
FROM DISCLAIMING AND DENYING THE ERRONEOUS STATEMENT MADE BY THE CITY TREASURER IN
HIS DECLARATION OF FORFEITURES DATED SEPTEMBER 13, 2006, WHICH INADVERTINTLY (SIC)
INFORMED THE PLAINTIFF THAT THE ONE YEAR REDEMPTION PERIOD STARTS FROM THE DATE OF
DECLARATION;
3. THAT THE HONORABLE COURT ERRED IN HOLDING THAT THE PROVISION OF SECTION 263 OF R.A.
7160, OTHERWISE KNOWN AS THE "LOCAL GOVERNMENT CODE OF 1991" DID NOT EXPRESSLY
REPEAL THE PERTINENT PROVISION OF REDEMPTION UNDER P.D. 464, THE LAW GOVERNING REAL
PROPERTY TAXATION THEN, AND ACT 496, SECTIONS 50 AND 377 GRANTING THE RIGHT OF
REDEMPTION TO BE EXERCISED WITHIN ONE YEAR FROM THE REGISTRATION OF SAID FORFEITED
PROPERTIES IN THE REGISTER OF DEEDS;

58
4. THAT THE HONORABLE COURT ERRED IN HOLDING PUBLIC DEFENDANT-APPELLANT LIABLE TO PAY
PLAINTIFF FOR ACTUAL DAMAGES IN THE AMOUNT OF P75,200.00 AS CONSIGNATION FEES AND
ATTORNEY'S FEES AMOUNTING TO P50,000.00.6
The City argues that no law provides that the one (1) year redemption period should be counted from the date of
the Declaration of Forfeiture. What the LGC simply provides is that the period of redemption is "within one (I)
year from the date of such forfeiture." For the City, this phrase means that the effective date of the forfeiture was
July 19, 2004, when the tax delinquent properties were sold at a public auction and, thus, forfeited in its favor for
want of a bidder, rather than September 13, 2005 or the date of the issued Declarations of Forfeiture.
Further, and contrary to the observation of the CA, Section 263 of the LGC does not order the City Treasurer to
issue a declaration of forfeiture within two (2) days from the date when tax delinquent real properties, sold at
auction sale, are purchased by the local government in the absence of a bidder. It merely directs the local
treasurer to make a report of his proceedings which shall be reflected in the records of his office. In fine, it is the
position of the City that the issuance of the said declarations of forfeiture had no bearing in the determination of
the period of redemption, inasmuch as the same were only issued for registration purposes with the Register of
Deeds.7 Here, the date of issuance of the five (5) declarations of forfeiture on September 13, 2005 was
immaterial as the same was merely intended to facilitate the transfers of title to the forfeited properties in favor of
the City after the lapse of the redemption period reckoned from the auction sale held on July 19,2004.
Assuming arguendo that the City Treasurer is mandated by law to issue a declaration of forfeiture within two (2)
days from the purchase of the properties, the City avers that it should not be bound by the consequences of the
malfeasance of its public officers. In other words, the City invokes the doctrine that the principle of estoppel does
not operate against the government for the act of its agents, and that it is never estopped by any mistake or error
on their part.8
Position of the Estate
For its part, the Estate argues that the City erred when it interpreted the subject provision and concluded that
"[t]he law does not say that the one (1) year period of redemption is counted from the date of 'declaration of
forfeiture.'"9 It explained that the provision merely states that the redemption period is counted from "the date of
such forfeiture," and the word "such" before the word "forfeiture" was resorted to in order to avoid the repetition
of the words "declaration of before the word "forfeiture."10 This interpretation is supported by the second
paragraph of the same provision which mentions the phrase, "any such declaration of forfeiture" in connection
with the duty of the Register of Deeds to transfer the title of the forfeited property to the local government unit
sans a court order. The Estate submits that the subject provision should be read as follows:
Within one (1) year from the date of declaration of forfeiture the taxpayer or any of its representative, may
redeem the property by paying to the local treasurer the full amount of the real property tax and the related
interest and costs of sale. If the property is not redeemed as provided herein, the ownership thereof shall be fully
vested in the local government unit concerned.11
[Emphasis Supplied]
The Estate likewise opposes the City's theory that declarations of forfeiture have no bearing in the determination
of the period of redemption because the same were only issued by the treasurer for registration purposes with
the Register of Deeds. For the Estate, there is a difference between redemption of property sold at a public
auction and redemption of property purchased by the local government unit for want of bidder. The former is
governed by Section 261 of the LGC, while the latter is covered by Section 263 (2) of the same law.

59
Reply of the City
The City replies that the term "such" as found in the phrase, "date of such forfeiture," should be construed as
referring to the entire legal process of forfeiture as prescribed in the first paragraph of Section 263 and not to the
singular word, "declaration," as found in the second sentence of the said paragraph. More importantly, the
operative act of forfeiture is the act of the City Treasurer, in behalf of the city, in purchasing the property for lack
of a bidder, and not the registration of any declaration of forfeiture because the said document only facilitates the
transfer of ownership of the property. The City also makes reference to Section 261 of the LGC, involving the
redemption of tax delinquent properties purchased by the public, which provides that the redemption of the
property is to be reckoned from the date of the sale. For the City, this rule is equally applicable in resolving the
present case involving Section 263 of the LGC because the distinctions between the said provisions are too
insignificant, for the Court to rule otherwise. Regardless of whether the property put up for auction was
purchased by the public or by the local government for want of a bidder, the commencement of the period for
redemption must begin on the date of the sale, for the sake of uniformity in the rules.12
The Issues
After a perusal of the arguments presented by the parties, the Court culled the main issue into this significant
question of law:
Whether the one (1) year redemption period of forfeited tax delinquent properties purchased by the local
government for want of a bidder is reckoned from the date of the auction or sale or from the date of the issuance
of the declaration of forfeiture.
The Court's Ruling
In its decision, the CA obviously resorted to an interpretation based solely on the basic rules in interpretation: the
liberal application of redemption laws. It inquired into the "equities of this case" and preferred to uphold the
protection afforded to the original owner of the property as it is "the policy of the law to aid rather than defeat the
owner's right."13
The Court need not belabor the existence of this rule in jurisprudence. In a long line of cases, the Court has
indeed been copious in its stance to allow the redemption of property where in doing so, the ends of justice are
better realized. Doronila v. Vasquez14 allowed redemption in certain cases even after the lapse of the one-year
period in order to promote justice and avoid injustice. In Tolentino v. Court of Appeals,15 the policy of the law to
aid rather than defeat the right of redemption was expressed, stressing that where no injury would ensue, liberal
construction of redemption laws was to be pursued and the exercise of the right to redemption to be permitted to
better serve the ends of justice. In De los Reyes v. Intermediate Appellate Court,16 the rule was liberally
interpreted in favor of the original owner of the property to give him another opportunity, should his fortunes
improve, to recover his property.
Nonetheless, the Court's agreement with the CA decision ends here. The above rulings now beget a more
important question for the resolution of this case: Does a simplistic application of the liberal construction of
redemption laws provide a just resolution of this case? The Court answers this question in the negative.
While it is a given that redemption by property owners is looked upon with favor, it is equally true that the right to
redeem properties remains to be a statutory privilege.17 Redemption is by force of law, and the purchaser at
public auction is bound to accept it.18 Further, the right to redeem property sold as security for the satisfaction of
an unpaid obligation does not exist preternaturally. Neither is it predicated on proprietary right, which, after the

60
sale of the property on execution, leaves the judgment debtor and vests in the purchaser. Instead, it is a bare
statutory privilege to be exercised only by the persons named in the statute.19
In other words, a valid redemption of property must appropriately be based on the law which is the very source
of this substantive right. It is, therefore, necessary that compliance with the rules set forth by law and
jurisprudence should be shown in order to render validity to the exercise of this right. Hence, when the Court is
beckoned to rule on this validity, a hasty resort to elementary rules on construction proves inadequate.
Especially so, when there are deeper underpinnings involved, not only as to the right of the owner to take back
his property, but equally important, as to the right of the purchaser to acquire the property after deficient
compliance with statutory requirements, including the exercise of the right within the period prescribed by law.
The Court cannot close its eyes and automatically rule in favor of the redemptioner at all times. The right
acquired by the purchaser at an execution sale is inchoate and does not become absolute until after the
expiration of the redemption period without the right of redemption having been exercised. "But inchoate though
it be, it is, like any other right, entitled to protection and must be respected until extinguished by redemption."20
Suffice it to say, the liberal application of redemption laws in favor of the property owner is not an austere
solution to a controversy, where there are remarkable factors that lead to a more sound and reasonable
interpretation of the law. Here, the proper focus of the CA should have been the just and fair interpretation of the
law, instead of an automatic and constricted view on its liberal application.
It is without question that Section 263 of the LGC lacks defmiteness as to the reckoning point for the redemption
of tax delinquent properties. It merely employs the phrase, "within one (I) year from the date of such forfeiture."
On one hand, the City avers that the period commences from the date of the forfeiture, that is, the date of the
auction. On the other hand, the Estate insists that the redemption period begins from the date when the
declarations of forfeiture were issued.
For the Court, the arguments of the City point toward a more just and fair resolution of the perceived vagueness
in the law.
First. The City's theory that the term "forfeiture," contemplated in the subject phrase, refers to the date when the
tax delinquent properties were sold at a public auction, holds more logic than the conjecture of the Estate on the
usage of the word "such."
Indeed, Section 263 of the LGC takes into effect because of one vital factor: the absence of a bidder in a public
auction for tax delinquent properties. Were it not for this fact, this provision would not come into operation or, at
the least, find relevance. Sections 260 and 261 would have come into play in cases where a purchaser, other
than the local government unit, places a bid on the property. This is undeniably a distinct feature of Section 263
that cannot be ignored. The absence of the public impels the City Treasurer to purchase the property in behalf of
the city. Reason would, therefore, dictate that this purchase by the City is the very forfeiture mandated by the
law. The contemplated "forfeiture" in the provision points to the situation where the local government ipso facto
"forfeits" the property for want of a bidder.
This analysis is ridden with substance that surpasses the hypothesis of the Estate. The Estate purely speculates
that the term "such" in the phrase "the date of such forfeiture," was only resorted to in order to avoid the
repetition of the words in the text of the law. It attempts to convince the Court that the second paragraph of the
same provision which mentions the phrase, "any such declaration of forfeiture," in connection with the duty of the
Register of Deeds to transfer the title of the forfeited property, shows that the "forfeiture" contemplated by the law

61
is that of the issuance of the Declaration of Forfeiture. While the Estate has a point in saying that the City may
not speciously insist that the law does not say that the one (1) year period of redemption is counted from the
date of "declaration of forfeiture," this proffered explanation is far more hallow and unfounded.
As explained above, the better theory that is consistent with the subject matter of the provision is that forfeiture
of tax delinquent properties transpires no later than the purchase made by the city due to lack of a bidder from
the public. This happens on the date of the sale, and not upon the issuance of the declaration of forfeiture.
To rule otherwise would be similar to saying that prior to the accrual of the local government's right as a
purchaser, an additional requirement of issuing a declaration of forfeiture is necessary. Not only is this duty
unfounded, but it also places the local government in a vacuum from the time of the auction up to the time it
issues the document. It causes the absurd situation, where the local government's forfeiture of the property for
want of a bidder becomes an empty and meaningless exercise merely because the issuance of the declaration
of forfeiture came at a much subsequent time. The precarious effect of this view strips off the local government
of the protection given by law to a purchaser during and after a public auction. This goes against the safeguards
to which a purchaser is entitled until a valid redemption of the property ensues because then, it is burdened with
yet another positive act of issuing a document in order to gain rights. Surely, this is not the intention of Section
263. The local government's power to acquire tax delinquent properties cannot be overemphasized at this point.
Second. The CA seemed to have completely disregarded the ruling in City Mayor v. RCBC (City Mayor)21 in its
quick application of the liberal rules of statutory construction. True, City Mayor involved Section 261 of the LGC,
instead of Section 263, because it involved a private individual who was adjudged as the highest bidder during
the public auction. Nevertheless, the said case passed upon the very issue at bench: the reckoning period of the
redemption period for auctioned tax delinquent properties.
In City Mayor, the property owner and respondent bank filed a petition for the acceptance of its tender of
payment and for the subsequent issuance of the certificate of redemption, after the highest bidder during the
auction had effected payment of the tax delinquencies and the issuance and registration of the corresponding
Certificate of Sale of Delinquent Property. The lower court ruled in favor of the respondent bank on the ground
that "the counting of the one (1) year redemption period of tax delinquent properties sold at public auction should
start from the date of registration of the certificate of sale or the final deed of sale in favor of the purchaser"
based on Section 78 of Presidential Decree (P.D.) No. 464.22
The Court, however, disagreed with the lower court's position, viz:
However, since the passing of R.A. No. 7160, such is no longer controlling. The issue of whether or not R.A No.
7160 or the Local Government Code, repealed P.D. No. 464 or the Real Property Tax Code has long been laid to
rest by this Court. Jurisdiction thrives to the effect that R.A. No. 7160 repealed P.D. No. 464. From January 1,
1992 onwards, the proper basis for the computation of the real property tax payable, including penalties or
interests, if applicable, must be R. A. No. 7160. Its repealing clause, Section 534, reads:
SECTION 534. Repealing Clause. xxxx
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a (3) and
b (2) of Republic Act No. 5447 regarding the Special Education Fund; Presidential Decree No. 144 as amended
by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential Decree No.
436 as amended by Presidential Decree No. 558; and Presidential Decrees Nos. 381, 436, 464, 477, 526, 632,

62
752, and 1136 are hereby repealed and rendered of no force and effect.
Inasmuch as the crafter of the Local Government Code clearly worded the above-cited Section to repeal P.D.
No. 464, it is a clear showing of their legislative intent that R.A. No. 7160 was to supersede P.D. No. 464. As
such, it is apparent that in case of sale of tax delinquent properties, R.A. No. 7160 is the general law applicable.
xxx
From the foregoing, the owner of the delinquent real property or person having legal interest therein, or his
representative, has the right to redeem the property within one (1) year from the date of sale upon payment of
the delinquent tax and other fees. Verily, the period of redemption of tax delinquent properties should be counted
not from the date of registration of the certificate of sale, as previously provided by Section 78 of P.D. No. 464,
but rather on the date of sale of the tax delinquent property, as explicitly provided by Section 261 of R.A. No.
7160.
[Emphases and Underscoring Supplied]
It is worthy to note, however, that City Mayor was ultimately resolved in favor of respondent bank because it
turned out that petitioner city government enacted an ordinance, which provided for the procedure in the
collection of delinquent taxes on real properties within its territorial jurisdiction. Section 14 (a) Paragraph 7 of the
said ordinance expressly set the redemption period within one (1) year from the date of the annotation of the
sale of the property at the proper registry. Being a special law with limited territorial application, the city
ordinance prevailed over that of the LGC which was, and still is, the general law on the matter. Consequently, the
respondent bank had until February 10, 2005 to redeem the subject properties counted from the date of
registration of the Certificate of Sale of Delinquent Property on February 10, 2004. Its tender of payment of the
subject properties' tax delinquencies and other fees on June 10, 2004, was then well within the redemption
period.
It is now apparent that the previous rule enunciating the reckoning period of redemption for tax delinquent
properties from the date of the registration of sale of the property is no longer controlling. Section 261 now
mandates that the owner of the delinquent real property or person having legal interest therein, or his
representative, has the right to redeem the property within one (1) year from the date of sale upon payment of
the delinquent tax and other fees.
In the case at bench, considering the fact that neither of the parties has invoked the existence of an ordinance of
similar import, the general law on the matter finds bearing. In applying the pronouncements in City Mayor to this
case, the Court finds no harm in considering the interpretation of Section 261 which is emphatic in saying that
the redemption period is set "within one (1) year from the date of sale," as applicable to Section 263. The usage
of the terms "sale" and "forfeiture" in Sections 261 and 263, respectively, only highlights a distinction in the
situations covered and produces no significant variance. The former refers to the voluntary purchase made by a
bidder in public auction while the latter points to the divesting of the ownership of a particular property on
account of the breach of a legal duty, without compensation,23 for example, the non-payment of tax. Therefore,
in cases covered by these pertinent provisions in the LGC, the date of the "sale" or "forfeiture" is rightfully the
point in time when the owner is divested of certain attributes of ownership over the property albeit only until the
redemption of the property. This translates to no other event but to the date of the public auction. More than the
purpose of uniformity and harmony among provisions of law, the Court finds this conclusion as consistent with
the intention of the law.
Third. At this juncture, the Court considers the peculiar fact involved in this case: the City Treasurer's belated
issuance of the disputed Declarations of Forfeiture. Clearly, this irregularity had eventually shaped and brought

63
forth the subject controversy. Had it not been for the severe delay in the issuance, there would have been no
dispute and the reckoning period of the redemption period would have been a toss between closer dates, rather
than those claimed, which are years apart, to wit: July 19, 2004 and September 13, 2005.
The general rule is that the State cannot be put in estoppel by the mistakes or errors of its officials or agents.24
Indeed, like all general rules, this is also subject to exceptions. Estoppel should not be invoked except in a rare
and unusual circumstance. It may not be invoked where they would operate to defeat the effective operation of a
policy adopted to protect the public. They must be applied with circumspection and should be applied only in
those special cases where the interests of justice clearly require it.25
The Court, however, can only commiserate with the situation of the state and its lost chance of recovering its
property, as it still sees no reason to depart from the general rule. The following circumstances became the
object of the Court's perplexity:y
1. The Estate does not dispute the validity of the notices with respect to the public auction. This brings the Court
to the safe assumption that there was valid constructive notice as to possible danger of forfeiture of the
properties prior to the auction. The Estate, with its administrator in the person of Nicasio B. Paderna, is
undoubtedly bound by this. Corollary thereto, the delinquent status of the properties may not be said to have
been surprising news to the Estate.
2. Just the same, it took the Estate more than one (1) year from the date of the auction of which it was properly
notified, to inquire from the City Treasurer's Office regarding the amount of the redemption price due. On the
same date of inquiry or on September 11, 2006, the Estate was furnished a handwritten summary of the amount
due for redemption. It is fair to suppose that at this point, the Estate became aware that no declaration of
forfeiture had yet been issued by the City Treasurer.
3. Two (2) days after this inquiry, and as if a reaction thereto, the City Treasurer issued the subject five (5)
Declarations of Forfeiture on September 13, 2006. Now with full confidence on the said document and its
expressed statement that the property owner had one year from the date of its issuance, within which to redeem
the properties, the Estate lost no time in tendering its payment for the redemption of the properties.
The delay on the part of the Estate to at least inquire into the outcome of the auction and its misplaced reliance
on a curious document heightens the belief of the Court that the City may not be deprived of a right that has long
been vested in its favor. The odd timing in the issuance of the Declarations of Forfeiture and its very contents
which observably benefit the Estate to the core form a nagging doubt that may not be easily shrugged off. This
hinders the Court from applying the exceptions to the rule on estoppel, when doing this would result in more
impropriety.
It is the City that would suffer an injustice if it were to be bound by its officer's suspect actions. The policy of
enabling local governments to fully utilize the income potentialities of the real property tax would be put at a
losing end if tax delinquent properties could be recovered by the sheer expediency of a document erroneously
or, perhaps fraudulently, issued by its officers. This would place at naught, the essence of redemption as a
statutory privilege; for then, the statutory period for its exercise may be extended by the indiscretion of
scrupulous officers. In other words, the period would become flexible because extensions of the period would
depend, not just on the sound discretion of the City Treasurer but on his attitude, work ethics and worse,
temperament.

64
The Court cannot allow this situation to prevail.
In this case, the period to redeem the subject properties of this case had long expired on July 19, 2005, and
since then, the forfeiture of the properties had become absolute. The failure of the Estate to validly exercise its
right of redemption within the statutory period had already resulted in the consolidation of ownership over the
properties by the City.
One final word. The resolution of this case does not, in any way, cloud the glaring misfeasance in office
committed by the City Treasurer. As discussed, this legal battle could not have developed were it not for the lull
of more than a year between the subject auction and the issuance of the declarations of forfeiture. More often
than not, inordinate delay in the issuance of documents, whether out of a ministerial or directory function, creates
an injurious effect to the parties concerned. This inefficiency in the bureaucracy must be thwarted lest the quality
of public service in local governments deteriorate and personal rights suffer. No less than the Constitution
sanctifies the principle that a public office is a public trust, and enjoins all public officers and employees to serve
with the highest degree of responsibility, integrity, loyalty, and efficiency.26 These attributes, by all means, are
expected of a City Treasurer.
WHEREFORE, the assailed January 24, 2013 Decision of the Court of Appeals and its May 15, 2013 Resolution
in C.A.-G.R. CV No. 01903-MIN are REVERSED and SET ASIDE. No costs.
The action for redemption, consignation and damages filed by respondent Estate is ordered DISMISSED.
SO ORDERED.

65
G.R. No. 106041 January 29, 1993
BENGUET CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF ZAMBALES,
PROVINCIAL ASSESSOR OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN
MARCELINO, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

CRUZ, J.:
The realty tax assessment involved in this case amounts to P11,319,304.00. It has been imposed on the
petitioner's tailings dam and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said properties as
taxable improvements. The assessment was appealed to the Board of Assessment Appeals of the Province of
Zambales. On August 24, 1988, the appeal was dismissed mainly on the ground of the petitioner's "failure to pay
the realty taxes that fell due during the pendency of the appeal."
The petitioner seasonably elevated the matter to the Central Board of Assessment Appeals, 1 one of the herein
respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the appeal but, on the
merits, agreed that "the tailings dam and the lands submerged thereunder (were) subject to realty tax."
For purposes of taxation the dam is considered as real property as it comes within the object
mentioned in paragraphs (a) and (b) of Article 415 of the New Civil Code. It is a construction
adhered to the soil which cannot be separated or detached without breaking the material or
causing destruction on the land upon which it is attached. The immovable nature of the dam as
an improvement determines its character as real property, hence taxable under Section 38 of the
Real Property Tax Code. (P.D. 464).
Although the dam is partly used as an anti-pollution device, this Board cannot accede to the
request for tax exemption in the absence of a law authorizing the same.
xxx xxx xxx
We find the appraisal on the land submerged as a result of the construction of the tailings dam,
covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for Zambales
which was reviewed and allowed for use by the Ministry (Department) of Finance in the 19811982 general revision. No serious attempt was made by Petitioner-Appellant Benguet
Corporation to impugn its reasonableness, i.e., that the P50.00 per square meter applied by
Respondent-Appellee Provincial Assessor is indeed excessive and unconscionable. Hence, we
find no cause to disturb the market value applied by Respondent Appellee Provincial Assessor of
Zambales on the properties of Petitioner-Appellant Benguet Corporation covered by Tax
Declaration Nos. 002-0260 and 002-0266.
This petition for certiorari now seeks to reverse the above ruling.
The principal contention of the petitioner is that the tailings dam is not subject to realty tax because it is not an
"improvement" upon the land within the meaning of the Real Property Tax Code. More particularly, it is claimed

66

(1) as regards the tailings dam as an "improvement":

(a) that the tailings dam has no value separate from and independent of the
mine; hence, by itself it cannot be considered an improvement separately
assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the petitioner corporation in the
area, the tailings dam will benefit the local community by serving as an irrigation
facility;
(d) that the building of the dam has stripped the property of any commercial
value as the property is submerged under water wastes from the mine;
(e) that the tailings dam is an environmental pollution control device for which
petitioner must be commended rather than penalized with a realty tax
assessment;
(f) that the installation and utilization of the tailings dam as a pollution control
device is a requirement imposed by law;
(2) as regards the valuation of the tailings dam and the submerged lands:
(a) that the subject properties have no market value as they cannot be sold
independently of the mine;
(b) that the valuation of the tailings dam should be based on its incidental use by
petitioner as a water reservoir and not on the alleged cost of construction of the
dam and the annual build-up expense;
(c) that the "residual value formula" used by the Provincial Assessor and
adopted by respondent CBAA is arbitrary and erroneous; and
(3) as regards the petitioner's liability for penalties for
non-declaration of the tailings dam and the submerged lands for realty tax purposes:
(a) that where a tax is not paid in an honest belief that it is not due, no penalty
shall be collected in addition to the basic tax;
(b) that no other mining companies in the Philippines operating a tailings dam
have been made to declare the dam for realty tax purposes.
The petitioner does not dispute that the tailings dam may be considered realty within the meaning of Article 415.
It insists, however, that the dam cannot be subjected to realty tax as a separate and independent property
because it does not constitute an "assessable improvement" on the mine although a considerable sum may have
been spent in constructing and maintaining it.
To support its theory, the petitioner cites the following cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the dikes and gates
constructed by the taxpayer in connection with a fishpond operation as integral parts of the fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303), involving a road constructed by

67
the timber concessionaire in the area, where this Court did not impose a realty tax on the road primarily for two
reasons:
In the first place, it cannot be disputed that the ownership of the road that was constructed by
appellee belongs to the government by right of accession not only because it is inherently
incorporated or attached to the timber land . . . but also because upon the expiration of the
concession said road would ultimately pass to the national government. . . . In the second place,
while the road was constructed by appellee primarily for its use and benefit, the privilege is not
exclusive, for . . . appellee cannot prevent the use of portions of the concession for
homesteading purposes. It is also duty bound to allow the free use of forest products within the
concession for the personal use of individuals residing in or within the vicinity of the land. . . . In
other words, the government has practically reserved the rights to use the road to promote its
varied activities. Since, as above shown, the road in question cannot be considered as an
improvement which belongs to appellee, although in part is for its benefit, it is clear that the
same cannot be the subject of assessment within the meaning of Section 2 of C.A.
No. 470.
Apparently, the realty tax was not imposed not because the road was an integral part of the lumber concession
but because the government had the right to use the road to promote its varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it was declared that the
reservoir dam went with and formed part of the reservoir and that the dam would be "worthless and useless
except in connection with the outlet canal, and the water rights in the reservoir represent and include whatever
utility or value there is in the dam and headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This case involved drain
tunnels constructed by plaintiff when it expanded its mining operations downward, resulting in a constantly
increasing flow of water in the said mine. It was held that:
Whatever value they have is connected with and in fact is an integral part of the mine itself. Just
as much so as any shaft which descends into the earth or an underground incline, tunnel, or drift
would be which was used in connection with the mine.
On the other hand, the Solicitor General argues that the dam is an assessable improvement because it
enhances the value and utility of the mine. The primary function of the dam is to receive, retain and hold the
water coming from the operations of the mine, and it also enables the petitioner to impound water, which is then
recycled for use in the plant.
There is also ample jurisprudence to support this view, thus:
. . . The said equipment and machinery, as appurtenances to the gas station building or shed
owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the
operation of the gas station, for without them the gas station would be useless and which have
been attached or affixed permanently to the gas station site or embedded therein, are taxable
improvements and machinery within the meaning of the Assessment Law and the Real Property
Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA 296).
We hold that while the two storage tanks are not embedded in the land, they may, nevertheless,
be considered as improvements on the land, enhancing its utility and rendering it useful to the oil
industry. It is undeniable that the two tanks have been installed with some degree of
permanence as receptacles for the considerable quantities of oil needed by MERALCO for its

68
operations. (Manila Electric Co. v. CBAA, 114 SCRA 273).
The pipeline system in question is indubitably a construction adhering to the soil. It is attached to
the land in such a way that it cannot be separated therefrom without dismantling the steel pipes
which were welded to form the pipeline. (MERALCO Securities Industrial Corp. v. CBAA, 114
SCRA 261).
The tax upon the dam was properly assessed to the plaintiff as a tax upon real estate. (FlaxPond Water Co. v. City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they are designed and used by the owner as
permanent improvement of the free hold, and that for such reasons they were properly assessed
by the respondent taxing district as improvements. (Standard Oil Co. of New Jersey v. Atlantic
City, 15 A 2d. 271)
The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is
imposed on "real property, such as lands, buildings, machinery and other improvements affixed or attached to
real property." In the absence of such a definition, we apply Article 415 of the Civil Code, the pertinent portions of
which state:
Art. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is due "on the
real property, including land, buildings, machinery and other improvements" not specifically exempted in Section
3 thereof. A reading of that section shows that the tailings dam of the petitioner does not fall under any of the
classes of exempt real properties therein enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines
improvement as follows:
(k) Improvements is a valuable addition made to property or an amelioration in its condition,
amounting to more than mere repairs or replacement of waste, costing labor or capital and
intended to enhance its value, beauty or utility or to adopt it for new or further purposes.
The term has also been interpreted as "artificial alterations of the physical condition of the ground that are
reasonably permanent in character." 2
The Court notes that in the Ontario case the plaintiff admitted that the mine involved therein could not be
operated without the aid of the drain tunnels, which were indispensable to the successful development and
extraction of the minerals therein. This is not true in the present case.
Even without the tailings dam, the petitioner's mining operation can still be carried out because the primary
function of the dam is merely to receive and retain the wastes and water coming from the mine. There is no
allegation that the water coming from the dam is the sole source of water for the mining operation so as to make
the dam an integral part of the mine. In fact, as a result of the construction of the dam, the petitioner can now
impound and recycle water without having to spend for the building of a water reservoir. And as the petitioner

69
itself points out, even if the petitioner's mine is shut down or ceases operation, the dam may still be used for
irrigation of the surrounding areas, again unlike in the Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not applicable because it involved water reservoir
dams used for different purposes and for the benefit of the surrounding areas. By contrast, the tailings dam in
question is being used exclusively for the benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate existence, just as
vigorously contends that at the end of the mining operation the tailings dam will serve the local community as an
irrigation facility, thereby implying that it can exist independently of the mine.
From the definitions and the cases cited above, it would appear that whether a structure constitutes an
improvement so as to partake of the status of realty would depend upon the degree of permanence intended in
its construction and use. The expression "permanent" as applied to an improvement does not imply that the
improvement must be used perpetually but only until the purpose to which the principal realty is devoted has
been accomplished. It is sufficient that the improvement is intended to remain as long as the land to which it is
annexed is still used for the said purpose.
The Court is convinced that the subject dam falls within the definition of an "improvement" because it is
permanent in character and it enhances both the value and utility of petitioner's mine. Moreover, the immovable
nature of the dam defines its character as real property under Article 415 of the Civil Code and thus makes it
taxable under Section 38 of the Real Property Tax Code.
The Court will also reject the contention that the appraisal at P50.00 per square meter made by the Provincial
Assessor is excessive and that his use of the "residual value formula" is arbitrary and erroneous.
Respondent Provincial Assessor explained the use of the "residual value formula" as follows:
A 50% residual value is applied in the computation because, while it is true that when slime fills
the dike, it will then be covered by another dike or stage, the stage covered is still there and still
exists and since only one face of the dike is filled, 50% or the other face is unutilized.
In sustaining this formula, the CBAA gave the following justification:
We find the appraisal on the land submerged as a result of the construction of the tailings dam,
covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for San
Marcelino, Zambales, which is fifty (50.00) pesos per square meter for third class industrial land
(TSN, page 17, July 5, 1989) and Schedule of Market Values for Zambales which was reviewed
and allowed for use by the Ministry (Department) of Finance in the 1981-1982 general revision.
No serious attempt was made by Petitioner-Appellant Benguet Corporation to impugn its
reasonableness, i.e, that the P50.00 per square meter applied by Respondent-Appellee
Provincial Assessor is indeed excessive and unconscionable. Hence, we find no cause to disturb
the market value applied by Respondent-Appellee Provincial Assessor of Zambales on the
properties of Petitioner-Appellant Benguet Corporation covered by Tax Declaration Nos. 0020260 and 002-0266.
It has been the long-standing policy of this Court to respect the conclusions of quasi-judicial agencies like the
CBAA, which, because of the nature of its functions and its frequent exercise thereof, has developed expertise in
the resolution of assessment problems. The only exception to this rule is where it is clearly shown that the
administrative body has committed grave abuse of discretion calling for the intervention of this Court in the
exercise of its own powers of review. There is no such showing in the case at bar.

70
We disagree, however, with the ruling of respondent CBAA that it cannot take cognizance of the issue of the
propriety of the penalties imposed upon it, which was raised by the petitioner for the first time only on appeal.
The CBAA held that this "is an entirely new matter that petitioner can take up with the Provincial Assessor (and)
can be the subject of another protest before the Local Board or a negotiation with the local sanggunian . . ., and
in case of an adverse decision by either the Local Board or the local sanggunian, (it can) elevate the same to
this Board for appropriate action."
There is no need for this time-wasting procedure. The Court may resolve the issue in this petition instead of
referring it back to the local authorities. We have studied the facts and circumstances of this case as above
discussed and find that the petitioner has acted in good faith in questioning the assessment on the tailings dam
and the land submerged thereunder. It is clear that it has not done so for the purpose of evading or delaying the
payment of the questioned tax. Hence, we hold that the petitioner is not subject to penalty for its
non-declaration of the tailings dam and the submerged lands for realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure to show that the questioned decision of respondent Central
Board of Assessment Appeals is tainted with grave abuse of discretion except as to the imposition of penalties
upon the petitioner which is hereby SET ASIDE. Costs against the petitioner. It is so ordered.

71
G.R. No. 183448

June 30, 2014

SPOUSES DOMINADOR PERALTA AND OFELIA PERALTA, Petitioners,

vs.
HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Respondents.
x-----------------------x
G.R. No. 183464
HEIRS OF BERNARDINA ABALON, represented by MANSUETO ABALON, Petitioners,
vs.
MARISSA ANDAL, LEONIL AND AL, ARNEL AND AL, SPOUSES DOMINDOR PERALTA AND OFELIA
PERALTA, and HEIRS of RESTITUTO RELLAMA, represented by his children ALEX, IMMANUEL, JULIUS
and SYLVIA, all surnamed RELLAMA.
DECISION
SERENO, CJ:
Before us are the consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court assailing
the 30 May 2007 Decision1 of the Court of Appeals (CA) Seventeenth Division in CA-G.R. CV No. 85542. The
CA had reversed the 14 April 2005 Decision2 of the Regional Trial Court (RTC), Fifth Judicial Region of Legaspi
City, Branch 5, in Civil Case No. 9243.
The civil case before the RTC of Legaspi City involved a parcel of land registered under the name of Bernardina
Abalon and fraudulently transferred to Restituto Rellama and who, in turn, subdivided the subject property and
sold it separately to the other parties to this case Spouses Dominador and Ofelia Peralta; and Marissa, Leonil
and Arnel, all surnamed Andal. Thereafter, Spouses Peralta and the Andals individually registered the respective
portions of the land they had bought under their names. The heirs of Bernardina were claiming back the land,
alleging that since it was sold under fraudulent circumstances, no valid title passed to the buyers. On the other
hand, the buyers, who were now title holders of the subject parcel of land, averred that they were buyers in good
faith and sought the protection accorded to them under the law.
THE FACTS
The RTC and the CA have the same findings of fact, but differ in their legal conclusions. There being no factual
issues raised in the Petitions, we adopt the findings of fact of the CA in CA-G.R. No. 85542, as follows:
The subject parcel of land, described as Lot 1679 of the Cadastral Survey of Legaspi, consisting of 8,571 square
meters, was originally covered by Original Certificate of Title (OCT) No. (O) 16 and registered in the name of
Bernardina Abalon (Abalon). It appears that a Deed of Absolute Sale was executed over the subject property in
favor of Restituto M. Rellama (Rellama) on June 10, 1975. By virtue of such conveyance OCT No. (O) 16 was
cancelled and in lieu thereof Transfer Certificate of Title (TCT) No. 42108 was issued in the name of Rellama.
The subject property was then subdivided into three (3) portions: Lot 1679-A, Lot 1679-B, Lot 1679-C. Lot 1679A was sold to Spouses Dominador P. Peralta, Jr. and Ofelia M. Peralta (Spouses Peralta) for which reason TCT
No. 42254 was issued in their names. Lot 1679-B, on the other hand, was first sold to Eduardo Lotivio (Lotivio)
who thereafter transferred his ownership thereto to Marissa Andal, Arnel Andal, and Leonil Andal (the Andals)
through a Deed of Absolute Sale dated October 9, 1995. On even date, TCT No. 42482 was issued in the name
of the Andals. The Andals likewise acquired Lot 1679-C as evidenced by the issuance of TCT No. 42821 in their
favor on December 27, 1995.
Claiming that the Deed of Absolute Sale executed by Abalon in favor of Rellama was a forged document, and

72
claiming further that they acquired the subject property by succession, they being the nephew and niece of
Abalon who died without issue, plaintiff-appellees Mansueta Abalon and Amelia Abalon filed the case below
against Rellama, Spouses Peralta, and the Andals, the herein defendants-appellants and the Bank of the
Philippines [sic] Islands which was later dropped as a party defendant.
It was alleged in their Complaint and subsequent Amended Complaint, under five separate causes of action, that
Rellama was able to cause the cancellation of OCT No. (O) 16, and in lieu thereof the issuance of TCT No.
42108 in his own name from which the defendants-appellants derived their own titles, upon presentation of a
xerox copy of the alleged forged deed of absolute sale and the order granting the issuance of a second owners
duplicate copy of OCT No. (O) 16 in his favor in Miscellaneous Cadastral Case No. 10648, which he had filed on
the pretext that Lot 1679 covered by OCT No. (O) 16 was sold to him and that the owners duplicate copy of the
said title got lost in 1976 after the same was delivered to him. They averred that the owners duplicate copy of
Oct NO. (O) 16 had always been with Abalon and that upon her death, it was delivered to them. Likewise, they
alleged that Abalon had always been in possession of the subject property through her tenant Pedro Bellen who
was thereafter succeeded by his wife, Ruperta Bellen, and then his son, Godofredo Bellen. On the other hand,
they said that Rellama had never set foot on the land he was claiming. They further alleged that after the
ownership over the subject property was transferred to them upon the death of Abalon, they took possession
thereof and retained Godofredo as their own tenant. However, they averred that in 1995 the defendantsappellants were able to wrest possession of the subject property from Godofredo Bellen. They alleged that the
defendants-appellants are not buyers in good faith as they were aware that the subject land was in the
possession of the plaintiffs-appellees at the time they made the purchase. They thus claim that the titles issued
to the defendants-appellants are null and void.
In his answer, Rellama alleged that the deed of absolute sale executed by Abalon is genuine and that the
duplicate copy of OCT No. (O) 16 had been delivered to him upon the execution of the said deed of transfer.
As for Spouses Peralta and the Andals, who filed their separate answers to the complaint, they mainly alleged
that they are buyers in good faith and for value.
During the trial, Rellama passed away. He was substituted by his heirs.
After the plaintiffs-appellees rested their case, instead of presenting their own evidence, the defendantsappellants and the Heirs of Restituto Rellama, on different occasions, filed a demurrer to evidence.
On April 14, 2005, the court a quo rendered judgment in favor of the plaintiffs-appellees and ordered the
restoration of OCT No. (O) 16 in the name of Abalon and the cancellation of the titles issued to the defendantsappellants. The fact that only a xerox copy of the purported deed of sale between Rellama and Abalon was
presented before the Register of Deeds for registration and the absence of such xerox copy on the official files of
the said Office made the court a quo conclude that the said document was a mere forgery. On the other hand,
the court a quo noted that the duplicate copy of OCT No. (O) 16 in the hands of the plaintiffs-appellees bears
[sic] the perforated serial number B 221377, which it held is a convincing proof of its authenticity and
genuineness. It thus stated that "Miscellaneous Cadastral Case No. 10648 is a (mere) strategem [sic]
fraudulently concocted ... for the issuance of a fabricated (second) owners duplicate certificate of Oct No. (O)
16" since the owners duplicate copy of OCT No. (O) 16 has not been lost at all. It said that any subsequent
registration procured by the presentation of such forged instrument is null and void. The dispositive portion of the
court a quos decision reads: WHEREFORE, [p]remises [c]onsidered, judgment is rendered as follows, to wit:
1. Ordering the restoration of Original Certificate of Title No. (O) 16 embracing Lot 1679 in the name of
Bernardina Abalon into the official files of the Registry of Deeds of Legaspi City a copy of the owners
duplicate certificate embodying the technical description of Lot 1679 forming official part of the record as

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Exhibit "D" as well as ordering the cancellation of any and all transfer certificates of title succeeding
Original Certificate of title No. (O) 16 including Transfer Certificates (sic) of Title Nos. 42108, 42254,
42255, 42256, 42821 [,] and 42482;
2. Ordering the defendants Marissa Andal, Leonil Andal, Arnel Andal[,] and the spouses Dominador and
Ofelia Peralta to vacate Lot 1679 and to peacefully surrender such lot to the plaintiffs;
3. Ordering the defendants to pay the plaintiffs the amount of P50,000.00 as litigation expenses; and
4. Ordering the defendants to pay the costs of suit.
The counterclaims by [sic] the defendants are all dismissed.
SO ORDERED.
Spouses Peralta and the Andals filed their separate Notices of Appeal and thereafter, upon approval, filed their
respective Defendants-Appellants Briefs. The Heirs of Rellama, on the other hand, opted not to challenge the
ruling of the lower court.3
The Andals and Spouses Peralta appellants in CA-G.R. CV No. 85542 raised several issues, which the CA
summarized as follows:
1. Whether the Deed of Absolute Sale executed by Abalon in favor of Rellama was spurious
2. Whether the Andals and Spouses Peralta were buyers in good faith and for value
3. Who among the parties were entitled to their claims for damages.4
THE RULING OF THE COURT OF APPEALS
On 30 May 2007, the Seventeenth Division of the Court of Appeals promulgated its assailed judgment setting
aside the RTC Decision. The CA ruled that the circumstances surrounding the sale of the subject property
showed badges of fraud or forgery against Rellama. It found that Abalon had not parted with her ownership over
the subject property despite the claim of Rellama that they both executed a Deed of Absolute Sale. As proof, the
CA pointed out the existence of a notarized contract of leasehold executed by Abalon with Ruperta Bellen on 11
June 1976. The genuineness and due execution of the said leasehold agreement was uncontroverted by the
parties. On this basis, the appellate court concluded that Abalon could not have leased the subject parcel of land
to Bellen if the former had parted with her ownership thereof.5
The CA also found no evidence to show that Rellama exercised dominion over the subject property, because he
had not introduced improvements on the property, despite claiming to have acquired it in 1975.6 Further, the CA
noted that he did not cause the annotation of the Deed of Sale, which he had executed with Abalon, on OCT No.
(O) 16. It observed that when the original copy of OCT No. (O) 16 was allegedly lost in 1976, while Rellama was
on his way to Legaspi City to register the title to his name, it took him almost 20 years to take steps to judicially
reconstitute a copy thereof. To the appellate court, these circumstances cast doubt on the veracity of Rellamas
claim of ownership over such a significant property, which was almost a hectare.7
The CA also ruled that the heirs of Bernardina Abalon had the legal standing to question the sale transaction
between Rellama and their predecessor-in-interest. It concluded that the heirs of Abalon had acquired the
subject property by ordinary acquisitive prescription and thus had every right to attack every document that
intended to divest them of ownership thereof,8 which in this case was the Deed of Sale that Bernardina executed
in favor of Rellama. Lastly, the appellate court considered the Spouses Peralta as buyers in bad faith for relying
on a mere photocopy of TCT No. 42108 when they bought the property from Rellama.9 On the other hand, it
accorded the Andals the presumption of good faith, finding no evidence that would rebut this presumption.10

74
The dispositive portion of the assailed CA Decision in CA-G.R. CV No. 85542 is as follows:
WHEREFORE, the assailed decision is SET ASIDE and a new judgment is rendered as follows:
1. Transfer Certificate of Title No. 42482 and Transfer Certificate of Title No. 42821, both in the names of
Andals, are held legal and valid.
2. Transfer Certificate of Title No. 42254 registered in the names of Spouses Peralta is cancelled for
being null and void. Hence, they are ordered to vacate the land covered thereby and to surrender
possession thereof in favor of the plaintiffs-appellees.
SO ORDERED.11
The heirs of Abalon filed a Motion for Reconsideration of the 30 May 2007 Decision, insofar as the CA declared
the Andals to be buyers in good faith of the subject property and, thus, that the land title issued in their favor was
valid. Spouses Peralta, for their part, filed a Motion for Partial Reconsideration of the said CA Decision pertaining
to the portion that declared them as buyers in bad faith which accordingly nullified the title issued to them.
On 10 June 2008, the CA denied the Motions for Partial Reconsideration of the movants for lack of merit.12
On 11 August 2008, Spouses Peralta filed with this Court a Petition for Review under Rule 45 of the Rules of
Court assailing the 30 May 2007 Decision in CA-G.R. CV No. 85542.13 On the same day, the heirs of
Bernardina Abalon, represented by Mansueto Abalon, filed a similar Petition questioning the portion of the
mentioned CA Decision declaring the validity of the title issued to the Andals, who were adjudged by the
appellate court as buyers in good faith.14 THE ISSUES
The Petition filed by Spouses Peralta, docketed as G.R. No. 183448, lists the following issues:
a) The case for annulment should have been dismissed because the purported Deed of Sale executed
by Abalon and Rellama was not introduced in evidence and thus, forgery was not proven.
b) The heirs of Abalon are notforced heirs of Bernardina Abalon; hence, they do not have the legal
personality to file the action to annul the subject Deed of Sale.
c) The heirs of Abalon failed to prove that they had inherited the subject property.
d) Spouses Peralta are buyers in good faith and, thus title to their portion of the subject property must be
upheld15
As for the heirs of Abalon, their Petition, docketed as G.R. No. 183464, raises the following issues:
a) The Andals cannot be considered as buyers in good faith by simply applying the ordinary presumption
in the absence of evidence showing the contrary.
b) The CA erred in applying in favor of the Andals, the doctrine that a forged instrument may become the
root of a valid title in the hands of an innocent purchaser for value, because Abalon never parted with her
possession of the valid and uncancelled title over the subject property
c) The CA erred in declaring the validity of the title issued in the names of the Andals, because Rellama
was bereft of any transmissible right over the portion of the property he had sold to them.16
THE COURTS RULING
We deny the Petitions and affirm the ruling of the CA.
The main issue to be resolved in this case is whether a forged instrument may become the root of a valid title in

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the hands of an innocent purchaser for value, even if the true owner thereof has been in possession of the
genuine title, which is valid and has not been cancelled.
It is well-settled that "a certificate of title serves as evidence of an indefeasible and incontrovertible title to the
property in favor of the person whose name appears therein. The real purpose of the Torrens system of land
registration is to quiet title to land and put a stop forever to any question as to the legality of the title."17
In Tenio-Obsequio v. Court of Appeals,18 we explained the purpose of the Torrens system and its legal
implications to third persons dealing with registered land, as follows:
The main purpose of the Torrens system is to avoid possible conflicts of title to real estate and to facilitate
transactions relative thereto by giving the public the right to rely upon the face of a Torrens certificate of title and
to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts
and circumstances that should impel a reasonably cautious man to make such further inquiry. Where innocent
third persons, relying on the correctness of the certificate of title thus issued, acquire rights over the property, the
court cannot disregard such rights and order the total cancellation of the certificate. The effect of such an outright
cancellation would be to impair public confidence in the certificate of title, for everyone dealing with property
registered under the Torrens system would have to inquire in every instance as to whether the title has been
regularly or irregularly issued by the court. Every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go beyond the
certificate to determine the condition of the property.
The Torrens system was adopted in this country because it was believed to be the most effective measure to
guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established
and recognized. If a person purchases a piece of land on the assurance that the seller's title thereto is valid, he
should not run the risk of being told later that his acquisition was ineffectual after all. This would not only be
unfair to him. What is worse is that if this were permitted, public confidence in the system would be eroded and
land transactions would have to be attended by complicated and not necessarily conclusive investigations and
proof of ownership. The further consequence would be that land conflicts could be even more numerous and
complex than they are now and possibly also more abrasive, if not even violent. The Government, recognizing
the worthy purposes of the Torrens system, should be the first to accept the validity of titles issued thereunder
once the conditions laid down by the law are satisfied.
The Torrens system was intended to guarantee the integrity and conclusiveness of the certificate of registration,
but the system cannot be used for the perpetration of fraud against the real owner of the registered land. The
system merely confirms ownership and does not create it. It cannot be used to divest lawful owners of their title
for the purpose of transferring it to another one who has not acquired it by any of the modes allowed or
recognized by law. Thus, the Torrens system cannot be used to protect a usurper from the true owner or to shield
the commission of fraud or to enrich oneself at the expense of another.19
It is well-established in our laws and jurisprudence that a person who is dealing with a registered parcel of land
need not go beyond the face of the title. A person is only charged with notice of the burdens and claims that are
annotated on the title.20 This rule, however, admits of exceptions, which we explained in Clemente v. Razo:21
Any buyer or mortgagee of realty covered by a Torrens certificate of title, in the absence of any suspicion, is not
obligated to look beyond the certificate to investigate the titles of the seller appearing on the face of the
certificate. And, he is charged with notice only of such burdens and claims as are annotated on the title.
We do acknowledge that the rule thus enunciated is not cast in stone. For, indeed, there are exceptions thereto.
Thus, in Sandoval vs. CA, we made clear the following:

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The aforesaid principle admits of an unchallenged exception: that a person dealing with registered land has a
right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except when the
party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make
such inquiry or when the purchaser has knowledge ofa defect or the lack of title in his vendor or of sufficient facts
to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. The presence
of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and
investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can
neither be denominated an innocent purchaser for value nor a purchaser in good faith; and hence does not merit
the protection of the law.22
Thus, the determination whether one is a buyer in good faith or can be considered an innocent purchaser for
value becomes imperative. Section 55 of the Land Registration Act provides protection to an innocent purchaser
for value23 by allowing him to retain the parcel of land bought and his title is considered valid. Otherwise, the
title would be cancelled and the original owner of the parcel of land is allowed to repossess it.
Jurisprudence has defined an innocent purchaser for value as one who buys the property of another without
notice that some other person has a right to or interest therein and who then pays a full and fair price for it at the
time of the purchase or before receiving a notice of the claim or interest of some other persons in the property.
Buyers in good faith buy a property with the belief that the person from whom they receive the thing is the owner
who can convey title to the property. Such buyers do not close their eyes to facts that should put a reasonable
person on guard and still claim that they are acting in good faith.24
The assailed Decision of the CA held that the Andals were buyers in good faith, while Spouses Peralta were not.
Despite its determination that fraud marred the sale between Bernardina Abalon and Rellama, a fraudulent or
forged document of sale may still give rise to a valid title. The appellate court reasoned that if the certificate of
title had already been transferred from the name of the true owner to that which was indicated by the forger and
remained as such, the land is considered to have been subsequently sold to an innocent purchaser, whose title
is thus considered valid.25 The CA concluded that this was the case for the Andals.
The appellate court cited Fule v. Legare26 as basis for its ruling. In the said case, the Court made an exception
to the general rule that a forged or fraudulent deed is a nullity and conveys no title. A fraudulent document may
then become the root of a valid title, as it held in Fule:
Although the deed of sale in favor of John W. Legare was fraudulent, the fact remains that he was able to secure
a registered title to the house and lot. It was this title which he subsequently conveyed to the herein petitioners.
We have indeed ruled that a forged or fraudulent deed is a nullity and conveys no title (Director of Lands vs.
Addison, 49 Phil., 19). However, we have also laid down the doctrine that there are instances when such a
fraudulent document may become the root of a valid title. One such instance is where the certificate of title was
already transferred from the name of the true owner to the forger, and while it remained that way, the land was
subsequently sold to an innocent purchaser. For then, the vendee had the right to rely upon what appeared in
the certificate (Inquimboy vs. Cruz, G.R. No. L-13953, July 28, 1960).
We have been constrained to adopt the conclusion here set forth because under the Torrens system,
"registration is the operative act that gives validity to the transfer or creates a lien upon the land (Secs. 50 and
51, Land Registration Act). Consequently, where there was nothing in the certificate of title to indicate any cloud
or vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required to explore
farther than what the Torrens title upon its face indicates in quest for any hidden defect or inchoate right that may
subsequently defeat his right thereto. If the rule were otherwise, the efficacy and conclusiveness of the certificate
of title which the Torrens system seeks to insure would entirely be futile and nugatory. (Reynes vs. Barrera, 68
Phil., 656; De Lara and De Guzman vs. Ayroso, 50 O.G. No 10, 4838). The public shall then be denied of its

77
foremost motivation for respecting and observing the Land Registration Act. In the end, the business community
stands to be inconvenienced and prejudiced immeasurably.
Furthermore, when the Register of Deeds issued a certificate of title in the name of John W. Legare, and
thereafter registered the same, John W. Legare, insofar as third parties were concerned, acquired valid title to
the house and lot here disputed. When, therefore, he transferred this title to the herein petitioners, third persons,
the entire transaction fell within the purview of Article 1434 of the Civil Code. The registration in John W. Legare's
name effectively operated to convey the properties to him.
After executing the Deed of Sale with Bernardina Abalon under fraudulent circumstances, Rellama succeeded in
obtaining a title in his name and selling a portion of the property to the Andals, who had no knowledge of the
fraudulent circumstances involving the transfer from Abalon to Rellama. In fact, the Decisions of the RTC and the
CA show no factual findings or proof that would rebut the presumption in favor of the Andals as buyers in good
faith. Thus, the CA correctly considered them as buyers in good faith and upheld their title.
The Abalons counter this ruling and allege that the CA erred in relying on Fuleto justify its assailed Decision.
They argue that Torres v. Court of Appeals27 is the applicable ruling, because the facts therein are on all fours
with the instant case.28
In Torres, the subject property was covered by TCT No. 53628 registered in the name of Mariano Torres. His
brother-in-law Francisco Fernandez, misrepresenting that the copy of the title had been lost, succeeded in
obtaining a court Order for the issuance of another copy of TCT No. 53628. He then forged a simulated deed of
sale purportedly showing that Torres had sold the property to him and caused the cancellation of TCT No. 53628,
as well as the issuance of TCT No. 86018 in his name. Soon, Fernandez mortgaged the property to Mota. Upon
learning of the fraud committed by Fernandez, Torres caused the annotation of an adverse claim on the formers
copy and succeeded in having Fernandezs title declared null and void. Meanwhile, Mota was able to foreclose
on Fernandezs real estate mortgage, as well as to cause the cancellation of TCT No. 86018 and the issuance of
a new one TCT No. 105953 in her name. The issue to be resolved in Torres was whether Mota can be
considered an innocent mortgagee for value, and whether her title can be deemed valid. Ruling in the negative,
the Court explained:
There is nothing on the records which shows that Torres performed any act or omission which could have
jeopardized his peaceful dominion over his realties. The decision under review, however, in considering Mota an
innocent mortgagee protected under Section 65 of the Land Registration Law, held that Torres was bound by the
mortgage. Inevitably, it pronounced that the foreclosure sale, where Mota was the highest bidder, also bound
Torres and concluded that the certificate of title issued in the name of Mota prevails over that of Torres'. As
correctly pointed out by Torres, however, his properties were sold on execution, and not on foreclosure sale, and
hence, the purchaser thereof was bound by his notice of adverse claim and lis pendens annotated at the back of
Fernandez' TCT. Moreover, even if We grant Mota the status of an innocent mortgagee, the doctrine relied upon
by the appellate court that a forged instrument may become the root of a valid title, cannot be applied where the
owner still holds a valid and existing certificate of title covering the same interest in a realty. The doctrine would
apply rather when, as in the cases for example of De la Cruz v. Fabie, 35 Phil. 144 [1916], Fule v. De Legare,
No. L-17951, February 28, 1963, 7 SCRA 351, and Republic v. Umali, G.R. No. 80687, April 10, 1989, the forger
thru insidious means obtains the owners duplicate certificate of title, converts it in his name, and subsequently
sells or otherwise encumbers it to an innocent holder for value, for in such a case the new certificate is binding
upon the owner (Sec.55, Act 496; Sec. 53, P.D. No. 1529). But if the owner holds a valid and existing certificate
of title, his would be indefeasible as against the whole world, and not that of the innocent holder's. "Prior tempore
potior jure" as We have said in Register of Deeds v. Philippine National Bank, No. L-17641, January 30, 1965,
13 SCRA 46, citing Legarda v. Saleeby, 31 Phil.590, Roman Catholic Bishop v. Philippine Railway, 49 Phil. 546,

78
Reyes v. Borbon, 50 Phil. 791.29 (Emphasis and underscoring supplied)
We do not agree with the contention of the Abalons that the ruling in Torresis controlling in this case. They
quoted a portion in the said case that is clearly an obiter. In Torres, it was shown that Mariano had annotated an
adverse claim on the title procured by Fernandez prior to the execution sale, in which Mota was the highest
bidder. This Court declared her as a mortgagee in bad faith because, at the back of Fernandezs title, Torres
made an annotation of the adverse claim and the notice of lis pendens. The annotation of the adverse claim was
made while the forged document was still in the name of the forger, who in this case is Fernandez. That situation
does not obtain in the instant case.
The records of the RTC and the CA have a finding that when Rellama sold the properties to the Andals, it was
still in his name; and there was no annotation that would blight his clean title. To the Andals, there was no doubt
that Rellama was the owner of the property being sold to them, and that he had transmissible rights of ownership
over the said property. Thus, they had every right to rely on the face of his title alone.
The established rule is that a forged deed is generally null and cannot convey title, the exception thereto,
pursuant to Section 55 of the Land Registration Act, denotes the registration of titles from the forger to the
innocent purchaser for value. Thus, the qualifying point here is that there must be a complete chain of registered
titles.30 This means that all the transfers starting from the original rightful owner to the innocent holder for value
and that includes the transfer to the forger must be duly registered, and the title must be properly issued to
the transferee. Contrary to what the Abalons would like to impress on us, Fuleand Torresdo not present clashing
views. In Fule, the original owner relinquished physical possession of her title and thus enabled the perpetrator
to commit the fraud, which resulted in the cancellation of her title and the issuance of a new one. The forged
instrument eventually became the root of a valid title in the hands of an innocent purchaser for value. The new
title under the name of the forger was registered and relied upon by the innocent purchaser for value. Hence, it
was clear that there was a complete chain of registered titles.
On the other hand in Torres, the original owner retained possession of the title, but through fraud, his brother-inlaw secured a court order for the issuance of a copy thereof. While the title was in the name of the forger, the
original owner annotated the adverse claim on the forged instrument. Thus, before the new title in the name of
the forger could be transferred to a third person, a lien had already been annotated on its back. The chain of
registered titles was broken and sullied by the original owners annotation of the adverse claim. By this act, the
mortgagee was shown to be in bad faith.
In the instant case, there is no evidence that the chain of registered titles was broken in the case of the Andals.
Neither were they proven to have knowledge of anything that would make them suspicious of the nature of
Rellamas ownership over the subject parcel of land. Hence, we sustain the CAs ruling that the Andals were
buyers in good faith. Consequently, the validity of their title to the parcel of the land bought from Rellama must
be upheld.
As for Spouses Peralta, we sustain the ruling of the CA that they are indeed buyers in bad faith. The appellate
court made a factual finding that in purchasing the subject property, they merely relied on the photocopy of the
title provided by Rellama. The CA concluded that a mere photocopy of the title should have made Spouses
Peralta suspicious that there was some flaw in the title of Rellama, because he was not in possession of the
original copy. This factual finding was supported by evidence.
The CA pointed out Spouses Peraltas Answer to the Complaint of the Abalons in Case No. 9243 in the RTC of
Legaspi City, Branch 5. In their Answer, they specifically alleged as follows:
2- These defendants [Spouses Peralta] acquired lot No. 1679-A by purchase in good faith and for value
from Restituto Rellama under Doc. No. 11212, page No. 26, Book No. 60, Series of 1996 of Notary

79
Public Atty. Otilio Bongon, Legaspi City on March 2, 1995 copy of which is attached as and made part of
this answer as Exhibit "1;"
3- That these defendants were handed over by Rellama xerox [sic] copy of the Transfer Certificate of
Title No. 42103 issued by the Register of Deed of Legaspi City on the 2nd day of August 1995 copy
attached and made integral part as Exhibit "1-A" and also Original Certificate of Title No. (O) 16 as
Exhibit "1-B"31
We have no reason to disturb this factual finding of the CA because it is supported by the evidence on record.
Spouses Peralta filed a Petition for Review on Certiorari under Rule 45, which allows only questions of law to be
raised. It is a settled rule that questions of fact are not reviewable in this kind of appeal. Under Rule 45, Section
1, "petitions for review on certiorari shall raise only questions of law which must be distinctly set forth."32 A
question of fact arises when there is "as to the truth or falsehood of facts or when there is a need to calibrate the
whole evidence considering mainly the credibility of the witnesses, the existence and relevancy of specific
surrounding circumstances, as well as their relation to each other and to the whole, and the probability of the
situation."33 It is further pointed out that "the determination of whether one is a buyer in good faith is a factual
issue, which generally is outside the province of this Court to determine in a petition for review."34
Whether or not Spouses Peralta are buyers in good faith, is without a doubt, a factual issue. Although this rule
admits of exceptions,35 none of these applies to their case. There is no conflict between the factual findings and
legal conclusions of the RTC and those of the CA, both of which found them to be buyers in bad faith. The fact
that they did not participate in the proceedings before the lower court does not help their case either.
On the issue of the legal standing of the Abalons to file this case, we find that the CA correctly upheld their
standing as heirs of the deceased Bernardina Abalon. The appellate court ruled that during her lifetime,
Bernardina Abalon had promised her heirs - siblings Mansueto and Amelia - that she would give them the
subject property. A duplicate copy of OCT No. (0) 16 was delivered to them upon her death. Thus, the CA
concluded that the two siblings acquired the subject property by ordinary prescription. Further, it deduced that
the mode of transmission of the property from Bernardina to her nephew and niece was a form of donation
mortis causa, though without the benefit of a will.36 Despite this omission, it still held that Mansueto and Amelia
acquired the subject property through ordinary acquisitive prescription because, since the death of their aunt
Bernardina, they had been in possession of the property for more than 10 years that ripened into full
ownership.37
Under Article 97538 of the Civil Code, siblings Mansueto and Amelia Abalon are the legal heirs of Bernardina,
the latter having had no issue during her marriage. As such, they succeeded to her estate when she passed
away. While we agree with the CA that the donation mortis causa was invalid in the absence of a will, it erred in
concluding that the heirs acquired the subject property through ordinary acquisitive prescription. The subject
parcel of land is a titled property; thus, acquisitive prescription is not applicable.39 Upon the death of Bernardina,
Mansueto and Amelia, being her legal heirs, acquired the subject property by virtue of succession, and not by
ordinary acquisitive prescription.
WHEREFORE, the petitions in G.R. Nos. 183448 and 183464 are DENIED for lack of merit. The Decision in CAG.R. CV No. 85542 is hereby AFFIRMED.
SO ORDERED.