G.R. No.

L-43938 April 15, 1988

REPUBLIC OF THE PHILIPPINES (DIRECTOR OF FOREST DEVELOPMENT), petitioner, vs. HON. COURT OF
APPEALS (THIRD DIVISION) and JOSE Y. DE LA ROSA, respondents.

G.R. No. L-44081 April 15, 1988

BENGUET CONSOLIDATED, INC., petitioner, vs.HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORIA,
BENJAMIN and EDUARDO, all surnamed DE LA ROSA, represented by their father JOSE Y. DE LA
ROSA, respondents.

G.R. No. L-44092 April 15, 1988

ATOK-BIG WEDGE MINING COMPANY, petitioner, vs. HON. COURT OF APPEALS, JOSE Y. DE LA ROSA,
VICTORlA, BENJAMIN and EDUARDO, all surnamed DE LA ROSA, represented by their father, JOSE Y. DE LA
ROSA, respondents.

CRUZ, J.:

The Regalian doctrine reserves to the State all natural wealth that may be found in the bowels of the earth even if the
land where the discovery is made be private. 1 In the cases at bar, which have been consolidated because they pose a
common issue, this doctrine was not correctly applied.

These cases arose from the application for registration of a parcel of land filed on February 11, 1965, by Jose de la
Rosa on his own behalf and on behalf of his three children, Victoria, Benjamin and Eduardo. The land, situated in
Tuding, Itogon, Benguet Province, was divided into 9 lots and covered by plan Psu-225009. According to the
application, Lots 1-5 were sold to Jose de la Rosa and Lots 6-9 to his children by Mamaya Balbalio and Jaime Alberto,
respectively, in 1964. 2

The application was separately opposed by Benguet Consolidated, Inc. as to Lots 1-5, Atok Big Wedge Corporation,
as to Portions of Lots 1-5 and all of Lots 6-9, and by the Republic of the Philippines, through the Bureau of Forestry
Development, as to lots 1-9. 3

In support of the application, both Balbalio and Alberto testified that they had acquired the subject land by virtue of
prescription Balbalio claimed to have received Lots 1-5 from her father shortly after the Liberation. She testified she
was born in the land, which was possessed by her parents under claim of ownership. 4 Alberto said he received Lots 6-9
in 1961 from his mother, Bella Alberto, who declared that the land was planted by Jaime and his predecessors-in-interest to
bananas, avocado, nangka and camote, and was enclosed with a barbed-wire fence. She was corroborated by Felix Marcos,
67 years old at the time, who recalled the earlier possession of the land by Alberto's father. 5 Balbalio presented her tax
declaration in 1956 and the realty tax receipts from that year to 1964, 6 Alberto his tax declaration in 1961 and the realty tax
receipts from that year to 1964. 7

Benguet opposed on the ground that the June Bug mineral claim covering Lots 1-5 was sold to it on September 22,
1934, by the successors-in-interest of James Kelly, who located the claim in September 1909 and recorded it on
October 14, 1909. From the date of its purchase, Benguet had been in actual, continuous and exclusive possession of
the land in concept of owner, as evidenced by its construction of adits, its affidavits of annual assessment, its
geological mappings, geological samplings and trench side cuts, and its payment of taxes on the land. 8

For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9 were covered by the Emma and Fredia mineral
claims located by Harrison and Reynolds on December 25, 1930, and recorded on January 2, 1931, in the office of the
mining recorder of Baguio. These claims were purchased from these locators on November 2, 1931, by Atok, which
has since then been in open, continuous and exclusive possession of the said lots as evidenced by its annual
assessment work on the claims, such as the boring of tunnels, and its payment of annual taxes thereon. 9

The location of the mineral claims was made in accordance with Section 21 of the Philippine Bill of 1902 which
provided that:

SEC. 21. All valuable mineral deposits in public lands in the philippine Islands both surveyed and
unsurveyed are hereby declared to be free and open to exploration, occupation and purchase and the
land in which they are found to occupation and purchase by the citizens of the United States, or of said
islands.
The Bureau of Forestry Development also interposed its objection, arguing that the land sought to be registered was
covered by the Central Cordillera Forest Reserve under Proclamation No. 217 dated February 16, 1929. Moreover, by
reason of its nature, it was not subject to alienation under the Constitutions of 1935 and 1973. 10

The trial court * denied the application, holding that the applicants had failed to prove their claim of possession and ownership of the land sought to be
registered. 11
The applicants appealed to the respondent court, * which reversed the trial court and recognized the claims of the applicant, but subject
to the rights of Benguet and Atok respecting their mining claims. 12
In other words, the Court of Appeals affirmed the surface rights of the de
la Rosas over the land while at the same time reserving the sub-surface rights of Benguet and Atok by virtue of their mining
claims.

Both Benguet and Atok have appealed to this Court, invoking their superior right of ownership. The Republic has filed
its own petition for review and reiterates its argument that neither the private respondents nor the two mining
companies have any valid claim to the land because it is not alienable and registerable.

It is true that the subject property was considered forest land and included in the Central Cordillera Forest Reserve, but
this did not impair the rights already vested in Benguet and Atok at that time. The Court of Appeals correctly declared
that:

There is no question that the 9 lots applied for are within the June Bug mineral claims of Benguet and
the "Fredia and Emma" mineral claims of Atok. The June Bug mineral claim of plaintiff Benguet was
one of the 16 mining claims of James E. Kelly, American and mining locator. He filed his declaration of
the location of the June Bug mineral and the same was recorded in the Mining Recorder's Office on
October 14, 1909. All of the Kelly claims ha subsequently been acquired by Benguet Consolidated, Inc.
Benguet's evidence is that it had made improvements on the June Bug mineral claim consisting of
mine tunnels prior to 1935. It had submitted the required affidavit of annual assessment. After World
War II, Benguet introduced improvements on mineral claim June Bug, and also conducted geological
mappings, geological sampling and trench side cuts. In 1948, Benguet redeclared the "June Bug" for
taxation and had religiously paid the taxes.

The Emma and Fredia claims were two of the several claims of Harrison registered in 1931, and which
Atok representatives acquired. Portions of Lots 1 to 5 and all of Lots 6 to 9 are within the Emma and
Fredia mineral claims of Atok Big Wedge Mining Company.

The June Bug mineral claim of Benguet and the Fredia and Emma mineral claims of Atok having been
perfected prior to the approval of the Constitution of the Philippines of 1935, they were removed from
the public domain and had become private properties of Benguet and Atok.

It is not disputed that the location of the mining claim under consideration was perfected
prior to November 15, 1935, when the Government of the Commonwealth was
inaugurated; and according to the laws existing at that time, as construed and applied
by this court in McDaniel v. Apacible and Cuisia (42 Phil. 749), a valid location of a
mining claim segregated the area from the public domain. Said the court in that case:
The moment the locator discovered a valuable mineral deposit on the lands located,
and perfected his location in accordance with law, the power of the United States
Government to deprive him of the exclusive right to the possession and enjoyment of
the located claim was gone, the lands had become mineral lands and they were
exempted from lands that could be granted to any other person. The reservations of
public lands cannot be made so as to include prior mineral perfected locations; and, of
course, if a valid mining location is made upon public lands afterwards included in a
reservation, such inclusion or reservation does not affect the validity of the former
location. By such location and perfection, the land located is segregated from the public
domain even as against the Government. (Union Oil Co. v. Smith, 249 U.S. 337; Van
Mess v. Roonet, 160 Cal. 131; 27 Cyc. 546).

"The legal effect of a valid location of a mining claim is not only to segregate the area
from the public domain, but to grant to the locator the beneficial ownership of the claim
and the right to a patent therefor upon compliance with the terms and conditions
prescribed by law. Where there is a valid location of a mining claim, the area becomes
segregated from the public domain and the property of the locator." (St. Louis Mining &
Milling Co. v. Montana Mining Co., 171 U.S. 650; 655; 43 Law ed., 320, 322.) "When a
location of a mining claim is perfected it has the effect of a grant by the United States of
the right of present and exclusive possession, with the right to the exclusive enjoyment
of all the surface ground as well as of all the minerals within the lines of the claim,
 except as limited by the extralateral right of adjoining locators; and this is the locator's
right before as well as after the issuance of the patent. While a lode locator acquires a
vested property right by virtue of his location made in compliance with the mining laws,
the fee remains in the government until patent issues."(18 R.C.L. 1152) (Gold Creek
Mining Corporation v. Hon. Eulogio Rodriguez, Sec. of Agriculture and Commerce, and
Quirico Abadilla, Director of the Bureau of Mines, 66 Phil. 259, 265-266)

It is of no importance whether Benguet and Atok had secured a patent for as held in the Gold Creek
Mining Corp. Case, for all physical purposes of ownership, the owner is not required to secure a patent
as long as he complies with the provisions of the mining laws; his possessory right, for all practical
purposes of ownership, is as good as though secured by patent.

We agree likewise with the oppositors that having complied with all the requirements of the mining
laws, the claims were removed from the public domain, and not even the government of the Philippines
can take away this right from them. The reason is obvious. Having become the private properties of the
oppositors, they cannot be deprived thereof without due process of law. 13

Such rights were not affected either by the stricture in the Commonwealth Constitution against the alienation of all
lands of the public domain except those agricultural in nature for this was made subject to existing rights. Thus, in its
Article XIII, Section 1, it was categorically provided that:

SEC. 1. All agricultural, timber and mineral lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces of potential energy and other natural resources of the
Philipppines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations or associations at least 60% of the capital of
which is owned by such citizens, subject to any existing right, grant, lease or concession at the time of
the inauguration of the government established under this Constitution. Natural resources with the
exception of public agricultural lands, shall not be alienated, and no license, concession, or lease for
the exploitation, development or utilization of any of the natural resources shall be granted for a period
exceeding 25 years, except as to water rights for irrigation, water supply, fisheries, or industrial uses
other than the development of water power, in which case beneficial use may be the measure and the
limit of the grant.

Implementing this provision, Act No. 4268, approved on November 8, 1935, declared:

Any provision of existing laws, executive order, proclamation to the contrary notwithstanding, all
locations of mining claim made prior to February 8, 1935 within lands set apart as forest reserve under
Sec. 1826 of the Revised Administrative Code which would be valid and subsisting location except to
the existence of said reserve are hereby declared to be valid and subsisting locations as of the date of
their respective locations.

The perfection of the mining claim converted the property to mineral land and under the laws then in force removed it
from the public domain. 14 By such act, the locators acquired exclusive rights over the land, against even the government,
without need of any further act such as the purchase of the land or the obtention of a patent over it. 15 As the land had
become the private property of the locators, they had the right to transfer the same, as they did, to Benguet and Atok.

It is true, as the Court of Appeals observed, that such private property was subject to the "vicissitudes of ownership,"
or even to forfeiture by non-user or abandonment or, as the private respondents aver, by acquisitive prescription.
However, the method invoked by the de la Rosas is not available in the case at bar, for two reasons.

First, the trial court found that the evidence of open, continuous, adverse and exclusive possession submitted by the
applicants was insufficient to support their claim of ownership. They themselves had acquired the land only in 1964
and applied for its registration in 1965, relying on the earlier alleged possession of their predecessors-in-interest. 16The
trial judge, who had the opportunity to consider the evidence first-hand and observe the demeanor of the witnesses and test
their credibility was not convinced. We defer to his judgment in the absence of a showing that it was reached with grave
abuse of discretion or without sufficient basis. 17

Second, even if it be assumed that the predecessors-in-interest of the de la Rosas had really been in possession of
the subject property, their possession was not in the concept of owner of the mining claim but of the property
as agricultural land, which it was not. The property was mineral land, and they were claiming it as agricultural land.
They were not disputing the lights of the mining locators nor were they seeking to oust them as such and to replace
them in the mining of the land. In fact, Balbalio testified that she was aware of the diggings being undertaken "down
below" 18 but she did not mind, much less protest, the same although she claimed to be the owner of the said land.
The Court of Appeals justified this by saying there is "no conflict of interest" between the owners of the surface rights
and the owners of the sub-surface rights. This is rather doctrine, for it is a well-known principle that the owner of piece
of land has rights not only to its surface but also to everything underneath and the airspace above it up to a reasonable
height. 19 Under the aforesaid ruling, the land is classified as mineral underneath and agricultural on the surface, subject to
separate claims of title. This is also difficult to understand, especially in its practical application.

Under the theory of the respondent court, the surface owner will be planting on the land while the mining locator will be
boring tunnels underneath. The farmer cannot dig a well because he may interfere with the operations below and the
miner cannot blast a tunnel lest he destroy the crops above. How deep can the farmer, and how high can the miner, go
without encroaching on each other's rights? Where is the dividing line between the surface and the sub-surface
rights?

The Court feels that the rights over the land are indivisible and that the land itself cannot be half agricultural and half
mineral. The classification must be categorical; the land must be either completely mineral or completely agricultural.
In the instant case, as already observed, the land which was originally classified as forest land ceased to be so and
became mineral and completely mineral once the mining claims were perfected. 20 As long as mining operations
were being undertaken thereon, or underneath, it did not cease to be so and become agricultural, even if only partly so,
because it was enclosed with a fence and was cultivated by those who were unlawfully occupying the surface.

What must have misled the respondent court is Commonwealth Act No. 137, providing as follows:

Sec. 3. All mineral lands of the public domain and minerals belong to the State, and their disposition,
exploitation, development or utilization, shall be limited to citizens of the Philippines, or to corporations,
or associations, at least 60% of the capital of which is owned by such citizens, subject to any existing
right, grant, lease or concession at the time of the inauguration of government established under the
Constitution.

SEC. 4. The ownership of, and the right to the use of land for agricultural, industrial, commercial,
residential, or for any purpose other than mining does not include the ownership of, nor the right to
extract or utilize, the minerals which may be found on or under the surface.

SEC. 5. The ownership of, and the right to extract and utilize, the minerals included within all areas for
which public agricultural land patents are granted are excluded and excepted from all such patents.

SEC. 6. The ownership of, and the right to extract and utilize, the minerals included within all areas for
which Torrens titles are granted are excluded and excepted from all such titles.

This is an application of the Regalian doctrine which, as its name implies, is intended for the benefit of the State, not of
private persons. The rule simply reserves to the State all minerals that may be found in public and even private land
devoted to "agricultural, industrial, commercial, residential or (for) any purpose other than mining." Thus, if a person is
the owner of agricultural land in which minerals are discovered, his ownership of such land does not give him the right
to extract or utilize the said minerals without the permission of the State to which such minerals belong.

The flaw in the reasoning of the respondent court is in supposing that the rights over the land could be used for both
mining and non-mining purposes simultaneously. The correct interpretation is that once minerals are discovered in the
land, whatever the use to which it is being devoted at the time, such use may be discontinued by the State to enable it
to extract the minerals therein in the exercise of its sovereign prerogative. The land is thus converted to mineral land
and may not be used by any private party, including the registered owner thereof, for any other purpose that will
impede the mining operations to be undertaken therein, For the loss sustained by such owner, he is of course entitled
to just compensation under the Mining Laws or in appropriate expropriation proceedings. 21

Our holding is that Benguet and Atok have exclusive rights to the property in question by virtue of their respective
mining claims which they validly acquired before the Constitution of 1935 prohibited the alienation of all lands of the
public domain except agricultural lands, subject to vested rights existing at the time of its adoption. The land was not
and could not have been transferred to the private respondents by virtue of acquisitive prescription, nor could its use
be shared simultaneously by them and the mining companies for agricultural and mineral purposes.

WHEREFORE, the decision of the respondent court dated April 30, 1976, is SET ASIDE and that of the trial court
dated March 11, 1969, is REINSTATED, without any pronouncement as to costs.

SO ORDERED.

G.R. No. L-14441 December 17, 1966

PEDRO R. PALTING, petitioner,
vs.
SAN JOSE PETROLEUM INCORPORATED, respondent.

BARRERA, J.:

This is a petition for review of the order of August 29, 1958, later supplemented and amplified by another dated
September 9, 1958, of the Securities and Exchange Commission denying the opposition to, and instead, granting the
registration, and licensing the sale in the Philippines, of 5,000,000 shares of the capital stock of the respondent-
appellee San Jose Petroleum, Inc. (hereafter referred to as SAN JOSE PETROLEUM), a corporation organized and
existing in the Republic of Panama.

On September 7, 1956, SAN JOSE PETROLEUM filed with the Philippine Securities and Exchange Commission a
sworn registration statement, for the registration and licensing for sale in the Philippines Voting Trust Certificates
representing 2,000,000 shares of its capital stock of a par value of $0.35 a share, at P1.00 per share. It was alleged
that the entire proceeds of the sale of said securities will be devoted or used exclusively to finance the operations of
San Jose Oil Company, Inc. (a domestic mining corporation hereafter to be referred to as SAN JOSE OIL) which has
14 petroleum exploration concessions covering an area of a little less than 1,000,000 hectares, located in the
provinces of Pangasinan, Tarlac, Nueva Ecija, La Union, Iloilo, Cotabato, Davao and Agusan. It was the express
condition of the sale that every purchaser of the securities shall not receive a stock certificate, but a registered or
bearer-voting-trust certificate from the voting trustees named therein James L. Buckley and Austin G.E. Taylor, the first
residing in Connecticut, U.S.A., and the second in New York City. While this application for registration was pending
consideration by the Securities and Exchange Commission, SAN JOSE PETROLEUM filed an amended Statement on
June 20, 1958, for registration of the sale in the Philippines of its shares of capital stock, which was increased from
2,000,000 to 5,000,000, at a reduced offering price of from P1.00 to P0.70 per share. At this time the par value of the
shares has also been reduced from $.35 to $.01 per share.1

Pedro R. Palting and others, allegedly prospective investors in the shares of SAN JOSE PETROLEUM, filed with the
Securities and Exchange Commission an opposition to registration and licensing of the securities on the grounds that
(1) the tie-up between the issuer, SAN JOSE PETROLEUM, a Panamanian corporation and SAN JOSE OIL, a
domestic corporation, violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act of 1949;
(2) the issuer has not been licensed to transact business in the Philippines; (3) the sale of the shares of the issuer is
fraudulent, and works or tends to work a fraud upon Philippine purchasers; and (4) the issuer as an enterprise, as well
as its business, is based upon unsound business principles. Answering the foregoing opposition of Palting, et al., the
registrant SAN JOSE PETROLEUM claimed that it was a "business enterprise" enjoying parity rights under the
Ordinance appended to the Constitution, which parity right, with respect to mineral resources in the Philippines, may
be exercised, pursuant to the Laurel-Langley Agreement, only through the medium of a corporation organized under
the laws of the Philippines. Thus, registrant which is allegedly qualified to exercise rights under the Parity Amendment,
had to do so through the medium of a domestic corporation, which is the SAN JOSE OIL. It refused the contention that
the Corporation Law was being violated, by alleging that Section 13 thereof applies only to foreign corporations doing
business in the Philippines, and registrant was not doing business here. The mere fact that it was a holding company
of SAN JOSE OIL and that registrant undertook the financing of and giving technical assistance to said corporation did
not constitute transaction of business in the Philippines. Registrant also denied that the offering for sale in the
Philippines of its shares of capital stock was fraudulent or would work or tend to work fraud on the investors. On
August 29, 1958, and on September 9, 1958 the Securities and Exchange Commissioner issued the orders object of
the present appeal.

The issues raised by the parties in this appeal are as follows:

1. Whether or not petitioner Pedro R. Palting, as a "prospective investor" in respondent's securities, has
personality to file the present petition for review of the order of the Securities and Exchange Commission;

2. Whether or not the issue raised herein is already moot and academic;

3. Whether or not the "tie-up" between the respondent SAN JOSE PETROLEUM, a foreign corporation, and
SAN JOSE OIL COMPANY, INC., a domestic mining corporation, is violative of the Constitution, the Laurel-
Langley Agreement, the Petroleum Act of 1949, and the Corporation Law; and

4. Whether or not the sale of respondent's securities is fraudulent, or would work or tend to work fraud to
purchasers of such securities in the Philippines.

1. In answer to the notice and order of the Securities and Exchange Commissioner, published in 2 newspapers of
general circulation in the Philippines, for "any person who is opposed" to the petition for registration and licensing of
respondent's securities, to file his opposition in 7 days, herein petitioner so filed an opposition. And, the Commissioner,
having denied his opposition and instead, directed the registration of the securities to be offered for sale, oppositor
Palting instituted the present proceeding for review of said order.

Respondent raises the question of the personality of petitioner to bring this appeal, contending that as a mere
"prospective investor", he is not an "Aggrieved" or "interested" person who may properly maintain the suit. Citing a
1931 ruling of Utah State Supreme Court2 it is claimed that the phrase "party aggrieved" used in the Securities Act3and
the Rules of Court4 as having the right to appeal should refer only to issuers, dealers and salesmen of securities.

It is true that in the cited case, it was ruled that the phrase "person aggrieved" is that party "aggrieved by the judgment
or decree where it operates on his rights of property or bears directly upon his interest", that the word "aggrieved"
refers to "a substantial grievance, a denial of some personal property right or the imposition upon a party of a burden
or obligation." But a careful reading of the case would show that the appeal therein was dismissed because the court
held that an order of registration was not final and therefore not appealable. The foregoing pronouncement relied upon
by herein respondent was made in construing the provision regarding an order of revocation which the court held was
the one appealable. And since the law provides that in revoking the registration of any security, only the issuer and
every registered dealer of the security are notified, excluding any person or group of persons having no such interest in
the securities, said court concluded that the phrase "interested person" refers only to issuers, dealers or salesmen of
securities.

We cannot consider the foregoing ruling by the Utah State Court as controlling on the issue in this case. Our Securities
Act in Section 7(c) thereof, requires the publication and notice of the registration statement. Pursuant thereto, the
Securities and Exchange Commissioner caused the publication of an order in part reading as follows:

. . . Any person who is opposed with this petition must file his written opposition with this Commission within
said period (2 weeks). . . .

In other words, as construed by the administrative office entrusted with the enforcement of the Securities Act, any
person (who may not be "aggrieved" or "interested" within the legal acceptation of the word) is allowed or permitted to
file an opposition to the registration of securities for sale in the Philippines. And this is in consonance with the generally
accepted principle that Blue Sky Laws are enacted to protect investors and prospective purchasers and to prevent
fraud and preclude the sale of securities which are in fact worthless or worth substantially less than the asking price. It
is for this purpose that herein petitioner duly filed his opposition giving grounds therefor. Respondent SAN JOSE
PETROLEUM was required to reply to the opposition. Subsequently both the petition and the opposition were set for
hearing during which the petitioner was allowed to actively participate and did so by cross-examining the respondent's
witnesses and filing his memorandum in support of his opposition. He therefore to all intents and purposes became a
party to the proceedings. And under the New Rules of Court,5 such a party can appeal from a final order, ruling or
decision of the Securities and Exchange Commission. This new Rule eliminating the word "aggrieved" appearing in the
old Rule, being procedural in nature,6 and in view of the express provision of Rule 144 that the new rules made
effective on January 1, 1964 shall govern not only cases brought after they took effect but all further proceedings in
cases then pending, except to the extent that in the opinion of the Court their application would not be feasible or
would work injustice, in which event the former procedure shall apply, we hold that the present appeal is properly
within the appellate jurisdiction of this Court.

The order allowing the registration and sale of respondent's securities is clearly a final order that is appealable. The
mere fact that such authority may be later suspended or revoked, depending on future developments, does not give it
the character of an interlocutory or provisional ruling. And the fact that seven days after the publication of the order, the
securities are deemed registered (Sec. 7, Com. Act 83, as amended), points to the finality of the order. Rights and
obligations necessarily arise therefrom if not reviewed on appeal.

Our position on this procedural matter that the order is appealable and the appeal taken here is proper is
strengthened by the intervention of the Solicitor General, under Section 23 of Rule 3 of the Rules of Court, as the
constitutional issues herein presented affect the validity of Section 13 of the Corporation Law, which, according to the
respondent, conflicts with the Parity Ordinance and the Laurel-Langley Agreement recognizing, it is claimed, its right to
exploit our petroleum resources notwithstanding said provisions of the Corporation Law.

2. Respondent likewise contends that since the order of Registration/Licensing dated September 9, 1958 took effect 30
days from September 3, 1958, and since no stay order has been issued by the Supreme Court, respondent's shares
became registered and licensed under the law as of October 3, 1958. Consequently, it is asserted, the present appeal
has become academic. Frankly we are unable to follow respondent's argumentation. First it claims that the order of
August 29 and that of September 9, 1958 are not final orders and therefor are not appealable. Then when these
orders, according to its theory became final and were implemented, it argues that the orders can no longer be
appealed as the question of registration and licensing became moot and academic.
But the fact is that because of the authority to sell, the securities are, in all probabilities, still being traded in the open
market. Consequently the issue is much alive as to whether respondent's securities should continue to be the subject
of sale. The purpose of the inquiry on this matter is not fully served just because the securities had passed out of the
hands of the issuer and its dealers. Obviously, so long as the securities are outstanding and are placed in the channels
of trade and commerce, members of the investing public are entitled to have the question of the worth or legality of the
securities resolved one way or another.

But more fundamental than this consideration, we agree with the late Senator Claro M. Recto, who appeared
as amicus curiae in this case, that while apparently the immediate issue in this appeal is the right of respondent SAN
JOSE PETROLEUM to dispose of and sell its securities to the Filipino public, the real and ultimate controversy here
would actually call for the construction of the constitutional provisions governing the disposition, utilization, exploitation
and development of our natural resources. And certainly this is neither moot nor academic.

3. We now come to the meat of the controversy the "tie-up" between SAN JOSE OIL on the one hand, and the
respondent SAN JOSE PETROLEUM and its associates, on the other. The relationship of these corporations involved
or affected in this case is admitted and established through the papers and documents which are parts of the records:
SAN JOSE OIL, is a domestic mining corporation, 90% of the outstanding capital stock of which is owned by
respondent SAN JOSE PETROLEUM, a foreign (Panamanian) corporation, the majority interest of which is owned by
OIL INVESTMENTS, Inc., another foreign (Panamanian) company. This latter corporation in turn is wholly (100%)
owned by PANTEPEC OIL COMPANY, C.A., and PANCOASTAL PETROLEUM COMPANY, C.A., both organized and
existing under the laws of Venezuela. As of September 30, 1956, there were 9,976 stockholders of PANCOASTAL
PETROLEUM found in 49 American states and U.S. territories, holding 3,476,988 shares of stock; whereas, as of
November 30, 1956, PANTEPEC OIL COMPANY was said to have 3,077,916 shares held by 12,373 stockholders
scattered in 49 American state. In the two lists of stockholders, there is no indication of the citizenship of these
stockholders,7 or of the total number of authorized stocks of each corporation, for the purpose of determining the
corresponding percentage of these listed stockholders in relation to the respective capital stock of said corporation.

Petitioner, as well as the amicus curiae and the Solicitor General8 contend that the relationship between herein
respondent SAN JOSE PETROLEUM and its subsidiary, SAN JOSE OIL, violates the Petroleum Law of 1949, the
Philippine Constitution, and Section 13 of the Corporation Law, which inhibits a mining corporation from acquiring an
interest in another mining corporation. It is respondent's theory, on the other hand, that far from violating the
Constitution; such relationship between the two corporations is in accordance with the Laurel-Langley Agreement
which implemented the Ordinance Appended to the Constitution, and that Section 13 of the Corporation Law is not
applicable because respondent is not licensed to do business, as it is not doing business, in the Philippines.

Article XIII, Section 1 of the Philippine Constitution provides:

SEC. 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the
State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the
Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such
citizens, subject to any existing right, grant, lease or concession at the time of the inauguration of this
Government established under this Constitution. . . . (Emphasis supplied)

In the 1946 Ordinance Appended to the Constitution, this right (to utilize and exploit our natural resources) was
extended to citizens of the United States, thus:

Notwithstanding the provisions of section one, Article Thirteen, and section eight, Article Fourteen, of the
foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the
Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six,
pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to
extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development,
and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines,
and the operation of public utilities shall, if open to any person, be open to citizens of the United States, and to
all forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States in
the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or
corporations or associations owned or controlled by citizens of the Philippines (Emphasis supplied.)

In the 1954 Revised Trade Agreement concluded between the United States and the Philippines, also known as the
Laurel-Langley Agreement, embodied in Republic Act 1355, the following provisions appear:

ARTICLE VI
 1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of the
public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and sources of potential
energy, and other natural resources of either Party, and the operation of public utilities, shall, if open to any
person, be open to citizens of the other Party and to all forms of business enterprise owned or controlled,
directly or indirectly, by citizens of such other Party in the same manner as to and under the same conditions
imposed upon citizens or corporations or associations owned or controlled by citizens of the Party granting the
right.

2. The rights provided for in Paragraph 1 may be exercised, . . . in the case of citizens of the United States,
with respect to natural resources in the public domain in the Philippines, only through the medium of a
corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned
or controlled by citizens of the United States. . . .

3. The United States of America reserves the rights of the several States of the United States to limit the extent
to which citizens or corporations or associations owned or controlled by citizens of the Philippines may engage
in the activities specified in this Article. The Republic of the Philippines reserves the power to deny any of the
rights specified in this Article to citizens of the United States who are citizens of States, or to corporations or
associations at least 60% of whose capital stock or capital is owned or controlled by citizens of States, which
deny like rights to citizens of the Philippines, or to corporations or associations which are owned or controlled
by citizens of the Philippines. . . . (Emphasis supplied.)

Re-stated, the privilege to utilize, exploit, and develop the natural resources of this country was granted, by Article XIII
of the Constitution, to Filipino citizens or to corporations or associations 60% of the capital of which is owned by such
citizens. With the Parity Amendment to the Constitution, the same right was extended to citizens of the United States
and business enterprises owned or controlled directly or indirectly, by citizens of the United States.

There could be no serious doubt as to the meaning of the word "citizens" used in the aforementioned provisions of the
Constitution. The right was granted to 2 types of persons: natural persons (Filipino or American citizens) and juridical
persons (corporations 60% of which capital is owned by Filipinos and business enterprises owned or controlled directly
or indirectly, by citizens of the United States). In American law, "citizen" has been defined as "one who, under the
constitution and laws of the United States, has a right to vote for representatives in congress and other public officers,
and who is qualified to fill offices in the gift of the people. (1 Bouvier's Law Dictionary, p. 490.) A citizen is

One of the sovereign people. A constituent member of the sovereignty, synonymous with the people." (Scott v.
Sandford, 19 Ho. [U.S.] 404, 15 L. Ed. 691.)

A member of the civil state entitled to all its privileges. (Cooley, Const. Lim. 77. See U.S. v. Cruikshank 92 U.S.
542, 23 L. Ed. 588; Minor v. Happersett 21 Wall. [U.S.] 162, 22 L. Ed. 627.)

These concepts clarified, is herein respondent SAN JOSE PETROLEUM an American business enterprise entitled to
parity rights in the Philippines? The answer must be in the negative, for the following reasons:

Firstly It is not owned or controlled directly by citizens of the United States, because it is owned and controlled by a
corporation, the OIL INVESTMENTS, another foreign (Panamanian) corporation.

Secondly Neither can it be said that it is indirectly owned and controlled by American citizens through the OIL
INVESTMENTS, for this latter corporation is in turn owned and controlled, not by citizens of the United States, but still
by two foreign (Venezuelan) corporations, the PANTEPEC OIL COMPANY and PANCOASTAL PETROLEUM.

Thirdly Although it is claimed that these two last corporations are owned and controlled respectively by 12,373 and
9,979 stockholders residing in the different American states, there is no showing in the certification furnished by
respondent that the stockholders of PANCOASTAL or those of them holding the controlling stock, are citizens of the
United States.

Fourthly Granting that these individual stockholders are American citizens, it is yet necessary to establish that the
different states of which they are citizens, allow Filipino citizens or corporations or associations owned or controlled by
Filipino citizens, to engage in the exploitation, etc. of the natural resources of these states (see paragraph 3, Article VI
of the Laurel-Langley Agreement, supra). Respondent has presented no proof to this effect.

Fifthly But even if the requirements mentioned in the two immediately preceding paragraphs are satisfied,
nevertheless to hold that the set-up disclosed in this case, with a long chain of intervening foreign corporations, comes
within the purview of the Parity Amendment regarding business enterprises indirectly owned or controlled by citizens of
the United States, is to unduly stretch and strain the language and intent of the law. For, to what extent must the word
"indirectly" be carried? Must we trace the ownership or control of these various corporations ad infinitum for the
purpose of determining whether the American ownership-control-requirement is satisfied? Add to this the admitted fact
that the shares of stock of the PANTEPEC and PANCOASTAL which are allegedly owned or controlled directly by
citizens of the United States, are traded in the stock exchange in New York, and you have a situation where it
becomes a practical impossibility to determine at any given time, the citizenship of the controlling stock required by the
law. In the circumstances, we have to hold that the respondent SAN JOSE PETROLEUM, as presently constituted, is
not a business enterprise that is authorized to exercise the parity privileges under the Parity Ordinance, the Laurel-
Langley Agreement and the Petroleum Law. Its tie-up with SAN JOSE OIL is, consequently, illegal.

What, then, would be the Status of SAN JOSE OIL, about 90% of whose stock is owned by SAN JOSE PETROLEUM?
This is a query which we need not resolve in this case as SAN JOSE OIL is not a party and it is not necessary to do so
to dispose of the present controversy. But it is a matter that probably the Solicitor General would want to look into.

There is another issue which has been discussed extensively by the parties. This is whether or not an American
mining corporation may lawfully "be in anywise interested in any other corporation (domestic or foreign) organized for
the purpose of engaging in agriculture or in mining," in the Philippines or whether an American citizen owning stock in
more than one corporation organized for the purpose of engaging in agriculture or in mining, may own more than 15%
of the capital stock then outstanding and entitled to vote, of each of such corporations, in view of the express
prohibition contained in Section 13 of the Philippine Corporation Law. The petitioner in this case contends that the
provisions of the Corporation Law must be applied to American citizens and business enterprise otherwise entitled to
exercise the parity privileges, because both the Laurel-Langley Agreement (Art. VI, par. 1) and the Petroleum Act of
1948 (Art. 31), specifically provide that the enjoyment by them of the same rights and obligations granted under the
provisions of both laws shall be "in the same manner as to, and under the same conditions imposed upon, citizens of
the Philippines or corporations or associations owned or controlled by citizens of the Philippines." The petitioner further
contends that, as the enjoyment of the privilege of exploiting mineral resources in the Philippines by Filipino citizens or
corporations owned or controlled by citizens of the Philippines (which corporation must necessarily be organized under
the Corporation Law), is made subject to the limitations provided in Section 13 of the Corporation Law, so necessarily
the exercise of the parity rights by citizens of the United States or business enterprise owned or controlled, directly or
indirectly, by citizens of the United States, must equally be subject to the same limitations contained in the aforesaid
Section 13 of the Corporation Law.

In view of the conclusions we have already arrived at, we deem it not indispensable for us to pass upon this legal
question, especially taking into account the statement of the respondent (SAN JOSE PETROLEUM) that it is
essentially a holding company, and as found by the Securities and Exchange Commissioner, its principal activity is
limited to the financing and giving technical assistance to SAN JOSE OIL.

4. Respondent SAN JOSE PETROLEUM, whose shares of stock were allowed registration for sale in the Philippines,
was incorporated under the laws of Panama in April, 1956 with an authorized capital stock of $500,000.00, American
currency, divided into 50,000,000 shares at par value of $0.01 per share. By virtue of a 3-party Agreement of June 14,
1956, respondent was supposed to have received from OIL INVESTMENTS 8,000,000 shares of the capital stock of
SAN JOSE OIL (at par value of $0.01 per share), plus a note for $250,000.00 due in 6 months, for which respondent
issued in favor of OIL INVESTMENTS 16,000,000 shares of its capital stock, at $0.01 per share or with a value of
$160,000.00, plus a note for $230,297.97 maturing in 2 years at 6% per annum interest,9 and the assumption of
payment of the unpaid price of 7,500,000 (of the 8,000,000 shares of SAN JOSE OIL).

On June 27, 1956, the capitalization of SAN JOSE PETROLEUM was increased from $500,000.00 to $17,500,000.00
by increasing the par value of the same 50,000,000 shares, from $0.01 to $0.35. Without any additional consideration,
the 16,000,000 shares of $0.01 previously issued to OIL INVESTMENTS with a total value of $160,000.00 were
changed with 16,000,000 shares of the recapitalized stock at $0.35 per share, or valued at $5,600,000.00. And, to
make it appear that cash was received for these re-issued 16,000,000 shares, the board of directors of respondent
corporation placed a valuation of $5,900,000.00 on the 8,000,000 shares of SAN JOSE OIL (still having par value of
$0.10 per share) which were received from OIL INVESTMENTS as part-consideration for the 16,000,000 shares at
$0.01 per share.

In the Balance Sheet of respondent, dated July 12, 1956, from the $5,900,000.00, supposedly the value of the
8,000,000 shares of SAN JOSE OIL, the sum of $5,100,000.00 was deducted, corresponding to the alleged difference
between the "value" of the said shares and the subscription price thereof which is $800,000.00 (at $0.10 per share).
From this $800,000.00, the subscription price of the SAN JOSE OIL shares, the amount of $319,702.03 was deducted,
as allegedly unpaid subscription price, thereby giving a difference of $480,297.97, which was placed as the amount
allegedly paid in on the subscription price of the 8,000,000 SAN JOSE OIL shares. Then, by adding thereto the note
receivable from OIL INVESTMENTS, for $250,000.00 (part-consideration for the 16,000,000 SAN JOSE PETROLEUM
shares), and the sum of $6,516.21, as deferred expenses, SAN JOSE PETROLEUM appeared to have assets in the
sum of $736,814.18.
These figures are highly questionable. Take the item $5,900,000.00 the valuation placed on the 8,000,000 shares of
SAN JOSE OIL. There appears no basis for such valuation other than belief by the board of directors of respondent
that "should San Jose Oil Company be granted the bulk of the concessions applied for upon reasonable terms, that it
would have a reasonable value of approximately $10,000,000." 10 Then, of this amount, the subscription price of
$800,000.00 was deducted and called it "difference between the (above) valuation and the subscription price for the
8,000,000 shares." Of this $800,000.00 subscription price, they deducted the sum of $480,297.97 and the difference
was placed as the unpaid portion of the subscription price. In other words, it was made to appear that they paid in
$480,297.97 for the 8,000,000 shares of SAN JOSE OIL. This amount ($480,297.97) was supposedly that
$250,000.00 paid by OIL INVESMENTS for 7,500,000 shares of SAN JOSE OIL, embodied in the June 14 Agreement,
and a sum of $230,297.97 the amount expended or advanced by OIL INVESTMENTS to SAN JOSE OIL. And yet,
there is still an item among respondent's liabilities, for $230,297.97 appearing as note payable to Oil Investments,
maturing in two (2) years at six percent (6%) per annum. 11 As far as it appears from the records, for the 16,000,000
shares at $0.35 per share issued to OIL INVESTMENTS, respondent SAN JOSE PETROLEUM received from OIL
INVESTMENTS only the note for $250,000.00 plus the 8,000,000 shares of SAN JOSE OIL, with par value of $0.10
per share or a total of $1,050,000.00 the only assets of the corporation. In other words, respondent actually lost
$4,550,000.00, which was received by OIL INVESTMENTS.

But this is not all. Some of the provisions of the Articles of Incorporation of respondent SAN JOSE PETROLEUM are
noteworthy; viz:

(1) the directors of the Company need not be shareholders;

(2) that in the meetings of the board of directors, any director may be represented and may vote through a
proxy who also need not be a director or stockholder; and

(3) that no contract or transaction between the corporation and any other association or partnership will be
affected, except in case of fraud, by the fact that any of the directors or officers of the corporation is interested
in, or is a director or officer of, such other association or partnership, and that no such contract or transaction
of the corporation with any other person or persons, firm, association or partnership shall be affected by the
fact that any director or officer of the corporation is a party to or has an interest in, such contract or transaction,
or has in anyway connected with such other person or persons, firm, association or partnership; and finally,
that all and any of the persons who may become director or officer of the corporation shall be relieved from all
responsibility for which they may otherwise be liable by reason of any contract entered into with the
corporation, whether it be for his benefit or for the benefit of any other person, firm, association or partnership
in which he may be interested.

These provisions are in direct opposition to our corporation law and corporate practices in this country. These
provisions alone would outlaw any corporation locally organized or doing business in this jurisdiction. Consider the
unique and unusual provision that no contract or transaction between the company and any other association or
corporation shall be affected except in case of fraud, by the fact that any of the directors or officers of the company
may be interested in or are directors or officers of such other association or corporation; and that none of such
contracts or transactions of this company with any person or persons, firms, associations or corporations shall be
affected by the fact that any director or officer of this company is a party to or has an interest in such contract or
transaction or has any connection with such person or persons, firms associations or corporations; and that any and all
persons who may become directors or officers of this company are hereby relieved of all responsibility which they
would otherwise incur by reason of any contract entered into which this company either for their own benefit, or for the
benefit of any person, firm, association or corporation in which they may be interested.

The impact of these provisions upon the traditional judiciary relationship between the directors and the stockholders of
a corporation is too obvious to escape notice by those who are called upon to protect the interest of investors. The
directors and officers of the company can do anything, short of actual fraud, with the affairs of the corporation even to
benefit themselves directly or other persons or entities in which they are interested, and with immunity because of the
advance condonation or relief from responsibility by reason of such acts. This and the other provision which authorizes
the election of non-stockholders as directors, completely disassociate the stockholders from the government and
management of the business in which they have invested.

To cap it all on April 17, 1957, admittedly to assure continuity of the management and stability of SAN JOSE
PETROLEUM, OIL INVESTMENTS, as holder of the only subscribed stock of the former corporation and acting "on
behalf of all future holders of voting trust certificates," entered into a voting trust agreement12 with James L. Buckley
and Austin E. Taylor, whereby said Trustees were given authority to vote the shares represented by the outstanding
trust certificates (including those that may henceforth be issued) in the following manner:
 (a) At all elections of directors, the Trustees will designate a suitable proxy or proxies to vote for the election of
directors designated by the Trustees in their own discretion, having in mind the best interests of the holders of
the voting trust certificates, it being understood that any and all of the Trustees shall be eligible for election as
directors;

(b) On any proposition for removal of a director, the Trustees shall designate a suitable proxy or proxies to vote
for or against such proposition as the Trustees in their own discretion may determine, having in mind the
best interest of the holders of the voting trust certificates;

(c) With respect to all other matters arising at any meeting of stockholders, the Trustees will instruct such proxy
or proxies attending such meetings to vote the shares of stock held by the Trustees in accordance with the
written instructions of each holder of voting trust certificates. (Emphasis supplied.)

It was also therein provided that the said Agreement shall be binding upon the parties thereto, their successors, and
upon all holders of voting trust certificates.

And these are the voting trust certificates that are offered to investors as authorized by Security and Exchange
Commissioner. It can not be doubted that the sale of respondent's securities would, to say the least, work or tend to
work fraud to Philippine investors.

FOR ALL THE FOREGOING CONSIDERATIONS, the motion of respondent to dismiss this appeal, is denied and the
orders of the Securities and Exchange Commissioner, allowing the registration of Respondent's securities and
licensing their sale in the Philippines are hereby set aside. The case is remanded to the Securities and Exchange
Commission for appropriate action in consonance with this decision. With costs. Let a copy of this decision be
furnished the Solicitor General for whatever action he may deem advisable to take in the premises. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.

Castro, J., took no part

G.R. No. L-30299 August 17, 1972

REPUBLIC OF THE PHILIPPINES and/or THE SOLICITOR GENERAL petitioners,

vs.
WILLIAM H. QUASHA, respondent.

Office of the Solicitor General Estelito P. Mendoza for petitioner.

Quasha, Asperilla Blanco, Zafra & Tayag for respondent.

REYES J. B. L., J.:p

This case involves a judicial determination of the scope and duration of the rights acquired by American citizens and
corporations controlled by them, under the Ordinance appended to the Constitution as of 18 September 1946, or the
so-called Parity Amendment.

The respondent, William H. Quasha, an American citizen, had acquired by purchase on 26 November 1954 a parcel of
land with the permanent improvements thereon, situated at 22 Molave Place, in Forbes Park, Municipality of Makati,
Province of Rizal, with an area of 2,616 sq. m. more or less, described in and covered by T. C. T. 36862. On 19 March
1968, he filed a petition in the Court of First Instance of Rizal, docketed as its Civil Case No. 10732, wherein he
(Quasha) averred the acquisition of the real estate aforesaid; that the Republic of the Philippines, through its officials,
claimed that upon expiration of the Parity Amendment on 3 July 1974, rights acquired by citizens of the United States
of America shall cease and be of no further force and effect; that such claims necessarily affect the rights and interest
of the plaintiff, and that continued uncertainty as to the status of plaintiff's property after 3 July 1974 reduces the value
thereof, and precludes further improvements being introduced thereon, for which reason plaintiff Quasha sought a
declaration of his rights under the Parity Amendment, said plaintiff contending that the ownership of properties during
the effectivity of the Parity Amendment continues notwithstanding the termination and effectivity of the Amendment.

The then Solicitor General Antonio P. Barredo (and later on his successors in office, Felix V. Makasiar and Felix Q.
Antonio) contended that the land acquired by plaintiff constituted private agricultural land and that the acquisition
violated section 5, Article XIII, of the Constitution of the Philippines, which prohibits the transfer of private agricultural
land to non-Filipinos, except by hereditary succession; and assuming, without conceding, that Quasha's acquisition
was valid, any and all rights by him so acquired "will expire ipso facto and ipso jure at the end of the day on 3 July
1974, if he continued to hold the property until then, and will be subject to escheat or reversion proceedings" by the
Republic.

After hearing, the Court of First Instance of Rizal (Judge Pedro A. Revilla presiding) rendered a decision, dated 6
March 1969, in favor of plaintiff, with the following dispositive portion:

WHEREFORE, judgment is hereby rendered declaring that acquisition by the plaintiff on 26 November
1954 of, the private agricultural land described in and covered by Transfer Certificate of Title No. 36862
in his name was valid, and that plaintiff has a right to continue in ownership of the said property even
beyond July 3, 1974.

Defendants appealed directly to this Court on questions of law, pleading that the court below erred:

(1) In ruling that under the Parity Amendment American citizens and American owned and/or controlled
business enterprises "are also qualified to acquire private agricultural lands" in the Philippines; and

(2) In ruling that when the Parity Amendment ceases to be effective on 3 July 1974, "what must be
considered to end should be the right to acquire land, and not the right to continue in ownership of land
already acquired prior to that time."

As a historical background, requisite to a proper understanding of the issues being litigated, it should be recalled that
the Constitution as originally adopted, contained the following provisions:

Article XIII CONSERVATION AND UTILIZATION

OF NATURAL RESOURCES
 Section 1. All Agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens subject to any existing right, grant, lease, or concession at
the time of the inauguration of the Government established under this Constitution. Natural resources,
with the exception of public agricultural land, shall not be alienated, and no license, concession, or
lease for the resources shall be granted for a period exceeding twenty-five years, renewable for
another twenty-five years, except as to water right for irrigation, water supply, fisheries, or industrial
uses other than the development of water power, in which cases beneficial use may be the measure
and the limit of the grant.

Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in
excess of one thousand and twenty-four hectares, nor may any individual acquire such lands by
purchase in excess of one hundred and forty-four hectares, or by lease in excess of one thousand and
twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing not
exceeding two thousand hectares, may be leased to an individual, private corporation, or association.

xxx xxx xxx

Section 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the
public domain in the Philippines.

Article XIV GENERAL PROVISIONS

Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to corporations or other entities organized under
the laws of the Philippines, sixty per centum of the capital of which is owned by citizens of the
Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a
longer period than fifty years. No franchise or right shall be granted to any individual, firm, or
corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by
the Congress when the public interest so requires.

The nationalistic spirit that pervaded these and other provisions of the Constitution are self-evident and require no
further emphasis.

From the Japanese occupation and the reconquest of the Archipelago, the Philippine nation emerged with its
industries destroyed and its economy dislocated. It was described in this Court's opinion in Commissioner of Internal
Revenue vs. Guerrero, et al.,
L-20942, 22 September 1967, 21 SCRA 181, 187, penned by Justice Enrique M. Fernando, in the following terms:

It was fortunate that the Japanese Occupation ended when it did. Liberation was hailed by all, but the
problems faced by the legitimate government were awesome in their immensity. The Philippine
treasury was bankrupt and her economy prostrate. There were no dollar-earning export crops to speak
of; commercial operations were paralyzed; and her industries were unable to produce with mills,
factories and plants either destroyed or their machineries obsolete or dismantled. It was a desolate and
tragic sight that greeted the victorious American and Filipino troops. Manila, particularly that portion
south of the Pasig, lay in ruins, its public edifices and business buildings lying in a heap of rubble and
numberless houses razed to the ground. It was in fact, next to Warsaw, the most devastated city in the
expert opinion of the then General Eisenhower. There was thus a clear need of help from the United
States. American aid was forthcoming but on terms proposed by her government and later on accepted
by the Philippines.

The foregoing description is confirmed by the 1945 Report of the Committee on Territories and Insular Affairs to the
United States Congress:

When the Philippines do become independent next July, they will start on the road to independence
with a country whose commerce, trade and political institutions have been very, very seriously
damaged. Years of rebuilding are necessary before the former physical conditions of the islands can be
restored. Factories, homes, government and commercial buildings, roads, bridges, docks, harbors and
the like are in need of complete reconstruction or widespread repairs. It will be quite some while before
the Philippine can produce sufficient food with which to sustain themselves.
 The internal revenues of the country have been greatly diminished by war. Much of the assessable
property basis has been destroyed. Foreign trade has vanished. Internal commerce is but a faction of
what it used to be. Machinery, farming implements, ships, bus and truck lines, inter-island
transportation and communications have been wrecked.

Shortly thereafter, in 1946, the United States 79th Congress enacted Public Law 3721, known as the Philippine Trade
Act, authorizing the President of the United States to enter into an Executive Agreement with the President of the
Philippines, which should contain a provision that

The disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands
of the public domain, waters, minerals, coal, petroleum, and other mineral oils,; all forces and sources
of potential energy, and other natural resources of the Philippines, and the operation of public utilities
shall, if open to any person, be open to citizens of the United States and to all forms of business
enterprise owned or controlled, directly or indirectly, by United States citizens.

and that:

The President of the United States is not authorized ... to enter into such executive agreement unless
in the agreement the Government of the Philippines ... will promptly take such steps as are necessary
to secure the amendment of the Constitution of the Philippines so as to permit the taking effect as laws
of the Philippines of such part of the provisions of section 1331 ... as is in conflict with such Constitution
before such amendment.

The Philippine Congress, by Commonwealth Act No. 733, authorized the President of the Philippines to enter into the
Executive Agreement. Said Act provided, inter alia, the following:

ARTICLE VII

1. The disposition, exploitation, development, and utilization of all agricultural, timber, and mineral
lands of the public domain, waters, mineral, coal, petroleum, and other mineral oils, all forces and
sources of potential energy, and other natural resources of the Philippines, and the operation of public
utilities, shall, if open to any person, be open to citizens of the United States and to all forms of
business enterprise owned or controlled, directly or indirectly, by United States citizens, except that (for
the period prior to the amendment of the Constitution of the Philippines referred to in Paragraph 2 of
this Article) the Philippines shall not be required to comply with such part of the foregoing provisions of
this sentence as are in conflict with such Constitution.

2. The Government of the Philippines will promptly take such steps as are necessary to secure the
amendment of the constitution of the Philippines so as to permit the taking effect as laws of the
Philippines of such part of the provisions of Paragraph 1 of this Article as is in conflict with such
Constitution before such amendment.

Thus authorized, the Executive Agreement was signed on 4 July 1946, and shortly thereafter the President of the
Philippines recommended to the Philippine Congress the approval of a resolution proposing amendments to the
Philippine Constitution pursuant to the Executive Agreement. Approved by the Congress in joint session, the proposed
amendment was submitted to a plebiscite and was ratified in November of 1946. Generally known as the Parity
Amendment, it was in the form of an Ordinance appended to the Philippine Constitution, reading as follows:

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the
foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President
of the Philippines with the President of the United States on the fourth of July, nineteen hundred and
forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three,
but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition,
exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public
domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of potential
energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if
OPEN to any person, be open to citizens of the United States and to all forms of business enterprise
owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to and
under the same conditions imposed upon, citizens of the Philippines or corporations or associations
owned or controlled by citizens of the Philippines.

A revision of the 1946 Executive Agreement was authorized by the Philippines by Republic Act 1355, enacted in July
1955. The revision was duly negotiated by representatives of the Philippines and the United States, and a new
agreement was concluded on 6 September 1955 to take effect on 1 January 1956, becoming known as the Laurel-
Langley Agreement.

This latter agreement, however, has no direct application to the case at bar, since the purchase by herein respondent
Quasha of the property in question was made in 1954, more than one year prior to the effectivity of the Laurel-Langley
Agreement..

Bearing in mind the legal provisions previously quoted and their background, We turn to the first main issue posed in
this appeal: whether under or by virtue of the so-called Parity Amendment to the Philippine Constitution respondent
Quasha could validly acquire ownership of the private residential land in Forbes Park, Makati, Rizal, which is
concededly classified private agricultural land.

Examination of the "Parity Amendment", as ratified, reveals that it only establishes an express exception to two (2)
provisions of our Constitution, to wit: (a) Section 1, Article XIII, re disposition, exploitation, development and utilization
of agricultural, timber and mineral lands of the public domain and other natural resources of the Philippines; and (b)
Section 8, Article XIV, regarding operation of public utilities. As originally drafted by the framers of the Constitution, the
privilege to acquire and exploit agricultural lands of the public domain, and other natural resources of the Philippines,
and to operate public utilities, were reserved to Filipinos and entities owned or controlled by them: but the "Parity
Amendment" expressly extended the privilege to citizens of the United States of America and/or to business
enterprises owned or controlled by them.

No other provision of our Constitution was referred to by the "Parity Amendment"; nor Section 2 of Article XIII limiting
the maximum area of public agricultural lands that could be held by individuals or corporations or associations; nor
Section 5 restricting the transfer or assignment of private agricultural lands to those qualified to acquire or hold lands of
the public domain (which under the original Section 1 of Article XIII meant Filipinos exclusively), save in cases of
hereditary succession. These sections 2 and 5 were therefore left untouched and allowed to continue in operation as
originally intended by the Constitution's framers.

Respondent Quasha argues that since the amendment permitted United States citizens or entities controlled by them
to acquire agricultural lands of the public domain, then such citizens or entities became entitled to acquire private
agricultural land in the Philippines, even without hereditary succession, since said section 5 of Article XIII only negates
the transfer or assignment of private agricultural land to individuals or entities not qualified to acquire or hold lands of
the public domain. Clearly, this argument of respondent Quasha rests not upon the text of the Constitutional
Amendment but upon a mere inference therefrom. If it was ever intended to create also an exception to section 5 of
Article XIII, why was mention therein made only of Section 1 of Article XIII and Section 8 of Article XIV and of no other?
When the text of the Amendment was submitted for popular ratification, did the voters understand that three sections
of the Constitution were to be modified, when only two sections were therein mentioned?

A reading of Sections 1 and 4 of Article XIII, as originally drafted by its farmers, leaves no doubt that the policy of the
Constitution was to reserve to Filipinos the disposition, exploitation development or utilization of agricultural lands,
public (section 1) or private (section 5), as well as all other natural resources of the Philippines. The "Parity
Amendment" created exceptions to that Constitutional Policy and in consequence to the sovereignty of the Philippines.
By all canons of construction, such exceptions must be given strict interpretation; and this Court has already so ruled
in Commissioner of Internal Revenue vs. Guerrero, et al., L-20942, 22 September 1967, 21 SCRA 181, per Justice
Enrique M. Fernando:

While good faith, no less than adherence to the categorical wording of the Ordinance, requires that all
the rights and privileges thus granted to Americans and business enterprises owned and controlled by
them be respected, anything further would not be warranted. Nothing less would suffice but anything
more is not justified.

The basis for the strict interpretation was given by former President of the University of the Philippines, Hon. Vicente
G. Sinco (Congressional Record, House of Representatives, Volume 1, No. 26, page 561):

It should be emphatically stated that the provisions of our Constitution which limit to Filipinos the rights
to develop the natural resources and to operate the public utilities of the Philippines is one of the
bulwarks of our national integrity. The Filipino people decided to include it in our Constitution in order
that it may have the stability and permanency that its importance requires. It is written in our
Constitution so that it may neither be the subject of barter nor be impaired in the give and take of
politics. With our natural resources, our sources of power and energy, our public lands, and our public
utilities, the material basis of the nation's existence, in the hands of aliens over whom the Philippine
 Government does not have complete control, the Filipinos may soon find themselves deprived of their
patrimony and living as it were, in a house that no longer belongs to them.

The true extent of the Parity Amendment, as understood by its proponents in the Philippine Congress, was clearly
expressed by one of its advocates, Senator Lorenzo Sumulong:

It is a misconception to believe that under this amendment Americans will be able to acquire all kinds of
natural resources of this country, and even after the expiration of 28 years their acquired rights cannot
be divested from them. If we read carefully the language of this amendment which is taken verbatim
from the Provision of the Bell Act, and, which in turn, is taken also verbatim from certain sections of the
Constitution, you will find out that the equality of rights granted under this amendment refers only to two
subjects. Firstly, it refers to exploitation of natural resources, and secondly, it refers to the operation of
public utilities. Now, when it comes to exploitation of natural resources, it must be pointed out here that,
under our Constitution and under this amendment, only public agricultural land may be acquired, may
be bought, so that on the supposition that we give way to this amendment and on the further
supposition that it is approved by our people, let not the mistaken belief be entertained that all kinds of
natural resources may be acquired by Americans because under our Constitution forest lands cannot
be bought, mineral lands cannot be bought, because by explicit provision of the Constitution they
belong to the State, they belong to our Government, they belong to our people. That is why we call
them rightly the patrimony of our race. Even if the Americans should so desire, they can have no
further privilege than to ask for a lease of concession of forest lands and mineral lands because it is so
commanded in the Constitution. And under the Constitution, such a concession is given only for a
limited period. It can be extended only for 25 years, renewable for another 25. So that with respect to
mineral or forest lands, all they can do is to lease it for 25 years, and after the expiration of the original
25 years they will have to extend it, and I believe it can be extended provided that it does not exceed
28 years because this agreement is to be effected only as an ordinance and for the express period of
28 years. So that it is my humble belief that there is nothing to worry about insofar as our forest and
mineral lands are concerned.

Now, coming to the operation of public utilities, as every member of the Congress knows, it is also for a
limited period, under our Constitution, for a period not exceeding 50 years. And since this amendment
is intended to endure only for 28 years, it is my humble opinion that when Americans try to operate
public utilities they cannot take advantage of the maximum provided in the Constitution but only the 28
years which is expressly provided to be the life of this amendment.

There remains for us to consider the case of our public agricultural lands. To be sure, they may be
bought, and if we pass this amendment, Americans may buy our public agricultural lands, but the very
same Constitution applying even to Filipinos, provides that the sale of public agricultural lands to a
corporation can never exceed one thousand and twenty-four hectares. That is to say, if an American
corporation, and American enterprise, should decide to invest its money in public agricultural lands, it
will be limited to the amount of 1,024 hectares, no more than 1,024 hectares' (Emphasis supplied).

No views contrary to these were ever expressed in the Philippine Legislature during the discussion of the Proposed
Amendment to our Constitution, nor was any reference made to acquisition of private agricultural lands by non-
Filipinos except by hereditary succession. On the American side, it is significant to observe that the draft of the
Philippine Trade Act submitted to the House of Representatives by Congressman Bell, provided in the first Portion of
Section 19 the following:

SEC. 19. Notwithstanding any existing provision of the constitution and statutes of the Philippine
Government, citizens and corporations of the United States shall enjoy in the Philippine Islands during
the period of the validity of this Act, or any extension thereof by statute or treaty, the same rights as
to property, residence, and occupation as citizens of the Philippine Islands ...

But as finally approved by the United States Congress, the equality as to " property residence and occupation"
provided in the bill was eliminated and Section 341 of the Trade Act limited such parity to the disposition, exploitation,
development, and utilization of lands of the public domain, and other natural resources of the Philippines (V. ante,
page 5 of this opinion).

Thus, whether from the Philippine or the American side, the intention was to secure parity for United States citizens,
only in two matters: (1) exploitation, development and utilization of public lands, and other natural resources of the
Philippines; and (2) the operation of public utilities. That and nothing else.
Respondent Quasha avers that as of 1935 when the Constitution was adopted, citizens of the United States were
already qualified to acquire public agricultural lands, so that the literal text of section 5 must be understood as
permitting transfer or assignment of private agricultural lands to Americans even without hereditary succession. Such
capacity of United States citizens could exist only during the American sovereignty over the Islands. For the
Constitution of the Philippines was designed to operate even beyond the extinction of the United States sovereignty,
when the Philippines would become fully independent. That is apparent from the provision of the original Ordinance
appended to the Constitution as originally approved and ratified. Section 17 of said Ordinance provided that:

(17) Citizens and corporations of the United States shall enjoy in the Commonwealth of the
Philippines all the civil rights of the citizens and corporations, respectively, thereof. (Emphasis supplied)

The import of paragraph (17) of the Ordinance was confirmed and reenforced by Section 127 of Commonwealth Act
141 (the Public Land Act of 1936) that prescribes:

Sec. 127. During the existence and continuance of the Commonwealth, and before the Republic of the
Philippines is established, citizens and corporations of the United States shall enjoy the same rights
granted to citizens and corporations of the Philippines under this Act.

thus clearly evidencing once more that equal rights of citizens and corporations of the United States to acquire
agricultural lands of the Philippines vanished with the advent of the Philippine Republic. Which explains the need of
introducing the "Parity Amendment" of 1946.

It is then indubitable that the right of United States citizens and corporations to acquire and exploit private or public
lands and other natural resources of the Philippines was intended to expire when the Commonwealth ended on 4 July
1946. Thereafter, public and private agricultural lands and natural resources of the Philippines were or became
exclusively reserved by our Constitution for Filipino citizens. This situation lasted until the "Parity Amendment", ratified
in November, 1946, once more reopened to United States citizens and business enterprises owned or controlled by
them the lands of the public domain, the natural resources of the Philippines, and the operation of the public utilities,
exclusively, but not the acquisition or exploitation of private agricultural lands, about which not a word is found in the
Parity Amendment..Respondent Quasha's pretenses can find no support in Article VI of the Trade Agreement of 1955,
known popularly as the Laurel-Langley Agreement, establishing a sort of reciprocity rights between citizens of the
Philippines and those of the United States, couched in the following terms:

ARTICLE VI

2. The rights provided for in Paragraph I may be exercised, in the case of citizens of the Philippines
with respect to natural resources in the United States which are subject to Federal control or
regulations, only through the medium of a corporation organized under the laws of the United States or
one of the States hereof and likewise, in the case of citizens of the United States with respect to natural
resources in the public domain in the Philippines only through the medium of a corporation organized
under the laws of the Philippines and at least 60% of the capital stock of which is owned or controlled
by citizens of the United States. This provision, however, does not affect the right of citizens of the
United States to acquire or own private agricultural lands in the Philippines or citizens of the Philippines
to acquire or own land in the United States which is subject to the jurisdiction of the United States and
not within the jurisdiction of any state and which is not within the public domain. The Philippines
reserves the right to dispose of the public lands in small quantities on especially favorable terms
exclusively to actual settlers or other users who are its own citizens. The United States reserves the
right to dispose of its public lands in small quantities on especially favorable terms exclusively to actual
settlers or other users who are its own citizens or aliens who have declared their intention to become
citizens. Each party reserves the right to limit the extent to which aliens may engage in fishing, or
engage in enterprises which furnish communications services and air or water transport. The United
States also reserves the right to limit the extent to which aliens may own land in its outlying territories
and possessions, but the Philippines will extend to American nationals who are residents of any of
those outlying territories and possessions only the same rights, with respect to, ownership of lands,
which are granted therein to citizens of the Philippines. The rights provided for in this paragraph shall
not, however, be exercised by either party so as to derogate from the rights previously acquired by
citizens or corporations or associations owned or controlled by citizens of the other party.

The words used in Article VI to the effect that

... This provision does not affect the right of citizen of the United States to acquire or own private
agricultural lands in the Philippines, or citizens of the Philippines to acquire or own land in the United
States which is subject to the jurisdiction of the United States ...
must be understood as referring to rights of United States citizens to acquire or own private agricultural lands before
the independence of the Philippines since the obvious purpose of the article was to establish rights of United States
and Filipino citizens on a basis of reciprocity. For as already shown, no such right to acquire or own private agricultural
lands in the Philippines has existed since the independent Republic was established in 1946. The quoted expressions
of the Laurel-Langley Agreement could not expand the rights of United States citizens as to public agricultural lands of
the Philippines to private lands, when the Parity Amendment and the Constitution authorize such United States citizens
and business entities only to acquire and exploit agricultural lands of the public domain. If the reopening of only public
lands to Americans required a Constitutional Amendment, how could a mere Trade Agreement, like the Laurel-
Langley, by itself enable United States citizens to acquire and exploit private agricultural lands, a right that ceased to
exist since the independence of the Philippines by express prescription of our Constitution?

We turn to the second issue involved in this appeal: On the assumption that respondent Quasha's purchase of the
private agricultural land involved is valid and constitutional, will or will not his rights expire on 3 July 1974?

For the solution of this problem, We again turn to the "Parity Amendment". Under it,

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the
foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President
of the Philippines with the President of the United States on the fourth of July, nineteen hundred and
forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-
three,but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the
disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the
public domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of
potential energy, and other natural resources of the Philippines, and the operation of public utilities,
shall, if open to any person, be open to citizens of the United states and to all forms of business
enterprise owned or controlled, directly or indirectly, by citizens of the United States in the same
manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations
or associations owned or controlled by citizens of the Philippines. (Emphasis supplied)

It is easy to see that all exceptional rights conferred upon United States citizens and business entities owned or
controlled by them, under the Amendment, are subject to one and the same resolutory term or period: they are to last
"during the effectivity of the Executive Agreement entered into on 4 July 1946", "but in no case to extend beyond the,
third of July, 1974". None of the privileges conferred by the "Parity Amendment" are excepted from this resolutory
period.

This limitation of time is in conformity with Article X, Section 2, of the Philippine Trade Act of 1946, as embodied in
Commonwealth Act No. 733. It says:

ARTICLE X

2. This Agreement shall have no effect after 3 July 1974. It may be terminated by either the United
States or the Philippines at any time, upon not less than five years' written notice. It the President of the
United States or the President of the Philippines determines and proclaims that the other Country has
adopted or applied measures or practices which would operate to nullify or impair any right or
obligation provided for in this Agreement, then the Agreement may be terminated upon not less than
six months' written notice.

Respondent Quasha argues that the limitative period set in the "Parity Amendment" should be understood not to be
applicable to the disposition, or correlative acquisition, of alienable agricultural lands of the public domain, since such
lands can be acquired in full ownership, in which event, under Article 428 of the Civil Code of Philippines

ART, 428. The owner has the right to enjoy and dispose of a thing, without other limitations than those
established by law.

The owner has also a right of action against the holder and possessor of the thing in order to recover it.

and that since any period or condition which produces the effect of loss or deprivation of valuable rights is in
derogation of due process of law, there must be "a law which expressly and indubitably limits and extinguishes the
ownership of non-citizens over private agricultural lands situated in the Philippines validly acquired under the law
existing at the time of acquisition."

Strangely enough, this argument ignores the provisions of the "Parity Amendment" prescribing that the disposition and
exploitation, etc. of agricultural lands of the public domain are in no case to extend beyond the third of July 1974. This
limitation already existed when Quasha in 1954 purchased the Forbes Park property, and the acquisition was subject
to it. If the Philippine government can not dispose of its alienable public agricultural lands beyond that date under the
"Parity Amendment", then, logically, the Constitution, as modified by the Amendment, only authorizes either of two
things: (a) alienation or transfer of rights less than ownership or (b) a resoluble ownership that will be extinguished not
later than the specified period. For the Philippine government to dispose of the public agricultural land for an indefinite
time would necessarily be in violation of the Constitution. There is nothing in the Civil Law of this country that is
repugnant to the existence of ownership for a limited duration; thus the title of a "reservista" (ascendant inheriting from
a descendant) in reserva troncal, under Article 891 of the Civil Code of the Philippines, is one such owner, holding title
and dominion, although under condition subsequent; he can do anything that a genuine owner can do, until his death
supervenes with "reservataries surviving", i.e., relatives within the third degree (Edroso vs. Sablan, 25 Phil. 295;
Lunsod vs. Ortega, 46 Phil. 661, 695). In truth, respondent himself invokes Article 428 of the Civil Code to the effect
that "the owner has the right to enjoy and dispose of a thing, without other limitations than those established by law".
One such limitation is the period fixed on the "Parity Amendment", which forms part of the Constitution, the highest law
of the land. How then can he complain of deprivation of due process?

That the legislature has not yet determined what is to be done with the property when the respondent's rights thereto
terminate on 3 July 1974 is irrelevant to the issues in this case. The law, making power has until that date full power to
adopt the apposite measures, and it is expected to do so.

One last point: under the "Parity Amendment" the disposition, exploitation, development and utilization of lands of the
public domain, and other natural resources of the Philippines, and the operation of public utilities are open

to citizens of the United States and to all forms of business enterprises owned or controlled, directly or
indirectly, by citizens of the United States

while under the Philippine Constitution (section 1, Article XIII, and section 8, Article XIV) utilization of such lands,
natural resources and public utilities are open to citizens of the Philippines or to

corporations or associations at least sixty per centum of the capital of which is owned by such
citizens...

It is thus apparent that American business enterprises are more favored than Philippine organization during the period
of parity in that, first, they need not be owned by American citizens up to 60% of their capital; all that is required is that
they be controlled by United States citizens, a control that is attained by ownership of only 51% a of the capital stock; and
second, that the control by United States citizens may be direct or indirect (voting trusts, pyramiding, etc.) which indirect control is not allowed in the case of Philippine
nationals.

That Filipinos should be placed under the so-called Parity in a more disadvantageous position than United States
citizens in the disposition, exploitation, development and utilization of the public lands, forests, mines, oils and other
natural resources of their own country is certainly rank injustice and inequity that warrants a most strict interpretation of
the "Parity Amendment", in order that the dishonorable inferiority in which Filipinos find themselves at present in the
land of their ancestors should not be prolonged more than is absolutely necessary.

FOR THE FOREGOING REASONS, the appealed decision of the Court of First Instance of Rizal is hereby reversed
and set aside; and judgment is rendered declaring that, under the "Parity Amendment" to our Constitution, citizens of
the United States and corporations and business enterprises owned or controlled by them can not acquire and own,
save in cases of hereditary succession, private agricultural lands in the Philippines and that all other rights acquired by
them under said amendment will expire on 3 July 1974.

Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando and Esguerra, JJ., concur.

Teehankee, Barredo, Makasiar and Antonio, JJ., took no part.

G.R. No. 98332 January 16, 1995

MINERS ASSOCIATION OF THE PHILIPPINES, INC., petitioner,

vs.
HON. FULGENCIO S. FACTORAN, JR., Secretary of Environment and Natural Resources, and JOEL D.
MUYCO, Director of Mines and Geosciences Bureau, respondents.

ROMERO, J.:

The instant petition seeks a ruling from this Court on the validity of two Administrative Orders issued by the Secretary
of the Department of Environment and Natural Resources to carry out the provisions of certain Executive Orders
promulgated by the President in the lawful exercise of legislative powers.

Herein controversy was precipitated by the change introduced by Article XII, Section 2 of the 1987 Constitution on the
system of exploration, development and utilization of the country's natural resources. No longer is the utilization of
inalienable lands of public domain through "license, concession or lease" under the 1935 and 1973
Constitutions1 allowed under the 1987 Constitution.

The adoption of the concept of jura regalia 2 that all natural resources are owned by the State embodied in the 1935, 1973
and 1987 Constitutions, as well as the recognition of the importance of the country's natural resources, not only for national
economic development, but also for its security and national
defense, 3 ushered in the adoption of the constitutional policy of "full control and supervision by the State" in the exploration,
development and utilization of the country's natural resources. The options open to the State are through direct undertaking
or by entering into co-production, joint venture; or production-sharing agreements, or by entering into agreement with
foreign-owned corporations for large-scale exploration, development and utilization.

Article XII, Section 2 of the 1987 Constitution provides:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. The exploration, development, and utilization of natural resources shall be under
the full control and supervision of the State. The State may directly undertake such activities, or it may
enter into co-production, joint venture, or product-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-
five years, and under such terms and conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant.

xxx xxx xxx

The President may enter into agreements with foreign-owned corporations involving either technical or
financial assistance for large-scale exploration, development, and utilization of minerals, petroleum,
and other mineral oils according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In such agreements, the State
shall promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision,
within thirty days from its execution. (Emphasis supplied)

Pursuant to the mandate of the above-quoted provision, legislative acts 4 were successively issued by the President in
the exercise of her legislative
power. 5

To implement said legislative acts, the Secretary of the Department of Environment and Natural Resources (DENR) in
turn promulgated Administrative Order Nos. 57 and 82, the validity and constitutionality of which are being challenged
in this petition.

On July 10, 1987, President Corazon C. Aquino, in the exercise of her then legislative powers under Article II, Section
1 of the Provisional Constitution and Article XIII, Section 6 of the 1987 Constitution, promulgated Executive Order No.
211 prescribing the interim procedures in the processing and approval of applications for the exploration, development
and utilization of minerals pursuant to the 1987 Constitution in order to ensure the continuity of mining operations and
activities and to hasten the development of mineral resources. The pertinent provisions read as follows:

Sec. 1. Existing mining permits, licenses, leases and other mining grants issued by the Department of
Environment and Natural Resources and Bureau of Mines and Geo-Sciences, including existing
operating agreements and mining service contracts, shall continue and remain in full force and effect,
subject to the same terms and conditions as originally granted and/or approved.

Sec. 2. Applications for the exploration, development and utilization of mineral resources, including
renewal applications for approval of operating agreements and mining service contracts, shall be
accepted and processed and may be approved; concomitantly thereto, declarations of locations and all
other kinds of mining applications shall be accepted and registered by the Bureau of Mines and Geo-
Sciences.

Sec. 3. The processing, evaluation and approval of all mining applications, declarations of locations,
operating agreements and service contracts as provided for in Section 2 above, shall be governed by
Presidential Decree No. 463, as amended, other existing mining laws and their implementing rules and
regulations: Provided, however, that the privileges granted, as well as the terms and conditions thereof
shall be subject to any and all modifications or alterations which Congress may adopt pursuant to
Section 2, Article XII of the 1987 Constitution.

On July 25, 1987, President Aquino likewise promulgated Executive Order No. 279 authorizing the DENR Secretary to
negotiate and conclude joint venture, co-production, or production-sharing agreements for the exploration,
development and utilization of mineral resources, and prescribing the guidelines for such agreements and those
agreements involving technical or financial assistance by foreign-owned corporations for large-scale exploration,
development, and utilization of minerals. The pertinent provisions relevant to this petition are as follows:

Sec. 1. The Secretary of the Department of Environment and Natural Resources (hereinafter referred
to as "the Secretary") is hereby authorized to negotiate and enter into, for and in behalf of the
Government, joint venture, co-production, or production-sharing agreements for the exploration,
development, and utilization of mineral resources with any Filipino citizens, or corporation or
association at least sixty percent (60%) of whose capital is owned by Filipino citizens. Such joint
venture, co-production, or production-sharing agreements may be for a period not exceeding twenty-
five years, renewable for not more than twenty-five years, and shall include the minimum terms and
conditions prescribed in Section 2 hereof. In the execution of a joint venture, co-production or
production agreements, the contracting parties, including the Government, may consolidate two or
more contiguous or geologically related mining claims or leases and consider them as one contract
area for purposes of determining the subject of the joint venture, co-production, or production-sharing
agreement.

xxx xxx xxx

Sec. 6. The Secretary shall promulgate such supplementary rules and regulations as may be
necessary to effectively implement the provisions of this Executive Order.

Sec. 7. All provisions of Presidential Decree No. 463, as amended, other existing mining laws, and their
implementing rules and regulations, or parts thereof, which are not inconsistent with the provisions of
this Executive Order, shall continue in force and effect.

Pursuant to Section 6 of Executive Order No. 279, the DENR Secretary issued on June 23, 1989 DENR Administrative
Order No. 57, series of 1989, captioned "Guidelines of Mineral Production Sharing Agreement under Executive Order
No. 279." 6 Under the transitory provision of said DENR Administrative Order No. 57, embodied in its Article 9, all existing
mining leases or agreements which were granted after the effectivity of the 1987 Constitution pursuant to Executive Order
No. 211, except small scale mining leases and those pertaining to sand and gravel and quarry resources covering an area of
twenty (20) hectares or less, shall be converted into production-sharing agreements within one (1) year from the effectivity of
these guidelines.

On November 20, 1980, the Secretary of the DENR Administrative Order No. 82, series of 1990, laying down the
"Procedural Guidelines on the Award of Mineral Production Sharing Agreement (MPSA) through Negotiation." 7

Section 3 of the aforementioned DENR Administrative Order No. 82 enumerates the persons or entities required to
submit Letter of Intent (LOIs) and Mineral Production Sharing Agreement (MPSAs) within two (2) years from the
effectivity of DENR Administrative Order No. 57 or until July 17, 1991. Failure to do so within the prescribed period
shall cause the abandonment of mining, quarry and sand and gravel claims. Section 3 of DENR Administrative Order
No. 82 provides:

Sec. 3. Submission of Letter of Intent (LOIs) and MPSAs). The following shall submit their LOIs and
MPSAs within two (2) years from the effectivity of DENR A.O. 57 or until July 17, 1991.

i. Declaration of Location (DOL) holders, mining lease applicants, exploration permitees, quarry
applicants and other mining applicants whose mining/quarry applications have not been perfected prior
to the effectivity of DENR Administrative Order No. 57.

ii. All holders of DOL acquired after the effectivity of DENR A.O. No. 57.

iii. Holders of mining leases or similar agreements which were granted after (the) effectivity of 1987
Constitution.

Failure to submit letters of intent and MPSA applications/proposals within the prescribed period shall
cause the abandonment of mining, quarry and sand and gravel claims.

The issuance and the impeding implementation by the DENR of Administrative Order Nos. 57 and 82 after their
respective effectivity dates compelled the Miners Association of the Philippines, Inc. 8 to file the instant petition assailing
their validity and constitutionality before this Court.

In this petition for certiorari, petitioner Miners Association of the Philippines, Inc. mainly contends that respondent
Secretary of DENR issued both Administrative Order Nos. 57 and 82 in excess of his rule-making power under Section
6 of Executive Order No. 279. On the assumption that the questioned administrative orders do not conform with
Executive Order Nos. 211 and 279, petitioner contends that both orders violate the
non-impairment of contract provision under Article III, Section 10 of the 1987 Constitution on the ground that
Administrative Order No. 57 unduly pre-terminates existing mining agreements and automatically converts them into
production-sharing agreements within one (1) year from its effectivity date. On the other hand, Administrative Order
No. 82 declares that failure to submit Letters of Intent and Mineral Production-Sharing Agreements within two (2) years
from the date of effectivity of said guideline or on July 17, 1991 shall cause the abandonment of their mining, quarry
and sand gravel permits.

On July 2, 1991, the Court, acting on petitioner's urgent ex-parte petition for issuance of a restraining order/preliminary
injunction, issued a Temporary Restraining Order, upon posting of a P500,000.00 bond, enjoining the enforcement and
implementation of DENR Administrative Order Nos. 57 and 82, as amended, Series of 1989 and 1990, respectively. 9

On November 13, 1991, Continental Marble Corporation, 10 thru its President, Felipe A. David, sought to intervene 11 in
this case alleging that because of the temporary order issued by the Court , the DENR, Regional Office No. 3 in San
Fernando, Pampanga refused to renew its Mines Temporary Permit after it expired on July 31, 1991. Claiming that its rights
and interests are prejudicially affected by the implementation of DENR Administrative Order Nos. 57 and 82, it joined
petitioner herein in seeking to annul Administrative Order Nos. 57 and 82 and prayed that the DENR, Regional Office No. 3
be ordered to issue a Mines Temporary Permit in its favor to enable it to operate during the pendency of the suit.

Public respondents were acquired to comment on the Continental Marble Corporation's petition for intervention in the
resolution of November 28, 1991. 12

Now to the main petition. If its argued that Administrative Order Nos. 57 and 82 have the effect of repealing or
abrogating existing mining laws 13 which are not inconsistent with the provisions of Executive Order No. 279. Invoking
Section 7 of said Executive Order No. 279, 14 petitioner maintains that respondent DENR Secretary cannot provide
guidelines such as Administrative Order Nos. 57 and 82 which are inconsistent with the provisions of Executive Order No.
279 because both Executive Order Nos. 211 and 279 merely reiterated the acceptance and registration of declarations of
location and all other kinds of mining applications by the Bureau of Mines and Geo-Sciences under the provisions of
Presidential Decree No. 463, as amended, until Congress opts to modify or alter the same.

In other words, petitioner would have us rule that DENR Administrative Order Nos. 57 and 82 issued by the DENR
Secretary in the exercise of his rule-making power are tainted with invalidity inasmuch as both contravene or subvert
the provisions of Executive Order Nos. 211 and 279 or embrace matters not covered, nor intended to be covered, by
the aforesaid laws.

We disagree.
We reiterate the principle that the power of administrative officials to promulgate rules and regulations in the
implementation of a statute is necessarily limited only to carrying into effect what is provided in the legislative
enactment. The principle was enunciated as early as 1908 in the case of United States v. Barrias. 15 The scope of the
exercise of such rule-making power was clearly expressed in the case of United States v. Tupasi Molina, 16 decided in 1914,
thus: "Of course, the regulations adopted under legislative authority by a particular department must be in harmony with the
provisions of the law, and for the sole purpose of carrying into effect its general provisions. By such regulations, of course,
the law itself can not be extended. So long, however, as the regulations relate solely to carrying into effect its general
provisions. By such regulations, of course, the law itself can not be extended. So long, however, as the regulations relate
solely to carrying into effect the provision of the law, they are valid."

Recently, the case of People v. Maceren 17 gave a brief delienation of the scope of said power of administrative officials:

Administrative regulations adopted under legislative authority by a particular department must be in

harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its
general provision. By such regulations, of course, the law itself cannot be extended (U.S. v. Tupasi
Molina, supra). An administrative agency cannot amend an act of Congress (Santos vs. Estenzo, 109
Phil. 419, 422; Teoxon vs. Members of the Board of Administrators, L-25619, June 30, 1970, 33 SCRA
585; Manuel vs. General Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao v.
Casteel, L-21906, August 29, 1969, 29 SCRA 350).

The rule-making power must be confined to details for regulating the mode or proceeding to carry into
effect the law as it has been enacted. The power cannot be extended to amending or expanding the
statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute
cannot be sanctioned (University of Santo Tomas v. Board of Tax Appeals, 93 Phil. 376, 382, citing 12
C.J. 845-46. As to invalid regulations, see Collector of Internal Revenue v. Villaflor, 69 Phil. 319; Wise
& Co. v. Meer, 78 Phil. 655, 676; Del Mar v. Phil. Veterans Administration, L-27299, June 27, 1973, 51
SCRA 340, 349).

xxx xxx xxx

. . . The rule or regulation should be within the scope of the statutory authority granted by the
legislature to the administrative agency (Davis, Administrative Law, p. 194, 197, cited in Victorias
Milling Co., Inc. v. Social Security Commission, 114 Phil. 555, 558).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the
basic prevails because said rule or regulations cannot go beyond the terms and provisions of the basic
law (People v. Lim, 108 Phil. 1091).

Considering that administrative rules draw life from the statute which they seek to implement, it is obvious that the
spring cannot rise higher than its source. We now examine petitioner's argument that DENR Administrative Order Nos.
57 and 82 contravene Executive Order Nos. 211 and 279 as both operate to repeal or abrogate Presidential Decree
No. 463, as amended, and other mining laws allegedly acknowledged as the principal law under Executive Order Nos.
211 and 279.

Petitioner's insistence on the application of Presidential Decree No. 463, as amended, as the governing law on the
acceptance and approval of declarations of location and all other kinds of applications for the exploration,
development, and utilization of mineral resources pursuant to Executive Order No. 211, is erroneous. Presidential
Decree No. 463, as amended, pertains to the old system of exploration, development and utilization of natural
resources through "license, concession or lease" which, however, has been disallowed by Article XII, Section 2 of the
1987 Constitution. By virtue of the said constitutional mandate and its implementing law, Executive Order No. 279
which superseded Executive Order No. 211, the provisions dealing on "license, concession or lease" of mineral
resources under Presidential Decree No. 463, as amended, and other existing mining laws are deemed repealed and,
therefore, ceased to operate as the governing law. In other words, in all other areas of administration and management
of mineral lands, the provisions of Presidential Decree No. 463, as amended, and other existing mining laws, still
govern. Section 7 of Executive Order No. 279 provides, thus:

Sec. 7. All provisions of Presidential Decree No. 463, as amended, other existing mining laws, and their
implementing rules and regulations, or parts thereof, which are not inconsistent with the provisions of
this Executive Order, shall continue in force and effect.

Specifically, the provisions of Presidential Decree No. 463, as amended, on lease of mining claims under Chapter VIII,
quarry permits on privately-owned lands of quarry license on public lands under Chapter XIII and other related
provisions on lease, license and permits are not only inconsistent with the raison d'etre for which Executive Order No.
279 was passed, but contravene the express mandate of Article XII, Section 2 of the 1987 Constitution. It force and
effectivity is thus foreclosed.

Upon the effectivity of the 1987 Constitution on February 2, 1987, 18 the State assumed a more dynamic role in the
exploration, development and utilization of the natural resources of the country. Article XII, Section 2 of the said Charter
explicitly ordains that the exploration, development and utilization of natural resources shall be under the full control and
supervision of the State. Consonant therewith, the exploration, development and utilization of natural resources may be
undertaken by means of direct act of the State, or it may opt to enter into co-production, joint venture, or production-sharing
agreements, or it may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according
to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare
of the country.

Given these considerations, there is no clear showing that respondent DENR Secretary has transcended the bounds
demarcated by Executive Order No. 279 for the exercise of his rule-making power tantamount to a grave abuse of
discretion. Section 6 of Executive Order No. 279 specifically authorizes said official to promulgate such supplementary
rules and regulations as may be necessary to effectively implement the provisions thereof. Moreover, the subject
sought to be governed and regulated by the questioned orders is germane to the objects and purposes of Executive
Order No. 279 specifically issued to carry out the mandate of Article XII, Section 2 of the 1987 Constitution.

Petitioner likewise maintains that Administrative Order No. 57, in relation to Administrative Order No. 82, impairs
vested rights as to violate the non-impairment of contract doctrine guaranteed under Article III, Section 10 of the 1987
Constitution because Article 9 of Administrative Order No. 57 unduly pre-terminates and automatically converts mining
leases and other mining agreements into production-sharing agreements within one (1) year from effectivity of said
guideline, while Section 3 of Administrative Order No. 82, declares that failure to submit Letters of Intent (LOIs) and
MPSAs within two (2) years from the effectivity of Administrative Order No. 57 or until July 17, 1991 shall cause the
abandonment of mining, quarry, and sand gravel permits.

In Support of the above contention, it is argued by petitioner that Executive Order No. 279 does not contemplate
automatic conversion of mining lease agreements into mining production-sharing agreement as provided under Article
9, Administrative Order No. 57 and/or the consequent abandonment of mining claims for failure to submit LOIs and
MPSAs under Section 3, Administrative Order No. 82 because Section 1 of said Executive Order No. 279 empowers
the DENR Secretary to negotiate and enter into voluntary agreements which must set forth the minimum terms and
conditions provided under Section 2 thereof. Moreover, petitioner contends that the power to regulate and enter into
mining agreements does not include the power to preterminate existing mining lease agreements.

To begin with, we dispel the impression created by petitioner's argument that the questioned administrative orders
unduly preterminate existing mining leases in general. A distinction which spells a real difference must be drawn.
Article XII, Section 2 of the 1987 Constitution does not apply retroactively to "license, concession or lease" granted by
the government under the 1973 Constitution or before the effectivity of the 1987 Constitution on February 2, 1987. The
intent to apply prospectively said constitutional provision was stressed during the deliberations in the Constitutional
Commission, 19 thus:

MR. DAVIDE: Under the proposal, I notice that except for the [inalienable] lands of the
public domain, all other natural resources cannot be alienated and in respect to
[alienable] lands of the public domain, private corporations with the required ownership
by Filipino citizens can only lease the same. Necessarily, insofar as other natural
resources are concerned, it would only be the State which can exploit, develop, explore
and utilize the same. However, the State may enter into a joint venture, co-production
or production-sharing. Is that not correct?

MR. VILLEGAS: Yes.

MR. DAVIDE: Consequently, henceforth upon, the approval of this Constitution, no

timber or forest concession, permits or authorization can be exclusively granted to any
citizen of the Philippines nor to any corporation qualified to acquire lands of the public
domain?

MR. VILLEGAS: Would Commissioner Monsod like to comment on that? I think his
answer is "yes."
 MR. DAVIDE: So, what will happen now license or concessions earlier granted by the
Philippine government to private corporations or to Filipino citizens? Would they be
deemed repealed?

MR. VILLEGAS: This is not applied retroactively. They will be respected.

MR. DAVIDE: In effect, they will be deemed repealed?

MR. VILLEGAS: No. (Emphasis supplied)

During the transition period or after the effectivity of the 1987 Constitution on February 2, 1987 until the first Congress
under said Constitution was convened on July 27, 1987, two (2) successive laws, Executive Order Nos. 211 and 279,
were promulgated to govern the processing and approval of applications for the exploration, development and
utilization of minerals. To carry out the purposes of said laws, the questioned Administrative Order Nos. 57 and 82,
now being assailed, were issued by the DENR Secretary.

Article 9 of Administrative Order No. 57 provides:

ARTICLE 9

TRANSITORY PROVISION

9.1. All existing mining leases or agreements which were granted after the effectivity of the 1987
Constitution pursuant to Executive Order No. 211, except small scale mining leases and those
pertaining to sand and gravel and quarry resources covering an area of twenty (20) hectares or less
shall be subject to these guidelines. All such leases or agreements shall be converted into production
sharing agreement within one (1) year from the effectivity of these guidelines. However, any minimum
firm which has established mining rights under Presidential Decree 463 or other laws may avail of the
provisions of EO 279 by following the procedures set down in this document.

It is clear from the aforestated provision that Administrative Order No. 57 applies only to all existing mining leases or
agreements which were granted after the effectivity of the 1987 Constitution pursuant to Executive Order No. 211. It
bears mention that under the text of Executive Order No. 211, there is a reservation clause which provides that the
privileges as well as the terms and conditions of all existing mining leases or agreements granted after the effectivity of
the 1987 Constitution pursuant to Executive Order No. 211, shall be subject to any and all modifications or alterations
which Congress may adopt pursuant to Article XII, Section 2 of the 1987 Constitution. Hence, the strictures of the
non-impairment of contract clause under Article III, Section 10 of the 1987 Constitution 20 do not apply to the aforesaid
leases or agreements granted after the effectivity of the 1987 Constitution, pursuant to Executive Order No. 211. They can
be amended, modified or altered by a statute passed by Congress to achieve the purposes of Article XII, Section 2 of the
1987 Constitution.

Clearly, Executive Order No. 279 issued on July 25, 1987 by President Corazon C. Aquino in the exercise of her
legislative power has the force and effect of a statute or law passed by Congress. As such, it validly modified or altered
the privileges granted, as well as the terms and conditions of mining leases and agreements under Executive Order
No. 211 after the effectivity of the 1987 Constitution by authorizing the DENR Secretary to negotiate and conclude joint
venture, co-production, or production-sharing agreements for the exploration, development and utilization of mineral
resources and prescribing the guidelines for such agreements and those agreements involving technical or financial
assistance by foreign-owned corporations for large-scale exploration, development, and utilization of minerals.

Well -settled is the rule, however, that regardless of the reservation clause, mining leases or agreements granted by
the State, such as those granted pursuant to Executive Order No. 211 referred to this petition, are subject to
alterations through a reasonable exercise of the police power of the State. In the 1950 case of Ongsiako v.
Gamboa, 21 where the constitutionality of Republic Act No. 34 changing the 50-50 sharecropping system in existing
agricultural tenancy contracts to 55-45 in favor of tenants was challenged, the Court, upholding the constitutionality of the
law, emphasized the superiority of the police power of the State over the sanctity of this contract:

The prohibition contained in constitutional provisions against: impairing the obligation of contracts is not an absolute
one and it is not to be read with literal exactness like a mathematical formula. Such provisions are restricted to
contracts which respect property, or some object or value, and confer rights which may be asserted in a court of
justice, and have no application to statute relating to public subjects within the domain of the general legislative powers
of the State, and involving the public rights and public welfare of the entire community affected by it. They do not
prevent a proper exercise by the State of its police powers. By enacting regulations reasonably necessary to secure
the health, safety, morals, comfort, or general welfare of the community, even the contracts may thereby be affected;
for such matter can not be placed by contract beyond the power of the State shall regulates and control them. 22

In Ramas v. CAR and Ramos 23 where the constitutionality of Section 14 of Republic Act No. 1199 authorizing the tenants
to charge from share to leasehold tenancy was challenged on the ground that it impairs the obligation of contracts, the Court
ruled that obligations of contracts must yield to a proper exercise of the police power when such power is exercised to
preserve the security of the State and the means adopted are reasonably adapted to the accomplishment of that end and
are, therefore, not arbitrary or oppressive.

The economic policy on the exploration, development and utilization of the country's natural resources under Article
XII, Section 2 of the 1987 Constitution could not be any clearer. As enunciated in Article XII, Section 1 of the 1987
Constitution, the exploration, development and utilization of natural resources under the new system mandated in
Section 2, is geared towards a more equitable distribution of opportunities, income, and wealth; a sustained increase in
the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity
as the key to raising the quality of life for all, especially the underprivileged.

The exploration, development and utilization of the country's natural resources are matters vital to the public interest
and the general welfare of the people. The recognition of the importance of the country's natural resources was
expressed as early as the 1984 Constitutional Convention. In connection therewith, the 1986 U.P. Constitution Project
observed: "The 1984 Constitutional Convention recognized the importance of our natural resources not only for its
security and national defense. Our natural resources which constitute the exclusive heritage of the Filipino nation,
should be preserved for those under the sovereign authority of that nation and for their prosperity. This will ensure the
country's survival as a viable and sovereign republic."

Accordingly, the State, in the exercise of its police power in this regard, may not be precluded by the constitutional
restriction on non-impairment of contract from altering, modifying and amending the mining leases or agreements
granted under Presidential Decree No. 463, as amended, pursuant to Executive Order No. 211. Police Power, being
co-extensive with the necessities of the case and the demands of public interest; extends to all the vital public needs.
The passage of Executive Order No. 279 which superseded Executive Order No. 211 provided legal basis for the
DENR Secretary to carry into effect the mandate of Article XII, Section 2 of the 1987 Constitution.

Nowhere in Administrative Order No. 57 is there any provision which would lead us to conclude that the questioned
order authorizes the automatic conversion of mining leases and agreements granted after the effectivity of the 1987
Constitution, pursuant to Executive Order No. 211, to production-sharing agreements. The provision in Article 9 of
Administrative Order No. 57 that "all such leases or agreements shall be converted into production sharing agreements
within one (1) year from the effectivity of these guidelines" could not possibility contemplate a unilateral declaration on
the part of the Government that all existing mining leases and agreements are automatically converted into
production-sharing agreements. On the contrary, the use of the term "production-sharing agreement" if they are so
minded. Negotiation negates compulsion or automatic conversion as suggested by petitioner in the instant petition. A
mineral production-sharing agreement (MPSA) requires a meeting of the minds of the parties after negotiations arrived
at in good faith and in accordance with the procedure laid down in the subsequent Administrative Order No. 82.

We, therefore, rule that the questioned administrative orders are reasonably directed to the accomplishment of the
purposes of the law under which they were issued and were intended to secure the paramount interest of the public,
their economic growth and welfare. The validity and constitutionality of Administrative Order Nos. 57 and 82 must be
sustained, and their force and effect upheld.

We now, proceed to the petition-in-intervention. Under Section 2, Rule 12 of the Revised Rules of Court, an
intervention in a case is proper when the intervenor has a "legal interest in the matter in litigation, or in the success of
either of the parties, or an interest against both, or when he is so situated as to be adversely affected by a distribution
or other disposition of property in the custody of the court or of an officer thereof. "Continental Marble Corporation has
not sufficiently shown that it falls under any of the categories mentioned above. The refusal of the DENR, Regional
Office No. 3, San Fernando, Pampanga to renew its Mines Temporary Permit does not justify such an intervention by
Continental Marble Corporation for the purpose of obtaining a directive from this Court for the issuance of said permit.
Whether or not Continental Marble matter best addressed to the appropriate government body but certainly, not
through this Court. Intervention is hereby DENIED.

WHEREFORE, the petition is DISMISSED for lack of merit. The Temporary Restraining Order issued on July 2, 1991
is hereby LIFTED.

SO ORDERED.
G.R. No. L-50340 December 26, 1984

DIRECTOR OF LANDS, petitioner,

vs.
COURT OF APPEALS, JOSE F. SALAZAR, JESUS F. SALAZAR, PEDRO F. SALAZAR and AURORA F.
SALAZAR, respondents.

Zamora, Trinidad, Reverente, Ferrer, Carpio and Associates for private respondents.

AQUINO, J.:

This is an application for the registration of 291 hectares of land located on both sides of the Sorsogon-Albay national
highway at Barrios Salvacion and Esperanza, Pilar, Sorsogon.

In its 1977 decision, the Court of Appeals denied the application. However, in its 1979 resolution, it reversed itself and
granted the application. The Director of Lands appealed to this Court.

The issue is whether that big tract of land is registerable under section 48(b) of the Public Land Law as amended by
Republic Act No. 1942, considering that it was declared alienable and disposable by the Director of Forestry only
on April 28, 1961 (Exh. D. and 1-A).

Applicant's evidence shows that on March 13, 1952 Tomas Cevallos, single, a Filipino citizen residing at Barrio
Salvacion, Pilar, Sorsogon and his sister, Alberta Cevallos Vda. de Vasquez, a Spanish citizen residing at Esguerra 18
Valladolid, Spain sold for P50,000 to Soledad Fajardo Vda. de Salazar, a resident of Legaspi City, five lots with a total
area of 291.5 hectares assessed at P40,670 (Exh. M). The deed of sale does not indicate how the Cevalloses became
the owners of that land. They had no Spanish title.

Then, more than thirteen years later, or on July 30, 1965, Mrs. Salazar allegedly sold the five lots to her four children
named Jose, Jesus, Pedro and Aurora, for P20,000 only (Exh. 0). The three Salazar brothers and their sister secured
tax declarations for their respective lots. Their total assessed value was P49,880 (Exh. H).

The 1965 tax declarations disclosed that out of the total area of 291 hectares, only about 96 hectares were supposed
to be planted to coconuts, rice and abaca and the rest, or 195 hectares were cogon or uncultivated land(Exh. H-1 to H-
5). It is noteworthy that the 37-hectare Lot 2 allocated to Aurora F. Salazar (single) had no permanent improvements in
1966. Five hectares of Lot 2 were planted to rice and the rest of 32 hectares were cogon land (Exh. H-2).

On September 22, 1965, or barely two months after their purchase of the five lots, the Salazars filed their application
for registration. They alleged that the 291-hectare land was occupied by their overseer, Nicolas Millevo, a resident of
Barrio Esperanza. Millevo did not testify at the hearing. So, his alleged possession of the land in behalf of the Salazar
applicants was never proven.

The application was opposed by the Director of Lands and by twenty-five occupants of the land, namely: Pedro
Adamos, Fidel Ate, Blas Baldano, Amando Bania, Delfin Bania, Silveriano Bania, Juan Castuera, Benito Dorado,
Felipa Gonzales, Juan Jacob, Amado Legeo, Calixto Llanera, Felix Llantos, Vivencia Losigro, Juan Lozada, Primo
Maldo (barrio captain), Higino Mansion, Alberto Marquez, Damian Marquez, Simeon Militante, Francisco Millanes,
Gaudencio Misolas, Juan Moratillo, Monico Nuelan and Santiago Obligar.

Land Inspector Baldomero Esperida in his report dated May 21, 1968 recommended that the application be opposed
(Exh. 1). During his ocular inspection of the lots, he ascertained the nature of the improvements thereon and the
persons who effected them. He found that "the improvements introduced on these five parcels of land were first made
by the ancestors of the present occupants (meaning the private oppositors), which occupation have (has) been open,
continuous, peaceful and exclusive, and in concept of owner" and that "due perhaps to sheer ignorance, the present
occupants nor their predecessors-ancestors has (have) never filed any public land applications for the respective
parcels that they have been occupying" (Exh. 1).

As indicated in Esperida's findings, quoted below, the occupants refused to acknowledge the alleged ownership of the
applicants (p. 2, Exh. 1):

In the year 1966 one Aurora Salazar came to the premises and informed the occupant-farmers that the
lands (that) they were cultivating for a long time are the properties of the Salazar family.
 The occupant-farmers were likewise informed that from then on they must give 20% share of the
harvest of whatever crops that they may produce on the land. They were also requested to sign
contract papers regarding their cultivation and stay on the respective parcels.

These occupant-farmers refused to sign these contract papers presented to them, on the belief that
they have a better right to the land against any other persons due to the length of time that they have
occupied the land.

Almost all of these occupant-farmers were born on the very parcels that they are presently cultivating.
(p. 2, Exh. 1).

Esperida found that Lot 1, with an area of 75.99 hectares, was fully cultivated by eleven occupant-farmers, namely: (1)
Fidel Ate, (2) Amando Baniya (3) Felipe Bolaos, (4) Benito Burabud, (5) Juan Castuira, (6) Felix Granadillos, (7)
Calixto Llanera, (8) Primo Maldo, (9) Crispin Marao, (10) Gaudencio Misolas and (1 1) Monico Noelan.

Each of them occupies an average of four hectares planted to upland rice, coconuts, fruit trees and root crops. They
constructed houses near the areas cultivated by them and the national road.

Ten other farmers have occupied and cultivated an area of ten hectares and built their respective houses thereon.

But the northern portion of Lot 1, where there are 300 fruit bearing coconut trees, is in the possession of Rufino
Balayo, Jr., the overseer of the Salazar family, who has a house in that portion. Nevertheless, Felix Llantos, who lives
on the other side of the road opposite the coconut trees, claims that he and his decease father planted those coconuts
and that it was only in 1966 when the possession thereof was taken from him against his will (pp. 2-3, Exh. 1).

Land Inspector Esperida found that Lot 2, with an area of 37.5 hectares planted to coconuts, fruit trees, upland rice,
bananas and root crops, was occupied by fourteen farmers with houses on the said lot, namely: (1) Pedro Adamos, (2)
Rosario Bazar, (3) Apolinar Bolaos, (4) Benito Burabud, (5) Felix Granadillos, (6) Nelson Granadillos, (7) Juan Jacob,
(8) Calixto Llanera, (9) Felix Llantos, (10) Juan Losada, (11) Leodegario Losigro, (12) Vivencio Losigro, (13)
Segundino Mallorca and (1 4) Ruben Nolong.

Felix Llantos informed Esperida that the Salazars also deprived him of the possession of more than one hundred
coconut trees (some of which are more than fifty years old) planted on Lot 2. His house is in the said lot (p. 3, Exh. 1).

Inspector Esperida found that Lot 3, with an area of 121.3 hectares, planted also to coconuts, fruit trees, upland rice,
bananas and root crops, was occupied by twenty farmers with portions of around two and a half hectares each and
with houses where their families resided.

These farmers are (1) Bienvenido Abrera, (2) Rosaleo L. Aonuevo, (3) Rosaleo M. Aonuevo, (4) Jose Aringo, (5)
Blas Baldano, (6) Juan Gonzales, (7) Felicisimo Logronio, (8) Higino Mansion, (9) Dionisio Maago, (10) Damian
Marquez, (11) Modesto Mijola, (12) Francisco Millanes, (13) Antonio Militante, (14) Simeon Militante, (15) Crispin
Montalban, (16) Juan Moratillo, (17) Catalino Obligar, (18) Santiago Obligar, (19) Julian Oca and (20) Gregorio Papa.

According to Esperida, about fifty hectares of Lot 3 were enclosed by the Salazars in 1965 with a barbed wire fence
and used as a ranch for about 80 head of cattle. The former occupants of that pasture land planted it to abaca,
bananas, upland rice and root crops. They had to vacate that portion because the cattle of the Salazars destroyed their
plants. The cattle also destroyed the crops of the farmers cultivating portions of Lot 3 contiguous to the ranch (Exh. 1).

The 1965 tax declaration in the name of Jesus F. Salazar shows that ten hectares of Lot No. 4 were planted to abaca,
eight hectares were planted to upland rice and thirty-eight hectares were uncultivated or cogon land (Exh. H-4). Lot
No. 5 with an area of 4,592 square meters is devoted to upland rice (Exh. H-5).

As already stated, the crucial legal issue raised by the Director of Lands is that the Appellate Court erred in holding
that the courts may classify lands into agricultural or forestal and in disregarding the certification of the Bureau of
Forestry that the land in question became alienable or disposable only on April 28,1961. That contention is
meritorious.

The classification, delimitation and survey of lands of the public domain are vested by sections 6, 7 and 8 of the Public
Land Law in the President of the Philippines upon the recommendation of the Minister of Natural Resources. The
assignment of forest land for agricultural purposes is vested in the Minister, formerly Secretary of Agriculture and
Natural Resources (Sec. 1827, Revised Administrative Code. See Justice Esguerra's opinion in Gaspar Vicente vs.
Director of Forestry, CA-G.R. No. 26677-R, July 30,1966).
Oppositors Felix Granadillos (whose father tilled the land even during the Spanish regime), Apolinar Bolaos, Santiago
Obligar, Benito Burabud, Juan Castuira, Julian Oca and Higino Mansion all testified that they wanted to file homestead
applications for the portions occupied by them but the officials of the Bureau of Lands apprised them that the land was
within the forest zone and, therefore, not disposable (24- 25 tsn May 30, 1969; 15, 18, 27 and 36 tsn July 30, 1969; 22
and 33 tsn October 28, 1969 and 5 tsn December 12, 1969). This point was omitted by the trial court in its truncated
summary of the evidence.

The Appellate Court held correctly through Justice Mariano Serrano in its decision that whatever possession of the
land the Salazars and their predecessors might have had prior to April 28, 1961 cannot be credited to the thirty-year
requirement under section 48)b).

Thus, forestal land, which was released for agricultural purposes by the Secretary of Agriculture and Natural
Resources in 1961, could not be registered immediately thereafter (Santiago vs. De los Santos, L-20241, November
22, 1974, 61 SCRA 146).

Land that was a part of the forest zone was not susceptible if of private ownership until November 28, 1923 when it
was reclassified and considered disposable and alienable by the Director of Forestry (Director of Lands vs. Heirs of T.
Villongco, CA-G.R. No. 31243-R, July 29, 1966. See Montoya vs. Ansojas, CA-G.R. No. 35113-R, May 31, 1966).

Forestal land is not registerable. Its inclusion in a title, whether the title be issued during the Spanish regime or under
the Torrens system, nullifies the title. (Director of Lands vs. Reyes, L-27594 and Alinsunurin vs. Director of Lands, L-
28144, November 28, 1975, 68 SCRA 177, 194-5; Li Seng Giap vs. Director of Lands, 55 Phil. 693; Director of
Forestry vs. Muoz, L-24796, June 28, 1968, 23 SCRA 1183; Dizon vs. Rodriguez, and Republic vs. Court of Appeals,
121 Phil. 681; Adorable vs. Director of Forestry, 107 Phil. 401).

Section 48(b) cannot apply to forestal land before it is declassified to form part of disposable public agricultural land
(Heirs of Jose Amunategui vs. Director of Forestry, L-27873, November 29, 1983, 126 SCRA 69, 75). A patent issued
for forestal land is void. The State may sue for its reversion to the public domain (Republic vs. Animas, L-37682, March
29,1974, 56 SCRA 499). Possession of forestal lands cannot ripen into private ownership (Director of Forestry vs.
Muoz, supra).

The other contention of the Director of Lands is that no competent evidence was offered by the Salazars that they and
their predecessors have been in continuous, uninterrupted, open, exclusive and notorious possession in the concept of
owner of the land for more than thirty years prior to 1965 when they filed their application.

Tomas Cevallos originally claimed possession of 231 hectares located in Barrio Esperanza. When he caused it to be
surveyed in 1949, the area of the land had been increased to 291 hectares or an increase of 60 hectares. The land
extended to Barrio Salvacion, a place not mentioned in his tax declarations. How he came to have possessory right
over 291 hectares is not established in the record. His relationship to Policarpia Cevallos who was mentioned in the
early tax declaration (Exh. H-10), was not shown.

It is noteworthy that while the two parcels with a total area of 231 hectares have as natural boundaries the Cagbacong
River and a brook, on the other hand, the five lots have as natural boundaries not only the Cagbacong River but also
the Kawilan Creek, Lonoy Creek and a dried up creek (Exh. M). It was simply an unwarranted appropriation of the
public domain, a notorious practice in land registration cases.

It is not clear whether the declarations and tax receipts (Exh. H to H-20 and Exh. N to N-53) refer to the land acquired
by the Salazars. For example, Exhibit N-8 was presented as receipt for payment of the realty taxes for the period from
April 12, 1950 to April 12, 1951. Actually, it is a receipt for P 25 issued by the municipal treasurer of Pilar "for annual
firearm fee" for the.45 caliber pistol of Cevallos.

Applicant's Exhibit N may also be cited. This is a receipt dated May 21, 1946 issued by the municipal treasurer of Pilar
showing that Cevallos paid P29.58 as full payment of the 1946 realty tax of land located at Barrio Cagbacong,covered
by Tax Declaration No. 11833 with an assessed value of P3,380.

It is true that there is a tax declaration No. 11833 in the name of Cevallos, Identified as Exhibit H-12. It is dated
September 12, 1928 but it refers to a parcel of land with an area of 175.6 hectares located at Barrio Esperanza (not
Cagbacong) and with a total assessed value of P26,900 (not merely P 3,380) consisting of P12,340 for the land and
P14,560 for the improvements or plantings thereon. Exhibit N is manifestly irrelevant to this case.

Exhibit N-2, a tax receipt dated May 30, 1946 issued to Cevallos, is also irrelevant to this case because it refers to his
two parcels of land located in Barrio Esperanza covered by Tax Declarations No. 13967 and 11832 which do not cover
the land involved in this case. The tax receipts Identified as Exhibits N-3, N-4, N-5 and N-6 likewise do not refer to the
land sought to be registered.

Anyway, tax declarations and receipts are not conclusive evidence of ownership or of the right to possess land when
not supported by other evidence (Evangelista vs. Tabayuyong, 7 Phil. 607; Casimiro vs. Fernandez, 9 Phil. 562;
Elumbaring vs. Elumbaring, 12 Phil.. 384; Province of Camarines Sur vs. Director of Lands, 64 Phil.. 600; Baez vs.
Court of Appeals, L-3035 1, September 11, 1974, 59 SCRA 15, 30).

Such proofs are lacking in this case. The evidence shows that numerous persons are in possession of portions of the
disputed land. It results that the Salazars failed to prove that they are entitled to register the 291-hectare land in
question.

WHEREFORE, the Appellate Court's resolution dated March 23, 1979 is reversed and set aside. Its decision of August
31, 1977 is affirmed. The application for registration is dismissed. Costs against respondents Salazar.

SO ORDERED.