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G.R. No.

L-11658 February 15, 1918 Should it be real property, it shall belong to the person acquiring it
who first recorded it in the registry.
LEUNG YEE, plaintiff-appellant,
vs. Should there be no entry, the property shall belong to the person
FRANK L. STRONG MACHINERY COMPANY and J. G. who first took possession of it in good faith, and, in the absence
WILLIAMSON, defendants-appellees. thereof, to the person who presents the oldest title, provided there
is good faith.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees. The registry her referred to is of course the registry of real property, and it
must be apparent that the annotation or inscription of a deed of sale of real
property in a chattel mortgage registry cannot be given the legal effect of an
CARSON, J.:
inscription in the registry of real property. By its express terms, the Chattel
Mortgage Law contemplates and makes provision for mortgages of personal
The "Compañia Agricola Filipina" bought a considerable quantity of rice- property; and the sole purpose and object of the chattel mortgage registry is to
cleaning machinery company from the defendant machinery company, and provide for the registry of "Chattel mortgages," that is to say, mortgages of
executed a chattel mortgage thereon to secure payment of the purchase price. personal property executed in the manner and form prescribed in the statute.
It included in the mortgage deed the building of strong materials in which the The building of strong materials in which the rice-cleaning machinery was
machinery was installed, without any reference to the land on which it stood. installed by the "Compañia Agricola Filipina" was real property, and the mere
The indebtedness secured by this instrument not having been paid when it fell fact that the parties seem to have dealt with it separate and apart from the land
due, the mortgaged property was sold by the sheriff, in pursuance of the terms on which it stood in no wise changed its character as real property. It follows
of the mortgage instrument, and was bought in by the machinery company. that neither the original registry in the chattel mortgage of the building and the
The mortgage was registered in the chattel mortgage registry, and the sale of machinery installed therein, not the annotation in that registry of the sale of
the property to the machinery company in satisfaction of the mortgage was the mortgaged property, had any effect whatever so far as the building was
annotated in the same registry on December 29, 1913. concerned.

A few weeks thereafter, on or about the 14th of January, 1914, the "Compañia We conclude that the ruling in favor of the machinery company cannot be
Agricola Filipina" executed a deed of sale of the land upon which the building sustained on the ground assigned by the trial judge. We are of opinion,
stood to the machinery company, but this deed of sale, although executed in a however, that the judgment must be sustained on the ground that the agreed
public document, was not registered. This deed makes no reference to the statement of facts in the court below discloses that neither the purchase of the
building erected on the land and would appear to have been executed for the building by the plaintiff nor his inscription of the sheriff's certificate of sale in
purpose of curing any defects which might be found to exist in the machinery his favor was made in good faith, and that the machinery company must be
company's title to the building under the sheriff's certificate of sale. The held to be the owner of the property under the third paragraph of the above
machinery company went into possession of the building at or about the time cited article of the code, it appearing that the company first took possession of
when this sale took place, that is to say, the month of December, 1913, and it the property; and further, that the building and the land were sold to the
has continued in possession ever since. machinery company long prior to the date of the sheriff's sale to the plaintiff.

At or about the time when the chattel mortgage was executed in favor of the It has been suggested that since the provisions of article 1473 of the Civil
machinery company, the mortgagor, the "Compañia Agricola Filipina" Code require "good faith," in express terms, in relation to "possession" and
executed another mortgage to the plaintiff upon the building, separate and "title," but contain no express requirement as to "good faith" in relation to the
apart from the land on which it stood, to secure payment of the balance of its "inscription" of the property on the registry, it must be presumed that good
indebtedness to the plaintiff under a contract for the construction of the faith is not an essential requisite of registration in order that it may have the
building. Upon the failure of the mortgagor to pay the amount of the effect contemplated in this article. We cannot agree with this contention. It
indebtedness secured by the mortgage, the plaintiff secured judgment for that could not have been the intention of the legislator to base the preferential right
amount, levied execution upon the building, bought it in at the sheriff's sale on secured under this article of the code upon an inscription of title in bad faith.
or about the 18th of December, 1914, and had the sheriff's certificate of the Such an interpretation placed upon the language of this section would open
sale duly registered in the land registry of the Province of Cavite. wide the door to fraud and collusion. The public records cannot be converted
into instruments of fraud and oppression by one who secures an inscription
therein in bad faith. The force and effect given by law to an inscription in a
At the time when the execution was levied upon the building, the defendant public record presupposes the good faith of him who enters such inscription;
machinery company, which was in possession, filed with the sheriff a sworn and rights created by statute, which are predicated upon an inscription in a
statement setting up its claim of title and demanding the release of the public registry, do not and cannot accrue under an inscription "in bad faith," to
property from the levy. Thereafter, upon demand of the sheriff, the plaintiff the benefit of the person who thus makes the inscription.
executed an indemnity bond in favor of the sheriff in the sum of P12,000, in
reliance upon which the sheriff sold the property at public auction to the
plaintiff, who was the highest bidder at the sheriff's sale. Construing the second paragraph of this article of the code, the supreme court
of Spain held in its sentencia of the 13th of May, 1908, that:
This action was instituted by the plaintiff to recover possession of the building
from the machinery company. This rule is always to be understood on the basis of the good faith
mentioned in the first paragraph; therefore, it having been found
that the second purchasers who record their purchase had
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave knowledge of the previous sale, the question is to be decided in
judgment in favor of the machinery company, on the ground that the company accordance with the following paragraph. (Note 2, art. 1473, Civ.
had its title to the building registered prior to the date of registry of the Code, Medina and Maranon [1911] edition.)
plaintiff's certificate.

Although article 1473, in its second paragraph, provides that the


Article 1473 of the Civil Code is as follows: title of conveyance of ownership of the real property that is first
recorded in the registry shall have preference, this provision must
If the same thing should have been sold to different vendees, the always be understood on the basis of the good faith mentioned in
ownership shall be transfer to the person who may have the first the first paragraph; the legislator could not have wished to strike it
taken possession thereof in good faith, if it should be personal out and to sanction bad faith, just to comply with a mere formality
property. which, in given cases, does not obtain even in real disputes
between third persons. (Note 2, art. 1473, Civ. Code, issued by the
publishers of the La Revista de los Tribunales, 13th edition.)

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The agreed statement of facts clearly discloses that the plaintiff, when he We conclude that upon the grounds herein set forth the disposing part of the
bought the building at the sheriff's sale and inscribed his title in the land decision and judgment entered in the court below should be affirmed with
registry, was duly notified that the machinery company had bought the costs of this instance against the appellant. So ordered.
building from plaintiff's judgment debtor; that it had gone into possession long
prior to the sheriff's sale; and that it was in possession at the time when the
sheriff executed his levy. The execution of an indemnity bond by the plaintiff
in favor of the sheriff, after the machinery company had filed its sworn claim
of ownership, leaves no room for doubt in this regard. Having bought in the
building at the sheriff's sale with full knowledge that at the time of the levy
and sale the building had already been sold to the machinery company by the
judgment debtor, the plaintiff cannot be said to have been a purchaser in good
faith; and of course, the subsequent inscription of the sheriff's certificate of
title must be held to have been tainted with the same defect.

Perhaps we should make it clear that in holding that the inscription of the
sheriff's certificate of sale to the plaintiff was not made in good faith, we
should not be understood as questioning, in any way, the good faith and
genuineness of the plaintiff's claim against the "Compañia Agricola Filipina."
The truth is that both the plaintiff and the defendant company appear to have
had just and righteous claims against their common debtor. No criticism can
properly be made of the exercise of the utmost diligence by the plaintiff in
asserting and exercising his right to recover the amount of his claim from the
estate of the common debtor. We are strongly inclined to believe that in
procuring the levy of execution upon the factory building and in buying it at G.R. No. L-41506 March 25, 1935
the sheriff's sale, he considered that he was doing no more than he had a right PHILIPPINE REFINING CO., INC., plaintiff-appellant,
to do under all the circumstances, and it is highly possible and even probable vs.
that he thought at that time that he would be able to maintain his position in a FRANCISCO JARQUE, JOSE COROMINAS, and ABOITIZ & CO.,
contest with the machinery company. There was no collusion on his part with defendants.
the common debtor, and no thought of the perpetration of a fraud upon the JOSE COROMINAS, in his capacity as assignee of the estate of the
rights of another, in the ordinary sense of the word. He may have hoped, and insolvent Francisco Jarque, appellee.
doubtless he did hope, that the title of the machinery company would not
stand the test of an action in a court of law; and if later developments had Thos. G. Ingalls, Vicente Pelaez and DeWitt, Perkins and Brady for appellant.
confirmed his unfounded hopes, no one could question the legality of the D.G. McVean and Vicente L. Faelnar for appellee.
propriety of the course he adopted.

MALCOLM, J.:
But it appearing that he had full knowledge of the machinery company's claim
of ownership when he executed the indemnity bond and bought in the
property at the sheriff's sale, and it appearing further that the machinery First of all the reason why the case has been decided by the court in banc
company's claim of ownership was well founded, he cannot be said to have needs explanation. A motion was presented by counsel for the appellant in
been an innocent purchaser for value. He took the risk and must stand by the which it was asked that the case be heard and determined by the court sitting
consequences; and it is in this sense that we find that he was not a purchaser in in banc because the admiralty jurisdiction of the court was involved, and this
good faith. motion was granted in regular course. On further investigation it appears that
this was error. The mere mortgage of a ship is a contract entered into by the
parties to it without reference to navigation or perils of the sea, and does not,
One who purchases real estate with knowledge of a defect or lack of title in therefore, confer admiralty jurisdiction. (Bogart vs. Steamboat John Jay
his vendor cannot claim that he has acquired title thereto in good faith as [1854], 17 How., 399.)
against the true owner of the land or of an interest therein; and the same rule
must be applied to one who has knowledge of facts which should have put
him upon such inquiry and investigation as might be necessary to acquaint Coming now to the merits, it appears that on varying dates the Philippine
him with the defects in the title of his vendor. A purchaser cannot close his Refining Co., Inc., and Francisco Jarque executed three mortgages on the
eyes to facts which should put a reasonable man upon his guard, and then motor vessels Pandan and Zaragoza. These documents were recorded in the
claim that he acted in good faith under the belief that there was no defect in record of transfers and incumbrances of vessels for the port of Cebu and each
the title of the vendor. His mere refusal to believe that such defect exists, or was therein denominated a "chattel mortgage". Neither of the first two
his willful closing of his eyes to the possibility of the existence of a defect in mortgages had appended an affidavit of good faith. The third mortgage
his vendor's title, will not make him an innocent purchaser for value, if contained such an affidavit, but this mortgage was not registered in the
afterwards develops that the title was in fact defective, and it appears that he customs house until May 17, 1932, or within the period of thirty days prior to
had such notice of the defects as would have led to its discovery had he acted the commencement of insolvency proceedings against Francisco Jarque; also,
with that measure of precaution which may reasonably be acquired of a while the last mentioned mortgage was subscribed by Francisco Jarque and M.
prudent man in a like situation. Good faith, or lack of it, is in its analysis a N. Brink, there was nothing to disclose in what capacity the said M. N. Brink
question of intention; but in ascertaining the intention by which one is signed. A fourth mortgage was executed by Francisco Jarque and Ramon
actuated on a given occasion, we are necessarily controlled by the evidence as Aboitiz on the motorship Zaragoza and was entered in the chattel mortgage
to the conduct and outward acts by which alone the inward motive may, with registry of the register of deeds on May 12, 1932, or again within the thirty-
safety, be determined. So it is that "the honesty of intention," "the honest day period before the institution of insolvency proceedings. These
lawful intent," which constitutes good faith implies a "freedom from proceedings were begun on June 2, 1932, when a petition was filed with the
knowledge and circumstances which ought to put a person on inquiry," and so Court of First Instance of Cebu in which it was prayed that Francisco Jarque
it is that proof of such knowledge overcomes the presumption of good faith in be declared an insolvent debtor, which soon thereafter was granted, with the
which the courts always indulge in the absence of proof to the contrary. result that an assignment of all the properties of the insolvent was executed in
"Good faith, or the want of it, is not a visible, tangible fact that can be seen or favor of Jose Corominas.
touched, but rather a state or condition of mind which can only be judged of
by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; On these facts, Judge Jose M. Hontiveros declined to order the foreclosure of
Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton the mortgages, but on the contrary sustained the special defenses of fatal
Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.) defectiveness of the mortgages. In so doing we believe that the trial judge
acted advisedly.

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Vessels are considered personal property under the civil law. (Code of sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever
Commerce, article 585.) Similarly under the common law, vessels are forms part or is necessary complement of said sugar-cane mill, steel railway,
personal property although occasionally referred to as a peculiar kind of telephone line, now existing or that may in the future exist is said lots."
personal property. (Reynolds vs. Nielson [1903], 96 Am. Rep., 1000; Atlantic
Maritime Co vs. City of Gloucester [1917], 117 N. E., 924.) Since the term
On October 5, 1926, shortly after said mortgage had been constituted, the
"personal property" includes vessels, they are subject to mortgage agreeably
Mabalacat Sugar Co., Inc., decided to increase the capacity of its sugar central
to the provisions of the Chattel Mortgage Law. (Act No. 1508, section 2.)
by buying additional machinery and equipment, so that instead of milling 150
Indeed, it has heretofore been accepted without discussion that a mortgage on
tons daily, it could produce 250. The estimated cost of said additional
a vessel is in nature a chattel mortgage. (McMicking vs. Banco Español-
machinery and equipment was approximately P100,000. In order to carry out
Filipino [1909], 13 Phil., 429; Arroyo vs. Yu de Sane [1930], 54 Phil., 511.)
this plan, B.A. Green, president of said corporation, proposed to the plaintiff,
The only difference between a chattel mortgage of a vessel and a chattel
B.H. Berkenkotter, to advance the necessary amount for the purchase of said
mortgage of other personalty is that it is not now necessary for a chattel
machinery and equipment, promising to reimburse him as soon as he could
mortgage of a vessel to be noted n the registry of the register of deeds, but it is
obtain an additional loan from the mortgagees, the herein defendants Cu
essential that a record of documents affecting the title to a vessel be entered in
Unjieng e Hijos. Having agreed to said proposition made in a letter dated
the record of the Collector of Customs at the port of entry. (Rubiso and Gelito
October 5, 1926 (Exhibit E), B.H. Berkenkotter, on October 9th of the same
vs. Rivera [1917], 37 Phil., 72; Arroyo vs. Yu de Sane, supra.) Otherwise a
year, delivered the sum of P1,710 to B.A. Green, president of the Mabalacat
mortgage on a vessel is generally like other chattel mortgages as to its
Sugar Co., Inc., the total amount supplied by him to said B.A. Green having
requisites and validity. (58 C.J., 92.)
been P25,750. Furthermore, B.H. Berkenkotter had a credit of P22,000 against
said corporation for unpaid salary. With the loan of P25,750 and said credit of
The Chattell Mortgage Law in its section 5, in describing what shall be P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery
deemed sufficient to constitute a good chattel mortgage, includes the and equipment now in litigation.
requirement of an affidavit of good faith appended to the mortgage and
recorded therewith. The absence of the affidavit vitiates a mortgage as against
On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc.,
creditors and subsequent encumbrancers. (Giberson vs. A. N. Jureidini Bros.
applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as
[1922], 44 Phil., 216; Benedicto de Tarrosa vs. F. M. Yap Tico & Co. and
security the additional machinery and equipment acquired by said B.A. Green
Provincial Sheriff of Occidental Negros [1923], 46 Phil., 753.) As a
and installed in the sugar central after the execution of the original mortgage
consequence a chattel mortgage of a vessel wherein the affidavit of good faith
deed, on April 27, 1927, together with whatever additional equipment
required by the Chattel Mortgage Law is lacking, is unenforceable against
acquired with said loan. B.A. Green failed to obtain said loan.
third persons.

Article 1877 of the Civil Code provides as follows.


In effect appellant asks us to find that the documents appearing in the record
do not constitute chattel mortgages or at least to gloss over the failure to
include the affidavit of good faith made a requisite for a good chattel ART. 1877. A mortgage includes all natural accessions,
mortgage by the Chattel Mortgage Law. Counsel would further have us improvements, growing fruits, and rents not collected when the
disregard article 585 of the Code of Commerce, but no reason is shown for obligation falls due, and the amount of any indemnities paid or due
holding this article not in force. Counsel would further have us revise the owner by the insurers of the mortgaged property or by virtue of
doctrines heretofore announced in a series of cases, which it is not desirable to the exercise of the power of eminent domain, with the declarations,
do since those principles were confirmed after due liberation and constitute a amplifications, and limitations established by law, whether the
part of the commercial law of the Philippines. And finally counsel would have estate continues in the possession of the person who mortgaged it
us make rulings on points entirely foreign to the issues of the case. As neither or whether it passes into the hands of a third person.
the facts nor the law remains in doubt, the seven assigned errors will be
overruled.
In the case of Bischoff vs. Pomar and Compañia General de Tabacos (12
Phil., 690), cited with approval in the case of Cea vs. Villanueva (18 Phil.,
Judgment affirmed, the costs of this instance to be paid by the appellant. 538), this court laid shown the following doctrine:

G.R. No. L-41643 July 31, 1935


1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES
B.H. BERKENKOTTER, plaintiff-appellant,
IMPROVEMENTS AND FIXTURES. — It is a rule, established
vs.
by the Civil Code and also by the Mortgage Law, with which the
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE
decisions of the courts of the United States are in accord, that in a
INSURANCE COMPANY, MABALACAT SUGAR COMPANY and
mortgage of real estate, the improvements on the same are
THE PROVINCE SHERIFF OF PAMPANGA, defendants-appellees.
included; therefore, all objects permanently attached to a
mortgaged building or land, although they may have been placed
VILLA-REAL, J.: there after the mortgage was constituted, are also included. (Arts.
110 and 111 of the Mortgage Law, and 1877 of the Civil Code;
decision of U.S. Supreme Court in the matter of Royal Insurance
This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the judgment
Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46;
of the Court of First Instance of Manila, dismissing said plaintiff's complaint
199 U.S., 353].)
against Cu Unjiengs e Hijos et al., with costs.

2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY,


In support of his appeal, the appellant assigns six alleged errors as committed
ETC. — In order that it may be understood that the machinery and
by the trial court in its decision in question which will be discussed in the
other objects placed upon and used in connection with a mortgaged
course of this decision.
estate are excluded from the mortgage, when it was stated in the
mortgage that the improvements, buildings, and machinery that
The first question to be decided in this appeal, which is raised in the first existed thereon were also comprehended, it is indispensable that
assignment of alleged error, is whether or not the lower court erred in the exclusion thereof be stipulated between the contracting parties.
declaring that the additional machinery and equipment, as improvement
incorporated with the central are subject to the mortgage deed executed in
The appellant contends that the installation of the machinery and equipment
favor of the defendants Cu Unjieng e Hijos.
claimed by him in the sugar central of the Mabalacat Sugar Company, Inc.,
was not permanent in character inasmuch as B.A. Green, in proposing to him
It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., to advance the money for the purchase thereof, made it appear in the letter,
Inc., owner of the sugar central situated in Mabalacat, Pampanga, obtained Exhibit E, that in case B.A. Green should fail to obtain an additional loan
from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage from the defendants Cu Unjieng e Hijos, said machinery and equipment would
constituted on two parcels and land "with all its buildings, improvements, become security therefor, said B.A. Green binding himself not to mortgage

3
nor encumber them to anybody until said plaintiff be fully reimbursed for the The issue in this case, as announced in the opening sentence of the decision in
corporation's indebtedness to him. the trial court and as set forth by counsel for the parties on appeal, involves
the determination of the nature of the properties described in the complaint.
The trial judge found that those properties were personal in nature, and as a
Upon acquiring the machinery and equipment in question with money
consequence absolved the defendants from the complaint, with costs against
obtained as loan from the plaintiff-appellant by B.A. Green, as president of
the plaintiff.
the Mabalacat Sugar Co., Inc., the latter became owner of said machinery and
equipment, otherwise B.A. Green, as such president, could not have offered
them to the plaintiff as security for the payment of his credit. The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the
Government of the Philippine Islands. It has operated a sawmill in the sitio of
Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However,
Article 334, paragraph 5, of the Civil Code gives the character of real property
the land upon which the business was conducted belonged to another person.
to "machinery, liquid containers, instruments or implements intended by the
On the land the sawmill company erected a building which housed the
owner of any building or land for use in connection with any industry or trade
machinery used by it. Some of the implements thus used were clearly personal
being carried on therein and which are expressly adapted to meet the
property, the conflict concerning machines which were placed and mounted
requirements of such trade or industry.
on foundations of cement. In the contract of lease between the sawmill
company and the owner of the land there appeared the following provision:
If the installation of the machinery and equipment in question in the central of
the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing
That on the expiration of the period agreed upon, all the
therein, for its sugar industry, converted them into real property by reason of
improvements and buildings introduced and erected by the party of
their purpose, it cannot be said that their incorporation therewith was not
the second part shall pass to the exclusive ownership of the party
permanent in character because, as essential and principal elements of a sugar
of the first part without any obligation on its part to pay any
central, without them the sugar central would be unable to function or carry on
amount for said improvements and buildings; also, in the event the
the industrial purpose for which it was established. Inasmuch as the central is
party of the second part should leave or abandon the land leased
permanent in character, the necessary machinery and equipment installed for
before the time herein stipulated, the improvements and buildings
carrying on the sugar industry for which it has been established must
shall likewise pass to the ownership of the party of the first part as
necessarily be permanent.
though the time agreed upon had expired: Provided, however, That
the machineries and accessories are not included in the
Furthermore, the fact that B.A. Green bound himself to the plaintiff B.H. improvements which will pass to the party of the first part on the
Berkenkotter to hold said machinery and equipment as security for the expiration or abandonment of the land leased.
payment of the latter's credit and to refrain from mortgaging or otherwise
encumbering them until Berkenkotter has been fully reimbursed therefor, is
In another action, wherein the Davao Light & Power Co., Inc., was the
not incompatible with the permanent character of the incorporation of said
plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment
machinery and equipment with the sugar central of the Mabalacat Sugar Co.,
was rendered in favor of the plaintiff in that action against the defendant in
Inc., as nothing could prevent B.A. Green from giving them as security at
that action; a writ of execution issued thereon, and the properties now in
least under a second mortgage.
question were levied upon as personalty by the sheriff. No third party claim
was filed for such properties at the time of the sales thereof as is borne out by
As to the alleged sale of said machinery and equipment to the plaintiff and the record made by the plaintiff herein. Indeed the bidder, which was the
appellant after they had been permanently incorporated with sugar central of plaintiff in that action, and the defendant herein having consummated the sale,
the Mabalacat Sugar Co., Inc., and while the mortgage constituted on said proceeded to take possession of the machinery and other properties described
sugar central to Cu Unjieng e Hijos remained in force, only the right of in the corresponding certificates of sale executed in its favor by the sheriff of
redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central with Davao.
which said machinery and equipment had been incorporated, was transferred
thereby, subject to the right of the defendants Cu Unjieng e Hijos under the
As connecting up with the facts, it should further be explained that the Davao
first mortgage.
Saw Mill Co., Inc., has on a number of occasions treated the machinery as
personal property by executing chattel mortgages in favor of third persons.
For the foregoing considerations, we are of the opinion and so hold: (1) That One of such persons is the appellee by assignment from the original
the installation of a machinery and equipment in a mortgaged sugar central, in mortgages.
lieu of another of less capacity, for the purpose of carrying out the industrial
functions of the latter and increasing production, constitutes a permanent
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to
improvement on said sugar central and subjects said machinery and equipment
the Code, real property consists of —
to the mortgage constituted thereon (article 1877, Civil Code); (2) that the fact
that the purchaser of the new machinery and equipment has bound himself to
the person supplying him the purchase money to hold them as security for the 1. Land, buildings, roads and constructions of all kinds adhering to
payment of the latter's credit, and to refrain from mortgaging or otherwise the soil;
encumbering them does not alter the permanent character of the incorporation
of said machinery and equipment with the central; and (3) that the sale of the
xxx xxx xxx
machinery and equipment in question by the purchaser who was supplied the
purchase money, as a loan, to the person who supplied the money, after the
incorporation thereof with the mortgaged sugar central, does not vest the 5. Machinery, liquid containers, instruments or implements
creditor with ownership of said machinery and equipment but simply with the intended by the owner of any building or land for use in connection
right of redemption. with any industry or trade being carried on therein and which are
expressly adapted to meet the requirements of such trade of
industry.
Wherefore, finding no error in the appealed judgment, it is affirmed in all its
parts, with costs to the appellant. So ordered.
Appellant emphasizes the first paragraph, and appellees the last mentioned
paragraph. We entertain no doubt that the trial judge and appellees are right in
G.R. No. L-40411 August 7, 1935
their appreciation of the legal doctrines flowing from the facts.
DAVAO SAW MILL CO., INC., plaintiff-appellant,
vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., In the first place, it must again be pointed out that the appellant should have
INC., defendants-appellees. registered its protest before or at the time of the sale of this property. It must
further be pointed out that while not conclusive, the characterization of the
property as chattels by the appellant is indicative of intention and impresses
.MALCOLM, J.:
upon the property the character determined by the parties. In this connection

4
the decision of this court in the case of Standard Oil Co. of New York vs. The machinery levied upon by Nevers & Callaghan, that is, that
Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the which was placed in the plant by the Altagracia Company, being,
key to such a situation. as regards Nevers & Callaghan, movable property, it follows that
they had the right to levy on it under the execution upon the
judgment in their favor, and the exercise of that right did not in a
It is, however not necessary to spend overly must time in the resolution of this
legal sense conflict with the claim of Valdes, since as to him the
appeal on side issues. It is machinery which is involved; moreover, machinery
property was a part of the realty which, as the result of his
not intended by the owner of any building or land for use in connection
obligations under the lease, he could not, for the purpose of
therewith, but intended by a lessee for use in a building erected on the land by
collecting his debt, proceed separately against. (Valdes vs. Central
the latter to be returned to the lessee on the expiration or abandonment of the
Altagracia [192], 225 U.S., 58.)
lease.

Finding no reversible error in the record, the judgment appealed from will be
A similar question arose in Puerto Rico, and on appeal being taken to the
affirmed, the costs of this instance to be paid by the appellant.
United States Supreme Court, it was held that machinery which is movable in
its nature only becomes immobilized when placed in a plant by the owner of
the property or plant, but not when so placed by a tenant, a usufructuary, or
any person having only a temporary right, unless such person acted as the G.R. No. L-7057 October 29, 1954
agent of the owner. In the opinion written by Chief Justice White, whose MACHINERY & ENGINEERING SUPPLIES, INC., petitioner,
knowledge of the Civil Law is well known, it was in part said: vs.
THE HONORABLE COURT OF APPEALS, HON. POTENCIANO
PECSON, JUDGE OF THE COURT OF FIRST INSTANCE OF
To determine this question involves fixing the nature and character
MANILA, IPO LIMESTONE CO., INC., and ANTONIO VILLARAMA,
of the property from the point of view of the rights of Valdes and
respondents.
its nature and character from the point of view of Nevers &
Callaghan as a judgment creditor of the Altagracia Company and
the rights derived by them from the execution levied on the Vicente J. Francisco for petitioner.
machinery placed by the corporation in the plant. Following the Capistrano and Capistrano for respondents.
Code Napoleon, the Porto Rican Code treats as immovable (real)
property, not only land and buildings, but also attributes
CONCEPCION, J.:
immovability in some cases to property of a movable nature, that
is, personal property, because of the destination to which it is
applied. "Things," says section 334 of the Porto Rican Code, "may This is an appeal by certiorari, taken by petitioner Machinery and
be immovable either by their own nature or by their destination or Engineering Supplies Inc., from a decision of the Court of Appeals denying an
the object to which they are applicable." Numerous illustrations are original petition for certiorari filed by said petitioner against Hon. Potenciano
given in the fifth subdivision of section 335, which is as follows: Pecson, Ipo Limestone Co., Inc., and Antonio Villarama, the respondents
"Machinery, vessels, instruments or implements intended by the herein.
owner of the tenements for the industrial or works that they may
carry on in any building or upon any land and which tend directly
The pertinent facts are set forth in the decision of the Court of Appeals, from
to meet the needs of the said industry or works." (See also Code
which we quote:
Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable,
may be immobilized.) So far as the subject-matter with which we On March 13, 1953, the herein petitioner filed a complaint for
are dealing — machinery placed in the plant — it is plain, both replevin in the Court of First Instance of Manila, Civil Case No.
under the provisions of the Porto Rican Law and of the Code 19067, entitled "Machinery and Engineering Supplies, Inc.,
Napoleon, that machinery which is movable in its nature only Plaintiff, vs. Ipo Limestone Co., Inc., and Dr. Antonio Villarama,
becomes immobilized when placed in a plant by the owner of the defendants", for the recovery of the machinery and equipment sold
property or plant. Such result would not be accomplished, and delivered to said defendants at their factory in barrio Bigti,
therefore, by the placing of machinery in a plant by a tenant or a Norzagaray, Bulacan. Upon application ex-parte of the petitioner
usufructuary or any person having only a temporary right. company, and upon approval of petitioner's bond in the sum of
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section P15,769.00, on March 13,1953, respondent judge issued an order,
164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier- commanding the Provincial Sheriff of Bulacan to seize and take
Herman ed. Code Napoleon under articles 522 et seq.) The immediate possession of the properties specified in the order
distinction rests, as pointed out by Demolombe, upon the fact that (Appendix I, Answer). On March 19, 1953, two deputy sheriffs of
one only having a temporary right to the possession or enjoyment Bulacan, the said Ramon S. Roco, and a crew of technical men and
of property is not presumed by the law to have applied movable laborers proceeded to Bigti, for the purpose of carrying the court's
property belonging to him so as to deprive him of it by causing it order into effect. Leonardo Contreras, Manager of the respondent
by an act of immobilization to become the property of another. It Company, and Pedro Torres, in charge thereof, met the deputy
follows that abstractly speaking the machinery put by the sheriffs, and Contreras handed to them a letter addressed to Atty.
Altagracia Company in the plant belonging to Sanchez did not lose Leopoldo C. Palad, ex-oficio Provincial Sheriff of Bulacan, signed
its character of movable property and become immovable by by Atty. Adolfo Garcia of the defendants therein, protesting
destination. But in the concrete immobilization took place because against the seizure of the properties in question, on the ground that
of the express provisions of the lease under which the Altagracia they are not personal properties. Contending that the Sheriff's duty
held, since the lease in substance required the putting in of is merely ministerial, the deputy sheriffs, Roco, the latter's crew of
improved machinery, deprived the tenant of any right to charge technicians and laborers, Contreras and Torres, went to the factory.
against the lessor the cost such machinery, and it was expressly Roco's attention was called to the fact that the equipment could not
stipulated that the machinery so put in should become a part of the possibly be dismantled without causing damages or injuries to the
plant belonging to the owner without compensation to the lessee. wooden frames attached to them. As Roco insisted in dismantling
Under such conditions the tenant in putting in the machinery was the equipment on his own responsibility, alleging that the bond
acting but as the agent of the owner in compliance with the was posted for such eventuality, the deputy sheriffs directed that
obligations resting upon him, and the immobilization of the some of the supports thereof be cut (Appendix 2). On March 20,
machinery which resulted arose in legal effect from the act of the 1953, the defendant Company filed an urgent motion, with a
owner in giving by contract a permanent destination to the counter-bond in the amount of P15,769, for the return of the
machinery. properties seized by the deputy sheriffs. On the same day, the trial
court issued an order, directing the Provincial Sheriff of Bulacan to
return the machinery and equipment to the place where they were
xxx xxx xxx
installed at the time of the seizure (Appendix 3). On March 21,
1953, the deputy sheriffs returned the properties seized, by
5
depositing them along the road, near the quarry, of the defendant reason of passion or personal hostility; on the contrary, it issued
Company, at Bigti, without the benefit of inventory and without re- said order, guided by the well known principle that of the property
installing hem in their former position and replacing the destroyed has to be returned, it should be returned in as good a condition as
posts, which rendered their use impracticable. On March 23, 1953, when taken (Bachrach Motor Co., Inc., vs. Bona, 44 Phil., 378). If
the defendants' counsel asked the provincial Sheriff if the any one had gone beyond the scope of his authority, it is the
machinery and equipment, dumped on the road would be re- respondent Provincial Sheriff. But considering that fact that he
installed tom their former position and condition (letter, Appendix acted under the pressure of Ramon S. Roco, and that the order
4). On March 24, 1953, the Provincial Sheriff filed an urgent impugned was issued not by him, but by the respondent Judge, We
motion in court, manifesting that Roco had been asked to furnish simply declare that said Sheriff' act was most unusual and the
the Sheriff's office with the expenses, laborers, technical men and result of a poor judgment. Moreover, the Sheriff not being an
equipment, to carry into effect the court's order, to return the seized officer exercising judicial functions, the writ may not reach him,
properties in the same way said Roco found them on the day of for certiorari lies only to review judicial actions.
seizure, but said Roco absolutely refused to do so, and asking the
court that the Plaintiff therein be ordered to provide the required
The Petitioner complains that the respondent Judge had completely
aid or relieve the said Sheriff of the duty of complying with the
disregarded his manifestation that the machinery and equipment
said order dated March 20, 1953 (Appendix 5). On March 30,
seized were and still are the Petitioner's property until fully paid
1953, the trial court ordered the Provincial Sheriff and the Plaintiff
for and such never became immovable. The question of ownership
to reinstate the machinery and equipment removed by them in their
and the applicability of Art. 415 of the new Civil Code are
original condition in which they were found before their removal at
immaterial in the determination of the only issue involved in this
the expense of the Plaintiff (Appendix 7). An urgent motion of the
case. It is a matter of evidence which should be decided in the
Provincial Sheriff dated April 15, 1953, praying for an extension of
hearing of the case on the merits. The question as to whether the
20 days within which to comply with the order of the Court
machinery or equipment in litigation are immovable or not is
(appendix 10) was denied; and on May 4, 1953, the trial court
likewise immaterial, because the only issue raised before the trial
ordered the Plaintiff therein to furnish the Provincial Sheriff within
court was whether the Provincial Sheriff of Bulacan, at the
5 days with the necessary funds, technical men, laborers,
Petitioner's instance, was justified in destroying the machinery and
equipment and materials to effect the repeatedly mentioned re-
in refusing to restore them to their original form , at the expense of
installation (Appendix 13). (Petitioner's brief, Appendix A, pp. I-
the Petitioner. Whatever might be the legal character of the
IV.)
machinery and equipment, would not be in any way justify their
justify their destruction by the Sheriff's and the said Petitioner's.
Thereupon petitioner instituted in the Court of Appeals civil case G.R. No. (Petitioner's brief, Appendix A, pp. IV-VII.)
11248-R, entitled "Machinery and Engineering Supplies, Inc. vs. Honorable
Potenciano Pecson, Provincial Sheriff of Bulacan, Ipo Limestone Co., Inc.,
A motion for reconsideration of this decision of the Court of Appeals having
and Antonio Villarama." In the petition therein filed, it was alleged that, in
been denied , petitioner has brought the case to Us for review by writ of
ordering the petitioner to furnish the provincial sheriff of Bulacan "with
certiorari. Upon examination of the record, We are satisfied, however that the
necessary funds, technical men, laborers, equipment and materials, to effect
Court of Appeals was justified in dismissing the case.
the installation of the machinery and equipment" in question, the Court of Firs
Instance of Bulacan had committed a grave abuse if discretion and acted in
excess of its jurisdiction, for which reason it was prayed that its order to this The special civil action known as replevin, governed by Rule 62 of Court, is
effect be nullified, and that, meanwhile, a writ of preliminary injunction be applicable only to "personal property".
issued to restrain the enforcement o said order of may 4, 1953. Although the
aforementioned writ was issued by the Court of Appeals, the same
Ordinarily replevin may be brought to recover any specific
subsequently dismissed by the case for lack of merit, with costs against the
personal property unlawfully taken or detained from the owner
petitioner, upon the following grounds:
thereof, provided such property is capable of identification and
delivery; but replevin will not lie for the recovery of real property
While the seizure of the equipment and personal properties was or incorporeal personal property. (77 C. J. S. 17) (Emphasis
ordered by the respondent Court, it is, however, logical to presume supplied.)
that said court did not authorize the petitioner or its agents to
destroy, as they did, said machinery and equipment, by dismantling
When the sheriff repaired to the premises of respondent, Ipo Limestone Co.,
and unbolting the same from their concrete basements, and cutting
Inc., machinery and equipment in question appeared to be attached to the land,
and sawing their wooden supports, thereby rendering them
particularly to the concrete foundation of said premises, in a fixed manner, in
unserviceable and beyond repair, unless those parts removed, cut
such a way that the former could not be separated from the latter "without
and sawed be replaced, which the petitioner, not withstanding the
breaking the material or deterioration of the object." Hence, in order to
respondent Court's order, adamantly refused to do. The Provincial
remove said outfit, it became necessary, not only to unbolt the same, but ,
Sheriff' s tortious act, in obedience to the insistent proddings of the
also, to cut some of its wooden supports. Moreover, said machinery and
president of the Petitioner, Ramon S. Roco, had no justification in
equipment were "intended by the owner of the tenement for an industry"
law, notwithstanding the Sheriffs' claim that his duty was
carried on said immovable and tended." For these reasons, they were already
ministerial. It was the bounden duty of the respondent Judge to
immovable property pursuant to paragraphs 3 and 5 of Article 415 of Civil
give redress to the respondent Company, for the unlawful and
Code of the Philippines, which are substantially identical to paragraphs 3 and
wrongful acts committed by the petitioner and its agents. And as
5 of Article 334 of the Civil Code of Spain. As such immovable property, they
this was the true object of the order of March 30, 1953, we cannot
were not subject to replevin.
hold that same was within its jurisdiction to issue. The ministerial
duty of the Sheriff should have its limitations. The Sheriff knew or
must have known what is inherently right and inherently wrong, In so far as an article, including a fixture annexed by a tenant, is
more so when, as in this particular case, the deputy sheriffs were regarded as part of the realty, it is not the subject for personality; . .
shown a letter of respondent Company's attorney, that the ..
machinery were not personal properties and, therefore, not subject
to seizure by the terms of the order. While it may be conceded that
this was a question of law too technical to decide on the spot, it . . . the action of replevin does not lie for articles so annexed to the
would not have costs the Sheriff much time and difficulty to bring realty as to be part as to be part thereof, as, for example, a house or
the letter to the court's attention and have the equipment and a turbine pump constituting part of a building's cooling system; . . .
machinery guarded, so as not to frustrate the order of seizure (36 C. J. S. 1000 & 1001)
issued by the trial court. But acting upon the directives of the
president of the Petitioner, to seize the properties at any costs, in Moreover, as the provincial sheriff hesitated to remove the property in
issuing the order sought to be annulled, had not committed abuse question, petitioner's agent and president, Mr. Ramon Roco, insisted "on the
of discretion at all or acted in an arbitrary or despotic manner, by dismantling at his own responsibility," stating that., precisely, "that is the

6
reason why plaintiff posted a bond ." In this manner, petitioner clearly the plaintiff the truth being the defendants are hard up these days
assumed the corresponding risks. and pleaded to the plaintiff to grant them more time within which
to pay their obligation and the plaintiff refused;
Such assumption of risk becomes more apparent when we consider that,
pursuant to Section 5 of Rule 62 of the Rules of Court, the defendant in an WHEREFORE, in view of the foregoing it is most respectfully
action for replevin is entitled to the return of the property in dispute upon the prayed that this Honorable Court render judgment granting the
filing of a counterbond, as provided therein. In other words, petitioner knew defendants until January 31, 1961, within which to pay their
that the restitution of said property to respondent company might be ordered obligation to the plaintiff.
under said provision of the Rules of Court, and that, consequently, it may
become necessary for petitioner to meet the liabilities incident to such return.
On September 30, 1960, plaintiff presented a Motion for summary Judgment,
claiming that the Answer failed to tender any genuine and material issue. The
Lastly, although the parties have not cited, and We have not found, any motion was set for hearing, but the record is not clear what ruling the lower
authority squarely in point — obviously real property are not subject to court made on the said motion. On November 11, 1960, however, the parties
replevin — it is well settled that, when the restitution of what has been submitted a Stipulation of Facts, wherein the defendants admitted the
ordered, the goods in question shall be returned in substantially the same indebtedness, the authenticity and due execution of the Real Estate and
condition as when taken (54 C.J., 590-600, 640-641). Inasmuch as the Chattel Mortgages; that the indebtedness has been due and unpaid since June
machinery and equipment involved in this case were duly installed and affixed 14, 1960; that a liability of 12% per annum as interest was agreed, upon
in the premises of respondent company when petitioner's representative failure to pay the principal when due and P500.00 as liquidated damages; that
caused said property to be dismantled and then removed, it follows that the instrument had been registered in the Registry of Property and Motor
petitioner must also do everything necessary to the reinstallation of said Vehicles Office, both of the province of Tarlac; that the only issue in the case
property in conformity with its original condition. is whether or not the residential house, subject of the mortgage therein, can be
considered a Chattel and the propriety of the attorney's fees.
Wherefore, the decision of the Court of Appeals is hereby affirmed, with costs
against the petitioner. So ordered. On February 24, 1961, the lower court held —

... WHEREFORE, this Court renders decision in this Case:


G.R. No. L-18456           November 30, 1963
CONRADO P. NAVARRO, plaintiff-appellee, (a) Dismissing the complaint with regard to defendant Gregorio
vs. Pineda;
RUFINO G. PINEDA, RAMONA REYES, ET AL., defendants-appellants.

(b) Ordering defendants Juana Gonzales and the spouses Rufino


DPAREDES, J.: Pineda and Ramon Reyes, to pay jointly and severally and within
ninety (90) days from the receipt of the copy of this decision to the
On December 14, 1959, defendants Rufino G. Pineda and his mother Juana plaintiff Conrado P. Navarro the principal sum of P2,550.00 with
Gonzales (married to Gregorio Pineda), borrowed from plaintiff Conrado P. 12% compounded interest per annum from June 14, 1960, until
Navarro, the sum of P2,500.00, payable 6 months after said date or on June said principal sum and interests are fully paid, plus P500.00 as
14, 1959. To secure the indebtedness, Rufino executed a document captioned liquidated damages and the costs of this suit, with the warning that
"DEED OF REAL ESTATE and CHATTEL MORTGAGES", whereby Juana in default of said payment of the properties mentioned in the deed
Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, of real estate mortgage and chattel mortgage (Annex "A" to the
belonging to her, registered with the Register of Deeds of Tarlac, under complaint) be sold to realize said mortgage debt, interests,
Transfer Certificate of Title No. 25776, and Rufino G. Pineda, by way of liquidated damages and costs, in accordance with the pertinent
Chattel Mortgage, mortgaged his two-story residential house, having a floor provisions of Act 3135, as amended by Act 4118, and Art. 14 of
area of 912 square meters, erected on a lot belonging to Atty. Vicente Castro, the Chattel Mortgage Law, Act 1508; and
located at Bo. San Roque, Tarlac, Tarlac; and one motor truck, registered in
his name, under Motor Vehicle Registration Certificate No. A-171806. Both (c) Ordering the defendants Rufino Pineda and Ramona Reyes, to
mortgages were contained in one instrument, which was registered in both the deliver immediately to the Provincial Sheriff of Tarlac the personal
Office of the Register of Deeds and the Motor Vehicles Office of Tarlac. properties mentioned in said Annex "A", immediately after the
lapse of the ninety (90) days above-mentioned, in default of such
When the mortgage debt became due and payable, the defendants, after payment.
demands made on them, failed to pay. They, however, asked and were granted
extension up to June 30, 1960, within which to pay. Came June 30, defendants The above judgment was directly appealed to this Court, the defendants
again failed to pay and, for the second time, asked for another extension, therein assigning only a single error, allegedly committed by the lower court,
which was given, up to July 30, 1960. In the second extension, defendant to wit —
Pineda in a document entitled "Promise", categorically stated that in the
remote event he should fail to make good the obligation on such date (July 30,
1960), the defendant would no longer ask for further extension and there In holding that the deed of real estate and chattel mortgages
would be no need for any formal demand, and plaintiff could proceed to take appended to the complaint is valid, notwithstanding the fact that
whatever action he might desire to enforce his rights, under the said mortgage the house of the defendant Rufino G. Pineda was made the subject
contract. In spite of said promise, defendants, failed and refused to pay the of the chattel mortgage, for the reason that it is erected on a land
obligation. that belongs to a third person.

On August 10, 1960, plaintiff filed a complaint for foreclosure of the Appellants contend that article 415 of the New Civil Code, in classifying a
mortgage and for damages, which consisted of liquidated damages in the sum house as immovable property, makes no distinction whether the owner of the
of P500.00 and 12% per annum interest on the principal, effective on the date land is or not the owner of the building; the fact that the land belongs to
of maturity, until fully paid. another is immaterial, it is enough that the house adheres to the land; that in
case of immovables by incorporation, such as houses, trees, plants, etc; the
Code does not require that the attachment or incorporation be made by the
Defendants, answering the complaint, among others, stated — owner of the land, the only criterion being the union or incorporation with the
soil. In other words, it is claimed that "a building is an immovable property,
Defendants admit that the loan is overdue but deny that portion of irrespective of whether or not said structure and the land on which it is
paragraph 4 of the First Cause of Action which states that the adhered to, belong to the same owner" (Lopez v. Orosa, G.R. Nos. L-10817-8,
defendants unreasonably failed and refuse to pay their obligation to Feb. 28, 1958). (See also the case of Leung Yee v. Strong Machinery Co., 37

7
Phil. 644). Appellants argue that since only movables can be the subject of a CENTRAL BOARD OF ASSESSMENT APPEALS and CITY
chattel mortgage (sec. 1, Act No. 3952) then the mortgage in question which ASSESSOR OF PASAY, respondents.
is the basis of the present action, cannot give rise to an action for foreclosure, AQUINO, J.:
because it is nullity. (Citing Associated Ins. Co., et al. v. Isabel Iya v. Adriano
Valino, et al., L-10838, May 30, 1958.)
This case is about the realty tax on machinery and equipment installed by
Caltex (Philippines) Inc. in its gas stations located on leased land.
The trial court did not predicate its decision declaring the deed of chattel
mortgage valid solely on the ground that the house mortgaged was erected on
The machines and equipment consists of underground tanks, elevated tank,
the land which belonged to a third person, but also and principally on the
elevated water tanks, water tanks, gasoline pumps, computing pumps, water
doctrine of estoppel, in that "the parties have so expressly agreed" in the
pumps, car washer, car hoists, truck hoists, air compressors and tireflators.
mortgage to consider the house as chattel "for its smallness and mixed
The city assessor described the said equipment and machinery in this manner:
materials of sawali and wood". In construing arts. 334 and 335 of the Spanish
Civil Code (corresponding to arts. 415 and 416, N.C.C.), for purposes of the
application of the Chattel Mortgage Law, it was held that under certain A gasoline service station is a piece of lot where a
conditions, "a property may have a character different from that imputed to it building or shed is erected, a water tank if there is any
in said articles. It is undeniable that the parties to a contract may by is placed in one corner of the lot, car hoists are placed
agreement, treat as personal property that which by nature would be real in an adjacent shed, an air compressor is attached in the
property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil. 632-633)."There can wall of the shed or at the concrete wall fence.
not be any question that a building of mixed materials may be the subject of a
chattel mortgage, in which case, it is considered as between the parties as
The controversial underground tank, depository of
personal property. ... The matter depends on the circumstances and the
gasoline or crude oil, is dug deep about six feet more or
intention of the parties". "Personal property may retain its character as such
less, a few meters away from the shed. This is done to
where it is so agreed by the parties interested even though annexed to the
prevent conflagration because gasoline and other
realty ...". (42 Am. Jur. 209-210, cited in Manarang, et al. v. Ofilada, et al.,
combustible oil are very inflammable.
G.R. No. L-8133, May 18, 1956; 52 O.G. No. 8, p. 3954.) The view that
parties to a deed of chattel mortgagee may agree to consider a house as
personal property for the purposes of said contract, "is good only insofar as This underground tank is connected with a steel pipe to
the contracting parties are concerned. It is based partly, upon the principles of the gasoline pump and the gasoline pump is commonly
estoppel ..." (Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958). In a placed or constructed under the shed. The footing of the
case, a mortgage house built on a rented land, was held to be a personal pump is a cement pad and this cement pad is imbedded
property, not only because the deed of mortgage considered it as such, but in the pavement under the shed, and evidence that the
also because it did not form part of the land (Evangelista v. Abad [CA];36 gasoline underground tank is attached and connected to
O.G. 2913), for it is now well settled that an object placed on land by one who the shed or building through the pipe to the pump and
has only a temporary right to the same, such as a lessee or usufructuary, does the pump is attached and affixed to the cement pad and
not become immobilized by attachment (Valdez v. Central Altagracia, 222 pavement covered by the roof of the building or shed.
U.S. 58, cited in Davao Sawmill Co., Inc. v. Castillo, et al., 61 Phil. 709).
Hence, if a house belonging to a person stands on a rented land belonging to
another person, it may be mortgaged as a personal property is so stipulated in The building or shed, the elevated water tank, the car
the document of mortgage. (Evangelista v. Abad, supra.) It should be noted, hoist under a separate shed, the air compressor, the
however, that the principle is predicated on statements by the owner declaring underground gasoline tank, neon lights signboard,
his house to be a chattel, a conduct that may conceivably estop him from concrete fence and pavement and the lot where they are
subsequently claiming otherwise (Ladera, et al.. v. C. N. Hodges, et al., [CA]; all placed or erected, all of them used in the pursuance
48 O.G. 5374). The doctrine, therefore, gathered from these cases is that of the gasoline service station business formed the
although in some instances, a house of mixed materials has been considered as entire gasoline service-station.
a chattel between them, has been recognized, it has been a constant criterion
nevertheless that, with respect to third persons, who are not parties to the As to whether the subject properties are attached and
contract, and specially in execution proceedings, the house is considered as an affixed to the tenement, it is clear they are, for the
immovable property (Art. 1431, New Civil Code). tenement we consider in this particular case are (is) the
pavement covering the entire lot which was constructed
In the case at bar, the house in question was treated as personal or movable by the owner of the gasoline station and the
property, by the parties to the contract themselves. In the deed of chattel improvement which holds all the properties under
mortgage, appellant Rufino G. Pineda conveyed by way of "Chattel question, they are attached and affixed to the pavement
Mortgage" "my personal properties", a residential house and a truck. The and to the improvement.
mortgagor himself grouped the house with the truck, which is, inherently a
movable property. The house which was not even declared for taxation The pavement covering the entire lot of the gasoline
purposes was small and made of light construction materials: G.I. sheets service station, as well as all the improvements,
roofing, sawali and wooden walls and wooden posts; built on land belonging machines, equipments and apparatus are allowed by
to another. Caltex (Philippines) Inc. ...

The cases cited by appellants are not applicable to the present case. The Iya The underground gasoline tank is attached to the shed
cases (L-10837-38, supra), refer to a building or a house of strong materials, by the steel pipe to the pump, so with the water tank it
permanently adhered to the land, belonging to the owner of the house himself. is connected also by a steel pipe to the pavement, then
In the case of Lopez v. Orosa, (L-10817-18), the subject building was a to the electric motor which electric motor is placed
theatre, built of materials worth more than P62,000, attached permanently to under the shed. So to say that the gasoline pumps, water
the soil. In these cases and in the Leung Yee case, supra, third persons pumps and underground tanks are outside of the service
assailed the validity of the deed of chattel mortgages; in the present case, it station, and to consider only the building as the service
was one of the parties to the contract of mortgages who assailed its validity. station is grossly erroneous. (pp. 58-60, Rollo).

CONFORMABLY WITH ALL THE FOREGOING, the decision appealed The said machines and equipment are loaned by Caltex to gas station
from, should be, as it is hereby affirmed, with costs against appellants. operators under an appropriate lease agreement or receipt. It is stipulated in
the lease contract that the operators, upon demand, shall return to Caltex the
G.R. No. L-50466 May 31, 1982 machines and equipment in good condition as when received, ordinary wear
CALTEX (PHILIPPINES) INC., petitioner, and tear excepted.
vs.
8
The lessor of the land, where the gas station is located, does not become the k) Improvements — is a valuable addition made to
owner of the machines and equipment installed therein. Caltex retains the property or an amelioration in its condition, amounting
ownership thereof during the term of the lease. to more than mere repairs or replacement of waste,
costing labor or capital and intended to enhance its
value, beauty or utility or to adapt it for new or further
The city assessor of Pasay City characterized the said items of gas station
purposes.
equipment and machinery as taxable realty. The realty tax on said equipment
amounts to P4,541.10 annually (p. 52, Rollo). The city board of tax appeals
ruled that they are personalty. The assessor appealed to the Central Board of m) Machinery — shall embrace machines, mechanical
Assessment Appeals. contrivances, instruments, appliances and apparatus
attached to the real estate. It includes the physical
facilities available for production, as well as the
The Board, which was composed of Secretary of Finance Cesar Virata as
installations and appurtenant service facilities, together
chairman, Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of
with all other equipment designed for or essential to its
Local Government and Community Development Jose Roño, held in its
manufacturing, industrial or agricultural purposes (See
decision of June 3, 1977 that the said machines and equipment are real
sec. 3[f], Assessment Law).
property within the meaning of sections 3(k) & (m) and 38 of the Real
Property Tax Code, Presidential Decree No. 464, which took effect on June 1,
1974, and that the definitions of real property and personal property in articles We hold that the said equipment and machinery, as appurtenances to the gas
415 and 416 of the Civil Code are not applicable to this case. station building or shed owned by Caltex (as to which it is subject to realty
tax) and which fixtures are necessary to the operation of the gas station, for
without them the gas station would be useless, and which have been attached
The decision was reiterated by the Board (Minister Vicente Abad Santos took
or affixed permanently to the gas station site or embedded therein, are taxable
Macaraig's place) in its resolution of January 12, 1978, denying Caltex's
improvements and machinery within the meaning of the Assessment Law and
motion for reconsideration, a copy of which was received by its lawyer on
the Real Property Tax Code.
April 2, 1979.

Caltex invokes the rule that machinery which is movable in its nature only
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the
becomes immobilized when placed in a plant by the owner of the property or
setting aside of the Board's decision and for a declaration that t he said
plant but not when so placed by a tenant, a usufructuary, or any person having
machines and equipment are personal property not subject to realty tax (p. 16,
only a temporary right, unless such person acted as the agent of the owner
Rollo).
(Davao Saw Mill Co. vs. Castillo, 61 Phil 709).

The Solicitor General's contention that the Court of Tax Appeals has exclusive
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code
appellate jurisdiction over this case is not correct. When Republic act No.
regarding machinery that becomes real property by destination. In the Davao
1125 created the Tax Court in 1954, there was as yet no Central Board of
Saw Mills case the question was whether the machinery mounted on
Assessment Appeals. Section 7(3) of that law in providing that the Tax Court
foundations of cement and installed by the lessee on leased land should be
had jurisdiction to review by appeal decisions of provincial or city boards of
regarded as real property for purposes of execution of a judgment against the
assessment appeals had in mind the local boards of assessment appeals but not
lessee. The sheriff treated the machinery as personal property. This Court
the Central Board of Assessment Appeals which under the Real Property Tax
sustained the sheriff's action. (Compare with Machinery & Engineering
Code has appellate jurisdiction over decisions of the said local boards of
Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case
assessment appeals and is, therefore, in the same category as the Tax Court.
machinery was treated as realty).

Section 36 of the Real Property Tax Code provides that the decision of the
Here, the question is whether the gas station equipment and machinery
Central Board of Assessment Appeals shall become final and executory after
permanently affixed by Caltex to its gas station and pavement (which are
the lapse of fifteen days from the receipt of its decision by the appellant.
indubitably taxable realty) should be subject to the realty tax. This question is
Within that fifteen-day period, a petition for reconsideration may be filed. The
different from the issue raised in the Davao Saw Mill case.
Code does not provide for the review of the Board's decision by this Court.

Improvements on land are commonly taxed as realty even though for some
Consequently, the only remedy available for seeking a review by this Court of
purposes they might be considered personalty (84 C.J.S. 181-2, Notes 40 and
the decision of the Central Board of Assessment Appeals is the special civil
41). "It is a familiar phenomenon to see things classed as real property for
action of certiorari, the recourse resorted to herein by Caltex (Philippines),
purposes of taxation which on general principle might be considered personal
Inc.
property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).

The issue is whether the pieces of gas station equipment and machinery
This case is also easily distinguishable from Board of Assessment Appeals vs.
already enumerated are subject to realty tax. This issue has to be resolved
Manila Electric Co., 119 Phil. 328, where Meralco's steel towers were
primarily under the provisions of the Assessment Law and the Real Property
considered poles within the meaning of paragraph 9 of its franchise which
Tax Code.
exempts its poles from taxation. The steel towers were considered personalty
because they were attached to square metal frames by means of bolts and
Section 2 of the Assessment Law provides that the realty tax is due "on real could be moved from place to place when unscrewed and dismantled.
property, including land, buildings, machinery, and other improvements" not
specifically exempted in section 3 thereof. This provision is reproduced with
Nor are Caltex's gas station equipment and machinery the same as tools and
some modification in the Real Property Tax Code which provides:
equipment in the repair shop of a bus company which were held to be personal
property not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116
SEC. 38. Incidence of Real Property Tax.— There shall Phil. 501).
be levied, assessed and collected in all provinces, cities
and municipalities an annual ad valorem tax on real
The Central Board of Assessment Appeals did not commit a grave abuse of
property, such as land, buildings, machinery and other
discretion in upholding the city assessor's is imposition of the realty tax on
improvements affixed or attached to real property not
Caltex's gas station and equipment.
hereinafter specifically exempted.

WHEREFORE, the questioned decision and resolution of the Central Board of


The Code contains the following definitions in its section 3:
Assessment Appeals are affirmed. The petition for certiorari is dismissed for
lack of merit. No costs.SO ORDERED.

9
G.R. No. 106041 January 29, 1993 (a) that the tailings dam has no
BENGUET CORPORATION, petitioner, value separate from and
vs. independent of the mine; hence,
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF by itself it cannot be considered
ASSESSMENT APPEALS OF ZAMBALES, PROVINCIAL ASSESSOR an improvement separately
OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY assessable;
OF SAN MARCELINO, respondents.
(b) that it is an integral part of the
.CRUZ, J.: mine;

The realty tax assessment involved in this case amounts to P11,319,304.00. It (c) that at the end of the mining
has been imposed on the petitioner's tailings dam and the land thereunder over operation of the petitioner
its protest. corporation in the area, the
tailings dam will benefit the local
community by serving as an
The controversy arose in 1985 when the Provincial Assessor of Zambales
irrigation facility;
assessed the said properties as taxable improvements. The assessment was
appealed to the Board of Assessment Appeals of the Province of Zambales.
On August 24, 1988, the appeal was dismissed mainly on the ground of the (d) that the building of the dam
petitioner's "failure to pay the realty taxes that fell due during the pendency of has stripped the property of any
the appeal." commercial value as the property
is submerged under water wastes
from the mine;
The petitioner seasonably elevated the matter to the Central Board of
Assessment Appeals,1 one of the herein respondents. In its decision dated
March 22, 1990, the Board reversed the dismissal of the appeal but, on the (e) that the tailings dam is an
merits, agreed that "the tailings dam and the lands submerged thereunder environmental pollution control
(were) subject to realty tax." device for which petitioner must
be commended rather than
penalized with a realty tax
For purposes of taxation the dam is considered as real
assessment;
property as it comes within the object mentioned in
paragraphs (a) and (b) of Article 415 of the New Civil
Code. It is a construction adhered to the soil which (f) that the installation and
cannot be separated or detached without breaking the utilization of the tailings dam as
material or causing destruction on the land upon which a pollution control device is a
it is attached. The immovable nature of the dam as an requirement imposed by law;
improvement determines its character as real property,
hence taxable under Section 38 of the Real Property
(2) as regards the valuation of the tailings dam and the
Tax Code. (P.D. 464).
submerged lands:

Although the dam is partly used as an anti-pollution


(a) that the subject properties
device, this Board cannot accede to the request for tax
have no market value as they
exemption in the absence of a law authorizing the same.
cannot be sold independently of
the mine;
xxx xxx xxx
(b) that the valuation of the
We find the appraisal on the land submerged as a result tailings dam should be based on
of the construction of the tailings dam, covered by Tax its incidental use by petitioner as
Declaration Nos. a water reservoir and not on the
002-0260 and 002-0266, to be in accordance with the alleged cost of construction of
Schedule of Market Values for Zambales which was the dam and the annual build-up
reviewed and allowed for use by the Ministry expense;
(Department) of Finance in the 1981-1982 general
revision. No serious attempt was made by Petitioner-
(c) that the "residual value
Appellant Benguet Corporation to impugn its
formula" used by the Provincial
reasonableness, i.e., that the P50.00 per square meter
Assessor and adopted by
applied by Respondent-Appellee Provincial Assessor is
respondent CBAA is arbitrary
indeed excessive and unconscionable. Hence, we find
and erroneous; and
no cause to disturb the market value applied by
Respondent Appellee Provincial Assessor of Zambales
on the properties of Petitioner-Appellant Benguet (3) as regards the petitioner's liability for penalties for
Corporation covered by Tax Declaration Nos. 002-0260 non-declaration of the tailings dam and the submerged
and 002-0266. lands for realty tax purposes:

This petition for certiorari now seeks to reverse the above ruling. (a) that where a tax is not paid in
an honest belief that it is not due,
no penalty shall be collected in
The principal contention of the petitioner is that the tailings dam is not subject
addition to the basic tax;
to realty tax because it is not an "improvement" upon the land within the
meaning of the Real Property Tax Code. More particularly, it is claimed —
(b) that no other mining
companies in the Philippines
(1) as regards the tailings dam as an "improvement":
operating a tailings dam have

10
been made to declare the dam for . . . The said equipment and machinery, as
realty tax purposes. appurtenances to the gas station building or shed owned
by Caltex (as to which it is subject to realty tax) and
which fixtures are necessary to the operation of the gas
The petitioner does not dispute that the tailings dam may be considered realty
station, for without them the gas station would be
within the meaning of Article 415. It insists, however, that the dam cannot be
useless and which have been attached or affixed
subjected to realty tax as a separate and independent property because it does
permanently to the gas station site or embedded therein,
not constitute an "assessable improvement" on the mine although a
are taxable improvements and machinery within the
considerable sum may have been spent in constructing and maintaining it.
meaning of the Assessment Law and the Real Property
Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA
To support its theory, the petitioner cites the following cases: 296).

1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court We hold that while the two storage tanks are not
considered the dikes and gates constructed by the taxpayer in connection with embedded in the land, they may, nevertheless, be
a fishpond operation as integral parts of the fishpond. considered as improvements on the land, enhancing its
utility and rendering it useful to the oil industry. It is
undeniable that the two tanks have been installed with
2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. some degree of permanence as receptacles for the
303), involving a road constructed by the timber concessionaire in the area, considerable quantities of oil needed by MERALCO for
where this Court did not impose a realty tax on the road primarily for two its operations. (Manila Electric Co. v. CBAA, 114
reasons: SCRA 273).

In the first place, it cannot be disputed that the The pipeline system in question is indubitably a
ownership of the road that was constructed by appellee construction adhering to the soil. It is attached to the
belongs to the government by right of accession not land in such a way that it cannot be separated therefrom
only because it is inherently incorporated or attached to without dismantling the steel pipes which were welded
the timber land . . . but also because upon the expiration to form the pipeline. (MERALCO Securities Industrial
of the concession said road would ultimately pass to the Corp. v. CBAA, 114 SCRA 261).
national government. . . . In the second place, while the
road was constructed by appellee primarily for its use
and benefit, the privilege is not exclusive, for . . . The tax upon the dam was properly assessed to the
appellee cannot prevent the use of portions of the plaintiff as a tax upon real estate. (Flax-Pond Water Co.
concession for homesteading purposes. It is also duty v. City of Lynn, 16 N.E. 742).
bound to allow the free use of forest products within the
concession for the personal use of individuals residing
The oil tanks are structures within the statute, that they
in or within the vicinity of the land. . . . In other words,
are designed and used by the owner as permanent
the government has practically reserved the rights to
improvement of the free hold, and that for such reasons
use the road to promote its varied activities. Since, as
they were properly assessed by the respondent taxing
above shown, the road in question cannot be considered
district as improvements. (Standard Oil Co. of New
as an improvement which belongs to appellee, although
Jersey v. Atlantic City, 15 A 2d. 271)
in part is for its benefit, it is clear that the same cannot
be the subject of assessment within the meaning of
Section 2 of C.A. The Real Property Tax Code does not carry a definition of "real property" and
No. 470. simply says that the realty tax is imposed on "real property, such as lands,
buildings, machinery and other improvements affixed or attached to real
property." In the absence of such a definition, we apply Article 415 of the
Apparently, the realty tax was not imposed not because the road was an
Civil Code, the pertinent portions of which state:
integral part of the lumber concession but because the government had the
right to use the road to promote its varied activities.
Art. 415. The following are immovable property.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case,
where it was declared that the reservoir dam went with and formed part of the (1) Lands, buildings and constructions of all kinds
reservoir and that the dam would be "worthless and useless except in adhered to the soil;
connection with the outlet canal, and the water rights in the reservoir represent
and include whatever utility or value there is in the dam and headgates."
xxx xxx xxx

4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United
(3) Everything attached to an immovable in a fixed
States. This case involved drain tunnels constructed by plaintiff when it
manner, in such a way that it cannot be separated
expanded its mining operations downward, resulting in a constantly increasing
therefrom without breaking the material or deterioration
flow of water in the said mine. It was held that:
of the object.

Whatever value they have is connected with and in fact


Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides
is an integral part of the mine itself. Just as much so as
that the realty tax is due "on the real property, including land, buildings,
any shaft which descends into the earth or an
machinery and other improvements" not specifically exempted in Section 3
underground incline, tunnel, or drift would be which
thereof. A reading of that section shows that the tailings dam of the petitioner
was used in connection with the mine.
does not fall under any of the classes of exempt real properties therein
enumerated.
On the other hand, the Solicitor General argues that the dam is an assessable
improvement because it enhances the value and utility of the mine. The
Is the tailings dam an improvement on the mine? Section 3(k) of the Real
primary function of the dam is to receive, retain and hold the water coming
Property Tax Code defines improvement as follows:
from the operations of the mine, and it also enables the petitioner to impound
water, which is then recycled for use in the plant.
(k) Improvements — is a valuable addition made to
property or an amelioration in its condition, amounting
There is also ample jurisprudence to support this view, thus:
11
to more than mere repairs or replacement of waste, Zambales, which is fifty (50.00) pesos per square meter
costing labor or capital and intended to enhance its for third class industrial land (TSN, page 17, July 5,
value, beauty or utility or to adopt it for new or further 1989) and Schedule of Market Values for Zambales
purposes. which was reviewed and allowed for use by the
Ministry (Department) of Finance in the 1981-1982
general revision. No serious attempt was made by
The term has also been interpreted as "artificial alterations of the physical
Petitioner-Appellant Benguet Corporation to impugn its
condition of the ground that are reasonably permanent in character."2
reasonableness, i.e, that the P50.00 per square meter
applied by Respondent-Appellee Provincial Assessor is
The Court notes that in the Ontario case the plaintiff admitted that the mine indeed excessive and unconscionable. Hence, we find
involved therein could not be operated without the aid of the drain tunnels, no cause to disturb the market value applied by
which were indispensable to the successful development and extraction of the Respondent-Appellee Provincial Assessor of Zambales
minerals therein. This is not true in the present case. on the properties of Petitioner-Appellant Benguet
Corporation covered by Tax Declaration Nos. 002-0260
and 002-0266.
Even without the tailings dam, the petitioner's mining operation can still be
carried out because the primary function of the dam is merely to receive and
retain the wastes and water coming from the mine. There is no allegation that It has been the long-standing policy of this Court to respect the conclusions of
the water coming from the dam is the sole source of water for the mining quasi-judicial agencies like the CBAA, which, because of the nature of its
operation so as to make the dam an integral part of the mine. In fact, as a functions and its frequent exercise thereof, has developed expertise in the
result of the construction of the dam, the petitioner can now impound and resolution of assessment problems. The only exception to this rule is where it
recycle water without having to spend for the building of a water reservoir. is clearly shown that the administrative body has committed grave abuse of
And as the petitioner itself points out, even if the petitioner's mine is shut discretion calling for the intervention of this Court in the exercise of its own
down or ceases operation, the dam may still be used for irrigation of the powers of review. There is no such showing in the case at bar.
surrounding areas, again unlike in the Ontario case.
We disagree, however, with the ruling of respondent CBAA that it cannot take
As correctly observed by the CBAA, the Kendrick case is also not applicable cognizance of the issue of the propriety of the penalties imposed upon it,
because it involved water reservoir dams used for different purposes and for which was raised by the petitioner for the first time only on appeal. The
the benefit of the surrounding areas. By contrast, the tailings dam in question CBAA held that this "is an entirely new matter that petitioner can take up with
is being used exclusively  for the benefit of the petitioner. the Provincial Assessor (and) can be the subject of another protest before the
Local Board or a negotiation with the local sanggunian . . ., and in case of an
adverse decision by either the Local Board or the local sanggunian, (it can)
Curiously, the petitioner, while vigorously arguing that the tailings dam has elevate the same to this Board for appropriate action."
no separate existence, just as vigorously contends that at the end of the mining
operation the tailings dam will serve the local community as an irrigation
facility, thereby implying that it can exist independently of the mine. There is no need for this time-wasting procedure. The Court may resolve the
issue in this petition instead of referring it back to the local authorities. We
have studied the facts and circumstances of this case as above discussed and
From the definitions and the cases cited above, it would appear that whether a find that the petitioner has acted in good faith in questioning the assessment
structure constitutes an improvement so as to partake of the status of realty on the tailings dam and the land submerged thereunder. It is clear that it has
would depend upon the degree of permanence intended in its construction not done so for the purpose of evading or delaying the payment of the
and use. The expression "permanent" as applied to an improvement does not questioned tax. Hence, we hold that the petitioner is not subject to penalty for
imply that the improvement must be used perpetually but only until the its
purpose to which the principal realty is devoted has been accomplished. It is non-declaration of the tailings dam and the submerged lands for realty tax
sufficient that the improvement is intended to remain as long as the land to purposes.
which it is annexed is still used for the said purpose.

WHEREFORE, the petition is DISMISSED for failure to show that the


The Court is convinced that the subject dam falls within the definition of an questioned decision of respondent Central Board of Assessment Appeals is
"improvement" because it is permanent in character and it enhances both the tainted with grave abuse of discretion except as to the imposition of penalties
value and utility of petitioner's mine. Moreover, the immovable nature of the upon the petitioner which is hereby SET ASIDE. Costs against the petitioner.
dam defines its character as real property under Article 415 of the Civil Code It is so ordered.
and thus makes it taxable under Section 38 of the Real Property Tax Code.

The Court will also reject the contention that the appraisal at P50.00 per
square meter made by the Provincial Assessor is excessive and that his use of
the "residual value formula" is arbitrary and erroneous.

Respondent Provincial Assessor explained the use of the "residual value


formula" as follows:

A 50% residual value is applied in the computation G.R. No. 137705               August 22, 2000
because, while it is true that when slime fills the dike, it SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,
will then be covered by another dike or stage, the stage vs.
covered is still there and still exists and since only one PCI LEASING AND FINANCE, INC., respondent.
face of the dike is filled, 50% or the other face is
unutilized.
DECISION

In sustaining this formula, the CBAA gave the following justification:


PANGANIBAN, J.:

We find the appraisal on the land submerged as a result


After agreeing to a contract stipulating that a real or immovable property be
of the construction of the tailings dam, covered by Tax
considered as personal or movable, a party is estopped from subsequently
Declaration Nos.
claiming otherwise. Hence, such property is a proper subject of a writ of
002-0260 and 002-0266, to be in accordance with the
replevin obtained by the other contracting party.
Schedule of Market Values for San Marcelino,

12
The Case was "not unfamiliar with the ways of the trade," it ruled that he "should have
realized the import of the document he signed." The CA further held:
Before us is a Petition for Review on Certiorari assailing the January 6, 1999
Decision1 of the Court of Appeals (CA)2 in CA-GR SP No. 47332 and its "Furthermore, to accord merit to this petition would be to preempt the trial
February 26, 1999 Resolution3 denying reconsideration. The decretal portion court in ruling upon the case below, since the merits of the whole matter are
of the CA Decision reads as follows: laid down before us via a petition whose sole purpose is to inquire upon the
existence of a grave abuse of discretion on the part of the [RTC] in issuing the
assailed Order and Resolution. The issues raised herein are proper subjects of
"WHEREFORE, premises considered, the assailed Order dated February 18,
a full-blown trial, necessitating presentation of evidence by both parties. The
1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are
contract is being enforced by one, and [its] validity is attacked by the other – a
hereby AFFIRMED. The writ of preliminary injunction issued on June 15,
matter x x x which respondent court is in the best position to determine."
1998 is hereby LIFTED."4

Hence, this Petition.11


In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon
City (Branch 218)6 issued a Writ of Seizure.7 The March 18, 1998
Resolution8 denied petitioners’ Motion for Special Protective Order, praying The Issues
that the deputy sheriff be enjoined "from seizing immobilized or other real
properties in (petitioners’) factory in Cainta, Rizal and to return to their
In their Memorandum, petitioners submit the following issues for our
original place whatever immobilized machineries or equipments he may have
consideration:
removed."9

"A. Whether or not the machineries purchased and imported by SERG’S


The Facts
became real property by virtue of immobilization.

The undisputed facts are summarized by the Court of Appeals as follows:10


B. Whether or not the contract between the parties is a loan or a lease."12

"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI
In the main, the Court will resolve whether the said machines are personal, not
Leasing" for short) filed with the RTC-QC a complaint for [a] sum of money
immovable, property which may be a proper subject of a writ of replevin. As a
(Annex ‘E’), with an application for a writ of replevin docketed as Civil Case
preliminary matter, the Court will also address briefly the procedural points
No. Q-98-33500.
raised by respondent.

"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent


The Court’s Ruling
judge issued a writ of replevin (Annex ‘B’) directing its sheriff to seize and
deliver the machineries and equipment to PCI Leasing after 5 days and upon
the payment of the necessary expenses. The Petition is not meritorious.

"On March 24, 1998, in implementation of said writ, the sheriff proceeded to Preliminary Matter:Procedural Questions
petitioner’s factory, seized one machinery with [the] word that he [would]
return for the other machineries.
Respondent contends that the Petition failed to indicate expressly whether it
was being filed under Rule 45 or Rule 65 of the Rules of Court. It further
"On March 25, 1998, petitioners filed a motion for special protective order alleges that the Petition erroneously impleaded Judge Hilario Laqui as
(Annex ‘C’), invoking the power of the court to control the conduct of its respondent.
officers and amend and control its processes, praying for a directive for the
sheriff to defer enforcement of the writ of replevin.
There is no question that the present recourse is under Rule 45. This
conclusion finds support in the very title of the Petition, which is "Petition for
"This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that the Review on Certiorari."13
properties [were] still personal and therefore still subject to seizure and a writ
of replevin.
While Judge Laqui should not have been impleaded as a
respondent,14 substantial justice requires that such lapse by itself should not
"In their Reply, petitioners asserted that the properties sought to be seized warrant the dismissal of the present Petition. In this light, the Court deems it
[were] immovable as defined in Article 415 of the Civil Code, the parties’ proper to remove, motu proprio, the name of Judge Laqui from the caption of
agreement to the contrary notwithstanding. They argued that to give effect to the present case.
the agreement would be prejudicial to innocent third parties. They further
stated that PCI Leasing [was] estopped from treating these machineries as
Main Issue: Nature of the Subject Machinery
personal because the contracts in which the alleged agreement [were]
embodied [were] totally sham and farcical.
Petitioners contend that the subject machines used in their factory were not
proper subjects of the Writ issued by the RTC, because they were in fact real
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and
property. Serious policy considerations, they argue, militate against a contrary
take possession of the remaining properties. He was able to take two more, but
characterization.
was prevented by the workers from taking the rest.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the
"On April 7, 1998, they went to [the CA] via an original action for certiorari."
recovery of personal property only.15 Section 3 thereof reads:

Ruling of the Court of Appeals


"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond,
the court shall issue an order and the corresponding writ of replevin describing
Citing the Agreement of the parties, the appellate court held that the subject the personal property alleged to be wrongfully detained and requiring the
machines were personal property, and that they had only been leased, not sheriff forthwith to take such property into his custody."
owned, by petitioners. It also ruled that the "words of the contract are clear
and leave no doubt upon the true intention of the contracting parties."
On the other hand, Article 415 of the Civil Code enumerates immovable or
Observing that Petitioner Goquiolay was an experienced businessman who
real property as follows:

13
"ART. 415. The following are immovable property: It should be stressed, however, that our holding -- that the machines should be
deemed personal property pursuant to the Lease Agreement – is good only
insofar as the contracting parties are concerned.22 Hence, while the parties are
x x x           x x x          x x x
bound by the Agreement, third persons acting in good faith are not affected by
its stipulation characterizing the subject machinery as personal. 23 In any event,
(5) Machinery, receptacles, instruments or implements intended by the owner there is no showing that any specific third party would be adversely affected.
of the tenement for an industry or works which may be carried on in a
building or on a piece of land, and which tend directly to meet the needs of the
Validity of the Lease Agreement
said industry or works;

In their Memorandum, petitioners contend that the Agreement is a loan and


x x x           x x x          x x x"
not a lease.24 Submitting documents supposedly showing that they own the
subject machines, petitioners also argue in their Petition that the Agreement
In the present case, the machines that were the subjects of the Writ of Seizure suffers from "intrinsic ambiguity which places in serious doubt the intention
were placed by petitioners in the factory built on their own land. Indisputably, of the parties and the validity of the lease agreement itself." 25 In their Reply to
they were essential and principal elements of their chocolate-making industry. respondent’s Comment, they further allege that the Agreement is invalid.26
Hence, although each of them was movable or personal property on its own,
all of them have become "immobilized by destination because they are
These arguments are unconvincing. The validity and the nature of the contract
essential and principal elements in the industry." 16 In that sense, petitioners are
are the lis mota of the civil action pending before the RTC. A resolution of
correct in arguing that the said machines are real, not personal, property
these questions, therefore, is effectively a resolution of the merits of the case.
pursuant to Article 415 (5) of the Civil Code.17
Hence, they should be threshed out in the trial, not in the proceedings
involving the issuance of the Writ of Seizure.
Be that as it may, we disagree with the submission of the petitioners that the
said machines are not proper subjects of the Writ of Seizure.
Indeed, in La Tondeña Distillers v. CA,27 the Court explained that the policy
under Rule 60 was that questions involving title to the subject property –
The Court has held that contracting parties may validly stipulate that a real questions which petitioners are now raising -- should be determined in the
property be considered as personal.18 After agreeing to such stipulation, they trial. In that case, the Court noted that the remedy of defendants under Rule 60
are consequently estopped from claiming otherwise. Under the principle of was either to post a counter-bond or to question the sufficiency of the
estoppel, a party to a contract is ordinarily precluded from denying the truth of plaintiff’s bond. They were not allowed, however, to invoke the title to the
any material fact found therein. subject property. The Court ruled:

Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties "In other words, the law does not allow the defendant to file a motion to
to treat a house as a personal property because it had been made the subject of dissolve or discharge the writ of seizure (or delivery) on ground of
a chattel mortgage. The Court ruled: insufficiency of the complaint or of the grounds relied upon therefor, as in
proceedings on preliminary attachment or injunction, and thereby put at issue
the matter of the title or right of possession over the specific chattel being
"x x x. Although there is no specific statement referring to the subject house replevied, the policy apparently being that said matter should be ventilated
as personal property, yet by ceding, selling or transferring a property by way and determined only at the trial on the merits."28
of chattel mortgage defendants-appellants could only have meant to convey
the house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming Besides, these questions require a determination of facts and a presentation of
otherwise." evidence, both of which have no place in a petition for certiorari in the CA
under Rule 65 or in a petition for review in this Court under Rule 45.29
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v.
Wearever Textile Mills20 also held that the machinery used in a factory and Reliance on the Lease Agreement
essential to the industry, as in the present case, was a proper subject of a writ
of replevin because it was treated as personal property in a contract. Pertinent
It should be pointed out that the Court in this case may rely on the Lease
portions of the Court’s ruling are reproduced hereunder:
Agreement, for nothing on record shows that it has been nullified or annulled.
In fact, petitioners assailed it first only in the RTC proceedings, which had
"x x x. If a house of strong materials, like what was involved in the above ironically been instituted by respondent. Accordingly, it must be presumed
Tumalad case, may be considered as personal property for purposes of valid and binding as the law between the parties.
executing a chattel mortgage thereon as long as the parties to the contract so
agree and no innocent third party will be prejudiced thereby, there is
Makati Leasing and Finance Corporation 30 is also instructive on this point. In
absolutely no reason why a machinery, which is movable in its nature and
that case, the Deed of Chattel Mortgage, which characterized the subject
becomes immobilized only by destination or purpose, may not be likewise
machinery as personal property, was also assailed because respondent had
treated as such. This is really because one who has so agreed is estopped from
allegedly been required "to sign a printed form of chattel mortgage which was
denying the existence of the chattel mortgage."
in a blank form at the time of signing." The Court rejected the argument and
relied on the Deed, ruling as follows:
In the present case, the Lease Agreement clearly provides that the machines in
question are to be considered as personal property. Specifically, Section 12.1
"x x x. Moreover, even granting that the charge is true, such fact alone does
of the Agreement reads as follows:21
not render a contract void ab initio, but can only be a ground for rendering
said contract voidable, or annullable pursuant to Article 1390 of the new Civil
"12.1 The PROPERTY is, and shall at all times be and remain, personal Code, by a proper action in court. There is nothing on record to show that the
property notwithstanding that the PROPERTY or any part thereof may now mortgage has been annulled. Neither is it disclosed that steps were taken to
be, or hereafter become, in any manner affixed or attached to or embedded in, nullify the same. x x x"
or permanently resting upon, real property or any building thereon, or attached
in any manner to what is permanent."
Alleged Injustice Committed on the Part of Petitioners

Clearly then, petitioners are estopped from denying the characterization of the
Petitioners contend that "if the Court allows these machineries to be seized,
subject machines as personal property. Under the circumstances, they are
then its workers would be out of work and thrown into the streets." 31 They also
proper subjects of the Writ of Seizure.
allege that the seizure would nullify all efforts to rehabilitate the corporation.

14
Petitioners’ arguments do not preclude the implementation of the SO ORDERED.10cräläwvirtualibräry
Writ.1âwphi1 As earlier discussed, law and jurisprudence support its
propriety. Verily, the above-mentioned consequences, if they come true,
The judgment became final and executory. Accordingly, the trial court issued
should not be blamed on this Court, but on the petitioners for failing to avail
a writ of execution in due course, by virtue of which, Deputy Sheriff Renato
themselves of the remedy under Section 5 of Rule 60, which allows the filing
E. Robles levied on the following real properties of the Galit spouses:
of a counter-bond. The provision states:

1. A parcel of land covered by Original Certificate of Title No. T-569


"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency
(Homestead Patent No. 14692) situated in the Bo. of Tapulac, Orani, Bataan.
of the applicant’s bond, or of the surety or sureties thereon, he cannot
Bounded on the SW, along line 1-2 by Lot No. 3, Cad. 145; containing an area
immediately require the return of the property, but if he does not so object, he
of THIRTY FIVE THOUSAND SEVEN HUNDRED FIFTY NINE (35,759)
may, at any time before the delivery of the property to the applicant, require
SQUARE METERS, more or less x x x;
the return thereof, by filing with the court where the action is pending a bond
executed to the applicant, in double the value of the property as stated in the
applicant’s affidavit for the delivery thereof to the applicant, if such delivery 2. STORE/HOUSE CONSTRUCTED on Lot No. 1103 made of strong
be adjudged, and for the payment of such sum to him as may be recovered materials G.I. roofing situated at Centro I, Orani, Bataan, x x x containing an
against the adverse party, and by serving a copy bond on the applicant." area of 30 sq. meters, more or less x x x (constructed on TCT No. T40785);

WHEREFORE, the Petition is DENIED and the assailed Decision of the 3. BODEGA constructed on Lot 1103, made of strong materials, G.I. roofing,
Court of Appeals AFFIRMED. Costs against petitioners. situated in Centro I, Orani, Bataan, x x x with a floor area of 42.75 sq. m.
more or less x x x.11cräläwvirtualibräry
SO ORDERED.
At the sale of the above-enumerated properties at public auction held
G.R. No. 156295 : September 23, 2003 on December 23, 1998, petitioner was the highest and only bidder with a bid
MARCELO R. SORIANO, Petitioner, vs. SPOUSES RICARDO and price of P483,000.00. Accordingly, on February 4, 1999, Deputy Sheriff
ROSALINA GALIT, Respondents. Robles issued a Certificate of Sale of Execution of Real Property, 12 which
reads:
DECISION
CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY
YNARES-SANTIAGO, J.:
TO ALL WHO MAY SEE THESE PRESENTS:
Petitioner was issued a writ of possession in Civil Case No. 6643 1 for Sum of
Money by the Regional Trial Court of Balanga, Bataan, Branch 1. The writ of GREETINGS:
possession was, however, nullified by the Court of Appeals in CA-G.R. SP
No. 658912 because it included a parcel of land which was not among those
I HEREBY that (sic) by virtue of the writ of execution dated October 16,
explicitly enumerated in the Certificate of Sale issued by the Deputy Sheriff,
1998, issued in the above-entitled case by the HON. BENJAMIN T.
but on which stand the immovables covered by the said Certificate. Petitioner
VIANZON, ordering the Provincial Sheriff of Bataan or her authorized
contends that the sale of these immovables necessarily encompasses the land
Deputy Sheriff to cause to be made (sic) the sum of P350,000.00 plus 12%
on which they stand.
interest to be computed from the date of maturity of the promissory notes until
the same are fully paid; P20,000.00 as attorneys fees plus legal expenses in
Dissatisfied, petitioner filed the instant petition for review on certiorari. the implementation of the writ of execution, the undersigned Deputy Sheriff
sold at public auction on December 23, 1998 the rights and interests of
defendants Sps. Ricardo and Rosalina Galit, to the plaintiff Marcelo Soriano,
Respondent Ricardo Galit contracted a loan from petitioner Marcelo Soriano,
the highest and only bidder for the amount of FOUR HNDRED EIGHTY
in the total sum of P480,000.00, evidenced by four promissory notes in the
THREE THOUSAND PESOS (P483,000.00, Philippine Currency), the
amount of P120,000.00 each dated August 2, 1996;3 August 15,
following real estate properties more particularly described as follows :
1996;4 September 4, 19965 and September 14, 1996.6 This loan was secured by
a real estate mortgage over a parcel of land covered by Original Certificate of
Title No. 569.7 After he failed to pay his obligation, Soriano filed a complaint ORIGINAL CERTIFICATE OF TITLE NO. T-569
for sum of money against him with the Regional Trial Court of Balanga City,
Branch 1, which was docketed as Civil Case No. 6643.8cräläwvirtualibräry
A parcel of land (Homestead Patent No. 14692) situated in the Bo. of Tapulac,
Orani, Bataan, x x x. Bounded on the SW., along line 1-2 by Lot No. 3, Cad.
Respondents, the Spouses Ricardo and Rosalina Galit, failed to file their 145, containing an area of THIRTY FIVE THOUSAND SEVEN HUNDRED
answer. Hence, upon motion of Marcelo Soriano, the trial court declared the FIFTY NINE (35,759) SQUARE METERS, more or less x x x
spouses in default and proceeded to receive evidence for petitioner Soriano ex
parte.
TAX DEC. NO. PROPERTY INDEX NO. 018-09-001-02

On July 7, 1997, the Regional Trial Court of Balanga City, Branch 1 rendered
STOREHOUSE constructed on Lot 1103, made of strong materials G.I.
judgment9 in favor of petitioner Soriano, the dispositive portion of which
roofing situated at Centro I, Orani, Bataan x x x containing an area of 30 sq.
reads:
meters, more or less x x (constructed on TCT No. 40785)

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and


TAX DEC. NO. 86 PROPERTY INDEX No. 018-09-001-02
against the defendant ordering the latter to pay:

BODEGA constructed on Lot 1103, made of strong materials G.I. roofing


1. the plaintiff the amount of P350,000.00 plus 12% interest to be computed
situated in Centro I, Orani, Bataan, x x x with a floor area of 42.75 sq. m.
from the dates of maturity of the promissory notes until the same are fully
more or less x x x
paid;

IT IS FURTHER CERTIFIED, that the aforesaid highest and lone bidder,


2. the plaintiff P20,000.00, as attorneys fees; and
Marcelo Soriano, being the plaintiff did not pay to the Provincial Sheriff of
Bataan the amount of P483,000.00, the sale price of the above-described
3. the costs of suit.

15
property which amount was credited to partial/full satisfaction of the judgment 3. Original Certificate of Title No. 40785 with an area of 134 square meters
embodied in the writ of execution. known as Lot No. 1103 of the Cadastral Survey of Orani

The period of redemption of the above described real properties together with against the mortgagor/former owners Sps. Ricardo and Rosalinda (sic) Galit,
all the improvements thereon will expire One (1) year from and after the her (sic) heirs, successors, assigns and all persons claiming rights and interests
registration of this Certificate of Sale with the Register of Deeds. adverse to the petitioner and make a return of this writ every thirty (30) days
from receipt hereof together with all the proceedings thereon until the same
has been fully satisfied.
This Certificate of Sheriffs Sale is issued to the highest and lone bidder,
Marcelo Soriano, under guarantees prescribed by law.
WITNESS THE HONORABLE BENJAMIN T. VIANZON, Presiding Judge,
this 18th day of July 2001, at Balanga City.
Balanga, Bataan, February 4, 1999.

(
On April 23, 1999, petitioner caused the registration of the Certificate of Sale
Sgd)
on Execution of Real Property with the Registry of Deeds.
GILBERT S.
ARGONZA
The said Certificate of Sale registered with the Register of Deeds includes at
the dorsal portion thereof the following entry, not found in the Certificate of IC
Sale on file with Deputy Sheriff Renato E. Robles:13cräläwvirtualibräry
Respondents filed a petition for certiorari with the Court of Appeals, which
ORIGINAL CERTIFICATE OF TITLE NO. T-40785 was docketed as CA-G.R. SP No. 65891, assailing the inclusion of the parcel
of land covered by Transfer Certificate of Title No. T-40785 among the list of
real properties in the writ of possession. 18 Respondents argued that said
A parcel of land (Lot No. 1103 of the Cadastral Survey of Orani) , with the property was not among those sold on execution by Deputy Sheriff Renato E.
improvements thereon, situated in the Municipality of Orani, Bounded on the Robles as reflected in the Certificate of Sale on Execution of Real Property.
NE; by Calle P. Gomez; on the E. by Lot No. 1104; on the SE by Calle
Washington; and on the W. by Lot 4102, containing an area of ONE
HUNDRED THIRTY NINE (139) SQUARE METERS, more or less. All In opposition, petitioner prayed for the dismissal of the petition because
points referred to are indicated on the plan; bearing true; declination 0 deg. respondent spouses failed to move for the reconsideration of the assailed order
40E., date of survey, February 191-March 1920. prior to the filing of the petition. Moreover, the proper remedy against the
assailed order of the trial court is an appeal, or a motion to quash the writ of
possession.
On February 23, 2001, ten months from the time the Certificate of Sale on
Execution was registered with the Registry of Deeds, petitioner moved 14 for
the issuance of a writ of possession. He averred that the one-year period of On May 13, 2002, the Court of Appeals rendered judgment as follows:
redemption had elapsed without the respondents having redeemed the
properties sold at public auction; thus, the sale of said properties had already
WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the
become final. He also argued that after the lapse of the redemption period, the
writ of possession issued by the Regional Trial Court of Balanga City, Branch
titles to the properties should be considered, for all legal intents and purposes,
1, on 18 July 2001 is declared NULL and VOID.
in his name and favor.15cräläwvirtualibräry

In the event that the questioned writ of possession has already been
On June 4, 2001, the Regional Trial Court of Balanga City, Branch 1 granted
implemented, the Deputy Sheriff of the Regional Trial Court of Balanga City,
the motion for issuance of writ of possession. 16 Subsequently, on July 18,
Branch 1, and private respondent Marcelo Soriano are hereby ordered to cause
2001, a writ of possession17 was issued in petitioners favor which reads:
the redelivery of Transfer Certificate of Title No. T-40785 to the petitioners.

WRIT OF POSSESSION
SO ORDERED.19cräläwvirtualibräry

Mr. Renato E. Robles


Aggrieved, petitioner now comes to this Court maintaining that
Deputy Sheriff
RTC, Br. 1, Balanga City
1.) THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 IS
NOT THE PLAIN, SPEEDY AND ADEQUATE REMEDY OF THE
Greetings :
RESPONDENTS IN ASSAILING THE WRIT OF POSSESSION ISSUED
BY THE LOWER COURT BUT THERE WERE STILL OTHER
WHEREAS on February 3, 2001, the counsel for plaintiff filed Motion for the REMEDIES AVAILABLE TO THEM AND WHICH WERE NOT
Issuance of Writ of Possession; RESORTED TO LIKE THE FILING OF A MOTION FOR
RECONSIDERATION OR MOTION TO QUASH OR EVEN APPEAL.
WHEREAS on June 4, 2001, this court issued an order granting the issuance
of the Writ of Possession; 2.) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
DECLARAING THE CERTIFICATE OF SALE ON EXECUTION OF
REAL PROPERTY AS NULL AND VOID AND SUBSEQUENTLY THE
WHEREFORE, you are hereby commanded to place the herein plaintiff WRIT OF POSSESSION BECAUSE THE SAME IS A PUBLIC
Marcelo Soriano in possession of the property involved in this case situated DOCUMENT WHICH ENJOYS THE PRESUMPTION OF REGULARITY
(sic) more particularly described as: AND IT CANNOT BE OVERCOME BY A MERE STRANGE FEELING
THAT SOMETHING IS AMISS ON ITS SURFACE SIMPLY BECAUSE
1. STORE HOUSE constructed on Lot No. 1103 situated at Centro 1, Orani, THE TYPEWRITTEN WORDS ON THE FRONT PAGE AND AT THE
Bataan covered by TCT No. 40785; DORSAL PORTION THEREOF IS DIFFERENT OR THAT IT IS
UNLIKELY FOR THE SHERIFF TO USE THE DORSAL PORTION OF
THE FIRST PAGE BECAUSE THE SECOND PAGE IS MERELY HALF
2. BODEGA constructed on Lot No. 1103 with an area of 42.75 square meters FILLED AND THE NOTATION ON THE DORSAL PORTION COULD
under Tax Declaration No. 86 situated at Centro 1, Orani, Bataan; STILL BE MADE AT THE SECOND PAGE.

16
On the first ground, petitioner contends that respondents were not without The argument is not persuasive.
remedy before the trial court. He points out that respondents could have filed a
motion for reconsideration of the Order dated June 4, 1999, but they did not
There are actually two  (2) copies of the Certificate of Sale on Execution of
do so. Respondents could also have filed an appeal but they, likewise, did not
Real Properties issued on February 4, 1999 involved, namely: (a) copy which
do so. When the writ of possession was issued, respondents could have filed a
is on file with the deputy sheriff; and (b) copy registered with the Registry of
motion to quash the writ. Again they did not. Respondents cannot now avail
Deeds. The object of scrutiny, however, is not the copy of the Certificate of
of the special civil action for certiorari as a substitute for these remedies. They
Sale on Execution of Real Properties issued by the deputy sheriff on February
should suffer the consequences for sleeping on their rights.
4, 1999,32 but the copy thereof subsequently registered by petitioner with the
Registry of Deeds on April 23, 1999,33 which included an entry on the dorsal
We disagree. portion of the first page thereof describing a parcel of land covered by OCT
No. T-40785 not  found in the Certificate of Sale of Real Properties on file
with the sheriff.
Concededly, those who seek to avail of the procedural remedies provided by
the rules must adhere to the requirements thereof, failing which the right to do
so is lost. It is, however, equally settled that the Rules of Court seek to True, public documents by themselves may be adequate to establish the
eliminate undue reliance on technical rules and to make litigation as presumption of their validity. However, their probative weight must be
inexpensive as practicable and as convenient as can be done. 20 This is in evaluated not in isolation but in conjunction with other evidence adduced by
accordance with the primary purpose of the 1997 Rules of Civil Procedure as the parties in the controversy, much more so in this case where the contents of
provided in Rule 1, Section 6, which reads: a copy thereof subsequently registered for documentation purposes is being
contested. No reason has been offered how and why the questioned entry was
subsequently intercalated in the copy of the certificate of sale subsequently
Section 6. Construction.  These rules shall be liberally construed in order to
registered with the Registry of Deeds. Absent any satisfactory explanation as
promote their objective of securing a just, speedy and inexpensive
to why said entry was belatedly inserted, the surreptitiousness of its inclusion
determination of every action and proceeding.21cräläwvirtualibräry
coupled with the furtive manner of its intercalation casts serious doubt on the
authenticity of petitioners copy of the Certificate of Sale. Thus, it has been
The rules of procedure are not to be applied in a very rigid, technical sense held that while a public document like a notarized deed of sale is vested with
and are used only to help secure substantial justice. If a technical and rigid the presumption of regularity, this is not a guarantee of the validity of its
enforcement of the rules is made, their aim would be defeated. 22 They should contents.34cräläwvirtualibräry
be liberally construed so that litigants can have ample opportunity to prove
their claims and thus prevent a denial of justice due to technicalities. 23 Thus,
It must be pointed out in this regard that the issuance of a Certificate of Sale is
in China Banking Corporation v. Members of the Board of Trustees of Home
an end result of judicial foreclosure where statutory requirements are strictly
Development Mutual Fund,24 it was held:
adhered to; where even the slightest deviations therefrom will invalidate the
proceeding35 and the sale.36 Among these requirements is an explicit
while certiorari as a remedy may not be used as a substitute for an appeal, enumeration and correct description of what properties are to be sold stated in
especially for a lost appeal, this rule should not be strictly enforced if the the notice. The stringence in the observance of these requirements is such that
petition is genuinely meritorious.25] It has been said that where the rigid an incorrect title number together with a correct technical description of the
application of the rules would frustrate substantial justice, or bar the property to be sold and vice versa is deemed a substantial and fatal error
vindication of a legitimate grievance, the courts are justified in exempting a which results in the invalidation of the sale.37cräläwvirtualibräry
particular case from the operation of the rules.26 (Emphasis ours)
The certificate of sale is an accurate record of what properties were actually
Indeed, well-known is the rule that departures from procedure may be sold to satisfy the debt. The strictness in the observance of accuracy and
forgiven where they do not appear to have impaired the substantial rights of correctness in the description of the properties renders the enumeration in the
the parties.27 Apropos in this regard is Cometa v. CA,28 where we said that certificate exclusive. Thus, subsequently including properties which have not
been explicitly mentioned therein for registration purposes under suspicious
circumstances smacks of fraud. The explanation that the land on which the
There is no question that petitioners were remiss in attending with dispatch to properties sold is necessarily included and, hence, was belatedly typed on the
the protection of their interests as regards the subject lots, and for that reason dorsal portion of the copy of the certificate subsequently registered is at best a
the case in the lower court was dismissed on a technicality and no definitive lame excuse unworthy of belief.
pronouncement on the inadequacy of the price paid for the levied properties
was ever made. In this regard, it bears stressing that procedural rules are not
to be belittled or dismissed simply because their non-observance may have The appellate court correctly observed that there was a marked difference in
resulted in prejudice to a partys substantive rights as in this case. Like all the appearance of the typewritten words appearing on the first page of the
rules, they are required to be followed except when only for the most copy of the Certificate of Sale registered with the Registry of Deeds 38 and
persuasive of reasons they may be relaxed to relieve a litigant of an injustice those appearing at the dorsal portion thereof. Underscoring the irregularity of
not commensurate with the degree of his thoughtlessness in not complying the intercalation is the clearly devious attempt to let such an insertion pass
with the procedure prescribed.29  (emphasis and italics supplied.) unnoticed by typing the same at the back of the first page instead of on the
second page which was merely half-filled and could accommodate the entry
with room to spare.
In short, since rules of procedure are mere tools designed to facilitate the
attainment of justice, their strict and rigid application which would result in
technicalities that tend to frustrate rather than promote substantial justice must The argument that the land on which the buildings levied upon in execution is
always be avoided.30 Technicality should not be allowed to stand in the way of necessarily included is, likewise, tenuous. Article 415 of the Civil Code
equitably and completely resolving the rights and obligations of the provides:
parties.31cräläwvirtualibräry
ART. 415. The following are immovable property:
Eschewing, therefore, the procedural objections raised by petitioner, it
behooves us to address the issue of whether or not the questioned writ of
(1) Land, buildings, roads and constructions of all kinds adhered to the soil.
possession is in fact a nullity considering that it includes real property not
expressly mentioned in the Certificate of Sale of Real Property.
xxx
Petitioner, in sum, dwells on the general proposition that since the certificate
of sale is a public document, it enjoys the presumption of regularity and all (3) Everything attached to an immovable in a fixed manner, in such a way
entries therein are presumed to be done in the performance of regular that it cannot be separated therefrom without breaking them material or
functions. deterioration of the object;

17
(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed For resolution before this Court are two motions filed by the petitioner, J.G.
in buildings or on lands by the owner of the immovable in such a manner that Summit Holdings, Inc. for reconsideration of our Resolution dated September
it reveals the intention to attach them permanently to the tenements; 24, 2003 and to elevate this case to the Court En Banc. The petitioner
questions the Resolution which reversed our Decision of November 20, 2000,
which in turn reversed and set aside a Decision of the Court of Appeals
(5) Machinery, receptacles, instruments or implements intended by the owner
promulgated on July 18, 1995.
of the tenement for an industry or works which may be carried on in a
building or on a piece of land, and which tend directly to meet the needs of the
said industry or works; I. Facts

(6) Animal houses, pigeon houses, beehives, fish ponds or breeding places of The undisputed facts of the case, as set forth in our Resolution of September
similar nature, in case their owner has placed them or preserves them with the 24, 2003, are as follows:
intention to have them permanently attached to the land, and forming a
permanent part of it; the animals in these places are also included;
On January 27, 1997, the National Investment and Development Corporation
(NIDC), a government corporation, entered into a Joint Venture Agreement
xxx (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI)
for the construction, operation and management of the Subic National
Shipyard, Inc. (SNS) which subsequently became the Philippine Shipyard and
(9) Docks and structures which, though floating, are intended by their nature
Engineering Corporation (PHILSECO). Under the JVA, the NIDC and
and object to remain at a fixed place on a river, lake or coast;
KAWASAKI will contribute ₱330 million for the capitalization of
PHILSECO in the proportion of 60%-40% respectively. One of its salient
xxx. features is the grant to the parties of the right of first refusal should either of
them decide to sell, assign or transfer its interest in the joint venture, viz:
The foregoing provision of the Civil Code enumerates land and
buildings separately. This can only mean that a building is, by itself, 1.4 Neither party shall sell, transfer or assign all or any part of its interest in
considered immovable.39 Thus, it has been held that SNS [PHILSECO] to any third party without giving the other under the same
terms the right of first refusal. This provision shall not apply if the transferee
is a corporation owned or controlled by the GOVERNMENT or by a
. . . while it is true that a mortgage of land necessarily includes, in the absence KAWASAKI affiliate.
of stipulation of the improvements thereon, buildings, still a building by itself
may be mortgaged apart from the land on which it has been built. Such
mortgage would be still a real estate mortgage for the building would still be On November 25, 1986, NIDC transferred all its rights, title and interest in
considered immovable property even if dealt with separately and apart from PHILSECO to the Philippine National Bank (PNB). Such interests were
the land.40  (emphasis and italics supplied) subsequently transferred to the National Government pursuant to
Administrative Order No. 14. On December 8, 1986, President Corazon C.
Aquino issued Proclamation No. 50 establishing the Committee on
In this case, considering that what was sold by virtue of the writ of execution Privatization (COP) and the Asset Privatization Trust (APT) to take title to,
issued by the trial court was merely the storehouse and bodega constructed on and possession of, conserve, manage and dispose of non-performing assets of
the parcel of land covered by Transfer Certificate of Title No. T-40785, which the National Government. Thereafter, on February 27, 1987, a trust agreement
by themselves are real properties of respondents spouses, the same should be was entered into between the National Government and the APT wherein the
regarded as separate and distinct from the conveyance of the lot on which they latter was named the trustee of the National Government's share in
stand. PHILSECO. In 1989, as a result of a quasi-reorganization of PHILSECO to
settle its huge obligations to PNB, the National Government's shareholdings in
WHEREFORE, in view of all the foregoing, the petition is hereby DENIED PHILSECO increased to 97.41% thereby reducing KAWASAKI's
for lack of merit. The Decision dated May 13, 2002 of the Court of Appeals in shareholdings to 2.59%.
CA-G.R. SP No. 65891, which declared the writ of possession issued by the
Regional Trial Court of Balanga City, Branch 1, on July 18, 2001, null and In the interest of the national economy and the government, the COP and the
void, is AFFIRMED in toto. APT deemed it best to sell the National Government's share in PHILSECO to
private entities. After a series of negotiations between the APT and
SO ORDERED. KAWASAKI, they agreed that the latter's right of first refusal under the JVA
be "exchanged" for the right to top by five percent (5%) the highest bid for the
said shares. They further agreed that KAWASAKI would be entitled to name
a company in which it was a stockholder, which could exercise the right to
top. On September 7, 1990, KAWASAKI informed APT that Philyards
Holdings, Inc. (PHI)1 would exercise its right to top.

At the pre-bidding conference held on September 18, 1993, interested bidders


were given copies of the JVA between NIDC and KAWASAKI, and of the
Asset Specific Bidding Rules (ASBR) drafted for the National Government's
87.6% equity share in PHILSECO. The provisions of the ASBR were
explained to the interested bidders who were notified that the bidding would
G.R. No. 124293             January 31, 2005 be held on December 2, 1993. A portion of the ASBR reads:

J.G. SUMMIT HOLDINGS, INC., petitioner, 1.0 The subject of this Asset Privatization Trust (APT) sale through public
vs. bidding is the National Government's equity in PHILSECO consisting of
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its 896,869,942 shares of stock (representing 87.67% of PHILSECO's
Chairman and Members; ASSET PRIVATIZATION TRUST; and outstanding capital stock), which will be sold as a whole block in accordance
PHILYARDS HOLDINGS, INC., respondents. with the rules herein enumerated.

RESOLUTION xxx xxx xxx

PUNO, J.: 2.0 The highest bid, as well as the buyer, shall be subject to the final approval
of both the APT Board of Trustees and the Committee on Privatization (COP).

18
2.1 APT reserves the right in its sole discretion, to reject any or all bids. the right to top; (c) giving the same option to top to PHI constituted
unwarranted benefit to a third party; (d) no right of first refusal can be
exercised in a public bidding or auction sale; and (e) the JG Summit
3.0 This public bidding shall be on an Indicative Price Bidding basis. The
consortium was not estopped from questioning the proceedings.
Indicative price set for the National Government's 87.67% equity in
PHILSECO is PESOS: ONE BILLION THREE HUNDRED MILLION
(₱1,300,000,000.00). On February 2, 1994, petitioner was notified that PHI had fully paid the
balance of the purchase price of the subject bidding. On February 7, 1994, the
APT notified petitioner that PHI had exercised its option to top the highest bid
xxx xxx xxx
and that the COP had approved the same on January 6, 1994. On February 24,
1994, the APT and PHI executed a Stock Purchase Agreement. Consequently,
6.0 The highest qualified bid will be submitted to the APT Board of Trustees petitioner filed with this Court a Petition for Mandamus under G.R. No.
at its regular meeting following the bidding, for the purpose of determining 114057. On May 11, 1994, said petition was referred to the Court of Appeals.
whether or not it should be endorsed by the APT Board of Trustees to the On July 18, 1995, the Court of Appeals denied the same for lack of merit. It
COP, and the latter approves the same. The APT shall advise Kawasaki Heavy ruled that the petition for mandamus was not the proper remedy to question
Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc., that the the constitutionality or legality of the right of first refusal and the right to top
highest bid is acceptable to the National Government. Kawasaki Heavy that was exercised by KAWASAKI/PHI, and that the matter must be brought
Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period "by the proper party in the proper forum at the proper time and threshed out in
of thirty (30) calendar days from the date of receipt of such advice from APT a full blown trial." The Court of Appeals further ruled that the right of first
within which to exercise their "Option to Top the Highest Bid" by offering a refusal and the right to top are prima facie legal and that the petitioner, "by
bid equivalent to the highest bid plus five (5%) percent thereof. participating in the public bidding, with full knowledge of the right to top
granted to KAWASAKI/[PHILYARDS] is…estopped from questioning the
validity of the award given to [PHILYARDS] after the latter exercised the
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, right to top and had paid in full the purchase price of the subject shares,
Inc. exercise their "Option to Top the Highest Bid," they shall so notify the pursuant to the ASBR." Petitioner filed a Motion for Reconsideration of said
APT about such exercise of their option and deposit with APT the amount Decision which was denied on March 15, 1996. Petitioner thus filed a Petition
equivalent to ten percent (10%) of the highest bid plus five percent (5%) for Certiorari with this Court alleging grave abuse of discretion on the part of
thereof within the thirty (30)-day period mentioned in paragraph 6.0 above. the appellate court.
APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they
shall have a period of ninety (90) days from the receipt of the APT's notice On November 20, 2000, this Court rendered x x x [a] Decision ruling among
within which to pay the balance of their bid price. others that the Court of Appeals erred when it dismissed the petition on the
sole ground of the impropriety of the special civil action of mandamus
because the petition was also one of certiorari. It further ruled that a shipyard
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, like PHILSECO is a public utility whose capitalization must be sixty percent
Inc. fail to exercise their "Option to Top the Highest Bid" within the thirty (60%) Filipino-owned. Consequently, the right to top granted to KAWASAKI
(30)-day period, APT will declare the highest bidder as the winning bidder. under the Asset Specific Bidding Rules (ASBR) drafted for the sale of the
87.67% equity of the National Government in PHILSECO is illegal — not
xxx xxx xxx only because it violates the rules on competitive bidding — but more so,
because it allows foreign corporations to own more than 40% equity in the
shipyard. It also held that "although the petitioner had the opportunity to
12.0 The bidder shall be solely responsible for examining with appropriate examine the ASBR before it participated in the bidding, it cannot be estopped
care these rules, the official bid forms, including any addenda or amendments from questioning the unconstitutional, illegal and inequitable provisions
thereto issued during the bidding period. The bidder shall likewise be thereof." Thus, this Court voided the transfer of the national government's
responsible for informing itself with respect to any and all conditions 87.67% share in PHILSECO to Philyard[s] Holdings, Inc., and upheld the
concerning the PHILSECO Shares which may, in any manner, affect the right of JG Summit, as the highest bidder, to take title to the said shares, viz:
bidder's proposal. Failure on the part of the bidder to so examine and inform
itself shall be its sole risk and no relief for error or omission will be given by
APT or COP. . . . WHEREFORE, the instant petition for review on certiorari is GRANTED.
The assailed Decision and Resolution of the Court of Appeals are
REVERSED and SET ASIDE. Petitioner is ordered to pay to APT its bid
At the public bidding on the said date, petitioner J.G. Summit Holdings, price of Two Billion Thirty Million Pesos (₱2,030,000,000.00), less its bid
Inc.2 submitted a bid of Two Billion and Thirty Million Pesos deposit plus interests upon the finality of this Decision. In turn, APT is
(₱2,030,000,000.00) with an acknowledgment of ordered to:
KAWASAKI/[PHILYARDS'] right to top, viz:

(a) accept the said amount of ₱2,030,000,000.00 less bid deposit


4. I/We understand that the Committee on Privatization (COP) has up to thirty and interests from petitioner;
(30) days to act on APT's recommendation based on the result of this bidding.
Should the COP approve the highest bid, APT shall advise Kawasaki Heavy
Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc. that the (b) execute a Stock Purchase Agreement with petitioner;
highest bid is acceptable to the National Government. Kawasaki Heavy
Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period (c) cause the issuance in favor of petitioner of the certificates of
of thirty (30) calendar days from the date of receipt of such advice from APT stocks representing 87.6% of PHILSECO's total capitalization;
within which to exercise their "Option to Top the Highest Bid" by offering a
bid equivalent to the highest bid plus five (5%) percent thereof.
(d) return to private respondent PHGI the amount of Two Billion
One Hundred Thirty-One Million Five Hundred Thousand Pesos
As petitioner was declared the highest bidder, the COP approved the sale on (₱2,131,500,000.00); and
December 3, 1993 "subject to the right of Kawasaki Heavy Industries,
Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's bid by 5% as specified in
the bidding rules." (e) cause the cancellation of the stock certificates issued to PHI.

On December 29, 1993, petitioner informed APT that it was protesting the SO ORDERED.
offer of PHI to top its bid on the grounds that: (a) the KAWASAKI/PHI
consortium composed of KAWASAKI, [PHILYARDS], Mitsui, Keppel, SM
In separate Motions for Reconsideration, respondents submit[ted] three basic
Group, ICTSI and Insular Life violated the ASBR because the last four (4)
issues for x x x resolution: (1) Whether PHILSECO is a public utility; (2)
companies were the losing bidders thereby circumventing the law and
Whether under the 1977 JVA, KAWASAKI can exercise its right of first
prejudicing the weak winning bidder; (b) only KAWASAKI could exercise
19
refusal only up to 40% of the total capitalization of PHILSECO; and (3) Resolution was based on well-settled jurisprudence. Likewise, PHILYARDS
Whether the right to top granted to KAWASAKI violates the principles of stresses that the Resolution was merely an outcome of the motions for
competitive bidding.3 (citations omitted) reconsideration filed by it and the COP and APT and is "consistent with the
inherent power of courts to ‘amend and control its process and orders so as to
make them conformable to law and justice.’ (Rule 135, sec. 5)" 14 Private
In a Resolution dated September 24, 2003, this Court ruled in favor of the
respondent belittles the petitioner’s allegations regarding the change in
respondents. On the first issue, we held that Philippine Shipyard and
ponente and the alleged executive interference as shown by former Secretary
Engineering Corporation (PHILSECO) is not a public utility, as by nature, a
of Finance Jose Isidro Camacho’s memorandum dated November 5, 2001
shipyard is not a public utility4 and that no law declares a shipyard to be a
arguing that these do not justify a referral of the present case to the Court en
public utility.5 On the second issue, we found nothing in the 1977 Joint
banc.
Venture Agreement (JVA) which prevents Kawasaki Heavy Industries, Ltd. of
Kobe, Japan (KAWASAKI) from acquiring more than 40% of PHILSECO’s
total capitalization.6 On the final issue, we held that the right to top granted to In insisting that its Motion to Elevate This Case to the Court En Banc should
KAWASAKI in exchange for its right of first refusal did not violate the be granted, J.G. Summit further argued that: its Opposition to the Office of the
principles of competitive bidding.7 Solicitor General’s Motion to Refer is different from its own Motion to
Elevate; different grounds are invoked by the two motions; there was
unwarranted "executive interference"; and the change in ponente is merely
On October 20, 2003, the petitioner filed a Motion for Reconsideration 8 and a
noted in asserting that this case should be decided by the Court en banc.15
Motion to Elevate This Case to the Court En Banc.9 Public respondents
Committee on Privatization (COP) and Asset Privatization Trust (APT), and
private respondent Philyards Holdings, Inc. (PHILYARDS) filed their We find no merit in petitioner’s contention that the propriety of the bidding
Comments on J.G. Summit Holdings, Inc.’s (JG Summit’s) Motion for process involved in the present case has been confused with the policy issue
Reconsideration and Motion to Elevate This Case to the Court En Banc on of the fate of the shipping industry which, petitioner maintains, has never been
January 29, 2004 and February 3, 2004, respectively. an issue that is determinative of this case. The Court’s Resolution of
September 24, 2003 reveals a clear and definitive ruling on the propriety of
the bidding process. In discussing whether the right to top granted to
II. Issues
KAWASAKI in exchange for its right of first refusal violates the principles of
competitive bidding, we made an exhaustive discourse on the rules and
Based on the foregoing, the relevant issues to resolve to end this litigation are principles of public bidding and whether they were complied with in the case
the following: at bar.16 This Court categorically ruled on the petitioner’s argument that
PHILSECO, as a shipyard, is a public utility which should maintain a 60%-
40% Filipino-foreign equity ratio, as it was a pivotal issue. In doing so, we
1. Whether there are sufficient bases to elevate the case at bar to recognized the impact of our ruling on the shipbuilding industry which was
the Court en banc. beyond avoidance.17

2. Whether the motion for reconsideration raises any new matter or We reject petitioner’s argument that the present case may be considered under
cogent reason to warrant a reconsideration of this Court’s the Supreme Court Resolution dated February 23, 1984 which included
Resolution of September 24, 2003. among en banc cases those involving a novel question of law and those where
a doctrine or principle laid down by the court en banc or in division may be
Motion to Elevate this Case to the modified or reversed. The case was resolved based on basic principles of the
right of first refusal in commercial law and estoppel in civil law. Contractual
obligations arising from rights of first refusal are not new in this jurisdiction
Court En Banc and have been recognized in numerous cases. 18 Estoppel is too known a civil
law concept to require an elongated discussion. Fundamental principles on
The petitioner prays for the elevation of the case to the Court en banc on the public bidding were likewise used to resolve the issues raised by the
following grounds: petitioner. To be sure, petitioner leans on the right to top in a public bidding in
arguing that the case at bar involves a novel issue. We are not swayed. The
right to top was merely a condition or a reservation made in the bidding rules
1. The main issue of the propriety of the bidding process involved which was fully disclosed to all bidding parties. In Bureau Veritas,
in the present case has been confused with the policy issue of the represented by Theodor H. Hunermann v. Office of the President, et
supposed fate of the shipping industry which has never been an al., 19 we dealt with this conditionality, viz:
issue that is determinative of this case.10

x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v.


2. The present case may be considered under the Supreme Court Aytona, et al., (L-18751, 28 April 1962, 4 SCRA 1245), that in an "invitation
Resolution dated February 23, 1984 which included among en to bid, there is a condition imposed upon the bidders to the effect that the
banc cases those involving a novel question of law and those bidding shall be subject to the right of the government to reject any and
where a doctrine or principle laid down by the Court en banc or in all bids subject to its discretion. In the case at bar, the government has
division may be modified or reversed.11 made its choice and unless an unfairness or injustice is shown, the losing
bidders have no cause to complain nor right to dispute that choice. This is
3. There was clear executive interference in the judicial functions a well-settled doctrine in this jurisdiction and elsewhere."
of the Court when the Honorable Jose Isidro Camacho, Secretary
of Finance, forwarded to Chief Justice Davide, a memorandum The discretion to accept or reject a bid and award contracts is vested in the
dated November 5, 2001, attaching a copy of the Foreign Government agencies entrusted with that function. The discretion given to the
Chambers Report dated October 17, 2001, which matter was authorities on this matter is of such wide latitude that the Courts will not
placed in the agenda of the Court and noted by it in a formal interfere therewith, unless it is apparent that it is used as a shield to a
resolution dated November 28, 2001.12 fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The
exercise of this discretion is a policy decision that necessitates prior inquiry,
Opposing J.G. Summit’s motion to elevate the case en banc, PHILYARDS investigation, comparison, evaluation, and deliberation. This task can best be
points out the petitioner’s inconsistency in discharged by the Government agencies concerned, not by the Courts. The
previously opposing PHILYARDS’ Motion to Refer the Case to the Court En role of the Courts is to ascertain whether a branch or instrumentality of the
Banc. PHILYARDS contends that J.G. Summit should now be estopped from Government has transgressed its constitutional boundaries. But the Courts will
asking that the case be referred to the Court en banc. PHILYARDS further not interfere with executive or legislative discretion exercised within those
contends that the Supreme Court en banc is not an appellate court to which boundaries. Otherwise, it strays into the realm of policy decision-making.
decisions or resolutions of its divisions may be appealed citing Supreme Court
Circular No. 2-89 dated February 7, 1989.13 PHILYARDS also alleges that
there is no novel question of law involved in the present case as the assailed
20
It is only upon a clear showing of grave abuse of discretion that the Courts refusal, and recognizing the assignable nature of contracts rights.26 Also, the
will set aside the award of a contract made by a government entity. Grave ruling that shipyards are not public utilities relies on established case law and
abuse of discretion implies a capricious, arbitrary and whimsical exercise of fundamental rules of statutory construction. PHILYARDS stresses that
power (Filinvest Credit Corp. v. Intermediate Appellate Court, No. 65935, 30 KAWASAKI’s right of first refusal or even the right to top is not limited to
September 1988, 166 SCRA 155). The abuse of discretion must be so patent the 40% equity of the latter.27 On the landholding issue raised by J.G. Summit,
and gross as to amount to an evasion of positive duty or to a virtual refusal to PHILYARDS emphasizes that this is a non-issue and even involves a question
perform a duty enjoined by law, as to act at all in contemplation of law, where of fact. Even assuming that this Court can take cognizance of such question of
the power is exercised in an arbitrary and despotic manner by reason of fact even without the benefit of a trial, PHILYARDS opines that landholding
passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L- by PHILSECO at the time of the bidding is irrelevant because what is
40867, 26 July 1988, 163 SCRA 489). essential is that ultimately a qualified entity would eventually hold
PHILSECO’s real estate properties.28 Further, given the assignable nature of
the right of first refusal, any applicable nationality restrictions, including
The facts in this case do not indicate any such grave abuse of discretion on the
landholding limitations, would not affect the right of first refusal itself, but
part of public respondents when they awarded the CISS contract to
only the manner of its exercise.29 Also, PHILYARDS argues that if this Court
Respondent SGS. In the "Invitation to Prequalify and Bid" (Annex "C,"
takes cognizance of J.G. Summit’s allegations of fact regarding PHILSECO’s
supra), the CISS Committee made an express reservation of the right of the
landholding, it must also recognize PHILYARDS’ assertions that
Government to "reject any or all bids or any part thereof or waive any
PHILSECO’s landholdings were sold to another corporation. 30 As regards the
defects contained thereon and accept an offer most advantageous to the
right of first refusal, private respondent explains that KAWASAKI’s reduced
Government." It is a well-settled rule that where such reservation is
shareholdings (from 40% to 2.59%) did not translate to a deprivation or loss
made in an Invitation to Bid, the highest or lowest bidder, as the case may
of its contractually granted right of first refusal. 31 Also, the bidding was valid
be, is not entitled to an award as a matter of right (C & C Commercial
because PHILYARDS exercised the right to top and it was of no moment that
Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the lowest
losing bidders later joined PHILYARDS in raising the purchase price.32
Bid or any Bid may be rejected or, in the exercise of sound discretion, the
award may be made to another than the lowest bidder (A.C. Esguerra & Sons
v. Aytona, supra, citing 43 Am. Jur., 788). (emphases supplied)1awphi1.nét In cadence with the private respondent PHILYARDS, public respondents
COP and APT contend:
Like the condition in the Bureau Veritas case, the right to top was a
condition imposed by the government in the bidding rules which was made 1. The conversion of the right of first refusal into a right to top by
known to all parties. It was a condition imposed on all bidders equally, 5% does not violate any provision in the JVA between NIDC and
based on the APT’s exercise of its discretion in deciding on how best to KAWASAKI.
privatize the government’s shares in PHILSECO. It was not a whimsical
or arbitrary condition plucked from the ether and inserted in the bidding rules
2. PHILSECO is not a public utility and therefore not governed by
but a condition which the APT approved as the best way the government
the constitutional restriction on foreign ownership.
could comply with its contractual obligations to KAWASAKI under the JVA
and its mandate of getting the most advantageous deal for the government.
The right to top had its history in the mutual right of first refusal in the JVA 3. The petitioner is legally estopped from assailing the validity of
and was reached by agreement of the government and KAWASAKI. the proceedings of the public bidding as it voluntarily submitted
itself to the terms of the ASBR which included the provision on
the right to top.
Further, there is no "executive interference" in the functions of this Court by
the mere filing of a memorandum by Secretary of Finance Jose Isidro
Camacho. The memorandum was merely "noted" to acknowledge its filing. It 4. The right to top was exercised by PHILYARDS as the nominee
had no further legal significance. Notably too, the assailed Resolution dated of KAWASAKI and the fact that PHILYARDS formed a
September 24, 2003 was decided unanimously by the Special First consortium to raise the required amount to exercise the right to top
Division in favor of the respondents. the highest bid by 5% does not violate the JVA or the ASBR.

Again, we emphasize that a decision or resolution of a Division is that of the 5. The 60%-40% Filipino-foreign constitutional requirement for
Supreme Court20 and the Court en banc is not an appellate court to which the acquisition of lands does not apply to PHILSECO because as
decisions or resolutions of a Division may be appealed.21 admitted by petitioner itself, PHILSECO no longer owns real
property.
For all the foregoing reasons, we find no basis to elevate this case to the
Court en banc. 6. Petitioner’s motion to elevate the case to the Court en banc is
baseless and would only delay the termination of this case.33
Motion for Reconsideration
In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the
arguments of the public and private respondents in this wise:
Three principal arguments were raised in the petitioner’s Motion for
Reconsideration. First, that a fair resolution of the case should be based on
contract law, not on policy considerations; the contracts do not authorize the 1. The award by the APT of 87.67% shares of PHILSECO to
right to top to be derived from the right of first refusal. 22 Second, that neither PHILYARDS with losing bidders through the exercise of a right to
the right of first refusal nor the right to top can be legally exercised by the top, which is contrary to law and the constitution is null and void
consortium which is not the proper party granted such right under either the for being violative of substantive due process and the abuse of
JVA or the Asset Specific Bidding Rules (ASBR). 23 Third, that the right provision in the Civil Code.
maintenance of the 60%-40% relationship between the National Investment
and Development Corporation (NIDC) and KAWASAKI arises from contract
a. The bidders[’] right to top was actually exercised by
and from the Constitution because PHILSECO is a landholding corporation
losing bidders.
and need not be a public utility to be bound by the 60%-40% constitutional
limitation.24
b. The right to top or the right of first refusal cannot co-
exist with a genuine competitive bidding.
On the other hand, private respondent PHILYARDS asserts that J.G. Summit
has not been able to show compelling reasons to warrant a reconsideration of
the Decision of the Court. 25 PHILYARDS denies that the Decision is based c. The benefits derived from the right to top were
mainly on policy considerations and points out that it is premised on unwarranted.
principles governing obligations and contracts and corporate law such as the
rule requiring respect for contractual stipulations, upholding rights of first

21
2. The landholding issue has been a legitimate issue since the start corporation which the government sought to privatize. As such, the persons
of this case but is shamelessly ignored by the respondents. with whom PHILYARDS desired to enter into business with in order to raise
funds to purchase the shares are basically its business. This is in contrast to a
case involving a contract for the operation of or construction of a government
a. The landholding issue is not a non-issue.
infrastructure where the identity of the buyer/bidder or financier constitutes an
important consideration. In such cases, the government would have to take
b. The landholding issue does not pose questions of utmost precaution to protect public interest by ensuring that the parties with
fact. which it is contracting have the ability to satisfactorily construct or operate the
infrastructure.
c. That PHILSECO owned land at the time that the
right of first refusal was agreed upon and at the time of On the landholding issue, J.G. Summit submits that since PHILSECO is a
the bidding are most relevant. landholding company, KAWASAKI could exercise its right of first refusal
only up to 40% of the shares of PHILSECO due to the constitutional
prohibition on landholding by corporations with more than 40% foreign-
d. Whether a shipyard is a public utility is not the core owned equity. It further argues that since KAWASAKI already held at least
issue in this case. 40% equity in PHILSECO, the right of first refusal was inutile and as such,
could not subsequently be converted into the right to top. 37 Petitioner also
3. Fraud and bad faith attend the alleged conversion of an asserts that, at present, PHILSECO continues to violate the constitutional
inexistent right of first refusal to the right to top. provision on landholdings as its shares are more than 40% foreign-
owned.38 PHILYARDS admits that it may have previously held land but had
already divested such landholdings.39 It contends, however, that even if
a. The history behind the birth of the right to top shows PHILSECO owned land, this would not affect the right of first refusal but only
fraud and bad faith. the exercise thereof. If the land is retained, the right of first refusal, being a
property right, could be assigned to a qualified party. In the alternative, the
b. The right of first refusal was, indeed, "effectively land could be divested before the exercise of the right of first refusal. In the
useless." case at bar, respondents assert that since the right of first refusal was validly
converted into a right to top, which was exercised not by KAWASAKI, but by
PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are
4. Petitioner is not legally estopped to challenge the right to top in owned by Filipinos), then there is no violation of the Constitution. 40 At first, it
this case. would seem that questions of fact beyond cognizance by this Court were
involved in the issue. However, the records show that PHILYARDS admits
a. Estoppel is unavailing as it would stamp validity to it had owned land up until the time of the bidding. 41 Hence, the only issue
an act that is prohibited by law or against public policy. is whether KAWASAKI had a valid right of first refusal over
PHILSECO shares under the JVA considering that PHILSECO owned
land until the time of the bidding and KAWASAKI already held 40% of
b. Deception was patent; the right to top was an PHILSECO’s equity.
attractive nuisance.

We uphold the validity of the mutual rights of first refusal under the JVA
c. The 10% bid deposit was placed in escrow. between KAWASAKI and NIDC. First of all, the right of first refusal is a
property right of PHILSECO shareholders, KAWASAKI and NIDC, under
J.G. Summit’s insistence that the right to top cannot be sourced from the right the terms of their JVA. This right allows them to purchase the shares of their
of first refusal is not new and we have already ruled on the issue in our co-shareholder before they are offered to a third party. The agreement of co-
Resolution of September 24, 2003. We upheld the mutual right of first refusal shareholders to mutually grant this right to each other, by itself, does not
in the JVA.34 We also ruled that nothing in the JVA prevents KAWASAKI constitute a violation of the provisions of the Constitution limiting land
from acquiring more than 40% of PHILSECO’s total ownership to Filipinos and Filipino corporations. As PHILYARDS
capitalization.35 Likewise, nothing in the JVA or ASBR bars the conversion of correctly puts it, if PHILSECO still owns land, the right of first refusal can be
the right of first refusal to the right to top. In sum, nothing new and of validly assigned to a qualified Filipino entity in order to maintain the 60%-
significance in the petitioner’s pleading warrants a reconsideration of our 40% ratio. This transfer, by itself, does not amount to a violation of the Anti-
ruling. Dummy Laws, absent proof of any fraudulent intent. The transfer could be
made either to a nominee or such other party which the holder of the right of
first refusal feels it can comfortably do business with. Alternatively,
Likewise, we already disposed of the argument that neither the right of first PHILSECO may divest of its landholdings, in which case KAWASAKI, in
refusal nor the right to top can legally be exercised by the consortium which is exercising its right of first refusal, can exceed 40% of PHILSECO’s equity. In
not the proper party granted such right under either the JVA or the ASBR. fact, it can even be said that if the foreign shareholdings of a landholding
Thus, we held: corporation exceeds 40%, it is not the foreign stockholders’ ownership of
the shares which is adversely affected but the capacity of the corporation
The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM to own land – that is, the corporation becomes disqualified to own land. This
Group, Insular Life Assurance, Mitsui and ICTSI), has joined PHILYARDS finds support under the basic corporate law principle that the corporation and
in the latter's effort to raise ₱2.131 billion necessary in exercising the right to its stockholders are separate juridical entities. In this vein, the right of first
top is not contrary to law, public policy or public morals. There is nothing in refusal over shares pertains to the shareholders whereas the capacity to own
the ASBR that bars the losing bidders from joining either the winning bidder land pertains to the corporation. Hence, the fact that PHILSECO owns land
(should the right to top is not exercised) or KAWASAKI/PHI (should it cannot deprive stockholders of their right of first refusal. No law disqualifies
exercise its right to top as it did), to raise the purchase price. The petitioner a person from purchasing shares in a landholding corporation even if the
did not allege, nor was it shown by competent evidence, that the participation latter will exceed the allowed foreign equity, what the law disqualifies is
of the losing bidders in the public bidding was done with fraudulent intent. the corporation from owning land. This is the clear import of the following
Absent any proof of fraud, the formation by [PHILYARDS] of a consortium provisions in the Constitution:
is legitimate in a free enterprise system. The appellate court is thus correct in
holding the petitioner estopped from questioning the validity of the transfer of Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
the National Government's shares in PHILSECO to respondent.36 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
Further, we see no inherent illegality on PHILYARDS’ act in seeking funding State. With the exception of agricultural lands, all other natural resources shall
from parties who were losing bidders. This is a purely commercial decision not be alienated. The exploration, development, and utilization of natural
over which the State should not interfere absent any legal infirmity. It is resources shall be under the full control and supervision of the State. The State
emphasized that the case at bar involves the disposition of shares in a may directly undertake such activities, or it may enter into co-production,
joint venture, or production-sharing agreements with Filipino citizens, or
22
corporations or associations at least sixty per centum of whose capital is evidence. The Court needs to validate these factual allegations based on
owned by such citizens. Such agreements may be for a period not exceeding competent and reliable evidence. As such, the Court cannot resolve the
twenty-five years, renewable for not more than twenty-five years, and under questions they pose. Second, J.G. Summit misreads the provisions of the
such terms and conditions as may be provided by law. In cases of water rights Constitution cited in its own pleadings, to wit:
for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and limit of
29.2 Petitioner has consistently pointed out in the past that private respondent
the grant.
is not a 60%-40% corporation, and this violates the Constitution x x x The
violation continues to this day because under the law, it continues to own
xxx xxx xxx real property…

Section 7. Save in cases of hereditary succession, no private lands shall be xxx xxx xxx
transferred or conveyed except to individuals, corporations, or
associations qualified to acquire or hold lands of the public
32. To review the constitutional provisions involved, Section 14, Article XIV
domain.42 (emphases supplied)
of the 1973 Constitution (the JVA was signed in 1977), provided:

The petitioner further argues that "an option to buy land is void in itself
"Save in cases of hereditary succession, no private lands shall be transferred
(Philippine Banking Corporation v. Lui She, 21 SCRA 52 [1967]). The right
or conveyed except to individuals, corporations, or associations qualified to
of first refusal granted to KAWASAKI, a Japanese corporation, is similarly
acquire or hold lands of the public domain."
void. Hence, the right to top, sourced from the right of first refusal, is also
void."43 Contrary to the contention of petitioner, the case of Lui She did not
that say "an option to buy land is void in itself," for we ruled as follows: 32.1 This provision is the same as Section 7, Article XII of the 1987
Constitution.
x x x To be sure, a lease to an alien for a reasonable period is valid.  So is
an option giving an alien the right to buy real property on condition that 32.2 Under the Public Land Act, corporations qualified to acquire or
he is granted Philippine citizenship. As this Court said in Krivenko vs. hold lands of the public domain are corporations at least 60% of which is
Register of Deeds: owned by Filipino citizens (Sec. 22, Commonwealth Act 141, as amended).
(emphases supplied)
[A]liens are not completely excluded by the Constitution from the use of lands
for residential purposes. Since their residence in the Philippines is temporary, As correctly observed by the public respondents, the prohibition in the
they may be granted temporary rights such as a lease contract which is not Constitution applies only to ownership of land.48 It does not extend to
forbidden by the Constitution. Should they desire to remain here forever and immovable or real property as defined under Article 415 of the Civil
share our fortunes and misfortunes, Filipino citizenship is not impossible to Code. Otherwise, we would have a strange situation where the ownership of
acquire. immovable property such as trees, plants and growing fruit attached to the
land49 would be limited to Filipinos and Filipino corporations only.
But if an alien is given not only a lease of, but also an option to buy, a
piece of land, by virtue of which the Filipino owner cannot sell or III.
otherwise dispose of his property, this to last for 50 years, then it becomes
clear that the arrangement is a virtual transfer of ownership whereby the
WHEREFORE, in view of the foregoing, the petitioner’s Motion for
owner divests himself in stages not only of the right to enjoy the land (jus
Reconsideration is DENIED WITH FINALITY and the decision appealed
possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to
from is AFFIRMED. The Motion to Elevate This Case to the Court En
dispose of it (jus disponendi) — rights the sum total of which make up
Banc is likewise DENIED for lack of merit.
ownership. It is just as if today the possession is transferred, tomorrow,
the use, the next day, the disposition, and so on, until ultimately all the
rights of which ownership is made up are consolidated in an alien. And yet SO ORDERED.
this is just exactly what the parties in this case did within this pace of one
year, with the result that Justina Santos'[s] ownership of her property was
reduced to a hollow concept. If this can be done, then the Constitutional ban
against alien landholding in the Philippines, as announced in Krivenko vs.
Register of Deeds, is indeed in grave peril. 44 (emphases supplied; Citations
omitted)
G.R. No. L-26278             August 4, 1927
In Lui She, the option to buy was invalidated because it amounted to a virtual LEON SIBAL , plaintiff-appellant,
transfer of ownership as the owner could not sell or dispose of his properties. vs.
The contract in Lui She prohibited the owner of the land from selling, EMILIANO J. VALDEZ ET AL., defendants.
donating, mortgaging, or encumbering the property during the 50-year period EMILIANO J. VALDEZ, appellee.
of the option to buy. This is not so in the case at bar where the mutual right of J. E. Blanco for appellant.
first refusal in favor of NIDC and KAWASAKI does not amount to a virtual Felix B. Bautista and Santos and Benitez for appellee.
transfer of land to a non-Filipino. In fact, the case at bar involves a right of
first refusal over shares of stock while the Lui She case involves an option
to buy the land itself. As discussed earlier, there is a distinction between the JOHNSON, J.:
shareholder’s ownership of shares and the corporation’s ownership of land
arising from the separate juridical personalities of the corporation and its The action was commenced in the Court of First Instance of the Province of
shareholders. Tarlac on the 14th day of December 1924. The facts are about as conflicting
as it is possible for facts to be, in the trial causes.
We note that in its Motion for Reconsideration, J.G. Summit alleges that
PHILSECO continues to violate the Constitution as its foreign equity is above As a first cause of action the plaintiff alleged that the defendant Vitaliano
40% and yet owns long-term leasehold rights which are real rights.45 It Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of
cites Article 415 of the Civil Code which includes in the definition of execution issued by the Court of First Instance of Pampanga, attached and
immovable property, "contracts for public works, and servitudes and other sold to the defendant Emiliano J. Valdez the sugar cane planted by the
real rights over immovable property."46 Any existing landholding, however, is plaintiff and his tenants on seven parcels of land described in the complaint in
denied by PHILYARDS citing its recent financial statements. 47 First, these are the third paragraph of the first cause of action; that within one year from the
questions of fact, the veracity of which would require introduction of date of the attachment and sale the plaintiff offered to redeem said sugar cane

23
and tendered to the defendant Valdez the amount sufficient to cover the price (b) 1,435.68, the value of the sugar-cane shoots;
paid by the latter, the interest thereon and any assessments or taxes which he
may have paid thereon after the purchase, and the interest corresponding
(c) 646.00, the value of palay harvested by plaintiff;
thereto and that Valdez refused to accept the money and to return the sugar
cane to the plaintiff.
(d) 600.00, the value of 150 cavans of palay which the
defendant was not able to raise by reason of the
As a second cause of action, the plaintiff alleged that the defendant Emiliano
injunction, at P4 cavan. 9,439.08 From that judgment
J. Valdez was attempting to harvest the palay planted in four of the seven
the plaintiff appealed and in his assignments of error
parcels mentioned in the first cause of action; that he had harvested and taken
contends that the lower court erred: (1) In holding that
possession of the palay in one of said seven parcels and in another parcel
the sugar cane in question was personal property and,
described in the second cause of action, amounting to 300 cavans; and that all
therefore, not subject to redemption;
of said palay belonged to the plaintiff.

(2) In holding that parcels 1 and 2 of the complaint belonged to


Plaintiff prayed that a writ of preliminary injunction be issued against the
Valdez, as well as parcels 7 and 8, and that the palay therein was
defendant Emiliano J. Valdez his attorneys and agents, restraining them (1)
planted by Valdez;
from distributing him in the possession of the parcels of land described in the
complaint; (2) from taking possession of, or harvesting the sugar cane in
question; and (3) from taking possession, or harvesting the palay in said (3) In holding that Valdez, by reason of the preliminary injunction
parcels of land. Plaintiff also prayed that a judgment be rendered in his favor failed to realized P6,757.40 from the sugar cane and P1,435.68
and against the defendants ordering them to consent to the redemption of the from sugar-cane shoots (puntas de cana dulce);
sugar cane in question, and that the defendant Valdez be condemned to pay to
the plaintiff the sum of P1,056 the value of palay harvested by him in the two
(4) In holding that, for failure of plaintiff to gather the sugar cane
parcels above-mentioned ,with interest and costs.
on time, the defendant was unable to raise palay on the land, which
would have netted him the sum of P600; and.
On December 27, 1924, the court, after hearing both parties and upon
approval of the bond for P6,000 filed by the plaintiff, issued the writ of
(5) In condemning the plaintiff and his sureties to pay to the
preliminary injunction prayed for in the complaint.
defendant the sum of P9,439.08.

The defendant Emiliano J. Valdez, in his amended answer, denied generally


It appears from the record:
and specifically each and every allegation of the complaint and step up the
following defenses:
(1) That on May 11, 1923, the deputy sheriff of the Province of
Tarlac, by virtue of writ of execution in civil case No. 20203 of the
(a) That the sugar cane in question had the nature of personal
Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon
property and was not, therefore, subject to redemption;
Sibal),levied an attachment on eight parcels of land belonging to
said Leon Sibal, situated in the Province of Tarlac, designated in
(b) That he was the owner of parcels 1, 2 and 7 described in the the second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit
first cause of action of the complaint; B, Exhibit 2-A).

(c) That he was the owner of the palay in parcels 1, 2 and 7; and (2) That on July 30, 1923, Macondray & Co., Inc., bought said
eight parcels of land, at the auction held by the sheriff of the
Province of Tarlac, for the sum to P4,273.93, having paid for the
(d) That he never attempted to harvest the palay in parcels 4 and 5.
said parcels separately as follows (Exhibit C, and 2-A):

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by


(3) That within one year from the sale of said parcel of land, and
reason of the preliminary injunction he was unable to gather the sugar cane,
on the 24th day of September, 1923, the judgment debtor, Leon
sugar-cane shoots (puntas de cana dulce) palay in said parcels of land,
Sibal, paid P2,000 to Macondray & Co., Inc., for the account of the
representing a loss to him of P8,375.20 and that, in addition thereto, he
redemption price of said parcels of land, without specifying the
suffered damages amounting to P3,458.56. He prayed, for a judgment (1)
particular parcels to which said amount was to applied. The
absolving him from all liability under the complaint; (2) declaring him to be
redemption price said eight parcels was reduced, by virtue of said
the absolute owner of the sugar cane in question and of the palay in parcels 1,
transaction, to P2,579.97 including interest (Exhibit C and 2).
2 and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76,
representing the value of the sugar cane and palay in question, including
damages. The record further shows:

Upon the issues thus presented by the pleadings the cause was brought on for (1) That on April 29, 1924, the defendant Vitaliano Mamawal,
trial. After hearing the evidence, and on April 28, 1926, the Honorable deputy sheriff of the Province of Tarlac, by virtue of a writ of
Cayetano Lukban, judge, rendered a judgment against the plaintiff and in execution in civil case No. 1301 of the Province of Pampanga
favor of the defendants — (Emiliano J. Valdez vs. Leon Sibal 1.º — the same parties in the
present case), attached the personal property of said Leon Sibal
located in Tarlac, among which was included the sugar cane now
(1) Holding that the sugar cane in question was personal property
in question in the seven parcels of land described in the complaint
and, as such, was not subject to redemption;
(Exhibit A).

(2) Absolving the defendants from all liability under the complaint;
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public
and
auction said personal properties of Leon Sibal, including the sugar
cane in question to Emilio J. Valdez, who paid therefor the sum of
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, P1,550, of which P600 was for the sugar cane (Exhibit A).
Juan Sangalang and Marcos Sibal to jointly and severally pay to
the defendant Emiliano J. Valdez the sum of P9,439.08 as follows:
(3) That on April 29,1924, said deputy sheriff, by virtue of said
writ of execution, also attached the real property of said Leon Sibal
(a) P6,757.40, the value of the sugar cane; in Tarlac, including all of his rights, interest and participation

24
therein, which real property consisted of eleven parcels of land and entender sobre un contrato de arrendamiento de un predio rustico,
a house and camarin situated in one of said parcels (Exhibit A). resuelve que su terminacion por desahucio no extingue los
derechos del arrendario, para recolectar o percibir los frutos
correspondientes al año agricola, dentro del que nacieron aquellos
(4) That on June 25, 1924, eight of said eleven parcels, including
derechos, cuando el arrendor ha percibido a su vez el importe de la
the house and the camarin, were bought by Emilio J. Valdez at the
renta integra correspondiente, aun cuando lo haya sido por
auction held by the sheriff for the sum of P12,200. Said eight
precepto legal durante el curso del juicio, fundandose para ello, no
parcels were designated in the certificate of sale as parcels 1, 3, 4,
solo en que de otra suerte se daria al desahucio un alcance que no
5, 6, 7, 10 and 11. The house and camarin were situated on parcel 7
tiene, sino en que, y esto es lo interesante a nuestro proposito, la
(Exhibit A).
consideracion de inmuebles que el articulo 334 del Codigo Civil
atribuge a los frutos pendientes, no les priva del caracter de
(5) That the remaining three parcels, indicated in the certificate of productos pertenecientes, como tales, a quienes a ellos tenga
the sheriff as parcels 2, 12, and 13, were released from the derecho, Ilegado el momento de su recoleccion.
attachment by virtue of claims presented by Agustin Cuyugan and
Domiciano Tizon (Exhibit A).
xxx     xxx     xxx

(6) That on the same date, June 25, 1924, Macondray & Co. sold
Mas actualmente y por virtud de la nueva edicion de la Ley
and conveyed to Emilio J. Valdez for P2,579.97 all of its rights and
Hipotecaria, publicada en 16 de diciembre de 1909, con las
interest in the eight parcels of land acquired by it at public auction
reformas introducidas por la de 21 de abril anterior, la hipoteca,
held by the deputy sheriff of Tarlac in connection with civil case
salvo pacto expreso que disponga lo contrario, y cualquiera que sea
No. 20203 of the Court of First Instance of Manila, as stated
la naturaleza y forma de la obligacion que garantice, no comprende
above. Said amount represented the unpaid balance of the
los frutos cualquiera que sea la situacion en que se encuentre. (3
redemption price of said eight parcels, after payment by Leon Sibal
Manresa, 5. edicion, pags. 22, 23.)
of P2,000 on September 24, 1923, fro the account of the
redemption price, as stated above. (Exhibit C and 2).
From the foregoing it appears (1) that, under Spanish authorities, pending
fruits and ungathered products may be sold and transferred as personal
The foregoing statement of facts shows:
property; (2) that the Supreme Court of Spain, in a case of ejectment of a
lessee of an agricultural land, held that the lessee was entitled to gather the
(1) The Emilio J. Valdez bought the sugar cane in question, located products corresponding to the agricultural year, because said fruits did not go
in the seven parcels of land described in the first cause of action of with the land but belonged separately to the lessee; and (3) that under the
the complaint at public auction on May 9 and 10, 1924, for P600. Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land
does not include the fruits and products existing thereon, unless the contract
expressly provides otherwise.
(2) That on July 30, 1923, Macondray & Co. became the owner of
eight parcels of land situated in the Province of Tarlac belonging to
Leon Sibal and that on September 24, 1923, Leon Sibal paid to An examination of the decisions of the Supreme Court of Louisiana may give
Macondray & Co. P2,000 for the account of the redemption price us some light on the question which we are discussing. Article 465 of the
of said parcels. Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of
our Civil Code, provides: "Standing crops and the fruits of trees not gathered,
and trees before they are cut down, are likewise immovable, and are
(3) That on June 25, 1924, Emilio J. Valdez acquired from considered as part of the land to which they are attached."
Macondray & Co. all of its rights and interest in the said eight
parcels of land.
The Supreme Court of Louisiana having occasion to interpret that provision,
held that in some cases "standing crops" may be considered and dealt with as
(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the personal property. In the case of Lumber Co. vs. Sheriff and Tax
rights and interest which Leon Sibal had or might have had on said Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the
eight parcels by virtue of the P2,000 paid by the latter to Civil Code it is provided that 'standing crops and the fruits of trees not
Macondray. gathered and trees before they are cut down . . . are considered as part of the
land to which they are attached, but the immovability provided for is only one
(5) That Emilio J. Valdez became the absolute owner of said eight in abstracto and without reference to rights on or to the crop acquired by
parcels of land. others than the owners of the property to which the crop is attached. . . . The
existence of a right on the growing crop is a mobilization by anticipation, a
gathering as it were in advance, rendering the crop movable quoad the right
The first question raised by the appeal is, whether the sugar cane in question is acquired therein. Our jurisprudence recognizes the possible mobilization of
personal or real property. It is contended that sugar cane comes under the the growing crop." (Citizens' Bank  vs. Wiltz, 31 La. Ann., 244;
classification of real property as "ungathered products" in paragraph 2 of Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629;
article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as Lewis vs. Klotz, 39 La. Ann., 267.)
real property the following: Trees, plants, and ungathered products, while they
are annexed to the land or form an integral part of any immovable property."
That article, however, has received in recent years an interpretation by "It is true," as the Supreme Court of Louisiana said in the case of Porche vs.
the Tribunal Supremo de España, which holds that, under certain conditions, Bodin  (28 La. An., 761) that "article 465 of the Revised Code says that
growing crops may be considered as personal property. (Decision of March standing crops are considered as immovable and as part of the land to which
18, 1904, vol. 97, Civil Jurisprudence of Spain.) they are attached, and article 466 declares that the fruits of an immovable
gathered or produced while it is under seizure are considered as making part
thereof, and incurred to the benefit of the person making the seizure. But the
Manresa, the eminent commentator of the Spanish Civil Code, in discussing evident meaning of these articles, is where the crops belong to the owner of
section 334 of the Civil Code, in view of the recent decisions of the supreme the plantation they form part of the immovable, and where it is seized, the
Court of Spain, admits that growing crops are sometimes considered and fruits gathered or produced inure to the benefit of the seizing creditor.
treated as personal property. He says:

A crop raised on leased premises in no sense forms part of the


No creemos, sin embargo, que esto excluya la excepcionque immovable. It belongs to the lessee, and may be sold by him,
muchos autores hacen tocante a la venta de toda cosecha o de parte whether it be gathered or not, and it may be sold by his judgment
de ella cuando aun no esta cogida (cosa frecuente con la uvay y la creditors. If it necessarily forms part of the leased premises the
naranja), y a la de lenas, considerando ambas como muebles. El result would be that it could not be sold under execution separate
Tribunal Supremo, en sentencia de 18 de marzo de 1904, al and apart from the land. If a lessee obtain supplies to make his
25
crop, the factor's lien would not attach to the crop as a separate Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops
thing belonging to his debtor, but the land belonging to the lessor are personal property. Section 2 of said Act provides: "All personal property
would be affected with the recorded privilege. The law cannot be shall be subject to mortgage, agreeably to the provisions of this Act, and a
construed so as to result in such absurd consequences. mortgage executed in pursuance thereof shall be termed a chattel mortgage."
Section 7 in part provides: "If growing crops be mortgaged the mortgage may
contain an agreement stipulating that the mortgagor binds himself properly to
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
tend, care for and protect the crop while growing.

If the crop quoad the pledge thereof under the act of 1874 was an


It is clear from the foregoing provisions that Act No. 1508 was enacted on the
immovable, it would be destructive of the very objects of the act, it
assumption that "growing crops" are personal property. This consideration
would render the pledge of the crop objects of the act, it would
tends to support the conclusion hereinbefore stated, that paragraph 2 of article
render the pledge of the crop impossible, for if the crop was an
334 of the Civil Code has been modified by section 450 of Act No. 190 and
inseparable part of the realty possession of the latter would be
by Act No. 1508 in the sense that "ungathered products" as mentioned in said
necessary to that of the former; but such is not the case. True, by
article of the Civil Code have the nature of personal property. In other words,
article 465 C. C. it is provided that "standing crops and the fruits of
the phrase "personal property" should be understood to include "ungathered
trees not gathered and trees before they are cut down are likewise
products."
immovable and are considered as part of the land to which they are
attached;" but the immovability provided for is only one in
abstracto and without reference to rights on or to the crop acquired At common law, and generally in the United States, all annual
by other than the owners of the property to which the crop was crops which are raised by yearly manurance and labor, and
attached. The immovability of a growing crop is in the order of essentially owe their annual existence to cultivation by man, . may
things temporary, for the crop passes from the state of a growing to be levied on as personal property." (23 C. J., p. 329.) On this
that of a gathered one, from an immovable to a movable. The question Freeman, in his treatise on the Law of Executions, says:
existence of a right on the growing crop is a mobilization by "Crops, whether growing or standing in the field ready to be
anticipation, a gathering as it were in advance, rendering the crop harvested, are, when produced by annual cultivation, no part of the
movable quoad the right acquired thereon. The provision of our realty. They are, therefore, liable to voluntary transfer as chattels.
Code is identical with the Napoleon Code 520, and we may It is equally well settled that they may be seized and sold under
therefore obtain light by an examination of the jurisprudence of execution. (Freeman on Executions, vol. p. 438.)
France.
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code
The rule above announced, not only by the Tribunal Supremo de España but has been modified by section 450 of the Code of Civil Procedure and by Act
by the Supreme Court of Louisiana, is followed in practically every state of No. 1508, in the sense that, for the purpose of attachment and execution, and
the Union. for the purposes of the Chattel Mortgage Law, "ungathered products" have the
nature of personal property. The lower court, therefore, committed no error in
holding that the sugar cane in question was personal property and, as such,
From an examination of the reports and codes of the State of California and
was not subject to redemption.
other states we find that the settle doctrine followed in said states in
connection with the attachment of property and execution of judgment is, that
growing crops raised by yearly labor and cultivation are considered personal All the other assignments of error made by the appellant, as above stated,
property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p. relate to questions of fact only. Before entering upon a discussion of said
329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; assignments of error, we deem it opportune to take special notice of the failure
Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; of the plaintiff to appear at the trial during the presentation of evidence by the
McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644; defendant. His absence from the trial and his failure to cross-examine the
Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on defendant have lent considerable weight to the evidence then presented for the
Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales, defense.
sec. 200 and 763.)
Coming not to the ownership of parcels 1 and 2 described in the first cause of
Mr. Mechem says that a valid sale may be made of a thing, which though not action of the complaint, the plaintiff made a futile attempt to show that said
yet actually in existence, is reasonably certain to come into existence as the two parcels belonged to Agustin Cuyugan and were the identical parcel 2
natural increment or usual incident of something already in existence, and which was excluded from the attachment and sale of real property of Sibal to
then belonging to the vendor, and then title will vest in the buyer the moment Valdez on June 25, 1924, as stated above. A comparison of the description of
the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the description
387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature of parcels 1 and 2 of the complaint will readily show that they are not the
are said to have a potential existence. A man may sell property of which he is same.
potentially and not actually possessed. He may make a valid sale of the wine
that a vineyard is expected to produce; or the gain a field may grow in a given
On the other hand the evidence for the defendant purported to show that
time; or the milk a cow may yield during the coming year; or the wool that
parcels 1 and 2 of the complaint were included among the parcels bought by
shall thereafter grow upon sheep; or what may be taken at the next cast of a
Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in the
fisherman's net; or fruits to grow; or young animals not yet in existence; or the
deed of sale (Exhibit B and 2), and were also included among the parcels
good will of a trade and the like. The thing sold, however, must be specific
bought by Valdez at the auction of the real property of Leon Sibal on June 25,
and identified. They must be also owned at the time by the vendor.
1924, and corresponded to parcel 3 in the certificate of sale made by the
(Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3
(Exhibit A) is as follows:
It is contended on the part of the appellee that paragraph 2 of article 334 of the
Civil Code has been modified by section 450 of the Code of Civil Procedure
As will be noticed, there is hardly any relation between parcels 1 and 2 of the
as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450
complaint and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But,
enumerates the property of a judgment debtor which may be subjected to
inasmuch as the plaintiff did not care to appear at the trial when the defendant
execution. The pertinent portion of said section reads as follows: "All goods,
offered his evidence, we are inclined to give more weight to the evidence
chattels, moneys, and other property, both real and personal, * * * shall be
adduced by him that to the evidence adduced by the plaintiff, with respect to
liable to execution. Said section 450 and most of the other sections of the
the ownership of parcels 1 and 2 of the compliant. We, therefore, conclude
Code of Civil Procedure relating to the execution of judgment were taken
that parcels 1 and 2 of the complaint belong to the defendant, having acquired
from the Code of Civil Procedure of California. The Supreme Court of
the same from Macondray & Co. on June 25, 1924, and from the plaintiff
California, under section 688 of the Code of Civil Procedure of that state
Leon Sibal on the same date.
(Pomeroy, p. 424) has held, without variation, that growing crops were
personal property and subject to execution.

26
It appears, however, that the plaintiff planted the palay in said parcels and are hereby ordered to pay to the defendant jointly and severally the sum of
harvested therefrom 190 cavans. There being no evidence of bad faith on his P8,900.80, instead of P9,439.08 allowed by the lower court, as follows:
part, he is therefore entitled to one-half of the crop, or 95 cavans. He should
therefore be condemned to pay to the defendant for 95 cavans only, at P3.40 a
cavan, or the sum of P323, and not for the total of 190 cavans as held by the P6,757.40 for the sugar cane;
lower court.
1,220.40 for the sugar cane shoots;

As to the ownership of parcel 7 of the complaint, the evidence shows that said for the palay harvested by plaintiff in parcels 1
323.00
parcel corresponds to parcel 1 of the deed of sale of Macondray & Co, to and 2;
Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to Valdez of
real property belonging to Sibal, executed by the sheriff as above stated for the palay which defendant could have
600.00
(Exhibit A). Valdez is therefore the absolute owner of said parcel, having raised.
acquired the interest of both Macondray and Sibal in said parcel.

With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 8,900.80
3 of the second cause of action, it appears from the testimony of the plaintiff ============
himself that said parcel corresponds to parcel 8 of the deed of sale of
Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of sale
In all other respects, the judgment appealed from is hereby affirmed, with
executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the
costs. So ordered.
absolute owner of said parcel, having acquired the interest of both Macondray
and Sibal therein.
G.R. No. 155076               January 13, 2009
LUIS MARCOS P. LAUREL, Petitioner,
In this connection the following facts are worthy of mention:
vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES &
were attached under said execution. Said parcels of land were sold to PHILIPPINE LONG DISTANCE TELEPHONE
Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On COMPANY Respondents.
September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the
redemption of said parcels of land. (See Exhibits B and C ).
RESOLUTION

Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal


YNARES-SANTIAGO, J.:
was attached, including the sugar cane in question. (Exhibit A) The said
personal property so attached, sold at public auction May 9 and 10, 1924.
April 29, 1924, the real property was attached under the execution in favor of On February 27, 2006, this Court’s First Division rendered judgment in this
Valdez (Exhibit A). June 25, 1924, said real property was sold and purchased case as follows:
by Valdez (Exhibit A).
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
June 25, 1924, Macondray & Co. sold all of the land which they had assailed Orders of the Regional Trial Court and the Decision of the Court of
purchased at public auction on the 30th day of July, 1923, to Valdez. Appeals are REVERSED and SET ASIDE. The Regional Trial Court is
directed to issue an order granting the motion of the petitioner to quash the
Amended Information.
As to the loss of the defendant in sugar cane by reason of the injunction, the
evidence shows that the sugar cane in question covered an area of 22 hectares
and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have yielded an SO ORDERED.1
average crop of 1039 picos and 60 cates; that one-half of the quantity, or 519
picos and 80 cates would have corresponded to the defendant, as owner; that
during the season the sugar was selling at P13 a pico (Exhibit 5 and 5-A). By way of brief background, petitioner is one of the accused in Criminal Case
Therefore, the defendant, as owner, would have netted P 6,757.40 from the No. 99-2425, filed with the Regional Trial Court of Makati City, Branch 150.
sugar cane in question. The evidence also shows that the defendant could have The Amended Information charged the accused with theft under Article 308
taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de cana) and of the Revised Penal Code, committed as follows:
not 1,170,000 as computed by the lower court. During the season the shoots
were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore On or about September 10-19, 1999, or prior thereto in Makati City, and
would have netted P1,220.40 from sugar-cane shoots and not P1,435.68 as within the jurisdiction of this Honorable Court, the accused, conspiring and
allowed by the lower court. confederating together and all of them mutually helping and aiding one
another, with intent to gain and without the knowledge and consent of the
As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, Philippine Long Distance Telephone (PLDT), did then and there willfully,
amounting to 190 cavans, one-half of said quantity should belong to the unlawfully and feloniously take, steal and use the international long distance
plaintiff, as stated above, and the other half to the defendant. The court erred calls belonging to PLDT by conducting International Simple Resale (ISR),
in awarding the whole crop to the defendant. The plaintiff should therefore which is a method of routing and completing international long distance calls
pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of using lines, cables, antenae, and/or air wave frequency which connect directly
P646 as allowed by the lower court. to the local or domestic exchange facilities of the country where the call is
destined, effectively stealing this business from PLDT while using its
facilities in the estimated amount of P20,370,651.92 to the damage and
The evidence also shows that the defendant was prevented by the acts of the prejudice of PLDT, in the said amount.
plaintiff from cultivating about 10 hectares of the land involved in the
litigation. He expected to have raised about 600 cavans of palay, 300 cavans
of which would have corresponded to him as owner. The lower court has CONTRARY TO LAW.2
wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would
have netted him P600. Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on
the ground that the factual allegations in the Amended Information do not
In view of the foregoing, the judgment appealed from is hereby modified. The constitute the felony of theft. The trial court denied the Motion to Quash the
plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal Amended Information, as well petitioner’s subsequent Motion for
Reconsideration.

27
Petitioner’s special civil action for certiorari was dismissed by the Court of The Office of the Solicitor General (OSG) agrees with respondent PLDT that
Appeals. Thus, petitioner filed the instant petition for review with this Court. "international phone calls and the business or service of providing
international phone calls" are subsumed in the enumeration and definition of
personal property under the Civil Code hence, may be proper subjects of theft.
In the above-quoted Decision, this Court held that the Amended Information
It noted that the cases of United States v. Genato,3 United States v.
does not contain material allegations charging petitioner with theft of personal
Carlos4 and United States v. Tambunting,5 which recognized intangible
property since international long distance calls and the business of providing
properties like gas and electricity as personal properties, are deemed
telecommunication or telephone services are not personal properties under
incorporated in our penal laws. Moreover, the theft provision in the Revised
Article 308 of the Revised Penal Code.
Penal Code was deliberately couched in broad terms precisely to be all-
encompassing and embracing even such scenario that could not have been
Respondent Philippine Long Distance Telephone Company (PLDT) filed a easily anticipated.
Motion for Reconsideration with Motion to Refer the Case to the Supreme
Court En Banc. It maintains that the Amended Information charging petitioner
According to the OSG, prosecution under Republic Act (RA) No. 8484 or
with theft is valid and sufficient; that it states the names of all the accused
the Access Device Regulations Act of 1998 and RA 8792 or the Electronic
who were specifically charged with the crime of theft of PLDT’s international
Commerce Act of 2000 does not preclude prosecution under the Revised Penal
calls and business of providing telecommunication or telephone service on or
Code for the crime of theft. The latter embraces unauthorized appropriation or
about September 10 to 19, 1999 in Makati City by conducting ISR or
use of PLDT’s international calls, service and business, for personal profit or
International Simple Resale; that it identifies the international calls and
gain, to the prejudice of PLDT as owner thereof. On the other hand, the
business of providing telecommunication or telephone service of PLDT as the
special laws punish the surreptitious and advanced technical means employed
personal properties which were unlawfully taken by the accused; and that it
to illegally obtain the subject service and business. Even assuming that the
satisfies the test of sufficiency as it enabled a person of common
correct indictment should have been under RA 8484, the quashal of the
understanding to know the charge against him and the court to render
information would still not be proper. The charge of theft as alleged in the
judgment properly.
Information should be taken in relation to RA 8484 because it is the elements,
and not the designation of the crime, that control.
PLDT further insists that the Revised Penal Code should be interpreted in the
context of the Civil Code’s definition of real and personal property. The
Considering the gravity and complexity of the novel questions of law involved
enumeration of real properties in Article 415 of the Civil Code is exclusive
in this case, the Special First Division resolved to refer the same to the Banc.
such that all those not included therein are personal properties. Since Article
308 of the Revised Penal Code used the words "personal property" without
qualification, it follows that all "personal properties" as understood in the We resolve to grant the Motion for Reconsideration but remand the case to the
context of the Civil Code, may be the subject of theft under Article 308 of the trial court for proper clarification of the Amended Information.
Revised Penal Code. PLDT alleges that the international calls and business of
providing telecommunication or telephone service are personal properties
Article 308 of the Revised Penal Code provides:
capable of appropriation and can be objects of theft.

Art. 308. Who are liable for theft. – Theft is committed by any person who,
PLDT also argues that "taking" in relation to theft under the Revised Penal
with intent to gain but without violence against, or intimidation of persons nor
Code does not require "asportation," the sole requisite being that the object
force upon things, shall take personal property of another without the latter’s
should be capable of "appropriation." The element of "taking" referred to in
consent.
Article 308 of the Revised Penal Code means the act of depriving another of
the possession and dominion of a movable coupled with the intention, at the
time of the "taking," of withholding it with the character of permanency. The elements of theft under Article 308 of the Revised Penal Code are as
There must be intent to appropriate, which means to deprive the lawful owner follows: (1) that there be taking of personal property; (2) that said property
of the thing. Thus, the term "personal properties" under Article 308 of the belongs to another; (3) that the taking be done with intent to gain; (4) that the
Revised Penal Code is not limited to only personal properties which are taking be done without the consent of the owner; and (5) that the taking be
"susceptible of being severed from a mass or larger quantity and of being accomplished without the use of violence against or intimidation of persons or
transported from place to place." force upon things.

PLDT likewise alleges that as early as the 1930s, international telephone calls Prior to the passage of the Revised Penal Code on December 8, 1930, the
were in existence; hence, there is no basis for this Court’s finding that the definition of the term "personal property" in the penal code provision on theft
Legislature could not have contemplated the theft of international telephone had been established in Philippine jurisprudence. This Court, in United States
calls and the unlawful transmission and routing of electronic voice signals or v. Genato, United States v. Carlos, and United States v. Tambunting,
impulses emanating from such calls by unlawfully tampering with the consistently ruled that any personal property, tangible or intangible, corporeal
telephone device as within the coverage of the Revised Penal Code. or incorporeal, capable of appropriation can be the object of theft.

According to respondent, the "international phone calls" which are "electric Moreover, since the passage of the Revised Penal Code on December 8, 1930,
currents or sets of electric impulses transmitted through a medium, and carry a the term "personal property" has had a generally accepted definition in civil
pattern representing the human voice to a receiver," are personal properties law. In Article 335 of the Civil Code of Spain, "personal property" is defined
which may be subject of theft. Article 416(3) of the Civil Code deems "forces as "anything susceptible of appropriation and not included in the foregoing
of nature" (which includes electricity) which are brought under the control by chapter (not real property)." Thus, the term "personal property" in the Revised
science, are personal property. Penal Code should be interpreted in the context of the Civil Code provisions
in accordance with the rule on statutory construction that where words have
been long used in a technical sense and have been judicially construed to have
In his Comment to PLDT’s motion for reconsideration, petitioner Laurel
a certain meaning, and have been adopted by the legislature as having a
claims that a telephone call is a conversation on the phone or a
certain meaning prior to a particular statute, in which they are used, the words
communication carried out using the telephone. It is not synonymous to
used in such statute should be construed according to the sense in which they
electric current or impulses. Hence, it may not be considered as personal
have been previously used.6 In fact, this Court used the Civil Code definition
property susceptible of appropriation. Petitioner claims that the analogy
of "personal property" in interpreting the theft provision of the penal code in
between generated electricity and telephone calls is misplaced. PLDT does not
United States v. Carlos.
produce or generate telephone calls. It only provides the facilities or services
for the transmission and switching of the calls. He also insists that "business"
is not personal property. It is not the "business" that is protected but the "right Cognizant of the definition given by jurisprudence and the Civil Code of
to carry on a business." This right is what is considered as property. Since the Spain to the term "personal property" at the time the old Penal Code was
services of PLDT cannot be considered as "property," the same may not be being revised, still the legislature did not limit or qualify the definition of
subject of theft. "personal property" in the Revised Penal Code. Neither did it provide a
restrictive definition or an exclusive enumeration of "personal property" in the
28
Revised Penal Code, thereby showing its intent to retain for the term an of which one may fraudulently obtain any current of electricity or any
extensive and unqualified interpretation.1avvphi1.zw+ Consequently, any telegraph or telephone service.
property which is not included in the enumeration of real properties under the
Civil Code and capable of appropriation can be the subject of theft under the
In the instant case, the act of conducting ISR operations by illegally
Revised Penal Code.
connecting various equipment or apparatus to private respondent PLDT’s
telephone system, through which petitioner is able to resell or re-route
The only requirement for a personal property to be the object of theft under international long distance calls using respondent PLDT’s facilities constitutes
the penal code is that it be capable of appropriation. It need not be capable of all three acts of subtraction mentioned above.
"asportation," which is defined as "carrying away." 7 Jurisprudence is settled
that to "take" under the theft provision of the penal code does not require
The business of providing telecommunication or telephone service is likewise
asportation or carrying away.8
personal property which can be the object of theft under Article 308 of the
Revised Penal Code. Business may be appropriated under Section 2 of Act
To appropriate means to deprive the lawful owner of the thing. 9 The word No. 3952 (Bulk Sales Law), hence, could be object of theft:
"take" in the Revised Penal Code includes any act intended to transfer
possession which, as held in the assailed Decision, may be committed through
Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods,
the use of the offenders’ own hands, as well as any mechanical device, such as
wares, merchandise, provisions, or materials otherwise than in the ordinary
an access device or card as in the instant case. This includes controlling the
course of trade and the regular prosecution of the business of the vendor,
destination of the property stolen to deprive the owner of the property, such as
mortgagor, transferor, or assignor, or any sale, transfer, mortgage, or
the use of a meter tampering, as held in Natividad v. Court of Appeals, 10 use
assignment of all, or substantially all, of the business or trade theretofore
of a device to fraudulently obtain gas, as held in United States v. Tambunting,
conducted by the vendor, mortgagor, transferor or assignor, or all, or
and the use of a jumper to divert electricity, as held in the cases of United
substantially all, of the fixtures and equipment used in and about the business
States v. Genato, United States v. Carlos, and United States v. Menagas. 11
of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale
and transfer in bulk, in contemplation of the Act. x x x.
As illustrated in the above cases, appropriation of forces of nature which are
brought under control by science such as electrical energy can be achieved by
In Strochecker v. Ramirez,12 this Court stated:
tampering with any apparatus used for generating or measuring such forces of
nature, wrongfully redirecting such forces of nature from such apparatus, or
using any device to fraudulently obtain such forces of nature. In the instant With regard to the nature of the property thus mortgaged which is one-half
case, petitioner was charged with engaging in International Simple Resale interest in the business above described, such interest is a personal property
(ISR) or the unauthorized routing and completing of international long capable of appropriation and not included in the enumeration of real
distance calls using lines, cables, antennae, and/or air wave frequency and properties in article 335 of the Civil Code, and may be the subject of
connecting these calls directly to the local or domestic exchange facilities of mortgage.
the country where destined.
Interest in business was not specifically enumerated as personal property in
As early as 1910, the Court declared in Genato that ownership over electricity the Civil Code in force at the time the above decision was rendered. Yet,
(which an international long distance call consists of), as well as telephone interest in business was declared to be personal property since it is capable of
service, is protected by the provisions on theft of the Penal Code. The appropriation and not included in the enumeration of real properties. Article
pertinent provision of the Revised Ordinance of the City of Manila, which was 414 of the Civil Code provides that all things which are or may be the object
involved in the said case, reads as follows: of appropriation are considered either real property or personal property.
Business is likewise not enumerated as personal property under the Civil
Code. Just like interest in business, however, it may be appropriated.
Injury to electric apparatus; Tapping current; Evidence. – No person shall
Following the ruling in Strochecker v. Ramirez, business should also be
destroy, mutilate, deface, or otherwise injure or tamper with any wire, meter,
classified as personal property. Since it is not included in the exclusive
or other apparatus installed or used for generating, containing, conducting, or
enumeration of real properties under Article 415, it is therefore personal
measuring electricity, telegraph or telephone service, nor tap or otherwise
property.13
wrongfully deflect or take any electric current from such wire, meter, or other
apparatus.
As can be clearly gleaned from the above disquisitions, petitioner’s acts
constitute theft of respondent PLDT’s business and service, committed by
No person shall, for any purpose whatsoever, use or enjoy the benefits of any
means of the unlawful use of the latter’s facilities. In this regard, the Amended
device by means of which he may fraudulently obtain any current of
Information inaccurately describes the offense by making it appear that what
electricity or any telegraph or telephone service; and the existence in any
petitioner took were the international long distance telephone calls, rather than
building premises of any such device shall, in the absence of satisfactory
respondent PLDT’s business.
explanation, be deemed sufficient evidence of such use by the persons
benefiting thereby.
A perusal of the records of this case readily reveals that petitioner and
respondent PLDT extensively discussed the issue of ownership of telephone
It was further ruled that even without the above ordinance the acts of
calls. The prosecution has taken the position that said telephone calls belong
subtraction punished therein are covered by the provisions on theft of the
to respondent PLDT. This is evident from its Comment where it defined the
Penal Code then in force, thus:
issue of this case as whether or not "the unauthorized use or appropriation of
PLDT international telephone calls, service and facilities, for the purpose of
Even without them (ordinance), the right of the ownership of electric current generating personal profit or gain that should have otherwise belonged to
is secured by articles 517 and 518 of the Penal Code; the application of these PLDT, constitutes theft."14
articles in cases of subtraction of gas, a fluid used for lighting, and in some
respects resembling electricity, is confirmed by the rule laid down in the
In discussing the issue of ownership, petitioner and respondent PLDT gave
decisions of the supreme court of Spain of January 20, 1887, and April 1,
their respective explanations on how a telephone call is generated. 15 For its
1897, construing and enforcing the provisions of articles 530 and 531 of the
part, respondent PLDT explains the process of generating a telephone call as
Penal Code of that country, articles 517 and 518 of the code in force in these
follows:
islands.

38. The role of telecommunication companies is not limited to merely


The acts of "subtraction" include: (a) tampering with any wire, meter, or other
providing the medium (i.e. the electric current) through which the human
apparatus installed or used for generating, containing, conducting, or
voice/voice signal of the caller is transmitted. Before the human voice/voice
measuring electricity, telegraph or telephone service; (b) tapping or otherwise
signal can be so transmitted, a telecommunication company, using its
wrongfully deflecting or taking any electric current from such wire, meter, or
facilities, must first break down or decode the human voice/voice signal into
other apparatus; and (c) using or enjoying the benefits of any device by means
29
electronic impulses and subject the same to further augmentation and City, Branch 150, which denied the Motion to Quash (With Motion to Defer
enhancements. Only after such process of conversion will the resulting Arraignment) in Criminal Case No. 99-2425 for theft, is AFFIRMED. The
electronic impulses be transmitted by a telecommunication company, again, case is remanded to the trial court and the Public Prosecutor of Makati City is
through the use of its facilities. Upon reaching the destination of the call, the hereby DIRECTED to amend the Amended Information to show that the
telecommunication company will again break down or decode the electronic property subject of the theft were services and business of the private offended
impulses back to human voice/voice signal before the called party receives the party.
same. In other words, a telecommunication company both converts/reconverts
the human voice/voice signal and provides the medium for transmitting the
SO ORDERED.
same.

G.R. No. L-26053             February 21, 1967


39. Moreover, in the case of an international telephone call, once the
electronic impulses originating from a foreign telecommunication company
country (i.e. Japan) reaches the Philippines through a local telecommunication CITY OF MANILA, plaintiff-appellee,
company (i.e. private respondent PLDT), it is the latter which decodes, vs.
augments and enhances the electronic impulses back to the human voice/voice GERARDO GARCIA — CARMENCITA VILLANUEVA, MODESTA
signal and provides the medium (i.e. electric current) to enable the called party PARAYNO — NARCISO PARAYNO, JUAN ASPERAS, MARIA
to receive the call. Thus, it is not true that the foreign telecommunication TABIA — SIMEON DILIMAN, AQUILINO BARRIOS — LEONORA
company provides (1) the electric current which transmits the human RUIZ, LAUREANO DIZO, BERNABE AYUDA — LEOGARDA DE
voice/voice signal of the caller and (2) the electric current for the called party LOS SANTOS, ISABELO OBAOB — ANDREA RIPARIP, JOSE
to receive said human voice/voice signal. BARRIENTOS, URBANO RAMOS,1 ELENA RAMOS, ESTEFANIA
NEPACINA, MODESTA SANCHEZ, MARCIAL LAZARO,
MARCIANA ALANO, HONORIO BERIÑO — SEDORA ORAYLE,
40. Thus, contrary to petitioner Laurel’s assertion, once the electronic
GLORIA VELASCO, WILARICO RICAMATA, BENEDICTO DIAZ,
impulses or electric current originating from a foreign telecommunication
ANA DEQUIZ — (MRS.) ALUNAN, LORENZO CARANDANG, JUAN
company (i.e. Japan) reaches private respondent PLDT’s network, it is private
PECAYO, FELICIDAD MIRANDA — EMIGDIO EGIPTO, defendants-
respondent PLDT which decodes, augments and enhances the electronic
appellants.
impulses back to the human voice/voice signal and provides the medium (i.e.
electric current) to enable the called party to receive the call. Without private
respondent PLDT’s network, the human voice/voice signal of the calling party Mauricio Z. Alunan for defendants-appellants.
will never reach the called party.16 City Fiscal's Office for plaintiff-appellee.

In the assailed Decision, it was conceded that in making the international SANCHEZ, J.:
phone calls, the human voice is converted into electrical impulses or electric
current which are transmitted to the party called. A telephone call, therefore,
Plaintiff City of Manila is owner of parcels of land, forming one compact
is electrical energy. It was also held in the assailed Decision that intangible
area, bordering Kansas, Vermont and Singalong streets in Malate, Manila, and
property such as electrical energy is capable of appropriation because it may
covered by Torrens Titles Nos. 49763, 37082 and 37558. Shortly after
be taken and carried away. Electricity is personal property under Article 416
liberation from 1945 to 1947, defendants entered upon these premises without
(3) of the Civil Code, which enumerates "forces of nature which are brought
plaintiff's knowledge and consent. They built houses of second-class
under control by science."17
materials, again without plaintiff's knowledge and consent, and without the
necessary building permits from the city. There they lived thru the years to the
Indeed, while it may be conceded that "international long distance calls," the present.
matter alleged to be stolen in the instant case, take the form of electrical
energy, it cannot be said that such international long distance calls were
In November, 1947, the presence of defendants having previously been
personal properties belonging to PLDT since the latter could not have
discovered, defendants Felicidad Miranda (Emigdio Egipto), Modesta C.
acquired ownership over such calls. PLDT merely encodes, augments,
Parayno, Benedicto Diaz, Laureano Dizo, Jose Barrientos, Elena Ramos,
enhances, decodes and transmits said calls using its complex communications
Estefania Nepacina, Modesta Sanchez, Honorio Beriño, Gloria Velasco, Ana
infrastructure and facilities. PLDT not being the owner of said telephone calls,
Dequis Alunan and Benedicto Ofiaza (predecessor of defendant Carandang)
then it could not validly claim that such telephone calls were taken without its
were given by Mayor Valeriano E. Fugoso written permits — each labeled
consent. It is the use of these communications facilities without the consent of
"lease contract" — to occupy specific areas in the property upon conditions
PLDT that constitutes the crime of theft, which is the unlawful taking of the
therein set forth. Defendants Isabelo Obaob and Gerardo Garcia (in the name
telephone services and business.
of Marta A. Villanueva) received their permits from Mayor Manuel de la
Fuente on January 29 and March 18, respectively, both of 1948. The rest of
Therefore, the business of providing telecommunication and the telephone the 23 defendants exhibited none.
service are personal property under Article 308 of the Revised Penal Code,
and the act of engaging in ISR is an act of "subtraction" penalized under said
For their occupancy, defendants were charged nominal rentals.1äwphï1.ñët
article. However, the Amended Information describes the thing taken as,
"international long distance calls," and only later mentions "stealing the
business from PLDT" as the manner by which the gain was derived by the Following are the rentals due as of February, 1962:
accused. In order to correct this inaccuracy of description, this case must be
remanded to the trial court and the prosecution directed to amend the
Amended Information, to clearly state that the property subject of the theft are Amt. due from
Area Monthly
the services and business of respondent PLDT. Parenthetically, this NAME date of delinquency
in sq.m. Rental
amendment is not necessitated by a mistake in charging the proper offense, to Feb. 1962
which would have called for the dismissal of the information under Rule 110,
Section 14 and Rule 119, Section 19 of the Revised Rules on Criminal 1. Gerardo Garcia 66.00 P7.92 P1,628.97
Procedure. To be sure, the crime is properly designated as one of theft. The
purpose of the amendment is simply to ensure that the accused is fully and 2. Modesta C. Parayno 87.75 10.53 379.08
sufficiently apprised of the nature and cause of the charge against him, and
3. Juan Asperas 39.00 4.68 9.36
thus guaranteed of his rights under the Constitution.
4. Maria Tabia 35.20 5.76 570.24
ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed
Decision dated February 27, 2006 is RECONSIDERED and SET ASIDE. The 5. Aquilino Barrios
54.00 4.32 99.36
Decision of the Court of Appeals in CA-G.R. SP No. 68841 affirming the (Leonora Ruiz)
Order issued by Judge Zeus C. Abrogar of the Regional Trial Court of Makati

30
6. Laureano Dizo 35.00 2.80 22.40 the attention of the court its contradictory stance. Not having done
so, this Court will not reopen the case solely for this purpose.4
7. Bernabe Ayuda 39.60 3.17 323.34
Anyway, elimination of the certification, Exhibit E, as evidence,
8. Isabelo Obaob 75.52 9.06 208.38
would not profit defendants. For, in reversing his stand, the trial
9. Jose Barrientos 39.53 4.74 744.18 judge could well have taken — because the was duty bound to take
— judicial notice5 of Ordinance 4566. The reason being that the
10. Cecilia Manzano in city charter of Manila requires all courts sitting therein to take
lieu of Urbano Ramos Paid up to judicial notice of all ordinances passed by the municipal board of
(deceased) 46.65 5.60 Feb. 1962. Manila.6 And, Ordinance 4566 itself confirms the certification
aforesaid that an appropriation of P100,000.00 was set aside for the
11. Elena Ramos 34.80 2.78 186.26 "construction of additional building" of the Epifanio de los Santos
Elementary School.
12. Estefania Nepacina 41.80 3.34 504.34

13. Modesta Sanchez 33.48 2.68 444.88 Furthermore, defendants' position is vulnerable to assault from a
third direction. Defendants have absolutely no right to remain in
14. Marcial Lazaro 22.40 1.79 688.32 the premises. The excuse that they have permits from the mayor is
at best flimsy. The permits to occupy are recoverable on thirty
15. Marciana Alano 25.80 2.06 255.44 days' notice. They have been asked to leave; they refused to heed.
It is in this factual background that we say that the city's need for
16. Honorio Beriño 24.00 1.92 188.16
the premises is unimportant. The city's right to throw defendants
17. Gloria Velasco 32.40 2.59 56.98 out of the area cannot be gainsaid. The city's dominical right to
possession is paramount. If error there was in the finding that the
18. Wilarico Ricamata 45.83 3.67 739.68 city needs the land, such error is harmless and will not justify
reversal of the judgment below.7
Paid up to
19. Benedicto Diaz 40.20 4.82
March 1962.
2. But defendants insist that they have acquired the legal status of
20. Ana Dequis Alunan 64.26 7.71 30.84 tenants. They are wrong.

21. Lorenzo Carandang 45.03 5.40 437.40


They entered the land, built houses of second-class materials
22. Juan N. Pecayo 25.52 3.06 30.60 thereon without the knowledge and consent of the city. Their
homes were erected without city permits.
23. Felicidad Miranda 48.02 5.76 132.48
These constructions are illegal. In a language familiar to all,
defendants are squatters:
P7,580.69
Since the last global war, squatting on another's property in this
Epifanio de los Santos Elementary School is close, though not contiguous, to country has become a widespread vice. It was and is a blight.
the property. Came the need for this school's expansion; it became pressing. Squatters' areas pose problems of health, sanitation. They are
On September 14, 1961, plaintiff's City Engineer, pursuant to the Mayor's breeding places for crime. They constitute proof that respect for
directive to clear squatters' houses on city property, gave each of defendants the law and the rights of others, even those of the government, are
thirty (30) days to vacate and remove his construction or improvement on the being flouted. Knowingly, squatters have embarked on the
premises. This was followed by the City Treasurer's demand on each pernicious act of occupying property whenever and wherever
defendant, made in February and March, 1962, for the payment of the amount convenient to their interests — without as much as leave, and even
due by reason of the occupancy and to vacate in fifteen (15) days. Defendants against the will, of the owner. They are emboldened seemingly
refused. Hence, this suit to recover possession.2 because of their belief that they could violate the law with
impunity. The pugnaciousness of some of them has tied up the
hands of legitimate owners. The latter are thus prevented from
The judgment below directed defendants to vacate the premises; to pay the recovering possession by peaceful means. Government lands have
amounts heretofore indicated opposite their respective names; and to pay their not been spared by them. They know, of course, that intrusion into
monthly rentals from March, 1962, until they vacate the said premises, and the property, government or private, is wrong. But, then, the mills of
costs. Defendants appealed. justice grind slow, mainly because of lawyers who, by means, fair
or foul, are quite often successful in procuring delay of the day of
1. We are called upon to rule on the forefront question of whether reckoning. Rampancy of forcible entry into government lands
the trial court properly found that the city needs the premises for particularly, is abetted by the apathy of some public officials to
school purposes. enforce the government's rights. Obstinacy of these squatters is
difficult to explain unless it is spawned by official tolerance, if not
outright encouragement or protection. Said squatters have become
The city's evidence on this point is Exhibit E, the certification of insensible to the difference between right and wrong. To them,
the Chairman, Committee on Appropriations of the Municipal violation of law means nothing. With the result that squatting still
Board. That document recites that the amount of P100,000.00 had exists, much to the detriment of public interest. It is high time that,
been set aside in Ordinance 4566, the 1962-1963 Manila City in this aspect, sanity and the rule of law be restored. It is in this
Budget, for the construction of an additional building of the environment that we look into the validity of the permits granted
Epifanio de los Santos Elementary School. It is indeed correct to defendants herein.
say that the court below, at the hearing, ruled out the admissibility
of said document. But then, in the decision under review, the trial
judge obviously revised his views. He there declared that there was These permits, erroneously labeled "lease" contracts, were issued
need for defendants to vacate the premises for school expansion; by the mayors in 1947 and 1948 when the effects of the war had
he cited the very document, Exhibit E, aforesaid. simmered down and when these defendants could have very well
adjusted themselves. Two decades have now elapsed since the
unlawful entry. Defendants could have, if they wanted to, located
It is beyond debate that a court of justice may alter its ruling while permanent premises for their abode. And yet, usurpers that they
the case is within its power, to make it conformable to law and are, they preferred to remain on city property.
justice.3 Such was done here. Defendants' remedy was to bring to
31
Defendants' entry as aforesaid was illegal. Their constructions are TERESITA L. CASTILLO, REGISTER OF DEEDS OF BATANGAS
as illegal, without permits.8 The city charter enjoins the mayor to and THE INTERMEDIATE APPELLATE COURT, respondents.
"safeguard all the lands" of the City of Manila.9
Castro, Nardo, Quintanilla, Gonzales & Macatangay Law Office for
Surely enough, the permits granted did not "safeguard" the city's respondents.
land in question. It is our considered view that the Mayor of the
City of Manila cannot legalize forcible entry into public property
by the simple expedient of giving permits, or, for that matter,
executing leases.
PARAS, J.:
Squatting is unlawful and no amount of acquiescence on the part of
the city officials will elevate it into a lawful act. In principle, a This is a petition for review on certiorari of the April 26, 1984 Decision of the
compound of illegal entry and official permit to stay is obnoxious then Intermediate Appellate Court * reversing the February 6, 1976 Decision
to our concept of proper official norm of conduct. Because, such of the then Court of First Instance of Batangas, Branch VI, in Civil Case No.
permit does not serve social justice; it fosters moral decadence. It 2044.
does not promote public welfare; it abets disrespect for the law. It
has its roots in vice; so it is an infected bargain. Official approval
The antecedental facts of this case, as found by the then Intermediate
of squatting should not, therefore, be permitted to obtain in this
Appellate Court, are as follows:
country where there is an orderly form of government.

Sometime in 1951, the late Modesto Castillo applied for


We, accordingly, rule that the Manila mayors did not have
the registration of two parcels of land, Lots 1 and 2,
authority to give permits, written or oral, to defendants, and that
located in Banadero, Tanauan, Batangas, described in
the permits herein granted are null and void.
Plan Psu-119166, with a total area of 39,755 square
meters. In a decision dated August 31, 1951, the said
3. Let us look into the houses and constructions planted by Modesto Castillo, married to Amanda Lat, was declared
defendants on the premises. They clearly hinder and impair the use the true and absolute owner of the land with the
of that property for school purposes. The courts may well take improvements thereon, for which Original Certificate of
judicial notice of the fact that housing school children in the Title No. 0-665 was, issued to him by the Register of
elementary grades has been and still is a perennial problem in the Deeds at Batangas, Batangas, on February 7, 1952. By
city. The selfish interests of defendants must have to yield to the virtue of an instrument dated March 18, 1960, the said
general good. The public purpose of constructing the school Lots 1 and 2 covered by Original Certificate of Title
building annex is paramount.10 No. 0-665, together with Lot No. 12374 covered by
Transfer Certificate of Title No. 3254-A and Lot No.
12377 covered by Transfer Certificate of Title No.
In the situation thus obtaining, the houses and constructions
3251-A, were consolidated and sub-divided into Lots 1
aforesaid constitute public nuisance per se. And this, for the reason
to 9 under Pcs-1046. After the death of Modesto
that they hinder and impair the use of the property for a badly
Castillo, or on August 31, 1960, Amanda Lat Vda. de
needed school building, to the prejudice of the education of the
Castillo, et al., executed a deed of partition and
youth of the land.11 They shackle the hands of the government and
assumption of mortgage in favor of Florencio L.
thus obstruct performance of its constitutionally ordained
Castillo, et al., as a result of which Original Certificate
obligation to establish and maintain a complete and adequate
of Title No. D-665 was cancelled, and in lieu thereof,
system of public education, and more, to "provide at least free
new transfer cerfificates of title were issued to
public primary instruction".12
Florencio Castillo, et al., to wit: Transfer Certificate of
Title No. 21703 (Lot 4) (and) Transfer Certificate of
Reason dictates that no further delay should be countenanced. The Title No. 21704 to Florencio Castillo (Lot 5); Transfer
public nuisance could well have been summarily abated by the city Certificate of Title No. T-21708 to Carlos L. Castillo
authorities themselves, even without the aid of the courts.13 (Lot 7); Transfer Certificate of Title No. T-21712 to
Mariano L. Castillo (Lot 6); Transfer Certificate of
Title No. T-21713 to Jose L. Castillo (Lot 9); Transfer
4. Defendants challenge the jurisdiction of the Court of First
Certificate of Title No. T-21718 to Aida C. Herrera
Instance of Manila. They say that the case should have been started
(Lot 2); and Transfer Certificate of Title No. T-21727
in the municipal court. They prop up their position by the averment
to Teresita L. Castillo (Lot 8).
that notice for them to vacate was only served in September, 1961,
and suit was started in July, 1962. Their legal ground is Section 1,
Rule 70 of the Rules of Court. We have reached the conclusion The Republic of the Philippines filed Civil Case No.
that their forcible entry dates back to the period from 1945 to 1947. 2044 with the lower court for the annulment of the
That entry was not legalized by the permits. Their possession certificates of title issued to defendants Amanda Lat
continued to remain illegal from incipiency. Suit was filed long Vda. de Castillo, et al., as heirs/successors of Modesto
after the one-year limitation set forth in Section 1 of Rule 70. And Castillo, and for the reversion of the lands covered
the Manila Court of First Instance has jurisdiction.14 thereby (Lots 1 and 2, Psu-119166) to the State. It was
alleged that said lands had always formed part of the
Taal Lake, washed and inundated by the waters thereof,
Upon the premises, we vote to affirm the judgment under review. Costs
and being of public ownership, it could not be the
against defendants-appellants. So ordered.
subject of registration as private property. Appellants
herein, defendants below, alleged in their answer that
G.R. No. L-69002 June 30, 1988 the Government's action was already barred by the
decision of the registration court; that the action has
prescribed; and that the government was estopped from
REPUBLIC OF THE PHILIPPINES, petitioner, questioning the ownership and possession of appellants.
vs.
AMANDA LAT VDA. DE CASTILLO, FLORENCIO T. CASTILLO,
SOLEDAD LOTA CASTILLO, CARLOS L. CASTILLO, NIEVES After trial, the then Court of First Instance of Batangas, Branch VI, presided
KATIGBAK CASTILLO, MARIANO L. CASTILLO, HIPOLITA over by Honorable Benjamin Relova, in a Decision dated February 6, 1976
DYTIAPCO CASTILLO, AIDA CASTILLO HERRERA, HERMITO (Record on Appeal, pp. 62-69), ruled in favor of herein petitioner Republic of
HERRERA, JOSE L. CASTILLO, LILIA MACEDA CASTILLO, the Philippines. The decretal portion of the said decision, reads:

32
WHEREFORE, the Register of Deeds of Batangas is 2. Braulio Almendral testified to the effect that he is a
hereby ordered to cancel Original Certificate of Title resident of Tanauan, Batangas, near the Taal lake; that
No. 0-665 in the name of Modesto Castillo and the like himself there are other occupants of the land
subsequent Transfer of Certificates of Title issued over among whom are Atanacio Tironas, Gavino Mendoza,
the property in the names of the defendants. Lots Nos. 1 Juliano Tirones, Agapito Llarena, etc.; that it was they
and 2 of Plan Psu-19166 are hereby declared public who filled up the area to make it habitable; that they
lands belonging to the state. Without pronouncement as filled up the area with shells and sand; that their
to costs. occupation is duck raising; and that the Castillos never
stayed in or occupied the premises (Tsn, Nov. 16, 1970,
pp. 32-50).
The Court of Appeals, on appeal, in a Decision promulgated on April 26,1984,
reversed and set aside the appealed decision, and dismissed the complaint
(Record, pp. 31-41). Herein petitioner filed a Motion for Reconsideration 3. Arsenio Ibay, a Geodetic Engineer connected with
(Record, pp. 42-51), but the same was denied in a Resolution promulgated on the Bureau of Lands since 1968, also testified to the
October 12,1984 (Record, p. 52). Hence, the instant petition. effect that in accordance with the cadastral plan of
Tanauan, the only private claim of Sixto Castillo
referred to Lots 1006 to 1008; that the Castillos never
The sole issue raised in this case is whether or not the decision of the Land
asserted any private claim to the lots in question during
Registration Court involving shore lands constitutes res adjudicata.
the cadastral survey;' that in the preparation of plan
Psu-119166, Lots 12374 and 12377 were made as
There is no question that one of the requisites of res judicata is that the court reference to conform to previously approved plans; that
rendering the final judgment must have jurisdiction over the subject matter lot 12374 is a portion of cadastral lot 10107, SWO-
(Ramos v. Pablo, 146 SCRA 24 [1986]; that shores are properties of the 86738 while Lot 22377 is a portion of Lot 10108 of the
public domain intended for public use (Article 420, Civil Code) and, same plan (Tsn, Nov. 25, 1970, pp. 115-137).
therefore, not registrable. Thus, it has long been settled that portions of the
foreshore or of the territorial waters and beaches cannot be registered. Their
4. Jose Isidro, a Land Investigator of the Bureau of
inclusion in a certificate of title does not convert the same into properties of
Lands, testified to the effect that pursuant to the order
private ownership or confer title upon the registrant (Republic v. Ayala y Cia,
of the Director of Lands, he, together with Engineer
14 SCRA, 259 [1965], citing the cases of Dizon, et al. v. Bayona, et al., 98
Rufino Santiago and the barrio captain of Tanauan,
Phil. 943; and Dizon, et al. v. Rodriguez, et al., 13 SCRA 704).
Batangas, conducted an investigation of the land in
question; that he submitted a report of investigation,
But an important bone of contention is the nature of the lands involved in this dated October 19, 1970 (Exh. H-1); that portions of the
case. lot in question were covered by public land applications
filed by the occupants thereof; that Engineer Santiago
also submitted a report (Exh. H-8); that he had notified
Petitioner contends "that "Lots 1 and 2, PSU-119166 had always formed part Dr. Mariano Castillo before conducting the
of the Taal Lake, washed and inundated by the waters thereof. Consequently, investigation (Tsn, Nov. 25,1970, pp. 137-162).
the same were not subject to registration, being outside the commerce of men;
and that since the lots in litigation are of public domain (Art. 502), par. 4 Civil
Code) the registration court (of 1951) did not have jurisdiction to adjudicate 5. Rufino Santiago, another Geodetic Engineer
said lands as private property, hence, res judicata does not apply. (Rollo, pp. connected with the Bureau of Lands, testified to the
37-38). effect that on October 19,1970, he submitted a report of
investigation regarding the land in question; that he
noted on the plan Exhibit H-9 the areas on which the
The Government presented both oral and documentary evidence. houses of Severo Alcantara and others were built; that
he found that the land was planted to coconuts which
As summarized by the Intermediate Appelate Court (now Court of Appeals), are about 15 years old; that the land is likewise
the testimonies of the witnesses for the petitioner are as follows: improved with rice paddies; that the occupants thereof
are duck raisers; that the area had been elevated
because of the waste matters and duck feeds that have
1. Rosendo Arcenas, a Geodetic Engineer connected accumulated on the ground through the years (Tsn,
with the Bureau of Lands since 1961, testified to the Nov. 26,1970, pp. 163-196).
effect that Lots 1 and 2, Psu-119166, which are the lots
in question, adjoin the cadastral survey of Tanauan,
Batangas (Cad. 168); that the original boundary of the 6. Pablo Tapia, Barrio Captain of Tanauan, Batangas,
original cadastral survey was foreshore land as since 1957, testified to the effect that the actual
indicated on the plan; that the cadastral survey of occupants of Lots I and 2 are Atanacio Tirones,tc.; that
Tanauan was executed sometime in 1923; that the first during the war the water line reached up to a point
survey executed of the land after 1923 was the one marked Exhibit A-9 and at present the water has
executed in 1948 under Plan Psu-119166 that in the receded to a point up to Exhibit A-12; that the reasons
relocation survey of the disputed lots in 1962 under why the waters of Taal lake have receded to the present
SWO-40601, said lots were annotated on the plan as level is because of the fillings made by the people
claimed by the Republic of the Philippines in the same living in Lots 1 and 2; that there are several duck pens
manner that it was so annotated in Plan Psu-119166; all over the place; that the composition of the soil is a
thus showing that the Government was the only mixture of mud and duck feeds; that improvements
claimant of the land during the survey in 1948; that consist of bananas, bamboos and palay; that the
during the relocation survey made in 1962, old points shoreline is not even in shape because of the Baloyboy
cannot be Identified or located because they were under Creek; that the people in the area never came to know
water by about forty centimeters; that during the ocular about the registration case in which the lots in question
inspection of the premises on November 23, 1970, he were registered; that the people living in the area, even
found that 2 monuments of the lots in question were without any government aid, helped one another in the
washed out by the waters of the Baloyboy Creek; that construction of irrigated rice paddies; that he helped
he also found duck pens along the lots in question; that them file their public land applications for the portions
there are houses in the premises as well as some occupied by them; that the Castillos have never been in
camotes and bananas; and that he found also some possession of the premises; that the people depend upon
shells ('suso') along the banks of the Taal lake (Tsn, duck raising as their means of their livelihood; that Lots
Nov. 16, 1970, pp. 13-21; Feb. 16, 1971, pp. 4-36). 1 and 2 were yet inexistent during the Japanese

33
occupation; and that the people started improving the A The basis of that statement is
area only during liberation and began to build their the plan itself, because there is
houses thereon. (Tsn, Nov. 26,1970, pp. 197-234). here an annotation that the
boundary on the northeastern
side is Tanauan Cadastre 168
Among the exhibits formally offered by the Government are: the Original
which indicates that the boundary
Plan of Tanauan, Batangas, particularly the Banader Estate, the Original Plan
of the original cadastral survey of
of PSU-119166, Relocation Verification Survey Plan, maps, and reports of
Tanauan Cadastre way back in
Geodetic Engineers, all showing the original shoreline of the disputed areas
the year 1923 adjoins a foreshore
and the fact that the properties in question were under water at the time and
land which is also indicated in
are still under water especially during the rainy season (Hearing, March
this plan as foreshore lands of
17,1971, TSN, pp. 46-47).
Taal lake, sir.

On the other hand, private respondents maintain that Lots 1 and 2 have always
xxx xxx xxx
been in the possession of the Castillo family for more than 76 years and that
their possession was public, peaceful, continuous, and adverse against the
whole world and that said lots were not titled during the cadastral survey of Q Now, on this plan Exhibit "A-
Tanauan, because they were still under water as a result of the eruption of 2", there are two lots indicated
Taal Volcano on May 5, 1911 and that the inundation of the land in question namely, Lots 12374 and 12377,
by the waters of Taal Lake was merely accidental and does not affect private what do these lots represent?
respondents' ownership and possession thereof pursuant to Article 778 of the
Law of Waters. They finally insisted that this issue of facts had been squarely
A This is the cadastral lot
raised at the hearing of the land registration case and, therefore, res
executed in favor of a certain
judicata (Record on Appeal, pp. 63-64). They submitted oral and
Modesto Castillo that
documentary evidence in support of their claim.
corresponds to Lots 12374 and
another Lot 12377, sir.
Also summarized by respondent Appellate Court, the testimonies of the
witnesses of private respondents are as follows:
Q At the time this survey plan
Psu-119166 and marked as
1. Silvano Reano, testified to the effect that he was the Exhibit "A-2" was executed in
overseer of the property of the late Modesto Castillo 1948, were these lots 1 and 2
located at Banadero,Tanauan, Batangas since 1944 to already in existence as part of the
1965; that he also knows Lots 1 and 2, the parcels of cadastral survey?
land in question, since he was managing said property;
that the occupants of said Lots 1 and 2 were engaged in
A No, sir, because there is
duck raising; that those occupants were paying the
already a foreshore boundary.
Castillos certain amount of money because their
animals used to get inside the lots in question; that he
was present during the survey of the land in 1948; and Q Do I understand from you Mr.
that aside from the duck pens which are built in the Witness at the time of the survey
premises, the land is planted to rice (Tsn, April 14, of this land these two lots form
1971, pp. 62-88). part of this portion?

2. Dr. Mariano Castillo, testified to the effect that the A Yes, sir.
late Modesto Castillo was a government official who
held high positions in the Government; and that upon
Q When again was the cadastral
his death the land was subdivided among his legal heirs.
survey of Tanauan, Batangas,
(Appellee's Brief, pp. 4-9).
executed if you know?

As above-stated, the trial court decided the case in favor of the government
A In the year 1923, sir. (Hearing
but the decision was reversed on appeal by the Court of Appeals.
of Nov. 16, 1970, TSN pp. 15-
17).
A careful study of the merits of their varied contentions readily shows that the
evidence for the government has far outweighed the evidence for the private
Such fact was further verified in the Verification-Relocation Survey of 1948
respondents. Otherwise stated, it has been satisfactorily established as found
by Engineer Arcenas who conducted said survey himself and reported the
by the trial court, that the properties in question were the shorelands of Taal
following:
Lake during the cadastral survey of 1923.

That as per original plan Psu-119166, it appears that


Explaining the first survey of 1923, which showed that Lots 1 and 2 are parts
Lot 1 and Lot 2, Psu-119166 surveyed and approved in
of the Taal Lake, Engineer Rosendo Arcenas testified as follows:
the name of Modesto Castillo is a portion of Taal Lake
and as such it appears to be under water during the
ATTY. AGCAOILI: survey of cadastral Lot No. 12374 and Lot No. 12377,
which was surveyed and approved in the name of
Modesto Castillo under Cad. 168. To support this
Q Now, you mentioned Engineer
theory is the annotation appearing and printed along
that a subject matter of that plan
lines 2-3-4-5 of Lot 1, Psu-119166 and along lines 4-5-
which appears to be Lots 1 and 2
6 of Lot 2, Psu-119166 which notations clearly
are adjoining cadastral lots of the
indicates that such boundary of property was a former
Tanauan Cadastre, now, will you
shorelines of Taal Lake, in other words, it was the
please state to the Court what is
extent of cultivation being the shorelines and the rest of
the basis of that statement of
the area going to the southwestern direction are already
yours?
covered by water level.

34
Another theory to bolster and support this Idea is the who are brothers-in-law, constructed a mixed residential and commercial
actual location now in the verification-relocation survey building on the interior part of Lot 2.
of a known geographic point were Barrio Boundary
Monument (BBM N. 22) is under water level quite for
On 14 April 1955, then President Ramon Magsaysay issued Proclamation No.
sometimes as evidence by earthworks (collection of
144, entitled "Reserving for Street Widening and Parking Space Purposes
mud) that amount over its surface by eighty (80)
Certain Parcels of the Public Domain Situated in the Municipality of Malabon,
centimeters below the ground, see notation appearing
Province of Rizal, Island of Luzon."1 Lots 1 and 2 were specifically
on verification-relocation plan previously submitted.
withdrawn from sale or settlement and reserved for the purposes mentioned in
(Re-Verification-Relocation Survey Exhibits, pp. 64-
the Proclamation.
65).

The Municipal Council of Malabon then passed Resolutions 2 authorizing the


Said surveys were further confirmed by the testimonies of witnesses to the
filing of ejectment cases against appellants so that Proclamation No, 144
effect that from 1950 to 1969, during rainy season, the water of Taal lake even
could be implemented. On 23 June 1955, the Assistant Provincial Fiscal of
went beyond the questioned lots; and that the water, which was about one (1)
Pasig, Rizal filed separate complaints against appellants for the recovery of
foot, stayed up to more or less two (2) to three (3) months (Testimonies of
the portions of Lot 2 they were occupying.
Braulio Almendral and Anastacio Tirones both residents of Banadero,
Tanauan, Batangas (Hearing of Nov. 16, 1970, TSN, pp. 41-42 and Hearing of
Nov. 23, 1970, TSN, pp. 93, 98-99, respectively). In the Relocation Survey of Appellants disputed the light of the Government to recover the land occupied
1962, there were no definite boundary or area of Lots 1 and 2 because a by them. In his answer, Policarpio Gonzales claimed (1) that Lot 2 was
certain point is existing which was under water by 40 centimeters (Testimony covered by a lease application, and later a miscellaneous sales application,
of Engineer Arcena, Hearing of Nov. 16,1970, TSN, p. 20). filed before the Bureau of Lands; (2) that he had a municipal permit to
construct a building as well as a business license duly issued by the Office of
the Mayor of Malabon; and (3) that the lot occupied by him was not needed
Lakeshore land or lands adjacent to the lake, like the lands in question must be
by the Municipality of Malabon in the widening of F. Sevilla Boulevard. The
differentiated from foreshore land or that part of the land adjacent to the sea
defenses interposed by Augusto Josue were substantially similar to those
which is alternately covered and left dry by the ordinary flow of the tides
raised by Policarpio Gonzales.
(Castillo, Law on Natural Resources, Fifth Edition, 1954, p. 67).

Upon agreement of the parties, the separate cases were tried jointly. On 28
Such distinction draws importance from the fact that accretions on the bank of
January 1967, the trial court, presided over by then Judge Cecilia Muñoz-
a lake, like Laguna de Bay, belong to the owners of the estate to which they
Palma, rendered a decision with the following dispositive portion:
have been added (Gov't. v. Colegio de San Jose, 53 Phil. 423) while accretion
on a sea bank still belongs to the public domain, and is not available for
private ownership until formally declared by the government to be no longer WHEREFORE, finding the complaints to be justified and
needed for public use (Ignacio v. Director of Lands, 108 Phil. 335 [1960]). meritorious, this Court orders defendants Policarpio Gonzales and
Augusto Josue and/or their agents, representatives, successors-in-
interest to vacate Lots 1 and 2 of Plan MR1018-D as described in
But said distinction will not help private respondents because there is no
the complaint, and to remove at their expense their respective
accretion shown to exist in the case at bar. On the contrary, it was established
buildings and/or improvements erected and existing on said lots,
that the occupants of the lots who were engaged in duck raising filled up the
and restore the possession thereof to the Republic of the
area with shells and sand to make it habitable.
Philippines, and to pay the corresponding costs in the respective
cases.
The defense of long possession is likewise not available in this case because,
as already ruled by this Court, mere possession of land does not by itself
SO ORDERED.3
automatically divest the land of its public character (Cuevas v. Pineda, 143
SCRA 674 [1968]).
Appellants appealed to the Court of Appeals. In a Resolution dated 1
December 1976, the Court of Appeals, speaking through Mr. Justice Luis B.
PREMISES CONSIDERED, the April 26,1984 Decision of the then
Reyes, certified the consolidated cases to this Court since the appeals raised
Intermediate Appellate Court is hereby SET ASIDE and REVERSED and the
only a question of law, that is, whether Presidential Proclamation No. 144 was
February 6,1976 Decision of the then Court of First Instance of Batangas is
valid or not.4
hereby AFFIRMED and REINSTATED.

Although appellants filed separate briefs before the Court of Appeals, their
SO ORDERED.
common defense was presented and discussed in very similar language:

Stripped of surplusage, it is respectfully submitted that


Proclamation No. 144 dated April 14, 1955 of the President of the
G.R. Nos. L-45338-39             July 31, 1991 Philippines, more particularly that portion which withdrew from
REPUBLIC OF THE PHILIPPINES, petitioner-appellee, sale and settlement the land in question and reserving [the] same
vs. for parking space purposes, is not in accordance with Section 83 of
POLICARPIO GONZALES and AUGUSTO JOSUE, respondents- the Public Land Law, Commonwealth Act No. 141, and therefore,
appellants. invalid. Under said law "parking space" is not one of those
reservations for public benefit which the President of the
Philippines may designate by proclamation from any tracts of land
of the public domain. The reservation for "parking lots" under the
FELICIANO, J.: presidential proclamation in question is not required by public
interest, nor it is for the benefit of the public, because only those
who have cars can use the parking lot. Public use or public benefit
The Republic of the Philippines is the owner of two (2) parcels of land
must be for the general public and not a use by or for particular
situated in Tañong Malabon, Metro Manila and designated as Lots 1 and 2 of
persons. The essential feature of public use is that it should not be
Plan MR-1018-D. Lot I which adjoins F. Sevilla Boulevard has an area of 605
confined to privileged individuals, but open to the general public.
square meters; Lot 2, an interior lot abutting F. Sevilla Boulevard only on its
This is not so of the parking space as contemplated by the
northern portion, is 664 square meters in area. This piece of property was
presidential proclamation in question. (Citations omitted.)
formerly a deep swamp until the occupants thereof, among them appellants
Policarpio Gonzales and Augusta Josue, started filling it. Each of appellants

35
Section 83 of Commonwealth Act No. 141, known as the Public Land Law Besides, the benefits directly obtained by car-owners do not determine either
provides: the validity or invalidity of Proclamation No. 144. What is important are the
long-term benefits which the proposed street widening and parking areas
make available to the public in the form of enhanced, safe and orderly
Upon the recommendation of the Secretary of Agriculture and
transportation on land. This is the kind of public benefit envisioned by the
Commerce [now Secretary of Environment and Natural
Municipal Council of Malabon, Rizal and which was sought to be promoted
Resources], the President may designate by proclamation any
by the President in issuing Proclamation No. 144.
tract or tracts  of land of the public domain as reservation for the
use of the Commonwealth of the Philippines [now Republic of the
Philippines] or of any of its branches, or of the inhabitants We believe and so hold that Proclamation No. 144 was lawful and valid.
thereof, in accordance with regulations prescribed for this purpose,
or for quasi-public uses or purposes when the public interest
Proclamation No. 144 specifically provided that the withdrawal of Lots No. 1
requires it, including reservations for highways, rights of way for
and 2 shall be subject to existing private rights, if any there be. Prior to the
railroads, hydraulic power sites, irrigation systems, communal
issuance of Proclamation No. 144, appellants had applied for miscellaneous
pastures or leguas comunales, public parks, public quarries, public
sales applications over the lots respectively occupied by them. Insofar as
fishponds, workingmen's village and other improvements for the
appellant Policarpio Gonzales is concerned, it is not disputed that he had
public benefit. (Emphasis supplied)
acknowledged the ownership of the National Government of the land applied
for by him.9 Although not expressly stated, Augusto Josue must be deemed to
Appellants urge this Court to declare Proclamation No. 144 invalid. They have similarly admitted that ownership by the National Government since he
contend that the setting aside of the lots occupied by them for parking space filed a miscellaneous sales application with the Bureau of Lands, an agency of
purposes does not redound to the public benefit as required under Section 83 the Government, an application which can only be filed in respect of tracts of
of the Public Land Act. They claim that only certain privileged individuals, public land, not private land.
i.e., those who have cars, can avail of the parking facility without any
advantage accruing to the general public.
The miscellaneous sales application, however, of appellant Policarpio
Gonzales had not been approved by the Bureau of Lands at the time
As observed by the trial court, Proclamation No. 144 was issued by then Proclamation No. 144 was issued; the land therefore retained its character as
President Ramon Magsaysay in response to several resolutions passed by the land of the public domain. Upon the other hand, the miscellaneous sales
Municipal Council of Malabon, Rizal, which had become particularly aware application of appellant Augusto Josue had already been rejected in an Order
of the increasing vehicular traffic and congestion along F. Sevilla of the Director of Lands dated 8 January 1954. 10 Accordingly, no private
Boulevard.5 The Municipal Council had proposed to widen F. Sevilla rights had accrued and become vested in appellants. In both cases, the lots
Boulevard and at the same time, to reserve an area for parking space to ease remained public lands and were in fact subject to the free disposition and
up traffic problems, in anticipation of the completion of the then proposed control of the Government.
market and slaughterhouse located to the west of F. Sevilla Boulevard. In this
day and age, it is hardly open to debate that the public has much to gain from
Appellants allege having built mixed residential and commercial buildings on
the proposed widening of F. Sevilla Boulevard and from establishment of a
Lot 2.1âwphi1 The evidence of record discloses that appellants had secured
municipal parking area. Indiscriminate parking along F. Sevilla Boulevard and
the appropriate municipal permits or licenses therefor, that is, for the
other main thoroughfares was prevalent; this, of course, caused the build up of
construction of said buildings as well as the carrying on of business therein.
traffic in the surrounding area to the great discomfort and inconvenience of
However, since the lease, sale or any other form of concession or disposition
the public who use the streets. Traffic congestion constitutes a threat to the
and management of lands of the public domain was directly under the
health, welfare, safety and convenience of the people and it can only be
executive control of the Director of Lands, 11 and not of local government
substantially relieved by widening streets and providing adequate parking
officials, the Malabon Municipal Mayor must be held to have exceeded his
areas.
authority in allowing the use of lands of the public domain to appellants by
constructing thereon commercial and residential use buildings, or any other
Under the Land Transportation and Traffic Code, parking in designated areas kind of building for that matter.
along public streets or highways is allowed6 which clearly indicates that
provision for parking spaces serves a useful purpose. In other jurisdictions
Sometime after Proclamation No. 144 was issued by the President, appellants
where traffic is at least as voluminous as here, the provision by municipal
brought their predicament to the attention of the President. The then
governments of parking space is not limited to parking along public streets or
Presidential Complaints and Action Committee ("PCAC") conducted an
highways. There has been a marked trend to build off-street parking facilities
investigation on the basis of which it eventually recommended the exclusion
with the view to removing parked cars from the streets. While the provision of
from the reservation of the lots affected, in line with the "Land for the
off-street parking facilities or carparks has been commonly undertaken by
Landless" policy of President Magsaysay's administration. 12 The then
private enterprise, municipal governments have been constrained to put up
Secretary of Agriculture and Natural Resources similarly recommended the
carparks in response to public necessity where private enterprise had failed to
exclusion of the portion of Lot 2 occupied by appellants and forwarded to the
keep up with the growing public demand. American courts have upheld the
Office of the President a draft of a proposed amendment of Proclamation No.
right of municipal governments to construct off-street parking facilities as
144 specifically excluding Lot 2 from the scope of application thereof .The
clearly redounding to the public benefit.7
amendment, however, remained merely a proposal for failure on the part of
the President of the Philippines to act favorably thereon.
Appellants, however, allege that the benefits, if any, that may be derived from
the proposed street-widening and parking space will be confined to people
WHEREFORE, the Petition for Review is hereby DENIED for lack of merit.
who have cars, hence there would be lacking the essential feature of property
The Decision dated 28 January 1967 of then Court of First Instance of Rizal,
reserved for public use or benefit. Appellants would restrict property reserved
Branch 1 is hereby AFFIRMED. Costs against appellants.
for public use or benefit to include only property susceptible of being utilized
by a generally unlimited number of people. The conception urged by
appellants is both flawed and obsolete since the number of users is not the SO ORDERED.
yardstick in determining whether property is properly reserved for public use
or public benefit. In the first place, Section 83 above speaks not only of use by
a local government but also of "quasi-public uses or purposes." To constitute
public use, the public in general should have equal or common rights to use
the land or facility involved on the same terms, however limited in number the
people who can actually avail themselves of it at a given time. 8 There is
nothing in Proclamation No. 144 which excludes non-car-owners from using a
widened street or a parking area should they in fact happen to be driving cars;
the opportunity to avail of the use thereof remains open for the public in
general.

36
Quezon for the cancellation of title and reversion of a
parcel of land to the public domain, subject of a free
patent in favor of respondent Morato, on the grounds
that the land is a foreshore land and was mortgaged and
leased within the five-year prohibitory period (p. 46,
G.R. No. 100709 November 14, 1997 Records).

REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR After trial, the lower court, on December 28, 1983,
OF LANDS, petitioner, rendered a decision dismissing petitioner's complaint.
vs. In finding for private respondents, the lower court ruled
COURT OF APPEALS, JOSEFINA L. MORATO, SPOUSES NENITA that there was no violation of the 5-year period ban
CO and ANTONIO QUILATAN AND THE REGISTER OF DEEDS OF against alienating or encumbering the land, because the
QUEZON PROVINCE, respondents. land was merely leased and not alienated. It also found
that the mortgage to Nenita Co and Antonio Quilatan
covered only the improvement and not the land itself.

On appeal, the Court of Appeals affirmed the decision of the trial court.
PANGANIBAN, J.: Thereafter, the Republic of the Philippines filed the present petition. 6

Will the lease and/or mortgage of a portion of a realty acquired through free The Issues
patent constitute sufficient ground for the nullification of such land grant?
Should such property revert to the State once it is invaded by the sea and thus
becomes foreshore land? Petitioner alleges that the following errors were committed by Respondent
Court: 7
The Case
I
These are the two questions raised in the petition before us assailing the Court
of Appeals' 1 Decision in CA-G.R. CV No. 02667 promulgated on June 13, Respondent court erred in holding that the patent
1991 which answered the said questions in the negative. 2 Respondent Court's granted and certificate of title issued to Respondent
dismissed 3 petitioner's appeal and affirmed in toto the decision of the Morato cannot be cancelled and annulled since the
Regional Trial Court4 of Calauag, Quezon, dated December 28, 1983 in Civil certificate of title becomes indefeasible after one year
Case No. C-608. In turn, the Regional Trial Court's decision dismissed from the issuance of the title.
petitioner's complaint for cancellation of the Torrens Certificate of Title of
Respondent Morato and for reversion of the parcel of land subject thereof of
II
the public domain.

Respondent Court erred in holding that the questioned


The Facts
land is part of a disposable public land and not a
foreshore land.
The petition of the solicitor general, representing the Republic of the
Philippines, recites the following facts: 5
The Court's Ruling

Sometime in December, 1972, respondent Morato filed


The petition is meritorious.
a Free Patent Application No. III-3-8186-B on a parcel
of land with an area of 1,265 square meters situated at
Pinagtalleran, Calauag, Quezon. On January 16, 1974, First Issue: Indefeasibility of a Free Patent Title
the patent was approved and the Register of Deeds of
Quezon at Lucena City issued on February 4, 1974
In resolving the first issue against petitioner, Respondent Court held: 8
Original Certificate of Title No. P-17789. Both the free
paten and the title specifically mandate that the land
shall not be alienated nor encumbered within five years . . . As ruled in Heirs of Gregorio Tengco vs. Heirs of
from the date of the issuance of the patent (Sections 118 Jose Alivalas, 168 SCRA 198. ". . . The rule is well-
and 124 of CA No. 141, as amended). settled that an original certificate of title issued on the
strength of a homestead patent partakes of the nature of
a certificate of title issued in a judicial proceeding, as
Subsequently, the District Land Officer in Lucena City,
long as the land disposed of is really part of the
acting upon reports that respondent Morato had
disposable land of the public domain, and becomes
encumbered the land in violation of the condition of the
indefeasible and incontrovertible upon the expiration of
patent, conducted an investigation. Thereafter, it was
one year from the date of promulgation of the order of
established that the subject land is a portion of the
the Director of Lands for the issuance of the patent.
Calauag Bay, five (5) to six (6) feet deep under water
(Republic v. Heirs of Carle, 105 Phil. 1227 (1959);
during high tide and two (2) feet deep at low tide, and
Ingaran v. Ramelo, 107 Phil. 498 (1960); Lopez
not suitable to vegetation. Moreover, on October 24,
v. Padilla, (G.R. No. L-27559, May 18, 1972, 45 SCRA
1974, a portion of the land was mortgaged by
44). A homestead patent, one registered under the Land
respondent Morato to respondents Nenita Co and
Registration Act, becomes as indefeasible as a Torrens
Antonio Quilatan for P10,000.00 (pp. 2, 25, Folder of
Title. (Pamintuan v. San Agustin, 43 Phil. 558 (1982);
Exhibits). The spouses Quilatan constructed a house on
El Hogar Filipino v. Olviga, 60 Phil. 17 (1934); Duran
the land. Another portion of the land was leased to
v. Oliva, 113 Phil. 144 (1961); Pajomayo v. Manipon,
Perfecto Advincula on February 2, 1976 at P100.00 a
G.R. No. L-33676, June 30, 1971, 39 SCRA 676). (p.
month, where a warehouse was constructed.
203).

On November 5, 1978, petitioner filed an amended


Again, in Lopez vs. Court of Appeals, 169 SCRA 271,
complaint against respondents Morato, spouses Nenita
citing Iglesia ni Cristo v. Hon. Judge, CFI of Nueva
Co and Antonio Quilatan, and the Register of Deeds of
37
Ecija, Branch I, (123 SCRA 516 (1983) and Pajomayo, banking corporations, lands acquired under free patent
et al. v. Manipon, et al. (39 SCRA 676 (1971) held that or homestead provisions shall not be subject to
once a homestead patent granted in accordance with the encumbrance or alienation from the date of the
Public Land Act is registered pursuant to Section 122 of approval of the application and for a term of five years
Act 496, the certificate of title issued in virtue of said from and after the date of issuance of the patent or
patent has the force and effect of a Torrens Title issued grant nor shall they become liable to the satisfaction of
under the Land Registration Act. any debt contracted prior to the expiration of said
period; but the improvements or crops on the land may
be mortgaged or pledged to qualified persons,
Indefeasibility of the title, however, may not bar the
associations, or corporations.
State, thru the Solicitor General, from filing an action
for reversion, as ruled in Heirs of Gregorio Tengco
v. Heirs of Jose Aliwalas, (supra), as follows: No alienation, transfer, or conveyance of any
homestead after five years and before twenty-five years
after issuance of title shall be valid without the approval
But, as correctly pointed out by the respondent Court of
of the Secretary of Agriculture and Natural Resources,
Appeals, Dr. Aliwalas' title to the property having
which approval shall not be denied except on
become incontrovertible, such may no longer be
constitutional and legal grounds. (As amended by Com.
collaterally attacked. If indeed there had been any fraud
Act No. 456, approved June 8, 1939.)
or misrepresentation in obtaining the title, an action for
reversion instituted by the Solicitor General would be
the proper remedy (Sec. 101, C.A. No. 141; Director of xxx xxx xxx
Lands v. Jugado, G.R. No. L-14702, May 21, 1961, 2
SCRA 32; Lopez v. Padilla, supra). (p. 204).
Sec. 121. Except with the consent of the grantee and the
approval of the Secretary of Agriculture and Natural
Petitioner contends that the grant of Free Patent (IV-3) 275 and the subsequent Resources, and solely for educational, religious, or
issuance of Original Certificate of Title No. P-17789 to Respondent Josefina charitable purposes or for a right of way, no
L. Morato were subject to the conditions provided for in Commonwealth Act corporation, association, or partnership may acquire or
(CA) No. 141. It alleges that on October 24, 1974, or nine (9) months and have any right, title, interest, or property right
eight (8) days after the grant of the patent, mortgaged a portion of the land" to whatsoever to any land granted under the free patent,
Respondent Nenita Co, who thereafter constructed a house thereon. Likewise, homestead, or individual sale provisions of this Act or
on February 2, 1976 and "within the five-year prohibitory period," to any permanent improvement on such land. (As
Respondent Morato "leased a portion of the land to Perfecto Advincula at a amended by Com. Act No. 615, approved May 5, 1941)
monthly rent of P100.00 who, shortly thereafter, constructed a house of
concrete materials on the subject land."9 Further, petitioner argues that the
Sec. 122. No land originally acquired in any manner
defense of indefeasibility of title is "inaccurate." The original certificate of
under the provisions of this Act, nor any permanent
title issued to Respondent Morato "contains the seeds of its own cancellation":
improvement on such land, shall be encumbered,
such certificate specifically states on its face that "it is subject to the
alienation or transferred, except to persons,
provisions of Sections 118, 119, 121, 122, 124 of CA No. 141, as
corporations, association, or partnerships who may
amended." 10
acquire lands of the public domain under this Act or to
corporations organized in the Philippines authorized
Respondent Morato counters by stating that although a "portion of the land therefore by their charters.
was previously leased," it resulted "from the fact that Perfecto Advincula built
a warehouse in the subject land without [her] prior consent." The mortgage
Except in cases of hereditary successions, no land or
executed over the improvement "cannot be considered a violation of the said
any portion thereof originally acquired under the free
grant since it can never affect the ownership." 11 She states further:
patent, homestead, or individual sale provisions of this
Act, or any permanent improvement on such land, shall
. . . . the appeal of the petitioner was dismissed not be transferred or assigned to any individual, nor shall
because of the principle of indefeasibility of title but such land or any permanent improvement thereon be
mainly due to failure of the latter to support and prove leased to such individual, when the area of said land,
the alleged violations of respondent Morato. The added to that of this own, shall exceed one hundred and
records of this case will readily show that although forty-four hectares. Any transfer, assignment, or lease
petitioner was able to establish that Morato committed made in violation hereto shall be null and void. (As
some acts during the prohibitory period of 5 years, a amended by Com Act No. 615, Id.).
perusal thereof will also show that what petitioner was
able to prove never constituted a violation of the
xxx xxx xxx
grant. 12

Sec. 124. Any acquisition, conveyance, alienation,


Respondent-Spouses Quilatan, on the other hand, state that the mortgage
transfer, or other contract made or executed in violation
contract they entered into with Respondent Morato "can never be considered
of any of the provisions of sections one hundred and
as [an] 'alienation' inasmuch as the ownership over the property remains with
eighteen, one hundred and twenty, one hundred and
the owner." 13 Besides, it is the director of lands and not the Republic of the
twenty-one, one hundred and twenty-two, and one
Philippines who is the real party in interest in this case, contrary to the
hundred and twenty-three of this Act shall be unlawful
provision of the Public Land Act which states that actions for reversion should
and null and void from its execution and shall produce
be instituted by the solicitor general in the name of Republic of the
the effect of annulling and cancelling the grant, title,
Philippines. 14
patent, or permit originally issued, recognized or
confirmed, actually or presumatively, and cause the
We find for petitioner. reversion of the property and its improvements to the
State. (Emphasis supplied)
Quoted below are relevant sections of Commonwealth Act No. 141, otherwise
known as the Public Land Act: The foregoing legal provisions clearly proscribe the encumbrance of a parcel
of land acquired under a free patent or homestead within five years from the
grant of such patent. Furthermore, such encumbrance results in the
Sec. 118. Except in favor of the Government or any of
cancellation of the grant and the reversion of the land to the public domain.
its branches, units or institutions, or legally constituted
38
Encumbrance has been defined as "[a]nything that impairs the use or transfer patent. After that five-year period the law impliedly
of property; anything which constitutes a burden on the title; a burden or permits alienation of the homestead; but in line with the
charge upon property; a claim or lien upon property." It may be a "legal claim primordial purpose to favor the homesteader and his
on an estate for the discharge of which the estate is liable; and embarrassment family the statute provides that such alienation or
of the estate or property so that it cannot be disposed of without being subject conveyance (Section 117) shall be subject to the right
to it; an estate, interest, or right in lands, diminishing their value to the general of repurchase by the homesteader, his widow or heirs
owner; a liability resting upon an estate." 15 Do the contracts of lease and within five years. This section 117 is undoubtedly a
mortgage executed within five (5) years from the issuance of the patent complement of section 116. It aims to preserve and
constitute an "encumbrance" and violate the terms and conditions of such keep in the family of the homesteader that portion of
patent? Respondent Court answered in the negative: 16 public land which the State had gratuitously given to
him. It would, therefore, be in keeping with this
fundamental idea to hold, as we hold, that the right to
From the evidence adduced by both parties, it has been
repurchase exists not only when the original
proved that the area of the portion of the land, subject
homesteader makes the conveyance, but also when it is
matter of the lease contract (Exh. "B") executed by and
made by his widow or heirs. This construction is clearly
between Perfecto Advincula and Josefina L. Morato is
deducible from the terms of the statute.
only 10 x 12 square meters, where the total area of the
land granted to Morato is 1,265 square meters. It is
clear from this that the portion of the land leased by By express provision of Section 118 of Commonwealth Act 141 and in
Advincula does not significantly affect Morato's conformity with the policy of the law, any transfer or alienation of a free
ownership and possession. Above all, the circumstances patent or homestead within five years from the issuance of the patent is
under which the lease was executed do not reflect a proscribed. Such transfer nullifies said alienation and constitutes a cause for
voluntary and blatant intent to violate the conditions the reversion of the property to the State.
provided for in the patent issued in her favor. On the
contrary, Morato was compelled to enter into that
The prohibition against any alienation or encumbrance of the land grant is a
contract of lease
proviso attached to the approval of every application. 23 Prior to the fulfillment
out of sympathy and the goodness of her heart to
of the requirements of law, Respondent Morato had only an inchoate right to
accommodate a fellow man. . . .
the property; such property remained part of the public domain and, therefore,
not susceptible to alienation or encumbrance. Conversely, when a
It is indisputable, however, that Respondent Morato cannot fully use or enjoy "homesteader has complied with all the terms and conditions which entitled
the land during the duration of the lease contract. This restriction on the him to a patent for [a] particular tract of public land, he acquires a vested
enjoyment of her property sufficiently meets the definition of an encumbrance interest therein and has to be regarded an equitable owner
under Section 118 of the Public Land Act, because such contract "impairs the thereof." 24 However, for Respondent Morato's title of ownership over the
use of the property" by the grantee. In a contract of lease which is consensual, patented land to be perfected, she should have complied with the requirements
bilateral, onerous and commutative, the owner temporarily grants the use of of the law, one of which was to keep the property for herself and her family
his or her property to another who undertakes to pay rent therefor. 17 During within the prescribed period of five (5) years. Prior to the fulfillment of all
the term of the lease, the grantee of the patent cannot enjoy the beneficial use requirements of the law, Respondent Morato's title over the property was
of the land leased. As already observed, the Public Land Act does not permit a incomplete. Accordingly, if the requirements are not complied with, the State
grantee of a free patent from encumbering any portion of such land. Such as the grantor could petition for the annulment of the patent and the
encumbrance is a ground for the nullification of the award. cancellation of the title.

Morato's resort to equity, i.e. that the lease was executed allegedly out of the Respondent Morato cannot use the doctrine of the indefeasibility of her
goodness of her heart without any intention of violating the law, cannot help Torrens title to bar the state from questioning its transfer or encumbrance. The
her. Equity, which has been aptly described as "justice outside legality," is certificate of title issued to her clearly stipulated that its award was "subject to
applied only in the absence of, and never against, statutory law or judicial the conditions provided for in Sections 118, 119, 121, 122 and 124 of
rules of procedure. Positive rules prevail over all abstract arguments based on Commonwealth Act (CA) No. 141." Because she violated Section 118, the
equity contra legem. 18 reversion of the property to the public domain necessarily follows, pursuant to
Section 124.
Respondents failed to justify their position that the mortgage should not be
considered an encumbrance. Indeed, we do not find any support for such Second Issue: Foreshore Land
contention. The questioned mortgage falls squarely within the term Revert to the Public Domain
"encumbrance" proscribed by Section 118 of the Public Land Act. 19 Verily, a
mortgage constitutes a legal limitation on the estate, and the foreclosure of
There is yet another reason for granting this petition.
such mortgage would necessarily result in the auction of the property. 20

Although Respondent Court found that the subject land was foreshore land, it
Even if only part of the property has been sold or alienated within the
nevertheless sustained the award thereof to Respondent Morato: 25
prohibited period of five years from the issuance of the patent, such alienation
is a sufficient cause for the reversion of the whole estate to the State. As a
condition for the grant of a free patent to an applicant, the law requires that the First of all, the issue here is whether the land in
land should not be encumbered, sold or alienated within five years from the question, is really part of the foreshore lands. The
issuance of Supreme Court defines foreshore land in the case
the patent. The sale or the alienation of part of the homestead violates that of Republic vs. Alagad, 169 SCRA 455, 464, as
condition. 21 follows:

The prohibition against the encumbrance — lease and mortgage included — Otherwise, where the rise in
of a homestead which, by analogy applies to a free patent, is mandated by the water level is due to, the
rationale for the grant, viz.: 22 "extraordinary" action of nature,
rainful, for instance, the portions
inundated thereby are not
It is well-known that the homestead laws were designed
considered part of the bed or
to distribute disposable agricultural lots of the State to
basin of the body of water in
land-destitute citizens for their home and cultivation.
question. It cannot therefore be
Pursuant to such benevolent intention the State
said to be foreshore land but land
prohibits the sale or incumbrance of the homestead
outside of the public dominion,
(Section 116) within five years after the grant of the
39
and land capable of registration caused by natural calamities, the sea advances had
as private property. permanently invaded a portion of subject land. As
disclosed at the trial, through the testimony of the
court-appointed commissioner, Engr. Abraham B. Pili,
A foreshore land, on the other
the land was under water during high tide in the month
hand has been defined as
of August 1978. The water margin covers half of the
follows:
property, but during low tide, the water is about a
kilometer (TSN, July 19, 1979, p. 12). Also, in 1974,
. . . that part of (the land) which is between high after the grant of the patent, the land was covered with
vegetation, but it disappeared in 1978 when the land
and low water and left dry by the flux and reflux of the tides . . . . (Republic
was reached by the tides (Exh. "E-1", "E-14"). In fact,
vs. C.A., Nos. L-43105, L-43190, August 31, 1984, 131 SCRA 532;
in its decision dated December 28, 1983, the lower
Government vs. Colegio de San Jose, 53 Phil 423)
court observed that the erosion of the land was caused
by natural calamities that struck the place in 1977 (Cf.
The strip of land that lies between the high and low water marks and that is Decision, pp. 17-18). 26
alternatively wet and dry according to the flow of the tide. (Rep. vs.
CA, supra, 539).
Respondent-Spouses Quilatan argue, however, that it is "unfair and unjust if
Josefina Morato will be deprived of the whole property just because a portion
The factual findings of the lower court regarding the nature of the parcel of thereof was immersed in water for reasons not her own doing." 27
land in question reads:

Evidence disclose that the marginal area of the land radically changed As a general rule, findings of facts of the Court of Appeals are binding and
sometime in 1937 up to 1955 due to a strong earthquake followed by frequent conclusive upon this Court, unless such factual findings are palpably
storms eventually eroding the land. From 1955 to 1968, however, gradual unsupported by the evidence on record or unless the judgment itself is based
reclamation was undertaken by the lumber company owned by the Moratos. on a misapprehension of facts. 28 The application for a free patent was made in
Having thus restored the land thru mostly human hands employed by the 1972. From the undisputed factual findings of the Court of Appeals, however,
lumber company, the area continued to be utilized by the owner of the sawmill the land has since become foreshore. Accordingly, it can no longer be subject
up to the time of his death in 1965. On or about March 17, 1973, there again of a free patent under the Public Land Act. Government of the Philippine
was a strong earthquake unfortunately causing destruction to hundreds of Islands vs. Cabañgis  29 explained the rationale for this proscription:
residential houses fronting the Calauag Bay including the Santiago Building, a
cinema house constructed of concrete materials. The catastrophe totally Article 339, subsection 1, of the Civil Code, reads:
caused the sinking of a concrete bridge at Sumulong river also in the
municipality of Calauag, Quezon.
Art. 339. Property of public ownership is —
On November 13, 1977 a typhoon code named "Unding" wrought havoc as it
lashed the main land of Calauag, Quezon causing again great erosion this time 1. That devoted to public use, such as roads, canals,
than that which the area suffered in 1937. The Court noted with the rivers, torrents, ports and bridges constructed by the
significance of the newspaper clipping entitled "Baryo ng Mangingisda Kinain State, riverbanks, shores, roadsteads, and that of a
ng Dagat" (Exh. "11"). similar character.

x x x           x x x          x x x xxx xxx xxx

Evidently this was the condition of the land when on or about December 5, Article 1, case 3, of the law of Waters of August 3,
1972 defendant Josefina L. Morato filed with the Bureau of Lands her free 1866, provides as follows:
patent application. The defendant Josefina Morato having taken possession of
the land after the demise of Don Tomas Morato, she introduced improvement
and continued developing the area, planted it to coconut tree. Having applied Art. 1. The following are part of the national domain
for a free patent, defendant had the land area surveyed and an approved plan open to public use.
(Exh. "9") based on the cadastral survey as early as 1927 (Exh. "10") was
secured. The area was declared for taxation purposes in the name of defendant xxx xxx xxx
Josefina Morato denominated as Tax Declaration No. 4115 (Exh. "8") and the
corresponding realty taxes religiously paid as shown by Exh. "8-A"). (pp. 12-
14, DECISION). 3. The Shores. By the shore is understood that space
covered and uncovered by the movement of the tide. Its
interior or terrestrial limit is the line reached by the
Being supported by substantial evidence and for failure highest equinoctal tides. Where the tides are not
of the appellant to show cause which would warrant appreciable, the shore begins on the land side at the line
disturbance, the aforecited findings of the lower court, reached by the sea during ordinary storms or tempests.
must be respected.

In the case of Aragon vs. Insular Government (19 Phil.


Petitioner correctly contends, however, that Private Respondent Morato 223), with reference to article 339 of the Civil Code just
cannot own foreshore land: quoted, this Court said:

Through the encroachment or erosion by the ebb and We should not be understood, by this decision, to hold
flow of the tide, a portion of the subject land was that in a case of gradual encroachment or erosion by the
invaded by the waves and sea advances. During high ebb and flow of the tide, private property may not
tide, at least half of the land (632.5 square meters) is 6 become "property of public ownership." as defined in
feet deep under water and three (3) feet deep during low article 339 of the code, where it appear that the owner
tide. The Calauag Bay shore has extended up to a has to all intents and purposes abandoned it and
portion of the questioned land. permitted it to be totally destroyed, so as to become a
part of the "playa" (shore of the sea), "rada"
While at the time of the grant of free patent to (roadstead), or the like. . . .
respondent Morato, the land was not reached by the
water, however, due to gradual sinking of the land
40
In the Enciclopedia Juridica Española, volume XII, On February 4, 1977, then President Ferdinand E. Marcos issued Presidential
page 558, we read the following: Decree No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land,
including foreshore and submerged areas," and "to develop, improve, acquire,
x x x lease and sell any and all kinds of lands." 1 On the same date, then
With relative frequency the opposite phenomenon
President Marcos issued Presidential Decree No. 1085 transferring to PEA the
occurs; that is, the sea advances and private properties
"lands reclaimed in the foreshore and offshore of the Manila Bay" 2 under the
are permanently invaded by the waves, and in this case
Manila-Cavite Coastal Road and Reclamation Project (MCCRRP).
they become part of the shore or breach. The then pass
to the public domain, but the owner thus dispossessed
does not retain any right to the natural products On December 29, 1981, then President Marcos issued a memorandum
resulting from their new nature; it is a de facto case of directing PEA to amend its contract with CDCP, so that "[A]ll future works in
eminent domain, and not subject to indemnity. MCCRRP x x x shall be funded and owned by PEA." Accordingly, PEA and
CDCP executed a Memorandum of Agreement dated December 29, 1981,
which stated:
In comparison, Article 420 of the Civil Code provides:

"(i) CDCP shall undertake all reclamation, construction, and such


Art. 420. The following things are property of public
other works in the MCCRRP as may be agreed upon by the parties,
dominion:
to be paid according to progress of works on a unit price/lump sum
basis for items of work to be agreed upon, subject to price
(1) Those intended for public use, such as roads, canals, escalation, retention and other terms and conditions provided for in
rivers, torrents, ports and bridges constructed by the Presidential Decree No. 1594. All the financing required for such
State, banks, shores, roadsteads, and others of similar works shall be provided by PEA.
character;
xxx
(2) Those which belong to the State, without being for
public use, and are intended for some public service or
(iii) x x x CDCP shall give up all its development rights and
for the development of the national wealth.
hereby agrees to cede and transfer in favor of PEA, all of the
rights, title, interest and participation of CDCP in and to all the
When the sea moved towards the estate and the tide invaded it, the invaded areas of land reclaimed by CDCP in the MCCRRP as of December
property became foreshore land and passed to the realm of the public domain. 30, 1981 which have not yet been sold, transferred or otherwise
In fact, the Court in Government vs. Cabangis 30 annulled the registration of disposed of by CDCP as of said date, which areas consist of
land subject of cadastral proceedings when the parcel subsequently became approximately Ninety-Nine Thousand Four Hundred Seventy
foreshore land. 31 In another case, the Court voided the registration decree of a Three (99,473) square meters in the Financial Center Area covered
trial court and held that said court had no jurisdiction to award foreshore land by land pledge No. 5 and approximately Three Million Three
to any private person or entity. 32 The subject land in this case, being foreshore Hundred Eighty Two Thousand Eight Hundred Eighty Eight
land, should therefore be returned to the public domain. (3,382,888) square meters of reclaimed areas at varying elevations
above Mean Low Water Level located outside the Financial Center
Area and the First Neighborhood Unit."3
WHEREFORE, the petition is GRANTED. This Court hereby REVERSES
and SETS ASIDE the assailed Decision of Respondent Court and ORDERS
the CANCELLATION of Free Patent No. (IV-3) 275 issued to Respondent On January 19, 1988, then President Corazon C. Aquino issued Special Patent
Morato and the subsequent Original Certificate of Title No. P-17789. The No. 3517, granting and transferring to PEA "the parcels of land so reclaimed
subject land therefore REVERTS to the State. No costs. under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP)
containing a total area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters." Subsequently, on April 9,
SO ORDERED. 1988, the Register of Deeds of the Municipality of Parañaque issued Transfer
Certificates of Title Nos. 7309, 7311, and 7312, in the name of PEA, covering
G.R. No. 133250           July 9, 2002 the three reclaimed islands known as the "Freedom Islands" located at the
FRANCISCO I. CHAVEZ, petitioner, southern portion of the Manila-Cavite Coastal Road, Parañaque City. The
vs. Freedom Islands have a total land area of One Million Five Hundred Seventy
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY Eight Thousand Four Hundred and Forty One (1,578,441) square meters or
DEVELOPMENT CORPORATION, respondents. 157.841 hectares.

CARPIO, J.: On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for
brevity) with AMARI, a private corporation, to develop the Freedom Islands.
The JVA also required the reclamation of an additional 250 hectares of
This is an original Petition for Mandamus with prayer for a writ of submerged areas surrounding these islands to complete the configuration in
preliminary injunction and a temporary restraining order. The petition seeks to the Master Development Plan of the Southern Reclamation Project-MCCRRP.
compel the Public Estates Authority ("PEA" for brevity) to disclose all facts PEA and AMARI entered into the JVA through negotiation without public
on PEA's then on-going renegotiations with Amari Coastal Bay and bidding.4 On April 28, 1995, the Board of Directors of PEA, in its Resolution
Development Corporation ("AMARI" for brevity) to reclaim portions of No. 1245, confirmed the JVA.5 On June 8, 1995, then President Fidel V.
Manila Bay. The petition further seeks to enjoin PEA from signing a new Ramos, through then Executive Secretary Ruben Torres, approved the JVA.6
agreement with AMARI involving such reclamation.

On November 29, 1996, then Senate President Ernesto Maceda delivered a


The Facts privilege speech in the Senate and denounced the JVA as the "grandmother of
all scams." As a result, the Senate Committee on Government Corporations
On November 20, 1973, the government, through the Commissioner of Public and Public Enterprises, and the Committee on Accountability of Public
Highways, signed a contract with the Construction and Development Officers and Investigations, conducted a joint investigation. The Senate
Corporation of the Philippines ("CDCP" for brevity) to reclaim certain Committees reported the results of their investigation in Senate Committee
foreshore and offshore areas of Manila Bay. The contract also included the Report No. 560 dated September 16, 1997. 7 Among the conclusions of their
construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the
obligated itself to carry out all the works in consideration of fifty percent of JVA are lands of the public domain which the government has not classified
the total reclaimed land. as alienable lands and therefore PEA cannot alienate these lands; (2) the
certificates of title covering the Freedom Islands are thus void, and (3) the
JVA itself is illegal.
41
On December 5, 1997, then President Fidel V. Ramos issued Presidential IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING
Administrative Order No. 365 creating a Legal Task Force to conduct a study THIS SUIT;
on the legality of the JVA in view of Senate Committee Report No. 560. The
members of the Legal Task Force were the Secretary of Justice, 8 the Chief
V. WHETHER THE CONSTITUTIONAL RIGHT TO
Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The
INFORMATION INCLUDES OFFICIAL INFORMATION ON
Legal Task Force upheld the legality of the JVA, contrary to the conclusions
ON-GOING NEGOTIATIONS BEFORE A FINAL
reached by the Senate Committees.11
AGREEMENT;

On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published


VI. WHETHER THE STIPULATIONS IN THE AMENDED
reports that there were on-going renegotiations between PEA and AMARI
JOINT VENTURE AGREEMENT FOR THE TRANSFER TO
under an order issued by then President Fidel V. Ramos. According to these
AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO
reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired
BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND
Navy Officer Sergio Cruz composed the negotiating panel of PEA.

VII. WHETHER THE COURT IS THE PROPER FORUM FOR


On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for
RAISING THE ISSUE OF WHETHER THE AMENDED JOINT
Prohibition with Application for the Issuance of a Temporary Restraining
VENTURE AGREEMENT IS GROSSLY
Order and Preliminary Injunction docketed as G.R. No. 132994 seeking to
DISADVANTAGEOUS TO THE GOVERNMENT.
nullify the JVA. The Court dismissed the petition "for unwarranted disregard
of judicial hierarchy, without prejudice to the refiling of the case before the
proper court."12 The Court's Ruling

On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a First issue: whether the principal reliefs prayed for in the petition are moot
taxpayer, filed the instant Petition for Mandamus with Prayer for the Issuance and academic because of subsequent events.
of a Writ of Preliminary Injunction and Temporary Restraining Order.
Petitioner contends the government stands to lose billions of pesos in the sale
The petition prays that PEA publicly disclose the "terms and conditions of the
by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly
on-going negotiations for a new agreement." The petition also prays that the
disclose the terms of any renegotiation of the JVA, invoking Section 28,
Court enjoin PEA from "privately entering into, perfecting and/or executing
Article II, and Section 7, Article III, of the 1987 Constitution on the right of
any new agreement with AMARI."
the people to information on matters of public concern. Petitioner assails the
sale to AMARI of lands of the public domain as a blatant violation of Section
3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands PEA and AMARI claim the petition is now moot and academic because
of the public domain to private corporations. Finally, petitioner asserts that he AMARI furnished petitioner on June 21, 1999 a copy of the signed Amended
seeks to enjoin the loss of billions of pesos in properties of the State that are JVA containing the terms and conditions agreed upon in the renegotiations.
of public dominion. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the
renegotiations. Likewise, petitioner's prayer to enjoin the signing of the
Amended JVA is now moot because PEA and AMARI have already signed
After several motions for extension of time, 13 PEA and AMARI filed their
the Amended JVA on March 30, 1999. Moreover, the Office of the President
Comments on October 19, 1998 and June 25, 1998, respectively. Meanwhile,
has approved the Amended JVA on May 28, 1999.
on December 28, 1998, petitioner filed an Omnibus Motion: (a) to require
PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for
issuance of a temporary restraining order; and (c) to set the case for hearing on Petitioner counters that PEA and AMARI cannot avoid the constitutional issue
oral argument. Petitioner filed a Reiterative Motion for Issuance of a TRO by simply fast-tracking the signing and approval of the Amended JVA before
dated May 26, 1999, which the Court denied in a Resolution dated June 22, the Court could act on the issue. Presidential approval does not resolve the
1999. constitutional issue or remove it from the ambit of judicial review.

In a Resolution dated March 23, 1999, the Court gave due course to the We rule that the signing of the Amended JVA by PEA and AMARI and its
petition and required the parties to file their respective memoranda. approval by the President cannot operate to moot the petition and divest the
Court of its jurisdiction. PEA and AMARI have still to implement the
Amended JVA. The prayer to enjoin the signing of the Amended JVA on
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture
constitutional grounds necessarily includes preventing its implementation if in
Agreement ("Amended JVA," for brevity). On May 28, 1999, the Office of
the meantime PEA and AMARI have signed one in violation of the
the President under the administration of then President Joseph E. Estrada
Constitution. Petitioner's principal basis in assailing the renegotiation of the
approved the Amended JVA.
JVA is its violation of Section 3, Article XII of the Constitution, which
prohibits the government from alienating lands of the public domain to private
Due to the approval of the Amended JVA by the Office of the President, corporations. If the Amended JVA indeed violates the Constitution, it is the
petitioner now prays that on "constitutional and statutory grounds the duty of the Court to enjoin its implementation, and if already implemented, to
renegotiated contract be declared null and void."14 annul the effects of such unconstitutional contract.

The Issues The Amended JVA is not an ordinary commercial contract but one which
seeks to transfer title and ownership to 367.5 hectares of reclaimed lands
and submerged areas of Manila Bay to a single private corporation. It now
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
becomes more compelling for the Court to resolve the issue to insure the
government itself does not violate a provision of the Constitution intended to
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN safeguard the national patrimony. Supervening events, whether intended or
THE PETITION ARE MOOT AND ACADEMIC BECAUSE OF accidental, cannot prevent the Court from rendering a decision if there is a
SUBSEQUENT EVENTS; grave violation of the Constitution. In the instant case, if the Amended JVA
runs counter to the Constitution, the Court can still prevent the transfer of title
and ownership of alienable lands of the public domain in the name of
II. WHETHER THE PETITION MERITS DISMISSAL FOR
AMARI. Even in cases where supervening events had made the cases moot,
FAILING TO OBSERVE THE PRINCIPLE GOVERNING THE
the Court did not hesitate to resolve the legal or constitutional issues raised to
HIERARCHY OF COURTS;
formulate controlling principles to guide the bench, bar, and the public.17

III. WHETHER THE PETITION MERITS DISMISSAL FOR


Also, the instant petition is a case of first impression. All previous decisions
NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES;
of the Court involving Section 3, Article XII of the 1987 Constitution, or its
42
counterpart provision in the 1973 Constitution, 18 covered agricultural public disclosure, and was even in breach of this legal duty, petitioner had the
lands sold to private corporations which acquired the lands from private right to seek direct judicial intervention.
parties. The transferors of the private corporations claimed or could claim the
right to judicial confirmation of their imperfect titles 19 under Title II of
Moreover, and this alone is determinative of this issue, the principle of
Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant case,
exhaustion of administrative remedies does not apply when the issue involved
AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and
is a purely legal or constitutional question. 27 The principal issue in the instant
submerged areas for non-agricultural purposes by purchase under PD No.
case is the capacity of AMARI to acquire lands held by PEA in view of the
1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by
constitutional ban prohibiting the alienation of lands of the public domain to
AMARI under the Amended JVA constitute the consideration for the
private corporations. We rule that the principle of exhaustion of administrative
purchase. Neither AMARI nor PEA can claim judicial confirmation of their
remedies does not apply in the instant case.
titles because the lands covered by the Amended JVA are newly reclaimed or
still to be reclaimed. Judicial confirmation of imperfect title requires open,
continuous, exclusive and notorious occupation of agricultural lands of the Fourth issue: whether petitioner has locus standi to bring this suit
public domain for at least thirty years since June 12, 1945 or earlier. Besides,
the deadline for filing applications for judicial confirmation of imperfect title
PEA argues that petitioner has no standing to institute mandamus proceedings
expired on December 31, 1987.20
to enforce his constitutional right to information without a showing that PEA
refused to perform an affirmative duty imposed on PEA by the Constitution.
Lastly, there is a need to resolve immediately the constitutional issue raised in PEA also claims that petitioner has not shown that he will suffer any concrete
this petition because of the possible transfer at any time by PEA to AMARI of injury because of the signing or implementation of the Amended JVA. Thus,
title and ownership to portions of the reclaimed lands. Under the Amended there is no actual controversy requiring the exercise of the power of judicial
JVA, PEA is obligated to transfer to AMARI the latter's seventy percent review.
proportionate share in the reclaimed areas as the reclamation progresses. The
Amended JVA even allows AMARI to mortgage at any time
The petitioner has standing to bring this taxpayer's suit because the petition
the entire reclaimed area to raise financing for the reclamation project.21
seeks to compel PEA to comply with its constitutional duties. There are two
constitutional issues involved here. First is the right of citizens to information
Second issue: whether the petition merits dismissal for failing to observe the on matters of public concern. Second is the application of a constitutional
principle governing the hierarchy of courts. provision intended to insure the equitable distribution of alienable lands of the
public domain among Filipino citizens. The thrust of the first issue is to
compel PEA to disclose publicly information on the sale of government lands
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking
worth billions of pesos, information which the Constitution and statutory law
relief directly from the Court. The principle of hierarchy of courts applies
mandate PEA to disclose. The thrust of the second issue is to prevent PEA
generally to cases involving factual questions. As it is not a trier of facts, the
from alienating hundreds of hectares of alienable lands of the public domain
Court cannot entertain cases involving factual issues. The instant case,
in violation of the Constitution, compelling PEA to comply with a
however, raises constitutional issues of transcendental importance to the
constitutional duty to the nation.
public.22 The Court can resolve this case without determining any factual issue
related to the case. Also, the instant case is a petition for mandamus which
falls under the original jurisdiction of the Court under Section 5, Article VIII Moreover, the petition raises matters of transcendental importance to the
of the Constitution. We resolve to exercise primary jurisdiction over the public. In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a
instant case. taxpayer's suit on matters of transcendental importance to the public, thus -

Third issue: whether the petition merits dismissal for non-exhaustion of "Besides, petitioner emphasizes, the matter of recovering the ill-
administrative remedies. gotten wealth of the Marcoses is an issue of 'transcendental
importance to the public.' He asserts that ordinary taxpayers have a
right to initiate and prosecute actions questioning the validity of
PEA faults petitioner for seeking judicial intervention in compelling PEA to
acts or orders of government agencies or instrumentalities, if the
disclose publicly certain information without first asking PEA the needed
issues raised are of 'paramount public interest,' and if they
information. PEA claims petitioner's direct resort to the Court violates the
'immediately affect the social, economic and moral well being of
principle of exhaustion of administrative remedies. It also violates the rule that
the people.'
mandamus may issue only if there is no other plain, speedy and adequate
remedy in the ordinary course of law.
Moreover, the mere fact that he is a citizen satisfies the
requirement of personal interest, when the proceeding involves the
PEA distinguishes the instant case from Tañada v. Tuvera 23 where the Court
assertion of a public right, such as in this case. He invokes several
granted the petition for mandamus even if the petitioners there did not initially
decisions of this Court which have set aside the procedural matter
demand from the Office of the President the publication of the presidential
of locus standi, when the subject of the case involved public
decrees. PEA points out that in Tañada, the Executive Department had
interest.
an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1
of Commonwealth Act No. 63825 to publish the presidential decrees. There
was, therefore, no need for the petitioners in Tañada to make an initial xxx
demand from the Office of the President. In the instant case, PEA claims it has
no affirmative statutory duty to disclose publicly information about its
In Tañada v. Tuvera, the Court asserted that when the issue
renegotiation of the JVA. Thus, PEA asserts that the Court must apply the
concerns a public right and the object of mandamus is to obtain the
principle of exhaustion of administrative remedies to the instant case in view
enforcement of a public duty, the people are regarded as the real
of the failure of petitioner here to demand initially from PEA the needed
parties in interest; and because it is sufficient that petitioner is a
information.
citizen and as such is interested in the execution of the laws, he
need not show that he has any legal or special interest in the result
The original JVA sought to dispose to AMARI public lands held by PEA, a of the action. In the aforesaid case, the petitioners sought to
government corporation. Under Section 79 of the Government Auditing enforce their right to be informed on matters of public concern, a
Code,26 the disposition of government lands to private parties requires public right then recognized in Section 6, Article IV of the 1973
bidding. PEA was under a positive legal duty to disclose to the public the Constitution, in connection with the rule that laws in order to be
terms and conditions for the sale of its lands. The law obligated PEA to valid and enforceable must be published in the Official Gazette or
make this public disclosure even without demand from petitioner or from otherwise effectively promulgated. In ruling for the petitioners'
anyone. PEA failed to make this public disclosure because the original JVA, legal standing, the Court declared that the right they sought to be
like the Amended JVA, was the result of a negotiated contract, not of a public enforced 'is a public right recognized by no less than the
bidding. Considering that PEA had an affirmative statutory duty to make the fundamental law of the land.'

43
Legaspi v. Civil Service Commission, while reiterating Tañada, channels for free political discussion be maintained to the end that
further declared that 'when a mandamus proceeding involves the the government may perceive and be responsive to the people's
assertion of a public right, the requirement of personal interest is will. Yet, this open dialogue can be effective only to the extent that
satisfied by the mere fact that petitioner is a citizen and, therefore, the citizenry is informed and thus able to formulate its will
part of the general 'public' which possesses the right.' intelligently. Only when the participants in the discussion are
aware of the issues and have access to information relating thereto
can such bear fruit."
Further, in Albano v. Reyes, we said that while expenditure of
public funds may not have been involved under the questioned
contract for the development, management and operation of the PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations
Manila International Container Terminal, 'public interest [was] the right to information is limited to "definite propositions of the
definitely involved considering the important role [of the subject government." PEA maintains the right does not include access to "intra-
contract] . . . in the economic development of the country and the agency or inter-agency recommendations or communications during the stage
magnitude of the financial consideration involved.' We concluded when common assertions are still in the process of being formulated or are in
that, as a consequence, the disclosure provision in the Constitution the 'exploratory stage'."
would constitute sufficient authority for upholding the petitioner's
standing.
Also, AMARI contends that petitioner cannot invoke the right at the pre-
decisional stage or before the closing of the transaction. To support its
Similarly, the instant petition is anchored on the right of the people contention, AMARI cites the following discussion in the 1986 Constitutional
to information and access to official records, documents and papers Commission:
— a right guaranteed under Section 7, Article III of the 1987
Constitution. Petitioner, a former solicitor general, is a Filipino
"Mr. Suarez. And when we say 'transactions' which should be
citizen. Because of the satisfaction of the two basic requisites laid
distinguished from contracts, agreements, or treaties or whatever,
down by decisional law to sustain petitioner's legal standing, i.e.
does the Gentleman refer to the steps leading to the consummation
(1) the enforcement of a public right (2) espoused by a Filipino
of the contract, or does he refer to the contract itself?
citizen, we rule that the petition at bar should be allowed."

Mr. Ople: The 'transactions' used here, I suppose is generic and


We rule that since the instant petition, brought by a citizen, involves the
therefore, it can cover both steps leading to a contract and
enforcement of constitutional rights - to information and to the equitable
already a consummated contract, Mr. Presiding Officer.
diffusion of natural resources - matters of transcendental public importance,
the petitioner has the requisite locus standi.
Mr. Suarez: This contemplates inclusion of negotiations leading
to the consummation of the transaction.
Fifth issue: whether the constitutional right to information includes official
information on on-going negotiations before a final agreement.
Mr. Ople: Yes, subject only to reasonable safeguards on the
national interest.
Section 7, Article III of the Constitution explains the people's right to
information on matters of public concern in this manner:
Mr. Suarez: Thank you."32 (Emphasis supplied)
"Sec. 7. The right of the people to information on matters of public
concern shall be recognized. Access to official records, and to AMARI argues there must first be a consummated contract before petitioner
documents, and papers pertaining to official acts, transactions, can invoke the right. Requiring government officials to reveal their
or decisions, as well as to government research data used as basis deliberations at the pre-decisional stage will degrade the quality of decision-
for policy development, shall be afforded the citizen, subject to making in government agencies. Government officials will hesitate to express
such limitations as may be provided by law." (Emphasis supplied) their real sentiments during deliberations if there is immediate public
dissemination of their discussions, putting them under all kinds of pressure
before they decide.
The State policy of full transparency in all transactions involving public
interest reinforces the people's right to information on matters of public
concern. This State policy is expressed in Section 28, Article II of the We must first distinguish between information the law on public bidding
Constitution, thus: requires PEA to disclose publicly, and information the constitutional right to
information requires PEA to release to the public. Before the consummation
of the contract, PEA must, on its own and without demand from anyone,
"Sec. 28. Subject to reasonable conditions prescribed by law, the
disclose to the public matters relating to the disposition of its property. These
State adopts and implements a policy of full public disclosure of
include the size, location, technical description and nature of the property
all its transactions involving public interest." (Emphasis supplied)
being disposed of, the terms and conditions of the disposition, the parties
qualified to bid, the minimum price and similar information. PEA must
These twin provisions of the Constitution seek to promote transparency in prepare all these data and disclose them to the public at the start of the
policy-making and in the operations of the government, as well as provide the disposition process, long before the consummation of the contract, because the
people sufficient information to exercise effectively other constitutional Government Auditing Code requires public bidding. If PEA fails to make this
rights. These twin provisions are essential to the exercise of freedom of disclosure, any citizen can demand from PEA this information at any time
expression. If the government does not disclose its official acts, transactions during the bidding process.
and decisions to citizens, whatever citizens say, even if expressed without any
restraint, will be speculative and amount to nothing. These twin provisions are
Information, however, on on-going evaluation or review of bids or proposals
also essential to hold public officials "at all times x x x accountable to the
being undertaken by the bidding or review committee is not immediately
people,"29 for unless citizens have the proper information, they cannot hold
accessible under the right to information. While the evaluation or review is
public officials accountable for anything. Armed with the right information,
still on-going, there are no "official acts, transactions, or decisions" on the
citizens can participate in public discussions leading to the formulation of
bids or proposals. However, once the committee makes its official
government policies and their effective implementation. An informed
recommendation, there arises a "definite proposition" on the part of the
citizenry is essential to the existence and proper functioning of any
government. From this moment, the public's right to information attaches, and
democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30 –
any citizen can access all the non-proprietary information leading to such
definite proposition. In Chavez v. PCGG,33 the Court ruled as follows:
"An essential element of these freedoms is to keep open a
continuing dialogue or process of communication between the
"Considering the intent of the framers of the Constitution, we
government and the people. It is in the interest of the State that the
believe that it is incumbent upon the PCGG and its officers, as well
44
as other government representatives, to disclose sufficient public pressure by interested parties, is essential to protect the independence of
information on any proposed settlement they have decided to take decision-making of those tasked to exercise Presidential, Legislative and
up with the ostensible owners and holders of ill-gotten wealth. Judicial power.39 This is not the situation in the instant case.
Such information, though, must pertain to definite propositions of
the government, not necessarily to intra-agency or inter-agency
We rule, therefore, that the constitutional right to information includes official
recommendations or communications during the stage when
information on on-going negotiations before a final contract. The
common assertions are still in the process of being formulated or
information, however, must constitute definite propositions by the
are in the "exploratory" stage. There is need, of course, to observe
government and should not cover recognized exceptions like privileged
the same restrictions on disclosure of information in general, as
information, military and diplomatic secrets and similar matters affecting
discussed earlier – such as on matters involving national security,
national security and public order.40 Congress has also prescribed other
diplomatic or foreign relations, intelligence and other classified
limitations on the right to information in several legislations.41
information." (Emphasis supplied)

Sixth issue: whether stipulations in the Amended JVA for the transfer to
Contrary to AMARI's contention, the commissioners of the 1986
AMARI of lands, reclaimed or to be reclaimed, violate the Constitution.
Constitutional Commission understood that the right to
information "contemplates inclusion of negotiations leading to the
consummation of the transaction." Certainly, a consummated contract is not The Regalian Doctrine
a requirement for the exercise of the right to information. Otherwise, the
people can never exercise the right if no contract is consummated, and if one
The ownership of lands reclaimed from foreshore and submerged areas is
is consummated, it may be too late for the public to expose its
rooted in the Regalian doctrine which holds that the State owns all lands and
defects.1âwphi1.nêt
waters of the public domain. Upon the Spanish conquest of the Philippines,
ownership of all "lands, territories and possessions" in the Philippines passed
Requiring a consummated contract will keep the public in the dark until the to the Spanish Crown.42 The King, as the sovereign ruler and representative of
contract, which may be grossly disadvantageous to the government or even the people, acquired and owned all lands and territories in the Philippines
illegal, becomes a fait accompli. This negates the State policy of full except those he disposed of by grant or sale to private individuals.
transparency on matters of public concern, a situation which the framers of the
Constitution could not have intended. Such a requirement will prevent the
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine
citizenry from participating in the public discussion of any proposed contract,
substituting, however, the State, in lieu of the King, as the owner of all lands
effectively truncating a basic right enshrined in the Bill of Rights. We can
and waters of the public domain. The Regalian doctrine is the foundation of
allow neither an emasculation of a constitutional right, nor a retreat by the
the time-honored principle of land ownership that "all lands that were not
State of its avowed "policy of full disclosure of all its transactions involving
acquired from the Government, either by purchase or by grant, belong to the
public interest."
public domain."43 Article 339 of the Civil Code of 1889, which is now Article
420 of the Civil Code of 1950, incorporated the Regalian doctrine.
The right covers three categories of information which are "matters of public
concern," namely: (1) official records; (2) documents and papers pertaining to
Ownership and Disposition of Reclaimed Lands
official acts, transactions and decisions; and (3) government research data
used in formulating policies. The first category refers to any document that is
part of the public records in the custody of government agencies or officials. The Spanish Law of Waters of 1866 was the first statutory law governing the
The second category refers to documents and papers recording, evidencing, ownership and disposition of reclaimed lands in the Philippines. On May 18,
establishing, confirming, supporting, justifying or explaining official acts, 1907, the Philippine Commission enacted Act No. 1654 which provided for
transactions or decisions of government agencies or officials. The third the lease, but not the sale, of reclaimed lands of the government to
category refers to research data, whether raw, collated or processed, owned by corporations and individuals. Later, on November 29, 1919, the Philippine
the government and used in formulating government policies. Legislature approved Act No. 2874, the Public Land Act, which
authorized the lease, but not the sale, of reclaimed lands of the government
to corporations and individuals. On November 7, 1936, the National
The information that petitioner may access on the renegotiation of the JVA
Assembly passed Commonwealth Act No. 141, also known as the Public Land
includes evaluation reports, recommendations, legal and expert opinions,
Act, which authorized the lease, but not the sale, of reclaimed lands of the
minutes of meetings, terms of reference and other documents attached to such
government to corporations and individuals. CA No. 141 continues to this
reports or minutes, all relating to the JVA. However, the right to information
day as the general law governing the classification and disposition of lands of
does not compel PEA to prepare lists, abstracts, summaries and the like
the public domain.
relating to the renegotiation of the JVA.34 The right only affords access to
records, documents and papers, which means the opportunity to inspect and
copy them. One who exercises the right must copy the records, documents and The Spanish Law of Waters of 1866 and the Civil Code of 1889
papers at his expense. The exercise of the right is also subject to reasonable
regulations to protect the integrity of the public records and to minimize
disruption to government operations, like rules specifying when and how to Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and
conduct the inspection and copying.35 all waters within the maritime zone of the Spanish territory belonged to the
public domain for public use. 44 The Spanish Law of Waters of 1866 allowed
the reclamation of the sea under Article 5, which provided as follows:
The right to information, however, does not extend to matters recognized as
privileged information under the separation of powers. 36 The right does not
also apply to information on military and diplomatic secrets, information "Article 5. Lands reclaimed from the sea in consequence of works
affecting national security, and information on investigations of crimes by law constructed by the State, or by the provinces, pueblos or private
enforcement agencies before the prosecution of the accused, which courts persons, with proper permission, shall become the property of the
have long recognized as confidential.37 The right may also be subject to other party constructing such works, unless otherwise provided by the
limitations that Congress may impose by law. terms of the grant of authority."

There is no claim by PEA that the information demanded by petitioner is Under the Spanish Law of Waters, land reclaimed from the sea belonged to
privileged information rooted in the separation of powers. The information the party undertaking the reclamation, provided the government issued the
does not cover Presidential conversations, correspondences, or discussions necessary permit and did not reserve ownership of the reclaimed land to the
during closed-door Cabinet meetings which, like internal deliberations of the State.
Supreme Court and other collegiate courts, or executive sessions of either
house of Congress,38 are recognized as confidential. This kind of information Article 339 of the Civil Code of 1889 defined property of public dominion as
cannot be pried open by a co-equal branch of government. A frank exchange follows:
of exploratory ideas and assessments, free from the glare of publicity and

45
"Art. 339. Property of public dominion is – Act No. 1654 mandated that the government should retain title to all lands
reclaimed by the government. The Act also vested in the government control
and disposition of foreshore lands. Private parties could lease lands reclaimed
1. That devoted to public use, such as roads, canals, rivers,
by the government only if these lands were no longer needed for public
torrents, ports and bridges constructed by the State, riverbanks,
purpose. Act No. 1654 mandated public bidding in the lease of government
shores, roadsteads, and that of a similar character;
reclaimed lands. Act No. 1654 made government reclaimed lands sui
generis in that unlike other public lands which the government could sell to
2. That belonging exclusively to the State which, without being of private parties, these reclaimed lands were available only for lease to private
general public use, is employed in some public service, or in the parties.
development of the national wealth, such as walls, fortresses, and
other works for the defense of the territory, and mines, until
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of
granted to private individuals."
Waters of 1866. Act No. 1654 did not prohibit private parties from reclaiming
parts of the sea under Section 5 of the Spanish Law of Waters. Lands
Property devoted to public use referred to property open for use by the public. reclaimed from the sea by private parties with government permission
In contrast, property devoted to public service referred to property used for remained private lands.
some specific public service and open only to those authorized to use the
property.
Act No. 2874 of the Philippine Legislature

Property of public dominion referred not only to property devoted to public


On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the
use, but also to property not so used but employed to develop the national
Public Land Act.46 The salient provisions of Act No. 2874, on reclaimed
wealth. This class of property constituted property of public dominion
lands, were as follows:
although employed for some economic or commercial activity to increase the
national wealth.
"Sec. 6. The Governor-General, upon the recommendation of the
Secretary of Agriculture and Natural Resources, shall from time
Article 341 of the Civil Code of 1889 governed the re-classification of
to time classify the lands of the public domain into –
property of public dominion into private property, to wit:

(a) Alienable or disposable,
"Art. 341. Property of public dominion, when no longer devoted to
public use or to the defense of the territory, shall become a part of
the private property of the State." (b) Timber, and

This provision, however, was not self-executing. The legislature, or the (c) Mineral lands, x x x.
executive department pursuant to law, must declare the property no longer
needed for public use or territorial defense before the government could lease
Sec. 7. For the purposes of the government and disposition of
or alienate the property to private parties.45
alienable or disposable public lands, the Governor-General, upon
recommendation by the Secretary of Agriculture and Natural
Act No. 1654 of the Philippine Commission Resources, shall from time to time declare what lands are open to
disposition or concession under this Act."
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which
regulated the lease of reclaimed and foreshore lands. The salient provisions of Sec. 8. Only those lands shall be declared open to disposition or
this law were as follows: concession which have been officially delimited or classified x x
x.
"Section 1. The control and disposition of the foreshore as
defined in existing law, and the title to all Government or public xxx
lands made or reclaimed by the Government by dredging or
filling or otherwise throughout the Philippine Islands, shall be
Sec. 55. Any tract of land of the public domain which, being
retained by the Government without prejudice to vested rights and
neither timber nor mineral land, shall be classified as suitable for
without prejudice to rights conceded to the City of Manila in the
residential purposes or for commercial, industrial, or other
Luneta Extension.
productive purposes other than agricultural purposes, and shall
be open to disposition or concession, shall be disposed of under the
Section 2. (a) The Secretary of the Interior shall cause all provisions of this chapter, and not otherwise.
Government or public lands made or reclaimed by the Government
by dredging or filling or otherwise to be divided into lots or blocks,
Sec. 56. The lands disposable under this title shall be classified
with the necessary streets and alleyways located thereon, and shall
as follows:
cause plats and plans of such surveys to be prepared and filed with
the Bureau of Lands.
(a) Lands reclaimed by the Government by dredging,
filling, or other means;
(b) Upon completion of such plats and plans the Governor-
General shall give notice to the public that such parts of the
lands so made or reclaimed as are not needed for public (b) Foreshore;
purposes will be leased for commercial and business purposes, x
x x.
(c) Marshy lands or lands covered with water
bordering upon the shores or banks of navigable lakes
xxx or rivers;

(e) The leases above provided for shall be disposed of to the (d) Lands not included in any of the foregoing classes.
highest and best bidder therefore, subject to such regulations and
safeguards as the Governor-General may by executive order
x x x.
prescribe." (Emphasis supplied)

46
Sec. 58. The lands comprised in classes (a), (b), and (c) of section inauguration of the Government established under this
fifty-six shall be disposed of to private parties by lease only and Constitution. Natural resources, with the exception of public
not otherwise, as soon as the Governor-General, upon agricultural land, shall not be alienated, and no license,
recommendation by the Secretary of Agriculture and Natural concession, or lease for the exploitation, development, or
Resources, shall declare that the same are not necessary for the utilization of any of the natural resources shall be granted for a
public service and are open to disposition under this chapter. The period exceeding twenty-five years, renewable for another twenty-
lands included in class (d) may be disposed of by sale or lease five years, except as to water rights for irrigation, water supply,
under the provisions of this Act." (Emphasis supplied) fisheries, or industrial uses other than the development of water
power, in which cases beneficial use may be the measure and limit
of the grant." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands
of the public domain into x x x alienable or disposable" 47 lands. Section 7 of
the Act empowered the Governor-General to "declare what lands are open to The 1935 Constitution barred the alienation of all natural resources except
disposition or concession." Section 8 of the Act limited alienable or public agricultural lands, which were the only natural resources the State
disposable lands only to those lands which have been "officially delimited and could alienate. Thus, foreshore lands, considered part of the State's natural
classified." resources, became inalienable by constitutional fiat, available only for lease
for 25 years, renewable for another 25 years. The government could alienate
foreshore lands only after these lands were reclaimed and classified as
Section 56 of Act No. 2874 stated that lands "disposable under this title 48 shall
alienable agricultural lands of the public domain. Government reclaimed and
be classified" as government reclaimed, foreshore and marshy lands, as well
marshy lands of the public domain, being neither timber nor mineral lands,
as other lands. All these lands, however, must be suitable for residential,
fell under the classification of public agricultural lands.50 However,
commercial, industrial or other productive non-agricultural purposes. These
government reclaimed and marshy lands, although subject to classification as
provisions vested upon the Governor-General the power to classify inalienable
disposable public agricultural lands, could only be leased and not sold to
lands of the public domain into disposable lands of the public domain. These
private parties because of Act No. 2874.
provisions also empowered the Governor-General to classify further such
disposable lands of the public domain into government reclaimed, foreshore
or marshy lands of the public domain, as well as other non-agricultural lands. The prohibition on private parties from acquiring ownership of government
reclaimed and marshy lands of the public domain was only a statutory
prohibition and the legislature could therefore remove such prohibition. The
Section 58 of Act No. 2874 categorically mandated that disposable lands of
1935 Constitution did not prohibit individuals and corporations from
the public domain classified as government reclaimed, foreshore and marshy
acquiring government reclaimed and marshy lands of the public domain that
lands "shall be disposed of to private parties by lease only and not
were classified as agricultural lands under existing public land laws. Section
otherwise." The Governor-General, before allowing the lease of these lands to
2, Article XIII of the 1935 Constitution provided as follows:
private parties, must formally declare that the lands were "not necessary for
the public service." Act No. 2874 reiterated the State policy to lease and not to
sell government reclaimed, foreshore and marshy lands of the public domain, "Section 2. No private corporation or association may acquire,
a policy first enunciated in 1907 in Act No. 1654. Government reclaimed, lease, or hold public agricultural lands in excess of one thousand
foreshore and marshy lands remained sui generis, as the only alienable or and twenty four hectares, nor may any individual acquire such
disposable lands of the public domain that the government could not sell to lands by purchase in excess of one hundred and forty hectares,
private parties. 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
The rationale behind this State policy is obvious. Government reclaimed,
an individual, private corporation, or association." (Emphasis
foreshore and marshy public lands for non-agricultural purposes retain their
supplied)
inherent potential as areas for public service. This is the reason the
government prohibited the sale, and only allowed the lease, of these lands to
private parties. The State always reserved these lands for some future public Still, after the effectivity of the 1935 Constitution, the legislature did not
service. repeal Section 58 of Act No. 2874 to open for sale to private parties
government reclaimed and marshy lands of the public domain. On the
contrary, the legislature continued the long established State policy of
Act No. 2874 did not authorize the reclassification of government reclaimed,
retaining for the government title and ownership of government reclaimed and
foreshore and marshy lands into other non-agricultural lands under Section 56
marshy lands of the public domain.
(d). Lands falling under Section 56 (d) were the only lands for non-
agricultural purposes the government could sell to private parties. Thus, under
Act No. 2874, the government could not sell government reclaimed, foreshore Commonwealth Act No. 141 of the Philippine National Assembly
and marshy lands to private parties, unless the legislature passed a law
allowing their sale.49
On November 7, 1936, the National Assembly approved Commonwealth Act
No. 141, also known as the Public Land Act, which compiled the then existing
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea laws on lands of the public domain. CA No. 141, as amended, remains to this
pursuant to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed day the existing general law governing the classification and disposition of
from the sea by private parties with government permission remained private lands of the public domain other than timber and mineral lands.51
lands.
Section 6 of CA No. 141 empowers the President to classify lands of the
Dispositions under the 1935 Constitution public domain into "alienable or disposable"52 lands of the public domain,
which prior to such classification are inalienable and outside the commerce of
man. Section 7 of CA No. 141 authorizes the President to "declare what lands
On May 14, 1935, the 1935 Constitution took effect upon its ratification by
are open to disposition or concession." Section 8 of CA No. 141 states that the
the Filipino people. The 1935 Constitution, in adopting the Regalian doctrine,
government can declare open for disposition or concession only lands that are
declared in Section 1, Article XIII, that –
"officially delimited and classified." Sections 6, 7 and 8 of CA No. 141 read
as follows:
"Section 1. All agricultural, timber, and mineral lands of the public
domain, waters, minerals, coal, petroleum, and other mineral oils,
"Sec. 6. The President, upon the recommendation of the
all forces of potential energy and other natural resources of the
Secretary of Agriculture and Commerce, shall from time to time
Philippines belong to the State, and their disposition, exploitation,
classify the lands of the public domain into –
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 (a) Alienable or disposable,
to any existing right, grant, lease, or concession at the time of the
47
(b) Timber, and reclaimed, foreshore and marshy disposable lands of the public domain. All
these lands are intended for residential, commercial, industrial or other non-
agricultural purposes. As before, Section 61 allowed only the lease of such
(c) Mineral lands,
lands to private parties. The government could sell to private parties only
lands falling under Section 59 (d) of CA No. 141, or those lands for non-
and may at any time and in like manner transfer such lands from agricultural purposes not classified as government reclaimed, foreshore and
one class to another,53 for the purpose of their administration and marshy disposable lands of the public domain. Foreshore lands, however,
disposition. became inalienable under the 1935 Constitution which only allowed the lease
of these lands to qualified private parties.
Sec. 7. For the purposes of the administration and disposition of
alienable or disposable public lands, the President, upon Section 58 of CA No. 141 expressly states that disposable lands of the public
recommendation by the Secretary of Agriculture and Commerce, domain intended for residential, commercial, industrial or other productive
shall from time to time declare what lands are open to disposition purposes other than agricultural "shall be disposed of under the provisions of
or concession under this Act. this chapter and not otherwise." Under Section 10 of CA No. 141, the term
"disposition" includes lease of the land. Any disposition of government
reclaimed, foreshore and marshy disposable lands for non-agricultural
Sec. 8. Only those lands shall be declared open to disposition or purposes must comply with Chapter IX, Title III of CA No. 141,54 unless a
concession which have been officially delimited and subsequent law amended or repealed these provisions.
classified and, when practicable, surveyed, and which have not
been reserved for public or quasi-public uses, nor appropriated by
the Government, nor in any manner become private property, nor In his concurring opinion in the landmark case of Republic Real Estate
those on which a private right authorized and recognized by this Corporation v. Court of Appeals,55 Justice Reynato S. Puno summarized
Act or any other valid law may be claimed, or which, having been succinctly the law on this matter, as follows:
reserved or appropriated, have ceased to be so. x x x."
"Foreshore lands are lands of public dominion intended for public
Thus, before the government could alienate or dispose of lands of the public use. So too are lands reclaimed by the government by dredging,
domain, the President must first officially classify these lands as alienable or filling, or other means. Act 1654 mandated that the control and
disposable, and then declare them open to disposition or concession. There disposition of the foreshore and lands under water remained in the
must be no law reserving these lands for public or quasi-public uses. national government. Said law allowed only the 'leasing' of
reclaimed land. The Public Land Acts of 1919 and 1936 also
declared that the foreshore and lands reclaimed by the government
The salient provisions of CA No. 141, on government reclaimed, foreshore were to be "disposed of to private parties by lease only and not
and marshy lands of the public domain, are as follows: otherwise." Before leasing, however, the Governor-General, upon
recommendation of the Secretary of Agriculture and Natural
"Sec. 58. Any tract of land of the public domain which, being Resources, had first to determine that the land reclaimed was not
neither timber nor mineral land, is intended to be used for necessary for the public service. This requisite must have been met
residential purposes or for commercial, industrial, or other before the land could be disposed of. But even then, the foreshore
productive purposes other than agricultural, and is open to and lands under water were not to be alienated and sold to
disposition or concession, shall be disposed of under the private parties. The disposition of the reclaimed land was only by
provisions of this chapter and not otherwise. lease. The land remained property of the State." (Emphasis
supplied)
Sec. 59. The lands disposable under this title shall be classified
as follows: As observed by Justice Puno in his concurring opinion, "Commonwealth Act
No. 141 has remained in effect at present."
(a) Lands reclaimed by the Government by dredging,
filling, or other means; The State policy prohibiting the sale to private parties of government
reclaimed, foreshore and marshy alienable lands of the public domain, first
implemented in 1907 was thus reaffirmed in CA No. 141 after the 1935
(b) Foreshore; Constitution took effect. The prohibition on the sale of foreshore lands,
however, became a constitutional edict under the 1935 Constitution.
(c) Marshy lands or lands covered with water Foreshore lands became inalienable as natural resources of the State, unless
bordering upon the shores or banks of navigable lakes reclaimed by the government and classified as agricultural lands of the public
or rivers; domain, in which case they would fall under the classification of government
reclaimed lands.
(d) Lands not included in any of the foregoing classes.
After the effectivity of the 1935 Constitution, government reclaimed and
marshy disposable lands of the public domain continued to be only leased and
Sec. 60. Any tract of land comprised under this title may be leased not sold to private parties.56 These lands remained sui generis, as the only
or sold, as the case may be, to any person, corporation, or alienable or disposable lands of the public domain the government could not
association authorized to purchase or lease public lands for sell to private parties.
agricultural purposes. x x x.

Since then and until now, the only way the government can sell to private
Sec. 61. The lands comprised in classes (a), (b), and (c) of section parties government reclaimed and marshy disposable lands of the public
fifty-nine shall be disposed of to private parties by lease only and domain is for the legislature to pass a law authorizing such sale. CA No. 141
not otherwise, as soon as the President, upon recommendation by does not authorize the President to reclassify government reclaimed and
the Secretary of Agriculture, shall declare that the same are not marshy lands into other non-agricultural lands under Section 59 (d). Lands
necessary for the public service and are open to disposition under classified under Section 59 (d) are the only alienable or disposable lands for
this chapter. The lands included in class (d) may be disposed of non-agricultural purposes that the government could sell to private parties.
by sale or lease under the provisions of this Act." (Emphasis
supplied)
Moreover, Section 60 of CA No. 141 expressly requires congressional
authority before lands under Section 59 that the government previously
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 transferred to government units or entities could be sold to private parties.
Constitution, Section 58 of Act No. 2874 prohibiting the sale of government Section 60 of CA No. 141 declares that –

48
"Sec. 60. x x x The area so leased or sold shall be such as shall, in (2) Those which belong to the State, without being for public use,
the judgment of the Secretary of Agriculture and Natural and are intended for some public service or for the development of
Resources, be reasonably necessary for the purposes for which the national wealth.
such sale or lease is requested, and shall not exceed one hundred
and forty-four hectares: Provided, however, That this limitation
x x x.
shall not apply to grants, donations, or transfers made to a
province, municipality or branch or subdivision of the Government
for the purposes deemed by said entities conducive to the public Art. 422. Property of public dominion, when no longer intended
interest; but the land so granted, donated, or transferred to a for public use or for public service, shall form part of the
province, municipality or branch or subdivision of the patrimonial property of the State."
Government shall not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, except when
Again, the government must formally declare that the property of public
authorized by Congress: x x x." (Emphasis supplied)
dominion is no longer needed for public use or public service, before the same
could be classified as patrimonial property of the State.59 In the case of
The congressional authority required in Section 60 of CA No. 141 mirrors the government reclaimed and marshy lands of the public domain, the declaration
legislative authority required in Section 56 of Act No. 2874. of their being disposable, as well as the manner of their disposition, is
governed by the applicable provisions of CA No. 141.
One reason for the congressional authority is that Section 60 of CA No. 141
exempted government units and entities from the maximum area of public Like the Civil Code of 1889, the Civil Code of 1950 included as property of
lands that could be acquired from the State. These government units and public dominion those properties of the State which, without being for public
entities should not just turn around and sell these lands to private parties in use, are intended for public service or the "development of the national
violation of constitutional or statutory limitations. Otherwise, the transfer of wealth." Thus, government reclaimed and marshy lands of the State, even if
lands for non-agricultural purposes to government units and entities could be not employed for public use or public service, if developed to enhance the
used to circumvent constitutional limitations on ownership of alienable or national wealth, are classified as property of public dominion.
disposable lands of the public domain. In the same manner, such transfers
could also be used to evade the statutory prohibition in CA No. 141 on the
Dispositions under the 1973 Constitution
sale of government reclaimed and marshy lands of the public domain to
private parties. Section 60 of CA No. 141 constitutes by operation of law a
lien on these lands.57 The 1973 Constitution, which took effect on January 17, 1973, likewise
adopted the Regalian doctrine. Section 8, Article XIV of the 1973
Constitution stated that –
In case of sale or lease of disposable lands of the public domain falling under
Section 59 of CA No. 141, Sections 63 and 67 require a public bidding.
Sections 63 and 67 of CA No. 141 provide as follows: "Sec. 8. All lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces of potential energy,
fisheries, wildlife, and other natural resources of the Philippines
"Sec. 63. Whenever it is decided that lands covered by this chapter
belong to the State. With the exception of agricultural, industrial
are not needed for public purposes, the Director of Lands shall ask
or commercial, residential, and resettlement lands of the public
the Secretary of Agriculture and Commerce (now the Secretary of
domain, natural resources shall not be alienated, and no license,
Natural Resources) for authority to dispose of the same. Upon
concession, or lease for the exploration, development, exploitation,
receipt of such authority, the Director of Lands shall give notice by
or utilization of any of the natural resources shall be granted for a
public advertisement in the same manner as in the case of leases or
period exceeding twenty-five years, renewable for not more than
sales of agricultural public land, x x x.
twenty-five years, except as to water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of
Sec. 67. The lease or sale shall be made by oral bidding; and water power, in which cases, beneficial use may be the measure
adjudication shall be made to the highest bidder. x x x." and the limit of the grant." (Emphasis supplied)
(Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with
Thus, CA No. 141 mandates the Government to put to public auction all the exception of "agricultural, industrial or commercial, residential, and
leases or sales of alienable or disposable lands of the public domain.58 resettlement lands of the public domain." In contrast, the 1935 Constitution
barred the alienation of all natural resources except "public agricultural
lands." However, the term "public agricultural lands" in the 1935 Constitution
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal
encompassed industrial, commercial, residential and resettlement lands of the
Section 5 of the Spanish Law of Waters of 1866. Private parties could still
public domain.60 If the land of public domain were neither timber nor mineral
reclaim portions of the sea with government permission. However,
land, it would fall under the classification of agricultural land of the public
the reclaimed land could become private land only if classified as alienable
domain. Both the 1935 and 1973 Constitutions, therefore, prohibited the
agricultural land of the public domain open to disposition under CA No.
alienation of all natural resources except agricultural lands of the public
141. The 1935 Constitution prohibited the alienation of all natural resources
domain.
except public agricultural lands.

The 1973 Constitution, however, limited the alienation of lands of the public
The Civil Code of 1950
domain to individuals who were citizens of the Philippines. Private
corporations, even if wholly owned by Philippine citizens, were no longer
The Civil Code of 1950 readopted substantially the definition of property of allowed to acquire alienable lands of the public domain unlike in the 1935
public dominion found in the Civil Code of 1889. Articles 420 and 422 of the Constitution. Section 11, Article XIV of the 1973 Constitution declared that –
Civil Code of 1950 state that –
"Sec. 11. The Batasang Pambansa, taking into account
"Art. 420. The following things are property of public dominion: conservation, ecological, and development requirements of the
natural resources, shall determine by law the size of land of the
public domain which may be developed, held or acquired by, or
(1) Those intended for public use, such as roads, canals, rivers,
leased to, any qualified individual, corporation, or association, and
torrents, ports and bridges constructed by the State, banks, shores,
the conditions therefor. No private corporation or association
roadsteads, and others of similar character;
may hold alienable lands of the public domain except by lease not
to exceed one thousand hectares in area nor may any citizen hold
such lands by lease in excess of five hundred hectares or acquire

49
by purchase, homestead or grant, in excess of twenty-four hectares. The ban in the 1973 Constitution on private corporations from acquiring
No private corporation or association may hold by lease, alienable lands of the public domain did not apply to PEA since it was then,
concession, license or permit, timber or forest lands and other and until today, a fully owned government corporation. The constitutional ban
timber or forest resources in excess of one hundred thousand applied then, as it still applies now, only to "private corporations and
hectares. However, such area may be increased by the Batasang associations." PD No. 1084 expressly empowers PEA "to hold lands of the
Pambansa upon recommendation of the National Economic and public domain" even "in excess of the area permitted to private corporations
Development Authority." (Emphasis supplied) by statute." Thus, PEA can hold title to private lands, as well as title to lands
of the public domain.
Thus, under the 1973 Constitution, private corporations could hold alienable
lands of the public domain only through lease. Only individuals could now In order for PEA to sell its reclaimed foreshore and submerged alienable lands
acquire alienable lands of the public domain, and private corporations of the public domain, there must be legislative authority empowering PEA to
became absolutely barred from acquiring any kind of alienable land of the sell these lands. This legislative authority is necessary in view of Section 60
public domain. The constitutional ban extended to all kinds of alienable lands of CA No.141, which states –
of the public domain, while the statutory ban under CA No. 141 applied only
to government reclaimed, foreshore and marshy alienable lands of the public
"Sec. 60. x x x; but the land so granted, donated or transferred to a
domain.
province, municipality, or branch or subdivision of the
Government shall not be alienated, encumbered or otherwise
PD No. 1084 Creating the Public Estates Authority disposed of in a manner affecting its title, except when authorized
by Congress; x x x." (Emphasis supplied)
On February 4, 1977, then President Ferdinand Marcos issued Presidential
Decree No. 1084 creating PEA, a wholly government owned and controlled Without such legislative authority, PEA could not sell but only lease its
corporation with a special charter. Sections 4 and 8 of PD No. 1084, vests reclaimed foreshore and submerged alienable lands of the public domain.
PEA with the following purposes and powers: Nevertheless, any legislative authority granted to PEA to sell its reclaimed
alienable lands of the public domain would be subject to the constitutional ban
on private corporations from acquiring alienable lands of the public domain.
"Sec. 4. Purpose. The Authority is hereby created for the following
Hence, such legislative authority could only benefit private individuals.
purposes:

Dispositions under the 1987 Constitution


(a) To reclaim land, including foreshore and submerged areas,
by dredging, filling or other means, or to acquire reclaimed land;
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has
adopted the Regalian doctrine. The 1987 Constitution declares that all natural
(b) To develop, improve, acquire, administer, deal in, subdivide,
resources are "owned by the State," and except for alienable agricultural lands
dispose, lease and sell any and all kinds of lands, buildings,
of the public domain, natural resources cannot be alienated. Sections 2 and 3,
estates and other forms of real property, owned, managed,
Article XII of the 1987 Constitution state that –
controlled and/or operated by the government;

"Section 2. All lands of the public domain, waters, minerals, coal,


(c) To provide for, operate or administer such service as may be
petroleum and other mineral oils, all forces of potential energy,
necessary for the efficient, economical and beneficial utilization of
fisheries, forests or timber, wildlife, flora and fauna, and other
the above properties.
natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be
Sec. 5. Powers and functions of the Authority. The Authority shall, alienated. The exploration, development, and utilization of natural
in carrying out the purposes for which it is created, have the resources shall be under the full control and supervision of the
following powers and functions: State. x x x.

(a)To prescribe its by-laws. Section 3. Lands of the public domain are classified into
agricultural, forest or timber, mineral lands, and national parks.
Agricultural lands of the public domain may be further classified
xxx by law according to the uses which they may be
devoted. Alienable lands of the public domain shall be limited to
(i) To hold lands of the public domain in excess of the area agricultural lands. Private corporations or associations may not
permitted to private corporations by statute. hold such alienable lands of the public domain except by lease,
for a period not exceeding twenty-five years, renewable for not
more than twenty-five years, and not to exceed one thousand
(j) To reclaim lands and to construct work across, or otherwise, hectares in area. Citizens of the Philippines may lease not more
any stream, watercourse, canal, ditch, flume x x x. than five hundred hectares, or acquire not more than twelve
hectares thereof by purchase, homestead, or grant.
xxx
Taking into account the requirements of conservation, ecology, and
(o) To perform such acts and exercise such functions as may be development, and subject to the requirements of agrarian reform,
necessary for the attainment of the purposes and objectives herein the Congress shall determine, by law, the size of lands of the
specified." (Emphasis supplied) public domain which may be acquired, developed, held, or leased
and the conditions therefor." (Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas
of the public domain. Foreshore areas are those covered and uncovered by the The 1987 Constitution continues the State policy in the 1973 Constitution
ebb and flow of the tide.61 Submerged areas are those permanently under banning private corporations from acquiring any kind of alienable land of
water regardless of the ebb and flow of the tide.62 Foreshore and submerged the public domain. Like the 1973 Constitution, the 1987 Constitution allows
areas indisputably belong to the public domain63 and are inalienable unless private corporations to hold alienable lands of the public domain only
reclaimed, classified as alienable lands open to disposition, and further through lease. As in the 1935 and 1973 Constitutions, the general law
declared no longer needed for public service. governing the lease to private corporations of reclaimed, foreshore and
marshy alienable lands of the public domain is still CA No. 141.

50
The Rationale behind the Constitutional Ban since the vehicle to circumvent the constitutional intent is removed. The
available alienable public lands are gradually decreasing in the face of an
ever-growing population. The most effective way to insure faithful adherence
The rationale behind the constitutional ban on corporations from acquiring,
to this constitutional intent is to grant or sell alienable lands of the public
except through lease, alienable lands of the public domain is not well
domain only to individuals. This, it would seem, is the practical benefit arising
understood. During the deliberations of the 1986 Constitutional Commission,
from the constitutional ban.
the commissioners probed the rationale behind this ban, thus:

The Amended Joint Venture Agreement


"FR. BERNAS: Mr. Vice-President, my questions have reference
to page 3, line 5 which says:
The subject matter of the Amended JVA, as stated in its second Whereas
clause, consists of three properties, namely:
`No private corporation or association may hold alienable lands of
the public domain except by lease, not to exceed one thousand
hectares in area.' 1. "[T]hree partially reclaimed and substantially eroded islands
along Emilio Aguinaldo Boulevard in Paranaque and Las Pinas,
Metro Manila, with a combined titled area of 1,578,441 square
If we recall, this provision did not exist under the 1935
meters;"
Constitution, but this was introduced in the 1973 Constitution. In
effect, it prohibits private corporations from acquiring alienable
public lands. But it has not been very clear in jurisprudence what 2. "[A]nother area of 2,421,559 square meters contiguous to the
the reason for this is. In some of the cases decided in 1982 and three islands;" and
1983, it was indicated that the purpose of this is to prevent large
landholdings. Is that the intent of this provision?
3. "[A]t AMARI's option as approved by PEA, an additional 350
hectares more or less to regularize the configuration of the
MR. VILLEGAS: I think that is the spirit of the provision. reclaimed area."65

FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, PEA confirms that the Amended JVA involves "the development of the
there were instances where the Iglesia ni Cristo was not allowed to Freedom Islands and further reclamation of about 250 hectares x x x," plus an
acquire a mere 313-square meter land where a chapel stood option "granted to AMARI to subsequently reclaim another 350 hectares x x
because the Supreme Court said it would be in violation of this." x."66
(Emphasis supplied)
In short, the Amended JVA covers a reclamation area of 750 hectares. Only
In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional 157.84 hectares of the 750-hectare reclamation project have been
ban in this way: reclaimed, and the rest of the 592.15 hectares are still submerged areas
forming part of Manila Bay.
"Indeed, one purpose of the constitutional prohibition against
purchases of public agricultural lands by private corporations is to Under the Amended JVA, AMARI will reimburse PEA the sum of
equitably diffuse land ownership or to encourage 'owner- P1,894,129,200.00 for PEA's "actual cost" in partially reclaiming the Freedom
cultivatorship and the economic family-size farm' and to prevent a Islands. AMARI will also complete, at its own expense, the reclamation of the
recurrence of cases like the instant case. Huge landholdings by Freedom Islands. AMARI will further shoulder all the reclamation costs of all
corporations or private persons had spawned social unrest." the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and
PEA will share, in the proportion of 70 percent and 30 percent, respectively,
the total net usable area which is defined in the Amended JVA as the total
However, if the constitutional intent is to prevent huge landholdings, the
reclaimed area less 30 percent earmarked for common areas. Title to
Constitution could have simply limited the size of alienable lands of the
AMARI's share in the net usable area, totaling 367.5 hectares, will be issued
public domain that corporations could acquire. The Constitution could have
in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that –
followed the limitations on individuals, who could acquire not more than 24
hectares of alienable lands of the public domain under the 1973 Constitution,
and not more than 12 hectares under the 1987 Constitution. "x x x, PEA shall have the duty to execute without delay the
necessary deed of transfer or conveyance of the title pertaining to
AMARI's Land share based on the Land Allocation Plan. PEA,
If the constitutional intent is to encourage economic family-size farms,
when requested in writing by AMARI, shall then cause the
placing the land in the name of a corporation would be more effective in
issuance and delivery of the proper certificates of title covering
preventing the break-up of farmlands. If the farmland is registered in the name
AMARI's Land Share in the name of AMARI, x x x; provided,
of a corporation, upon the death of the owner, his heirs would inherit shares in
that if more than seventy percent (70%) of the titled area at any
the corporation instead of subdivided parcels of the farmland. This would
given time pertains to AMARI, PEA shall deliver to AMARI only
prevent the continuing break-up of farmlands into smaller and smaller plots
seventy percent (70%) of the titles pertaining to AMARI, until
from one generation to the next.
such time when a corresponding proportionate area of additional
land pertaining to PEA has been titled." (Emphasis supplied)
In actual practice, the constitutional ban strengthens the constitutional
limitation on individuals from acquiring more than the allowed area of
Indisputably, under the Amended JVA AMARI will acquire and own a
alienable lands of the public domain. Without the constitutional ban,
maximum of 367.5 hectares of reclaimed land which will be titled in its
individuals who already acquired the maximum area of alienable lands of the
name.
public domain could easily set up corporations to acquire more alienable
public lands. An individual could own as many corporations as his means
would allow him. An individual could even hide his ownership of a To implement the Amended JVA, PEA delegated to the unincorporated PEA-
corporation by putting his nominees as stockholders of the corporation. The AMARI joint venture PEA's statutory authority, rights and privileges to
corporation is a convenient vehicle to circumvent the constitutional limitation reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the
on acquisition by individuals of alienable lands of the public domain. Amended JVA states that –

The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer "PEA hereby contributes to the joint venture its rights and
ownership of only a limited area of alienable land of the public domain to a privileges to perform Rawland Reclamation and Horizontal
qualified individual. This constitutional intent is safeguarded by the provision Development as well as own the Reclamation Area, thereby
prohibiting corporations from acquiring alienable lands of the public domain, granting the Joint Venture the full and exclusive right, authority

51
and privilege to undertake the Project in accordance with the State." As such, foreshore and submerged areas "shall not be alienated,"
Master Development Plan." unless they are classified as "agricultural lands" of the public domain. The
mere reclamation of these areas by PEA does not convert these inalienable
natural resources of the State into alienable or disposable lands of the public
The Amended JVA is the product of a renegotiation of the original JVA dated
domain. There must be a law or presidential proclamation officially
April 25, 1995 and its supplemental agreement dated August 9, 1995.
classifying these reclaimed lands as alienable or disposable and open to
disposition or concession. Moreover, these reclaimed lands cannot be
The Threshold Issue classified as alienable or disposable if the law has reserved them for some
public or quasi-public use.71
The threshold issue is whether AMARI, a private corporation, can acquire and
own under the Amended JVA 367.5 hectares of reclaimed foreshore and Section 8 of CA No. 141 provides that "only those lands shall be declared
submerged areas in Manila Bay in view of Sections 2 and 3, Article XII of the open to disposition or concession which have been officially delimited and
1987 Constitution which state that: classified."72 The President has the authority to classify inalienable lands of
the public domain into alienable or disposable lands of the public domain,
pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia, 73 the Executive
"Section 2. All lands of the public domain, waters, minerals, coal, Department attempted to sell the Roppongi property in Tokyo, Japan, which
petroleum, and other mineral oils, all forces of potential energy, was acquired by the Philippine Government for use as the Chancery of the
fisheries, forests or timber, wildlife, flora and fauna, and other Philippine Embassy. Although the Chancery had transferred to another
natural resources are owned by the State. With the exception of location thirteen years earlier, the Court still ruled that, under Article 422 74 of
agricultural lands, all other natural resources shall not be the Civil Code, a property of public dominion retains such character until
alienated. x x x. formally declared otherwise. The Court ruled that –

xxx "The fact that the Roppongi site has not been used for a long time
for actual Embassy service does not automatically convert it to
Section 3. x x x Alienable lands of the public domain shall be patrimonial property. Any such conversion happens only if the
limited to agricultural lands. Private corporations or associations property is withdrawn from public use (Cebu Oxygen and
may not hold such alienable lands of the public domain except Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property
by lease, x x x."(Emphasis supplied) continues to be part of the public domain, not available for
private appropriation or ownership 'until there is a formal
declaration on the part of the government to withdraw it from
Classification of Reclaimed Foreshore and Submerged Areas being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]."
(Emphasis supplied)
PEA readily concedes that lands reclaimed from foreshore or submerged areas
of Manila Bay are alienable or disposable lands of the public domain. In its PD No. 1085, issued on February 4, 1977, authorized the issuance of special
Memorandum,67 PEA admits that – land patents for lands reclaimed by PEA from the foreshore or submerged
areas of Manila Bay. On January 19, 1988 then President Corazon C. Aquino
"Under the Public Land Act (CA 141, as amended), reclaimed issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares
lands are classified as alienable and disposable lands of the comprising the partially reclaimed Freedom Islands. Subsequently, on April 9,
public domain: 1999 the Register of Deeds of the Municipality of Paranaque issued TCT Nos.
7309, 7311 and 7312 in the name of PEA pursuant to Section 103 of PD No.
1529 authorizing the issuance of certificates of title corresponding to land
'Sec. 59. The lands disposable under this title shall be patents. To this day, these certificates of title are still in the name of PEA.
classified as follows:

PD No. 1085, coupled with President Aquino's actual issuance of a special


(a) Lands reclaimed by the government by dredging, patent covering the Freedom Islands, is equivalent to an official proclamation
filling, or other means; classifying the Freedom Islands as alienable or disposable lands of the public
domain. PD No. 1085 and President Aquino's issuance of a land patent also
x x x.'" (Emphasis supplied) constitute a declaration that the Freedom Islands are no longer needed for
public service. The Freedom Islands are thus alienable or disposable lands
of the public domain, open to disposition or concession to qualified parties.
Likewise, the Legal Task Force68 constituted under Presidential
Administrative Order No. 365 admitted in its Report and Recommendation to
then President Fidel V. Ramos, "[R]eclaimed lands are classified as At the time then President Aquino issued Special Patent No. 3517, PEA had
alienable and disposable lands of the public domain."69 The Legal Task already reclaimed the Freedom Islands although subsequently there were
Force concluded that – partial erosions on some areas. The government had also completed the
necessary surveys on these islands. Thus, the Freedom Islands were no longer
part of Manila Bay but part of the land mass. Section 3, Article XII of the
"D. Conclusion 1987 Constitution classifies lands of the public domain into "agricultural,
forest or timber, mineral lands, and national parks." Being neither timber,
Reclaimed lands are lands of the public domain. However, by mineral, nor national park lands, the reclaimed Freedom Islands necessarily
statutory authority, the rights of ownership and disposition over fall under the classification of agricultural lands of the public domain. Under
reclaimed lands have been transferred to PEA, by virtue of which the 1987 Constitution, agricultural lands of the public domain are the only
PEA, as owner, may validly convey the same to any qualified natural resources that the State may alienate to qualified private parties. All
person without violating the Constitution or any statute. other natural resources, such as the seas or bays, are "waters x x x owned by
the State" forming part of the public domain, and are inalienable pursuant to
Section 2, Article XII of the 1987 Constitution.
The constitutional provision prohibiting private corporations from
holding public land, except by lease (Sec. 3, Art. XVII, 70 1987
Constitution), does not apply to reclaimed lands whose ownership AMARI claims that the Freedom Islands are private lands because CDCP,
has passed on to PEA by statutory grant." then a private corporation, reclaimed the islands under a contract dated
November 20, 1973 with the Commissioner of Public Highways. AMARI,
citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the
Under Section 2, Article XII of the 1987 Constitution, the foreshore and ownership of reclaimed lands may be given to the party constructing the
submerged areas of Manila Bay are part of the "lands of the public domain, works, then it cannot be said that reclaimed lands are lands of the public
waters x x x and other natural resources" and consequently "owned by the

52
domain which the State may not alienate."75 Article 5 of the Spanish Law of outside the commerce of man. Until reclaimed from the sea, these submerged
Waters reads as follows: areas are, under the Constitution, "waters x x x owned by the State," forming
part of the public domain and consequently inalienable. Only when actually
reclaimed from the sea can these submerged areas be classified as public
"Article 5. Lands reclaimed from the sea in consequence of works
agricultural lands, which under the Constitution are the only natural resources
constructed by the State, or by the provinces, pueblos or private
that the State may alienate. Once reclaimed and transformed into public
persons, with proper permission, shall become the property of the
agricultural lands, the government may then officially classify these lands as
party constructing such works, unless otherwise provided by the
alienable or disposable lands open to disposition. Thereafter, the government
terms of the grant of authority." (Emphasis supplied)
may declare these lands no longer needed for public service. Only then can
these reclaimed lands be considered alienable or disposable lands of the public
Under Article 5 of the Spanish Law of Waters of 1866, private parties could domain and within the commerce of man.
reclaim from the sea only with "proper permission" from the State. Private
parties could own the reclaimed land only if not "otherwise provided by the
The classification of PEA's reclaimed foreshore and submerged lands into
terms of the grant of authority." This clearly meant that no one could reclaim
alienable or disposable lands open to disposition is necessary because PEA is
from the sea without permission from the State because the sea is property of
tasked under its charter to undertake public services that require the use of
public dominion. It also meant that the State could grant or withhold
lands of the public domain. Under Section 5 of PD No. 1084, the functions of
ownership of the reclaimed land because any reclaimed land, like the sea from
PEA include the following: "[T]o own or operate railroads, tramways and
which it emerged, belonged to the State. Thus, a private person reclaiming
other kinds of land transportation, x x x; [T]o construct, maintain and operate
from the sea without permission from the State could not acquire ownership of
such systems of sanitary sewers as may be necessary; [T]o construct, maintain
the reclaimed land which would remain property of public dominion like the
and operate such storm drains as may be necessary." PEA is empowered to
sea it replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the
issue "rules and regulations as may be necessary for the proper use by private
time-honored principle of land ownership that "all lands that were not
parties of any or all of the highways, roads, utilities, buildings and/or any of
acquired from the government, either by purchase or by grant, belong to the
its properties and to impose or collect fees or tolls for their use." Thus, part of
public domain."77
the reclaimed foreshore and submerged lands held by the PEA would actually
be needed for public use or service since many of the functions imposed on
Article 5 of the Spanish Law of Waters must be read together with laws PEA by its charter constitute essential public services.
subsequently enacted on the disposition of public lands. In particular, CA No.
141 requires that lands of the public domain must first be classified as
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be
alienable or disposable before the government can alienate them. These lands
primarily responsible for integrating, directing, and coordinating all
must not be reserved for public or quasi-public purposes.78 Moreover, the
reclamation projects for and on behalf of the National Government." The
contract between CDCP and the government was executed after the effectivity
same section also states that "[A]ll reclamation projects shall be approved by
of the 1973 Constitution which barred private corporations from acquiring any
the President upon recommendation of the PEA, and shall be undertaken by
kind of alienable land of the public domain. This contract could not have
the PEA or through a proper contract executed by it with any person or entity;
converted the Freedom Islands into private lands of a private corporation.
x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084,
PEA became the primary implementing agency of the National Government to
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws reclaim foreshore and submerged lands of the public domain. EO No. 525
authorizing the reclamation of areas under water and revested solely in the recognized PEA as the government entity "to undertake the reclamation of
National Government the power to reclaim lands. Section 1 of PD No. 3-A lands and ensure their maximum utilization in promoting public welfare and
declared that – interests."79 Since large portions of these reclaimed lands would obviously be
needed for public service, there must be a formal declaration segregating
reclaimed lands no longer needed for public service from those still needed for
"The provisions of any law to the contrary notwithstanding, the public service.1âwphi1.nêt
reclamation of areas under water, whether foreshore or inland,
shall be limited to the National Government or any person
authorized by it under a proper contract. (Emphasis supplied) Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall
belong to or be owned by the PEA," could not automatically operate to
classify inalienable lands into alienable or disposable lands of the public
x x x." domain. Otherwise, reclaimed foreshore and submerged lands of the public
domain would automatically become alienable once reclaimed by PEA,
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because whether or not classified as alienable or disposable.
reclamation of areas under water could now be undertaken only by the
National Government or by a person contracted by the National Government. The Revised Administrative Code of 1987, a later law than either PD No.
Private parties may reclaim from the sea only under a contract with the 1084 or EO No. 525, vests in the Department of Environment and Natural
National Government, and no longer by grant or permission as provided in Resources ("DENR" for brevity) the following powers and functions:
Section 5 of the Spanish Law of Waters of 1866.

"Sec. 4. Powers and Functions. The Department shall:


Executive Order No. 525, issued on February 14, 1979, designated PEA as the
National Government's implementing arm to undertake "all reclamation
projects of the government," which "shall be undertaken by the PEA or (1) x x x
through a proper contract executed by it with any person or entity." Under
such contract, a private party receives compensation for reclamation services
xxx
rendered to PEA. Payment to the contractor may be in cash, or in kind
consisting of portions of the reclaimed land, subject to the constitutional ban
on private corporations from acquiring alienable lands of the public domain. (4) Exercise supervision and control over forest lands, alienable
The reclaimed land can be used as payment in kind only if the reclaimed land and disposable public lands, mineral resources and, in the process
is first classified as alienable or disposable land open to disposition, and then of exercising such control, impose appropriate taxes, fees, charges,
declared no longer needed for public service. rentals and any such form of levy and collect such revenues for the
exploration, development, utilization or gathering of such
resources;
The Amended JVA covers not only the Freedom Islands, but also an
additional 592.15 hectares which are still submerged and forming part of
Manila Bay. There is no legislative or Presidential act classifying these xxx
submerged areas as alienable or disposable lands of the public domain open
to disposition. These submerged areas are not covered by any patent or
(14) Promulgate rules, regulations and guidelines on the
certificate of title. There can be no dispute that these submerged areas form
issuance of licenses, permits, concessions, lease agreements and
part of the public domain, and in their present state are inalienable and
53
such other privileges concerning the development, exploration "Sec. 48. Official Authorized to Convey Real Property. Whenever
and utilization of the country's marine, freshwater, and brackish real property of the Government is authorized by law to be
water and over all aquatic resources of the country and shall conveyed, the deed of conveyance shall be executed in behalf of
continue to oversee, supervise and police our natural resources; the government by the following: x x x."
cancel or cause to cancel such privileges upon failure, non-
compliance or violations of any regulation, order, and for all other
Thus, the Court concluded that a law is needed to convey any real property
causes which are in furtherance of the conservation of natural
belonging to the Government. The Court declared that -
resources and supportive of the national interest;

"It is not for the President to convey real property of the


(15) Exercise exclusive jurisdiction on the management and
government on his or her own sole will. Any such conveyance
disposition of all lands of the public domain and serve as the sole
must be authorized and approved by a law enacted by the
agency responsible for classification, sub-classification, surveying
Congress. It requires executive and legislative concurrence."
and titling of lands in consultation with appropriate
(Emphasis supplied)
agencies."80 (Emphasis supplied)

PEA contends that PD No. 1085 and EO No. 525 constitute the legislative
As manager, conservator and overseer of the natural resources of the State,
authority allowing PEA to sell its reclaimed lands. PD No. 1085, issued on
DENR exercises "supervision and control over alienable and disposable public
February 4, 1977, provides that –
lands." DENR also exercises "exclusive jurisdiction on the management and
disposition of all lands of the public domain." Thus, DENR decides whether
areas under water, like foreshore or submerged areas of Manila Bay, should be "The land reclaimed in the foreshore and offshore area of
reclaimed or not. This means that PEA needs authorization from DENR Manila Bay pursuant to the contract for the reclamation and
before PEA can undertake reclamation projects in Manila Bay, or in any part construction of the Manila-Cavite Coastal Road Project between
of the country. the Republic of the Philippines and the Construction and
Development Corporation of the Philippines dated November 20,
1973 and/or any other contract or reclamation covering the same
DENR also exercises exclusive jurisdiction over the disposition of all lands of
area is hereby transferred, conveyed and assigned to the
the public domain. Hence, DENR decides whether reclaimed lands of PEA
ownership and administration of the Public Estates
should be classified as alienable under Sections 681 and 782 of CA No. 141.
Authority established pursuant to PD No. 1084; Provided,
Once DENR decides that the reclaimed lands should be so classified, it then
however, That the rights and interests of the Construction and
recommends to the President the issuance of a proclamation classifying the
Development Corporation of the Philippines pursuant to the
lands as alienable or disposable lands of the public domain open to
aforesaid contract shall be recognized and respected.
disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr.
countersigned Special Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No. 141. Henceforth, the Public Estates Authority shall exercise the rights
and assume the obligations of the Republic of the Philippines
(Department of Public Highways) arising from, or incident to, the
In short, DENR is vested with the power to authorize the reclamation of areas
aforesaid contract between the Republic of the Philippines and the
under water, while PEA is vested with the power to undertake the physical
Construction and Development Corporation of the Philippines.
reclamation of areas under water, whether directly or through private
contractors. DENR is also empowered to classify lands of the public domain
into alienable or disposable lands subject to the approval of the President. On In consideration of the foregoing transfer and assignment, the
the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable Public Estates Authority shall issue in favor of the Republic of the
lands of the public domain. Philippines the corresponding shares of stock in said entity with an
issued value of said shares of stock (which) shall be deemed fully
paid and non-assessable.
Clearly, the mere physical act of reclamation by PEA of foreshore or
submerged areas does not make the reclaimed lands alienable or disposable
lands of the public domain, much less patrimonial lands of PEA. Likewise, the The Secretary of Public Highways and the General Manager of the
mere transfer by the National Government of lands of the public domain to Public Estates Authority shall execute such contracts or
PEA does not make the lands alienable or disposable lands of the public agreements, including appropriate agreements with the
domain, much less patrimonial lands of PEA. Construction and Development Corporation of the Philippines, as
may be necessary to implement the above.
Absent two official acts – a classification that these lands are alienable or
disposable and open to disposition and a declaration that these lands are not Special land patent/patents shall be issued by the Secretary of
needed for public service, lands reclaimed by PEA remain inalienable lands of Natural Resources in favor of the Public Estates Authority
the public domain. Only such an official classification and formal declaration without prejudice to the subsequent transfer to the contractor or
can convert reclaimed lands into alienable or disposable lands of the public his assignees of such portion or portions of the land reclaimed or
domain, open to disposition under the Constitution, Title I and Title III 83 of to be reclaimed as provided for in the above-mentioned contract.
CA No. 141 and other applicable laws.84 On the basis of such patents, the Land Registration Commission
shall issue the corresponding certificate of title." (Emphasis
supplied)
PEA's Authority to Sell Reclaimed Lands

On the other hand, Section 3 of EO No. 525, issued on February 14, 1979,
PEA, like the Legal Task Force, argues that as alienable or disposable lands of
provides that -
the public domain, the reclaimed lands shall be disposed of in accordance with
CA No. 141, the Public Land Act. PEA, citing Section 60 of CA No. 141,
admits that reclaimed lands transferred to a branch or subdivision of the "Sec. 3. All lands reclaimed by PEA shall belong to or be owned
government "shall not be alienated, encumbered, or otherwise disposed of in a by the PEA which shall be responsible for its administration,
manner affecting its title, except when authorized by Congress: x x development, utilization or disposition in accordance with the
x."85 (Emphasis by PEA) provisions of Presidential Decree No. 1084. Any and all income
that the PEA may derive from the sale, lease or use of reclaimed
lands shall be used in accordance with the provisions of
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised
Presidential Decree No. 1084."
Administrative Code of 1987, which states that –

There is no express authority under either PD No. 1085 or EO No. 525 for
PEA to sell its reclaimed lands. PD No. 1085 merely transferred "ownership
54
and administration" of lands reclaimed from Manila Bay to PEA, while EO private sale at such price as may be fixed by the same committee
No. 525 declared that lands reclaimed by PEA "shall belong to or be owned or body concerned and approved by the Commission."
by PEA." EO No. 525 expressly states that PEA should dispose of its
reclaimed lands "in accordance with the provisions of Presidential Decree No.
It is only when the public auction fails that a negotiated sale is allowed, in
1084," the charter of PEA.
which case the Commission on Audit must approve the selling price. 90 The
Commission on Audit implements Section 79 of the Government Auditing
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, Code through Circular No. 89-29691 dated January 27, 1989. This circular
administer, deal in, subdivide, dispose, lease and sell any and all kinds of emphasizes that government assets must be disposed of only through public
lands x x x owned, managed, controlled and/or operated by the auction, and a negotiated sale can be resorted to only in case of "failure of
government."87 (Emphasis supplied) There is, therefore, legislative authority public auction."
granted to PEA to sell its lands, whether patrimonial or alienable lands of
the public domain. PEA may sell to private parties its patrimonial
At the public auction sale, only Philippine citizens are qualified to bid for
properties in accordance with the PEA charter free from constitutional
PEA's reclaimed foreshore and submerged alienable lands of the public
limitations. The constitutional ban on private corporations from acquiring
domain. Private corporations are barred from bidding at the auction sale of
alienable lands of the public domain does not apply to the sale of PEA's
any kind of alienable land of the public domain.
patrimonial lands.

PEA originally scheduled a public bidding for the Freedom Islands on


PEA may also sell its alienable or disposable lands of the public domain to
December 10, 1991. PEA imposed a condition that the winning bidder should
private individuals since, with the legislative authority, there is no longer any
reclaim another 250 hectares of submerged areas to regularize the shape of the
statutory prohibition against such sales and the constitutional ban does not
Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in
apply to individuals. PEA, however, cannot sell any of its alienable or
favor of the winning bidder. 92 No one, however, submitted a bid. On
disposable lands of the public domain to private corporations since Section 3,
December 23, 1994, the Government Corporate Counsel advised PEA it could
Article XII of the 1987 Constitution expressly prohibits such sales. The
sell the Freedom Islands through negotiation, without need of another public
legislative authority benefits only individuals. Private corporations remain
bidding, because of the failure of the public bidding on December 10, 1991.93
barred from acquiring any kind of alienable land of the public domain,
including government reclaimed lands.
However, the original JVA dated April 25, 1995 covered not only the
Freedom Islands and the additional 250 hectares still to be reclaimed, it also
The provision in PD No. 1085 stating that portions of the reclaimed lands
granted an option to AMARI to reclaim another 350 hectares. The original
could be transferred by PEA to the "contractor or his assignees" (Emphasis
JVA, a negotiated contract, enlarged the reclamation area to 750
supplied) would not apply to private corporations but only to individuals
hectares.94 The failure of public bidding on December 10, 1991, involving
because of the constitutional ban. Otherwise, the provisions of PD No. 1085
only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750
would violate both the 1973 and 1987 Constitutions.
hectares, almost double the area publicly auctioned. Besides, the failure of
public bidding happened on December 10, 1991, more than three years before
The requirement of public auction in the sale of reclaimed lands the signing of the original JVA on April 25, 1995. The economic situation in
the country had greatly improved during the intervening period.
Assuming the reclaimed lands of PEA are classified as alienable or disposable
lands open to disposition, and further declared no longer needed for public Reclamation under the BOT Law and the Local Government Code
service, PEA would have to conduct a public bidding in selling or leasing
these lands. PEA must observe the provisions of Sections 63 and 67 of CA
The constitutional prohibition in Section 3, Article XII of the 1987
No. 141 requiring public auction, in the absence of a law exempting PEA
Constitution is absolute and clear: "Private corporations or associations may
from holding a public auction.88 Special Patent No. 3517 expressly states that
not hold such alienable lands of the public domain except by lease, x x x."
the patent is issued by authority of the Constitution and PD No. 1084,
Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and
"supplemented by Commonwealth Act No. 141, as amended." This is an
AMARI as legislative authority to sell reclaimed lands to private parties,
acknowledgment that the provisions of CA No. 141 apply to the disposition of
recognizes the constitutional ban. Section 6 of RA No. 6957 states –
reclaimed alienable lands of the public domain unless otherwise provided by
law. Executive Order No. 654,89 which authorizes PEA "to determine the kind
and manner of payment for the transfer" of its assets and properties, does not "Sec. 6. Repayment Scheme. - For the financing, construction,
exempt PEA from the requirement of public auction. EO No. 654 merely operation and maintenance of any infrastructure projects
authorizes PEA to decide the mode of payment, whether in kind and in undertaken through the build-operate-and-transfer arrangement or
installment, but does not authorize PEA to dispense with public auction. any of its variations pursuant to the provisions of this Act, the
project proponent x x x may likewise be repaid in the form of a
share in the revenue of the project or other non-monetary
Moreover, under Section 79 of PD No. 1445, otherwise known as the
payments, such as, but not limited to, the grant of a portion or
Government Auditing Code, the government is required to sell valuable
percentage of the reclaimed land, subject to the constitutional
government property through public bidding. Section 79 of PD No. 1445
requirements with respect to the ownership of the land: x x x."
mandates that –
(Emphasis supplied)

"Section 79. When government property has become


A private corporation, even one that undertakes the physical reclamation of a
unserviceable for any cause, or is no longer needed, it shall, upon
government BOT project, cannot acquire reclaimed alienable lands of the
application of the officer accountable therefor, be inspected by the
public domain in view of the constitutional ban.
head of the agency or his duly authorized representative in the
presence of the auditor concerned and, if found to be valueless or
unsaleable, it may be destroyed in their presence. If found to be Section 302 of the Local Government Code, also mentioned by PEA and
valuable, it may be sold at public auction to the highest AMARI, authorizes local governments in land reclamation projects to pay the
bidder under the supervision of the proper committee on award or contractor or developer in kind consisting of a percentage of the reclaimed
similar body in the presence of the auditor concerned or other land, to wit:
authorized representative of the Commission, after advertising by
printed notice in the Official Gazette, or for not less than three
"Section 302. Financing, Construction, Maintenance, Operation,
consecutive days in any newspaper of general circulation, or
and Management of Infrastructure Projects by the Private Sector. x
where the value of the property does not warrant the expense of
xx
publication, by notices posted for a like period in at least three
public places in the locality where the property is to be sold. In the
event that the public auction fails, the property may be sold at a xxx

55
In case of land reclamation or construction of industrial estates, the Registration Act. Such land grant is constitutive of a 'fee simple'
repayment plan may consist of the grant of a portion or percentage title or absolute title in favor of petitioner Mindanao Medical
of the reclaimed land or the industrial estate constructed." Center. Thus, Section 122 of the Act, which governs the
registration of grants or patents involving public lands, provides
that 'Whenever public lands in the Philippine Islands belonging to
Although Section 302 of the Local Government Code does not contain a
the Government of the United States or to the Government of the
proviso similar to that of the BOT Law, the constitutional restrictions on land
Philippines are alienated, granted or conveyed to persons or to
ownership automatically apply even though not expressly mentioned in the
public or private corporations, the same shall be brought forthwith
Local Government Code.
under the operation of this Act (Land Registration Act, Act 496)
and shall become registered lands.'"
Thus, under either the BOT Law or the Local Government Code, the
contractor or developer, if a corporate entity, can only be paid with leaseholds
The first four cases cited involve petitions to cancel the land patents and the
on portions of the reclaimed land. If the contractor or developer is an
corresponding certificates of titles issued to private parties. These four cases
individual, portions of the reclaimed land, not exceeding 12 hectares 96 of non-
uniformly hold that the Director of Lands has no jurisdiction over private
agricultural lands, may be conveyed to him in ownership in view of the
lands or that upon issuance of the certificate of title the land automatically
legislative authority allowing such conveyance. This is the only way these
comes under the Torrens System. The fifth case cited involves the registration
provisions of the BOT Law and the Local Government Code can avoid a
under the Torrens System of a 12.8-hectare public land granted by the
direct collision with Section 3, Article XII of the 1987 Constitution.
National Government to Mindanao Medical Center, a government unit under
the Department of Health. The National Government transferred the 12.8-
Registration of lands of the public domain hectare public land to serve as the site for the hospital buildings and other
facilities of Mindanao Medical Center, which performed a public service. The
Court affirmed the registration of the 12.8-hectare public land in the name of
Finally, PEA theorizes that the "act of conveying the ownership of the Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is
reclaimed lands to public respondent PEA transformed such lands of the an example of a public land being registered under Act No. 496 without the
public domain to private lands." This theory is echoed by AMARI which land losing its character as a property of public dominion.
maintains that the "issuance of the special patent leading to the eventual
issuance of title takes the subject land away from the land of public domain
and converts the property into patrimonial or private property." In short, PEA In the instant case, the only patent and certificates of title issued are those in
and AMARI contend that with the issuance of Special Patent No. 3517 and the the name of PEA, a wholly government owned corporation performing public
corresponding certificates of titles, the 157.84 hectares comprising the as well as proprietary functions. No patent or certificate of title has been
Freedom Islands have become private lands of PEA. In support of their issued to any private party. No one is asking the Director of Lands to cancel
theory, PEA and AMARI cite the following rulings of the Court: PEA's patent or certificates of title. In fact, the thrust of the instant petition is
that PEA's certificates of title should remain with PEA, and the land covered
by these certificates, being alienable lands of the public domain, should not be
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held – sold to a private corporation.

"Once the patent was granted and the corresponding certificate of Registration of land under Act No. 496 or PD No. 1529 does not vest in the
title was issued, the land ceased to be part of the public domain and registrant private or public ownership of the land. Registration is not a mode
became private property over which the Director of Lands has of acquiring ownership but is merely evidence of ownership previously
neither control nor jurisdiction." conferred by any of the recognized modes of acquiring ownership.
Registration does not give the registrant a better right than what the registrant
2. Lee Hong Hok v. David,98 where the Court declared - had prior to the registration.102 The registration of lands of the public domain
under the Torrens system, by itself, cannot convert public lands into private
lands.103
"After the registration and issuance of the certificate and duplicate
certificate of title based on a public land patent, the land covered
thereby automatically comes under the operation of Republic Act Jurisprudence holding that upon the grant of the patent or issuance of the
496 subject to all the safeguards provided therein."3. Heirs of certificate of title the alienable land of the public domain automatically
Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled becomes private land cannot apply to government units and entities like PEA.
- The transfer of the Freedom Islands to PEA was made subject to the
provisions of CA No. 141 as expressly stated in Special Patent No. 3517
issued by then President Aquino, to wit:
"While the Director of Lands has the power to review homestead
patents, he may do so only so long as the land remains part of the
public domain and continues to be under his exclusive control; but "NOW, THEREFORE, KNOW YE, that by authority of the
once the patent is registered and a certificate of title is issued, the Constitution of the Philippines and in conformity with the
land ceases to be part of the public domain and becomes private provisions of Presidential Decree No. 1084, supplemented by
property over which the Director of Lands has neither control nor Commonwealth Act No. 141, as amended, there are hereby
jurisdiction." granted and conveyed unto the Public Estates Authority the
aforesaid tracts of land containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four (1,915,894)
4. Manalo v. Intermediate Appellate Court,100 where the Court held square meters; the technical description of which are hereto
– attached and made an integral part hereof." (Emphasis supplied)

"When the lots in dispute were certified as disposable on May 19, Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters
1971, and free patents were issued covering the same in favor of not covered by PD No. 1084. Section 60 of CA No. 141 prohibits, "except
the private respondents, the said lots ceased to be part of the public when authorized by Congress," the sale of alienable lands of the public
domain and, therefore, the Director of Lands lost jurisdiction over domain that are transferred to government units or entities. Section 60 of CA
the same." No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien
affecting title" of the registered land even if not annotated on the certificate of
5.Republic v. Court of Appeals,101 where the Court stated – title.104 Alienable lands of the public domain held by government entities
under Section 60 of CA No. 141 remain public lands because they cannot be
alienated or encumbered unless Congress passes a law authorizing their
"Proclamation No. 350, dated October 9, 1956, of President disposition. Congress, however, cannot authorize the sale to private
Magsaysay legally effected a land grant to the Mindanao Medical corporations of reclaimed alienable lands of the public domain because of the
Center, Bureau of Medical Services, Department of Health, of the constitutional ban. Only individuals can benefit from such law.
whole lot, validly sufficient for initial registration under the Land
56
The grant of legislative authority to sell public lands in accordance with other alienable lands, does not dispose of private lands but alienable lands of
Section 60 of CA No. 141 does not automatically convert alienable lands of the public domain. Only when qualified private parties acquire these lands
the public domain into private or patrimonial lands. The alienable lands of the will the lands become private lands. In the hands of the government agency
public domain must be transferred to qualified private parties, or to tasked and authorized to dispose of alienable of disposable lands of the
government entities not tasked to dispose of public lands, before these lands public domain, these lands are still public, not private lands.
can become private or patrimonial lands. Otherwise, the constitutional ban
will become illusory if Congress can declare lands of the public domain as
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the
private or patrimonial lands in the hands of a government agency tasked to
public domain" as well as "any and all kinds of lands." PEA can hold both
dispose of public lands. This will allow private corporations to acquire
lands of the public domain and private lands. Thus, the mere fact that
directly from government agencies limitless areas of lands which, prior to
alienable lands of the public domain like the Freedom Islands are transferred
such law, are concededly public lands.
to PEA and issued land patents or certificates of title in PEA's name does not
automatically make such lands private.
Under EO No. 525, PEA became the central implementing agency of the
National Government to reclaim foreshore and submerged areas of the public
To allow vast areas of reclaimed lands of the public domain to be transferred
domain. Thus, EO No. 525 declares that –
to PEA as private lands will sanction a gross violation of the constitutional
ban on private corporations from acquiring any kind of alienable land of the
"EXECUTIVE ORDER NO. 525 public domain. PEA will simply turn around, as PEA has now done under
the Amended JVA, and transfer several hundreds of hectares of these
reclaimed and still to be reclaimed lands to a single private corporation in only
Designating the Public Estates Authority as the Agency Primarily
one transaction. This scheme will effectively nullify the constitutional ban in
Responsible for all Reclamation Projects
Section 3, Article XII of the 1987 Constitution which was intended to diffuse
equitably the ownership of alienable lands of the public domain among
Whereas, there are several reclamation projects which are ongoing Filipinos, now numbering over 80 million strong.
or being proposed to be undertaken in various parts of the country
which need to be evaluated for consistency with national
This scheme, if allowed, can even be applied to alienable agricultural lands of
programs;
the public domain since PEA can "acquire x x x any and all kinds of lands."
This will open the floodgates to corporations and even individuals acquiring
Whereas, there is a need to give further institutional support to the hundreds of hectares of alienable lands of the public domain under the guise
Government's declared policy to provide for a coordinated, that in the hands of PEA these lands are private lands. This will result in
economical and efficient reclamation of lands; corporations amassing huge landholdings never before seen in this country -
creating the very evil that the constitutional ban was designed to prevent. This
will completely reverse the clear direction of constitutional development in
Whereas, Presidential Decree No. 3-A requires that all reclamation this country. The 1935 Constitution allowed private corporations to acquire
of areas shall be limited to the National Government or any person not more than 1,024 hectares of public lands. 105 The 1973 Constitution
authorized by it under proper contract; prohibited private corporations from acquiring any kind of public land, and
the 1987 Constitution has unequivocally reiterated this prohibition.
Whereas, a central authority is needed to act on behalf of the
National Government which shall ensure a coordinated and The contention of PEA and AMARI that public lands, once registered under
integrated approach in the reclamation of lands; Act No. 496 or PD No. 1529, automatically become private lands is contrary
to existing laws. Several laws authorize lands of the public domain to be
Whereas, Presidential Decree No. 1084 creates the Public registered under the Torrens System or Act No. 496, now PD No. 1529,
Estates Authority as a government corporation to undertake without losing their character as public lands. Section 122 of Act No. 496, and
reclamation of lands and ensure their maximum utilization in Section 103 of PD No. 1529, respectively, provide as follows:
promoting public welfare and interests; and
Act No. 496
Whereas, Presidential Decree No. 1416 provides the President with
continuing authority to reorganize the national government "Sec. 122. Whenever public lands in the Philippine Islands
including the transfer, abolition, or merger of functions and offices. belonging to the x x x Government of the Philippine Islands are
alienated, granted, or conveyed to persons or the public or private
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of corporations, the same shall be brought forthwith under the
the Philippines, by virtue of the powers vested in me by the operation of this Act and shall become registered lands."
Constitution and pursuant to Presidential Decree No. 1416, do
hereby order and direct the following: PD No. 1529

Section 1. The Public Estates Authority (PEA) shall be primarily "Sec. 103. Certificate of Title to Patents. Whenever public land is
responsible for integrating, directing, and coordinating all by the Government alienated, granted or conveyed to any person,
reclamation projects for and on behalf of the National the same shall be brought forthwith under the operation of this
Government. All reclamation projects shall be approved by the Decree." (Emphasis supplied)
President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it
with any person or entity; Provided, that, reclamation projects of Based on its legislative history, the phrase "conveyed to any person" in
any national government agency or entity authorized under its Section 103 of PD No. 1529 includes conveyances of public lands to public
charter shall be undertaken in consultation with the PEA upon corporations.
approval of the President.
Alienable lands of the public domain "granted, donated, or transferred to a
x x x ." province, municipality, or branch or subdivision of the Government," as
provided in Section 60 of CA No. 141, may be registered under the Torrens
System pursuant to Section 103 of PD No. 1529. Such registration, however,
As the central implementing agency tasked to undertake reclamation projects is expressly subject to the condition in Section 60 of CA No. 141 that the land
nationwide, with authority to sell reclaimed lands, PEA took the place of "shall not be alienated, encumbered or otherwise disposed of in a manner
DENR as the government agency charged with leasing or selling reclaimed affecting its title, except when authorized by Congress." This provision refers
lands of the public domain. The reclaimed lands being leased or sold by PEA to government reclaimed, foreshore and marshy lands of the public domain
are not private lands, in the same manner that DENR, when it disposes of
57
that have been titled but still cannot be alienated or encumbered unless This stipulation still contravenes Section 3, Article XII of the 1987
expressly authorized by Congress. The need for legislative authority prevents Constitution which provides that private corporations "shall not hold such
the registered land of the public domain from becoming private land that can alienable lands of the public domain except by lease." The transfer of title and
be disposed of to qualified private parties. ownership to AMARI clearly means that AMARI will "hold" the reclaimed
lands other than by lease. The transfer of title and ownership is a "disposition"
of the reclaimed lands, a transaction considered a sale or alienation under CA
The Revised Administrative Code of 1987 also recognizes that lands of the
No. 141,108 the Government Auditing Code,109 and Section 3, Article XII of
public domain may be registered under the Torrens System. Section 48,
the 1987 Constitution.
Chapter 12, Book I of the Code states –

The Regalian doctrine is deeply implanted in our legal system. Foreshore and
"Sec. 48. Official Authorized to Convey Real Property. Whenever
submerged areas form part of the public domain and are inalienable. Lands
real property of the Government is authorized by law to be
reclaimed from foreshore and submerged areas also form part of the public
conveyed, the deed of conveyance shall be executed in behalf of
domain and are also inalienable, unless converted pursuant to law into
the government by the following:
alienable or disposable lands of the public domain. Historically, lands
reclaimed by the government are sui generis, not available for sale to private
(1) x x x parties unlike other alienable public lands. Reclaimed lands retain their
inherent potential as areas for public use or public service. Alienable lands of
the public domain, increasingly becoming scarce natural resources, are to be
(2) For property belonging to the Republic of the Philippines, but distributed equitably among our ever-growing population. To insure such
titled in the name of any political subdivision or of any corporate equitable distribution, the 1973 and 1987 Constitutions have barred private
agency or instrumentality, by the executive head of the agency or corporations from acquiring any kind of alienable land of the public domain.
instrumentality." (Emphasis supplied) Those who attempt to dispose of inalienable natural resources of the State, or
seek to circumvent the constitutional ban on alienation of lands of the public
Thus, private property purchased by the National Government for expansion domain to private corporations, do so at their own risk.
of a public wharf may be titled in the name of a government corporation
regulating port operations in the country. Private property purchased by the We can now summarize our conclusions as follows:
National Government for expansion of an airport may also be titled in the
name of the government agency tasked to administer the airport. Private
property donated to a municipality for use as a town plaza or public school 1. The 157.84 hectares of reclaimed lands comprising the Freedom
site may likewise be titled in the name of the municipality. 106 All these Islands, now covered by certificates of title in the name of PEA,
properties become properties of the public domain, and if already registered are alienable lands of the public domain. PEA may lease these
under Act No. 496 or PD No. 1529, remain registered land. There is no lands to private corporations but may not sell or transfer ownership
requirement or provision in any existing law for the de-registration of land of these lands to private corporations. PEA may only sell these
from the Torrens System. lands to Philippine citizens, subject to the ownership limitations in
the 1987 Constitution and existing laws.
Private lands taken by the Government for public use under its power of
eminent domain become unquestionably part of the public domain. 2. The 592.15 hectares of submerged areas of Manila Bay remain
Nevertheless, Section 85 of PD No. 1529 authorizes the Register of Deeds to inalienable natural resources of the public domain until classified
issue in the name of the National Government new certificates of title as alienable or disposable lands open to disposition and declared
covering such expropriated lands. Section 85 of PD No. 1529 states – no longer needed for public service. The government can make
such classification and declaration only after PEA has reclaimed
these submerged areas. Only then can these lands qualify as
"Sec. 85. Land taken by eminent domain. Whenever any registered agricultural lands of the public domain, which are the only natural
land, or interest therein, is expropriated or taken by eminent resources the government can alienate. In their present state, the
domain, the National Government, province, city or municipality, 592.15 hectares of submerged areas are inalienable and outside
or any other agency or instrumentality exercising such right shall the commerce of man.
file for registration in the proper Registry a certified copy of the
judgment which shall state definitely by an adequate description,
the particular property or interest expropriated, the number of the 3. Since the Amended JVA seeks to transfer to AMARI, a private
certificate of title, and the nature of the public use. A memorandum corporation, ownership of 77.34 hectares110 of the Freedom Islands,
of the right or interest taken shall be made on each certificate of such transfer is void for being contrary to Section 3, Article XII of
title by the Register of Deeds, and where the fee simple is taken, a the 1987 Constitution which prohibits private corporations from
new certificate shall be issued in favor of the National acquiring any kind of alienable land of the public domain.
Government, province, city, municipality, or any other agency or
instrumentality exercising such right for the land so taken. The
4. Since the Amended JVA also seeks to transfer to AMARI
legal expenses incident to the memorandum of registration or
ownership of 290.156 hectares111 of still submerged areas of
issuance of a new certificate of title shall be for the account of the
Manila Bay, such transfer is void for being contrary to Section 2,
authority taking the land or interest therein." (Emphasis supplied)
Article XII of the 1987 Constitution which prohibits the alienation
of natural resources other than agricultural lands of the public
Consequently, lands registered under Act No. 496 or PD No. 1529 are not domain. PEA may reclaim these submerged areas. Thereafter, the
exclusively private or patrimonial lands. Lands of the public domain may also government can classify the reclaimed lands as alienable or
be registered pursuant to existing laws. disposable, and further declare them no longer needed for public
service. Still, the transfer of such reclaimed alienable lands of the
public domain to AMARI will be void in view of Section 3, Article
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI XII of the 1987 Constitution which prohibits private corporations
of the Freedom Islands or of the lands to be reclaimed from submerged areas from acquiring any kind of alienable land of the public domain.
of Manila Bay. In the words of AMARI, the Amended JVA "is not a sale but a
joint venture with a stipulation for reimbursement of the original cost incurred
by PEA for the earlier reclamation and construction works performed by the Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of
CDCP under its 1973 contract with the Republic." Whether the Amended JVA the 1987 Constitution. Under Article 1409112 of the Civil Code, contracts
is a sale or a joint venture, the fact remains that the Amended JVA requires whose "object or purpose is contrary to law," or whose "object is outside the
PEA to "cause the issuance and delivery of the certificates of title conveying commerce of men," are "inexistent and void from the beginning." The Court
AMARI's Land Share in the name of AMARI."107 must perform its duty to defend and uphold the Constitution, and therefore
declares the Amended JVA null and void ab initio.

58
Seventh issue: whether the Court is the proper forum to raise the issue of claimed that the Morandarte spouses deliberately and intentionally concealed
whether the Amended JVA is grossly disadvantageous to the government. such fact in the application to ensure approval thereof. Considering that the
Morandarte spouses are guilty of fraud and misrepresentation in the
procurement of their title, the Republic stressed that their title is void.9
Considering that the Amended JVA is null and void ab initio, there is no
necessity to rule on this last issue. Besides, the Court is not a trier of facts, and
this last issue involves a determination of factual matters. The Register of Deeds of Dipolog City filed a Motion to Dismiss, dated April
7, 1987, praying for the dismissal of the complaint as against her since the
complaint failed to state a claim against her.10
WHEREFORE, the petition is GRANTED. The Public Estates Authority and
Amari Coastal Bay Development Corporation are PERMANENTLY
ENJOINED from implementing the Amended Joint Venture Agreement In their Answer dated April 13, 1987, the Morandarte spouses denied the
which is hereby declared NULL and VOID ab initio. allegations of the complaint and claimed that they were able to secure the title
in accordance and in compliance with the requirements of the law. They
alleged that the land is a portion of inherited property from Antonio L.
SO ORDERED.
Morandarte whose ownership thereof is covered by Tax Declaration No. 2296.

G.R. No. 123586             August 12, 2004


As regards the Miputak River, they argued that the river changed its course
brought about by the fact that a portion of the Miputak River was leased by
SPOUSES BEDER MORANDARTE and MARINA the Bureau of Fisheries (BOF for brevity) to a certain Aguido Realiza whose
FEBRERA, petitioners, rights were subsequently transferred to Virginio Lacaya. They alleged that
vs. they indicated in their survey plan the actual location of the Miputak River in
COURT OF APPEALS, REPUBLIC OF THE PHILIPPINES, and relation to the property but the BOL returned the survey with the directive that
SPOUSES VIRGINIO B. LACAYA and NENITA LACAYA, respondents. the existence of the river should not be indicated as the original survey did not
show its existence, to which they complied with by submitting a new survey
AUSTRIA-MARTINEZ, J.: plan which did not indicate the existence of the river.

Before us is a petition for review on certiorari under Rule 45 of the Rules of In the alternative, they alleged that inclusion of the Miputak River should not
Court which seeks the reversal of the Decision, 1 dated August 23, 1995, of the render the title void; only the portion of the property covered by the Miputak
Court of Appeals (CA for brevity) in CA-G.R. CV No. 36258, affirming the River should be nullified but their title to the remaining portion should be
Decision, dated November 5, 1991, rendered by the Regional Trial Court maintained.11
(Branch 7), Dipolog City, Zamboanga del Norte (RTC for brevity) in Civil
Case No. 3890, declaring Free Patent No. (IX-8) 7852 and Original Certificate
For its part, DBP filed its Answer dated April 13, 1987 praying for the
of Title No. P-21972, in the name of petitioner Beder Morandarte (Morandarte
dismissal of the complaint as against it since it had nothing to do with the
for brevity), and all its derivative titles, null and void ab initio.
issuance of the title to the spouses. 12 DBP interposed a cross-claim against the
spouses for the payment of their outstanding obligations. 13 The Morandarte
The factual antecedents are as follows: spouses filed an Answer to the Crossclaim dated April 29, 1987.14

Morandarte filed an application for free patent, dated December 5, 1972, No answer was filed by the Register of Deeds of Zamboanga del Norte.
before the Bureau of Lands, Dipolog City District Land Office (BOL for
brevity), covering a parcel of land located at Sta. Filomena, Dipolog City with
On March 4, 1988, upon prior leave of court, herein respondent spouses
an area of 4.5499 hectares and described as a portion of Lot 1038 of Dipolog
Virginio B. Lacaya and Nenita Lacaya filed their Complaint-In-Intervention
Cadastre No. 85.3
which alleged that they are holders of a fishpond lease agreement covering a
fishpond area of about 5.0335 hectares, 1.2681 hectares of which have been
On July 27, 1976, the District Land Officer of the BOL approved the free included in the title issued to the Morandarte spouses. Considering that the
patent application of Morandarte and directed the issuance of a free patent in land of the Morandarte spouses encroaches on the area leased to them, the
his favor.4 Accordingly, Free Patent No. (IX-8) 785 for Lot No. 7, Csd-09-05- Lacaya spouses submit that the former's title thereto is void.15
00078-D was issued in the name of Morandarte. On September 20, 1976, the
Register of Deeds of Zamboanga del Norte issued the corresponding Original
In their Answer to the complaint-in-intervention, dated March 19, 1988, the
Certificate of Title No. (P-21972) 5954.5
Morandarte spouses denied the allegations of the Lacaya spouses. 16 They
maintained that the portion of the fishpond originally belonged to Antonio L.
Subsequently, Morandarte caused a subdivision survey of the lot, dividing the Morandarte, their predecessor-in-interest, and the Lacaya spouses have never
same into Lot No. 6781-A, with an area of 13,939 square meters, and Lot No. been in possession thereof but are actually squatters therein.
6781-B, with an area of 32,819 square meters. As a result of the subdivision
survey, Transfer Certificates of Title Nos. T-1835 and T-1836 covering Lots
On the other hand, the Republic, in its Answer to the complaint-in-
6781-A and 6781-B, respectively, were issued in favor of Morandarte on May
intervention, dated March 21, 1988, adopted the allegations of the complaint-
12, 1980 by the Registry of Deeds of Dipolog City.6
in-intervention to further support its claim that the title of the Morandarte
spouses is void.17 The Lacaya spouses filed their Reply and Answer on March
On May 22, 1981, Morandarte and his wife, Marina Febrera, executed a real 30, 1988, denying the arguments of the Morandarte spouses and reiterating the
estate mortgage over Lot 6781-B, subject of TCT No. 1836, in favor of the allegations in their complaint-in-intervention.18
Development Bank of the Philippines, Dipolog City branch (DBP for brevity),
in consideration of a loan in the amount of P52,160.00.7
Following trial on the merits, on November 5, 1992, the RTC rendered a
Decision19 in favor of the Republic and the Lacaya spouses. The RTC declared
More than ten years after the issuance of the OCT in Morandarte's name, or on that while fraud in the procurement of the title was not established by the
March 19, 1987, respondent Republic of the Philippines (Republic for State, Morandarte's title is, nonetheless, void because it includes a portion of
brevity), represented by the Director of Lands, filed before the RTC a the Miputak River which is outside the commerce of man and beyond the
Complaint for Annulment of Title and Reversion against the Morandarte authority of the BOL to dispose of. In addition, the RTC sustained the
spouses, the Register of Deeds of Zamboanga del Norte, the Register of Deeds fishpond rights of the Lacaya spouses over a portion included in Morandarte's
of Dipolog City, and DBP, docketed as Civil Case No. 3890.8 title based on a Deed of Transfer of Fishpond Rights from Felipe B. Lacaya
and a Fishpond Lease Agreement with the BOF.
The Republic alleged that the BOL found that the subject land includes a
portion of the Miputak River which cannot be validly awarded as it is outside The dispositive portion of the decision of the trial court reads:
the commerce of man and beyond the authority of the BOL to dispose of. It
59
WHEREFORE, judgment is hereby rendered: stream (Talion vs. Sec. of Public Works and Highways, L-24281,
May 16, 1967; Paras, supra).
1. Declaring null and void ab initio Free Patent No. (IX-5) (sic)
785 and Original Certificate of Title No. P-21972 in the name of Correspondingly, Art. 462 of the same Civil Code provides:
Beder Morandarte, as well as all derivative titles issued thereafter;
Art. 462. Whenever a river, changing its course by natural causes,
2. Ordering defendants spouses Beder Morandarte and Marina opens a new bed through a private estate, this bed shall become of
Febrera to surrender their owner's duplicate copies of Transfer public dominion.
Certificate of Title Nos. T-1835 and T-1836, which were the
derivative titles of Original Certificate of Title No. P-21972;
The rule is the same that even if the new bed is on private property.
The bed becomes property of public dominion. Just as the old bed
3. Directing the Register of Deeds of Zamboanga del Norte to had been of public dominion before the abandonment, the new
cancel Original Certificate of Title No. P-21972 in the name of riverbed shall likewise be of public dominion (Hilario vs. City of
Beder Morandarte, and the Register of Deeds of Dipolog City to Manila, L-19570, April 27, 1967).23
cancel Transfer Certificate of Title Nos. T-1835 and T-1836 in the
name of the same defendant;
On October 10, 1995, the Morandarte spouses filed a motion for
reconsideration.24 In its Resolution dated January 19, 1996, the CA found no
4. Ordering the reversion of the land in question to the state, free justifiable cause or reason to modify or reverse its decision.25
from liens and encumbrances;
Hence, the instant petition for review anchored on the following assigned
5. Enjoining defendants spouses Beder Morandarte and Marina errors:
Febrera from exercising any act of ownership or possession of the
subject property;
A.

6. Dismissing the Cross-Claim of defendant Development Bank of


RESPONDENT COURT COMMITTED A GRAVE ERROR OF
the Philippines against Cross Defendants Spouses Beder
LAW IN APPLYING ARTICLE 462 OF THE CIVIL CODE TO
Morandarte and Marina Febrera, for being premature, but ordering
THIS CASE WHEN THE CHANGE IN COURSE OF THE OLD
the latter cross defendants to give a substitute security in favor of
MIPUTAK RIVER WAS NOT DUE TO NATURAL CAUSES
DBP as indicated in this decision;
BUT WAS ACCIDENTAL.

7. Declaring valid and enforceable the Lease Agreement for a


B.
period of twenty five years over the fishpond area of Intervenors;

ASSUMING ARGUENDO THAT THE CHANGE OF COURSE


8. Denying Intervenors' prayer for damages against defendants-
OF THE OLD MIPUTAK RIVER WAS DUE TO NATURAL
spouses Morandarte; and
CAUSE ONLY A PORTION OF THE SUBJECT PROPERTY OF
PETITIONERS WAS AFFECTED THEREBY SO THAT THE
9. Dismissing, for lack of merit, the counterclaim and prayer for TITLE OF PETITIONERS TO THE REMAINING PORTION IS
damages of defendants spouses Morandarte against the VALID AND CANNOT BE NULLIFIED AS IT REMAINED
Intervenors. PRIVATE PROPERTY.

No costs against defendant-spouses Morandarte. C.

IT IS SO ORDERED.20 RESPONDENT COURT GRAVELY ERRED IN ORDERING


THE REVERSION OF LOT 7, CSD-09-05-00078-D TO THE
PUBLIC DOMAIN.
Dissatisfied, the Morandarte spouses appealed to the CA. 21 In a Decision dated
August 23, 1995, the CA affirmed the decision of the RTC, 22 ratiocinating, as
follows: D.

The present controversial Miputak River used to occupy the area RESPONDENT COURT GRAVELY ERRED IN NOT
adjacent to the northern and western boundaries of Lot No. 6781 DECLARING AS NULL AND VOID THE LEASE
Cad-85 (Exh. J). As time passed, it changed its course and AGREEMENT EXECUTED IN FAVOR OF INTERVENORS.
occupies (sic) Lot No. 6781 Cad-85 (identical to Lot 7, Exh. H).
This will explain Beder Morandarte's argument that when he
E.
applied for the Sales Patent Lot 7 (identical to Lot 6781), the
original technical description did not show the Miputak River. But
it is inescapable though, that while originally, Lot 6781 is not RESPONDENT COURT GRAVELY ERRED IN NOT
occupied by the river, at the time that the Sales Application was DISMISSING THE COMPLAINT CONSIDERING THAT NO
filed by Beder Morandarte, the Miputak River was actually FRAUD OR MISREPRESENTATION WAS EMPLOYED BY
occupying said Lot 6781 or Lot 7 covered by his Sales Application THE SPOUSES MORANDARTE IN OBTAINING THE TITLE.26
and the titles sought to be annulled in this case.
The Morandarte spouses emphatically argue that the CA failed to take into
Rivers and their natural beds are undoubtedly properties of public consideration the true state of the present Miputak River in relation to Lot 7.
dominion (Art. 502 par. 1, Civil Code of the Philippines). Whether They contend that the Miputak River changed its course due to the closure of
navigable or not, rivers belong to the public and cannot be acquired the river bed through the construction of dikes by the Lacaya spouses, forcing
by prescription (Com vs. Meneses, 38 O.G. 2839, Paras, Civil the river to be diverted into Lot 6781-B. Thus, they submit that the applicable
Code, p. 328, Vol. II, 12th Edition). In fact, a stream located within provision is Article 77 of the Law of Waters, which provides that "[l]ands
private land is still property of public dominion, even if the accidentally inundated by the waters of lakes, or by creeks, rivers and other
Torrens Title of the land does not show the existence of said streams shall continue to be the property of their respective owners."

60
Furthermore, they staunchly claim that the Miputak River does not actually 1038 but the BOL did not approve the plan because a 1916 survey did not so
correspond to Lot 7. The Miputak River occupies only 12,162 square meters indicate the existence of a river traversing Lot 1038 such that Morandarte was
of Lot 7 which has an area of 45,499 square meters. Also, they insist that the directed to submit an amended plan deleting the existence of the Miputak
lower courts made capital, albeit erroneously, of their agreement to a River. This mothered the subsequent error of the BOL of approving the
reversion. The reversion agreed to refers only to the 12,162 square meters amended plan as CAS-09-05-000078-D.
portion covered by the Miputak River, which should be voided, while the
portion unaffected by the Miputak River is valid and their title thereto should
This error could have been discovered through a thorough ocular inspection of
be maintained and respected.
the property claimed under the free patent application. However, Aurelio F.
Bureros, Hearing Officer I of the BOL, surprisingly failed to notice the
Moreover, they vigorously contend that the CA erred in sustaining the validity existence of the river traversing Lot 1038 in the field investigation he
of fishpond rights of the Lacaya spouses. They aver that the Lacaya spouses conducted on January 10, 1976.38
violated the terms of the lease agreement by constructing dikes for the
fishponds which caused the Miputak River to traverse the property of the
Neither did Bureros note the 13,339 square meter portion already covered by
Morandarte spouses.
an existing fishpond lease agreement granted by the BOF in favor of Felipe B.
Lacaya, the predecessor-in-interest of the Lacaya spouses.39
Prefatorily, it must be stated that in petitions for review on certiorari, only
questions of law may be raised by the parties and passed upon by this
The records reveal that as early as 1948, 4.6784 hectares40 of the public land
Court.27 Factual findings of the trial court, when adopted and confirmed by the
have been leased for fishpond purposes. Aguido S. Realiza was the initial
CA, are binding and conclusive upon the Supreme Court and generally will
grantee of a fishpond lease agreement. 41 Amor A. Realiza, Aguido's son,
not be reviewed on appeal.28 Inquiry upon the veracity of the CA's factual
acquired his fishpond permit on May 29, 1953. 42 Amor A. Realiza transferred
findings and conclusion is not the function of the Supreme Court for the Court
his fishpond rights to Felipe B. Lacaya on May 14, 1956. 43 By 1960, the public
is not a trier of facts.29
land leased for fishpond purposes had increased to 5.0335 hectares. 44 Felipe B.
Lacaya transferred his fishpond rights to Virgilio B. Lacaya on October 25,
While this Court has recognized several exceptions to this rule, to wit: (1) 1977.45 Thus, the fishpond rights have been in existence since 1948, prior to
when the findings are grounded entirely on speculation, surmises, or the 1972 free patent application of Morandarte.
conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment
Regardless of the foregoing, Aurelio F. Bureros, concluded that Morandarte is
is based on a misapprehension of facts; (5) when the findings of facts are
a qualified applicant and recommended that a free patent be granted to him.
conflicting; (6) when in making its findings, the CA went beyond the issues of
This error culminated in the erroneous grant of a free patent on July 27, 1976
the case, or its findings are contrary to the admissions of both the appellant
covering the Miputak River and land subject of the fishpond rights of Felipe
and the appellee; (7) when the findings are contrary to the trial court; (8) when
B. Lacaya.46
the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent; (10) Be that as it may, the mistake or error of the officials or agents of the BOL in
when the findings of fact are premised on the supposed absence of evidence this regard cannot be invoked against the government with regard to property
and contradicted by the evidence on record; and (11) when the CA manifestly of the public domain. It has been said that the State cannot be estopped by the
overlooked certain relevant facts not disputed by the parties, which, if omission, mistake or error of its officials or agents.47
properly considered, would justify a different conclusion,30 none of these
exceptions find application here.
It is well-recognized that if a person obtains a title under the Public Land Act
which includes, by oversight, lands which cannot be registered under the
A complaint for reversion involves a serious controversy, involving a question Torrens system, or when the Director of Lands did not have jurisdiction over
of fraud and misrepresentation committed against the government and it seeks the same because it is a public domain, the grantee does not, by virtue of the
the return of the disputed portion of the public domain. It seeks to cancel the said certificate of title alone, become the owner of the land or property
original certificate of registration, and nullify the original certificate of title, illegally included.48 Otherwise stated, property of the public domain is
including the transfer certificate of title of the successors-in-interest because incapable of registration and its inclusion in a title nullifies that title. 49
the same were all procured through fraud and misrepresentation.31
The present controversy involves a portion of the public domain that was
The State, as the party alleging that fraud and misrepresentation attended the merely erroneously included in the free patent. A different rule would apply
application for free patent, bears the burden of proof. The circumstances where fraud is convincingly shown. The absence of clear evidence of fraud
evidencing fraud and misrepresentation are as varied as the people who will not invalidate the entire title of the Morandarte spouses.
perpetrate it in each case. It assumes different shapes and forms and may be
committed in as many different ways.32 Therefore, fraud and misrepresentation
Accordingly, the 12,162-square meter portion traversed by the Miputak River
are never presumed but must be proved by clear and convincing
and the 13,339-square meter portion covered by the fishpond lease agreement
evidence;33 mere preponderance of evidence not even being adequate.34
of the Lacaya spouses which were erroneously included in Free Patent No.
(IX-8) 785 and Original Certificate of Title No. P-21972 should be
In this case, the State failed to prove that fraud and misrepresentation attended reconveyed back to the State.
the application for free patent. The RTC, in fact, recognized that no fraud
attended the application for free patent 35 but declared reversion based on the
The Morandarte spouses cannot seek refuge in their claim that Antonio A.
judicial admission of the Morandarte spouses that reversion is warranted due
Morandarte, their predecessor-in-interest, was already the owner of that
to the inalienability of the Miputak River. Ordinarily, a judicial admission
portion of Lot 1038 when the fishpond application of Aguido S. Realiza was
requires no proof and a party is precluded from denying it except when it is
approved in 1948 because Lot 1038 was still part of the public domain then. It
shown that such admission was made through palpable mistake or that no such
was only in 1972, through Forestry Administrative Order No. 4-1257, which
admission was made.36 In this case, the exception finds application since the
was approved August 14, 1972, when Lot 1038 was declared alienable or
records lay bare that such admission was made through mistake and not in the
disposable property of the State.50
context it was considered. As reflected in the Order dated May 25, 1998, 37 the
Morandarte spouses essentially agreed only to a reconveyance of the portion
covering the Miputak River. Undoubtedly, such acquiescence to return the It is a settled rule that unless a public land is shown to have been reclassified
portion covering the Miputak River is not, and cannot be considered, an as alienable or actually alienated by the State to a private person, that piece of
admission that fraud and misrepresentation attended the application for free land remains part of the public domain. Hence, Antonio A. Morandarte's
patent. This fact, standing alone, does not prove fraud and misrepresentation. occupation thereof, however long, cannot ripen into private ownership.51

Besides, it is undisputed that the original survey plan submitted by The Morandarte spouses also unsuccessfully harp on the inapplicability of
Morandarte to the BOL reflected the true state of the Miputak River in Lot Article 462 of the Civil Code by claiming that the change of course of the
61
Miputak River was due to a man-made cause and not by natural means. They portions of this strip of public land to enable the people to have access to the
offered no iota of evidence to substantiate this claim, other than the bare highway.
testimony of Beder Morandarte. Neither is there proof that the movement of
the river was caused by accident or calamity, such as a typhoon, and not by
Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento and
the natural movements thereof. General statements, which are mere
her husband Beth Del Mundo, respondents herein, had a building constructed
conclusions of law and not proofs, are unavailing and cannot suffice.
on a portion of said government land. In November that same year, a part
thereof was occupied by Andok’s Litson Corporation and Marites’ Carinderia,
Besides, at the time of the filing of the application for free patent in 1972, a also impleaded as respondents.
portion of the Miputak River was already in its present course, traversing Lot
1038, particularly Lot 7 of the amended plan submitted by Morandarte.
In 1993, by means of a Deed of Exchange of Real Property, petitioner
acquired a 74.30 square meter portion of the same area owned by the
We need not delve on the question of whether the Lacaya spouses violated the government. The property was registered in his name as T.C.T. No. 74430 in
terms of the fishpond lease agreement. It is not material in this case in the the Registry of Deeds of Parañaque City.
sense that it was not made an issue by the parties. Neither is there evidence to
corroborate the bare allegation of petitioners that the Lacaya spouses
In 1995, petitioner filed with the RTC, Branch 259, Parañaque City, a
constructed dikes for the fishponds which caused the Miputak River to
complaint for accion publiciana against respondents, docketed as Civil Case
traverse Lot 7. What is significant here is the established fact that there was an
No. 95-044. He alleged inter alia that respondents’ structures on the
existing fishpond lease agreement between Felipe Lacaya and the Bureau of
government land closed his "right of way" to the Ninoy Aquino Avenue; and
Fisheries at the time of Morandarte's application for free patent; in effect,
encroached on a portion of his lot covered by T.C.T. No. 74430.
proving that the area covering the fishpond belongs to the Government and
petitioners have no rights thereto.
Respondents, in their answer, specifically denied petitioner’s allegations,
claiming that they have been issued licenses and permits by Parañaque City to
In closing, we cannot but decry the carelessness of the BOL in having issued
construct their buildings on the area; and that petitioner has no right over the
the Free Patent in Morandarte's favor which covered the Miputak River and
subject property as it belongs to the government.
the fishpond rights of Felipe B. Lacaya. Surely, a more diligent search into
their records and thorough ocular inspection of Lot 7 would have revealed the
presence of the Miputak River traversing therein and an existing fishpond After trial, the RTC rendered its Decision, the dispositive portion of which
right thereon. Had more vigilance been exercised by the BOL, the government reads:
agency entrusted specifically with the task of administering and disposing of
public lands, the present litigation could have been averted.
"WHEREFORE, premises considered, judgment is hereby
rendered:
WHEREFORE, the petition is partly GRANTED. The assailed Decision of
the Court of Appeals, dated August 23, 1995, in CA G.R. No. 36258 is
1. Declaring the defendants to have a better right of
REVERSED insofar only as it affirmed the nullity of Free Patent No. (IX-8)
possession over the subject land except the portion
785 and Original Certificate of Title No. P-21972, in the name of petitioner
thereof covered by Transfer Certificate of Title No.
Beder Morandarte. In its stead, petitioners Spouses Beder Morandarte and
74430 of the Register of Deeds of Parañaque;
Marina Febrera are directed to reconvey to the respondent Republic of the
Philippines within thirty (30) days from the finality of this Decision the
12,162-square meter portion traversed by the Miputak River and the 13,339- 2. Ordering the defendants to vacate the portion of the
square meter portion covered by the fishpond lease agreement of the Lacaya subject premises described in Transfer Certificate of
spouses. No pronouncement as to costs. Title No. 74430 and gives its possession to plaintiff;
and
SO ORDERED.
3. Dismissing the claim for damages of the plaintiff
against the defendants, and likewise dismissing the
G.R. No. 136438             November 11, 2004
claim for attorney’s fees of the latter against the former.
TEOFILO C. VILLARICO, petitioner,
vs.
VIVENCIO SARMIENTO, SPOUSES BESSIE SARMIENTO-DEL Without pronouncement as to costs.
MUNDO & BETH DEL MUNDO, ANDOK’S LITSON CORPORATION
and MARITES’ CARINDERIA, respondents.
SO ORDERED."3

SANDOVAL-GUTIERREZ, J.:
The trial court found that petitioner has never been in possession of any
portion of the public land in question. On the contrary, the defendants are the
Before us is a petition for review on certiorari of the Decision 1 of the Court of ones who have been in actual possession of the area. According to the trial
Appeals dated December 7, 1998 in CA-G.R. CV No. 54883, affirming in toto court, petitioner was not deprived of his "right of way" as he could use the
the Decision2 of the Regional Trial Court (RTC) of Parañaque City, Branch Kapitan Tinoy Street as passageway to the highway.
259, dated November 14, 1996, in Civil Case No. 95-044.
On appeal by petitioner, the Court of Appeals issued its Decision affirming
The facts of this case, as gleaned from the findings of the Court of Appeals, the trial court’s Decision in toto, thus:
are:
"WHEREFORE, the judgment hereby appealed from is hereby
Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta, Parañaque AFFIRMED in toto, with costs against the plaintiff-appellant.
City, Metro Manila with an area of sixty-six (66) square meters and covered
by Transfer Certificate of Title (T.C.T.) No. 95453 issued by the Registry of
Deeds, same city. SO ORDERED."4

Petitioner’s lot is separated from the Ninoy Aquino Avenue (highway) by a In this petition, petitioner ascribes to the Court of Appeals the following
strip of land belonging to the government. As this highway was elevated by assignments of error:
four (4) meters and therefore higher than the adjoining areas, the Department
of Public Works and Highways (DPWH) constructed stairways at several "I

62
THE FINDINGS OF FACT OF THE HON. COURT OF attachment and execution; and (4) cannot be burdened by any voluntary
APPEALS CONTAINED A CONCLUSION WITHOUT easement.7
CITATION OF SPECIFIC EVIDENCE ON WHICH THE SAME
WAS BASED.
Considering that the lot on which the stairways were constructed is a property
of public dominion, it can not be burdened by a voluntary easement of right of
II way in favor of herein petitioner. In fact, its use by the public is by mere
tolerance of the government through the DPWH. Petitioner cannot appropriate
it for himself. Verily, he can not claim any right of possession over it. This is
THE HON. COURT OF APPEALS ERRED IN CONSIDERING
clear from Article 530 of the Civil Code which provides:
THAT THE ONLY ISSUE IN THIS CASE IS WHETHER OR
NOT THE PLAINTIFF-APPELLANT HAS ACQUIRED A
RIGHT OF WAY OVER THE LAND OF THE GOVERNMENT "ART. 530. Only things and rights which are susceptible of being
WHICH IS BETWEEN HIS PROPERTY AND THE NINOY appropriated may be the object of possession."
AQUINO AVENUE.
Accordingly, both the trial court and the Court of Appeals erred in ruling that
III respondents have better right of possession over the subject lot.

THE HON. COURT OF APPEALS ERRED IN CONCLUDING However, the trial court and the Court of Appeals found that defendants’
THAT ACCION PUBLICIANA IS NOT THE PROPER buildings were constructed on the portion of the same lot now covered by
REMEDY IN THE CASE AT BAR. T.C.T. No. 74430 in petitioner’s name. Being its owner, he is entitled to its
possession.
IV
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of
Appeals dated December 7, 1998 in CA-G.R. CV No. 54883 is AFFIRMED
THE HON. COURT OF APPEALS ERRED IN CONCLUDING
with MODIFICATION in the sense that neither petitioner nor respondents
THAT THE EXISTENCE OF THE PLAINTIFF-APPELLANT’S
have a right of possession over the disputed lot where the stairways were built
RIGHT OF WAY DOES NOT CARRY POSSESSION OVER
as it is a property of public dominion. Costs against petitioner.
THE SAME.

SO ORDERED.
V

G.R. No. 158687             January 27, 2006


THE HON. COURT OF APPEALS ERRED IN NOT
FRISCO F. DOMALSIN, Petitioner,
RESOLVING THE ISSUE OF WHO HAS THE BETTER RIGHT
vs.
OF POSSESSION OVER THE SUBJECT LAND BETWEEN
SPOUSES JUANITO VALENCIANO and AMALIA
THE PLAINTIFF-APPELLANT AND THE DEFENDANT-
VALENCIANO, Respondents.
APPELLEES."5

DECISION
In their comment, respondents maintain that the Court of Appeals did not err
in ruling that petitioner’s action for accion publiciana is not the proper remedy
in asserting his "right of way" on a lot owned by the government. CHICO-NAZARIO, J.:

Here, petitioner claims that respondents, by constructing their buildings on the Before Us is a petition for review which seeks to set aside the decision 1 of the
lot in question, have deprived him of his "right of way" and his right of Court of Appeals in CA-G.R. SP No. 69415 dated 20 August 2002 which
possession over a considerable portion of the same lot, which portion is reversed and set aside the decision 2 of Branch 63 of the Regional Trial Court
covered by his T.C.T. No. 74430 he acquired by means of exchange of real (RTC) of La Trinidad, Benguet, in Civil Case No. 01-CV-1582(150) dated 23
property. January 2002, which affirmed the decision3 of the Municipal Circuit Trial
Court (MCTC) of Tuba-Sablan, Tuba, Benguet, in Civil Case No. 150 dated
20 November 2000, declaring petitioner Frisco F. Domalsin the actual
It is not disputed that the lot on which petitioner’s alleged "right of way"
possessor of the lot in dispute and ordering, inter alia, respondent spouses
exists belongs to the state or property of public dominion. Property of public
Juanito and Amalia Valenciano to vacate and deliver the physical possession
dominion is defined by Article 420 of the Civil Code as follows:
thereof to the former, and its Resolution 4 dated 20 May 2003 denying
petitioner’s motion for reconsideration.
"ART. 420. The following things are property of public dominion:
The respective allegations of the parties as contained in the complaint and
(1) Those intended for public use such as roads, canals, rivers, answer are substantially summarized by the Court of Appeals as follows:
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and other of similar character.
The property subject of this action for forcible entry is a parcel of land located
at sitio Riverside, Camp 3, Tuba, Benguet. Respondent Frisco B. Domalsin
(2) Those which belong to the State, without being for public use, claims to be the lawful owner and possessor of said parcel of land since 1979
and are intended for some public service or for the development of up to the present. He declared it for taxation purposes in 1983 as (per) Tax
the national wealth." Declaration No. 9540 issued on September 12, 1983 by the Municipal
Assessor of Tuba Benguet. He allegedly introduced improvements consisting
of levelling, excavation, riprapping of the earth and a private road to the river,
Public use is "use that is not confined to privileged individuals, but is open to fruitbearing trees and other agricultural plants of economic value. He was in
the indefinite public."6 Records show that the lot on which the stairways were continuous, adverse possession and in the concept of an owner for the past
built is for the use of the people as passageway to the highway. Consequently, nineteen (19) years.
it is a property of public dominion.

On August 1, 1998, petitioners Spouses Juanito Valenciano and Amalia


Property of public dominion is outside the commerce of man and hence it: (1) Valenciano (Sps. Valenciano, for brevity) allegedly entered the premises to
cannot be alienated or leased or otherwise be the subject matter of contracts; construct a building made of cement and strong materials, without the
(2) cannot be acquired by prescription against the State; (3) is not subject to authority and consent of respondent, by means of force and strategy, and
without a building permit from the Department of Public Works and
63
Highways (DPWH, for brevity). Respondent protested and demanded that (Bureau of Mines).17 The Commercial Permit, which was renewable every
petitioners Sps. Valenciano halt construction of said building, but the latter year, was last renewed in 1987.18
refused to do so. Hence, he filed the instant case.
Based on the Deed of Waiver and Quitclaim executed by Castillo Binay-an,
Petitioners Sps. Valenciano, on the other hand, claimed that the ongoing petitioner was able to apply for, and was issued, a tax declaration over the
construction was with the consent and conformity of the DPWH and in fact land covering one hectare. Tax Declaration No. 9540 19 dated 12 September
the improvements found in the property were introduced by the residents 1983 was issued to petitioner describing the land bounded on the North by
thereof, including its first residents, William and Gloria Banuca, and not by Bued River, on the South by Kennon Road, on the East by Kennon Road, and
respondent. The premises on which petitioners Sps. Valenciano are on the West by a Creek. With the revision of the fair market value and
constructing their house were leveled after the earthquake in 1990 by the assessed value of lands, Tax Declaration No. 94-004-00327 dated 12
Banuca spouses. Petitioners Sps. Valenciano are just starting the construction November 1994 was issued to him. 20 From 1983 up to 1998, petitioner has
because the permission was only given now by Gloria Banuca.5 been regularly paying real property taxes over the land.

On 18 August 1998, petitioner filed before the MCTC of Tuba, Benguet, a Petitioner disclosed that in 1983, William Banuca applied for, and was
complaint for Forcible Entry with Prayer for Preliminary Mandatory accepted, as foreman.21 Due to the nature of his job, Banuca was permitted to
Injunction with Application for Issuance of a Temporary Restraining Order stay in the second house beside the private road.22 Banuca now lives
plus Damages.6 The complaint was amended on 27 August 1998.7 Per Order permanently in said house after petitioner gave it to him. Petitioner revealed
dated 19 August 1998, a Temporary Restraining Order (TRO) was issued that the houses his former laborers constructed were awarded to them as a
ordering respondents to desist and cease and refrain from continuing the kind gesture to them. As to the land he occupied along the Kennon Road
construction of a house on the land in question.8 where the first house was erected, he claims that same still belongs to him.
This house, which his laborers and drivers used as a resting area, was
cannibalized and leveled, and the land over which it once stood was taken
On 27 August 1998, respondent spouses Juanito and Amalia Valenciano filed
possession by respondents who are now building their house thereon.
their Answer with Opposition to the Prayer for Issuance of Writ of
Preliminary Injunction.9 On 07 September 1998, they filed an Answer to the
Amended Complaint10 to which petitioner filed a Reply.11 Gloria Banuca testified for respondents. She disclosed that it was she who
invited respondents to come and reside at Riverside, Camp 3, Tuba, Benguet.
She said she knew petitioner to be engaged in the sand and gravel business in
On 15 September 1998, the MCTC issued another TRO.12
Tuba, Benguet, from 1981 to 1985, and that the latter stopped in 1985 and
never returned to haul sand and gravel at the Bued River. She claimed she
The pre-trial order dated 6 November 1998 contained, among other things, never saw petitioner introduce any improvements on the land he claimed he
petitioner’s admission that he was temporarily not operating any business in bought from Castillo Binay-an, and that it was she and the other residents who
the area, and respondents’ admission regarding the issuance of Tax introduced the existing improvements.
Declarations on the property in dispute in petitioner’s name.13
She narrated that in 1983, she planted fruit-bearing trees in the area where
Trial ensued. Petitioner presented Mariano Suyam and Tonsing Binay-an, two respondents were constructing their house which is located along the Kennon
of his former truck drivers from 1981 to 1985 in his business of hauling sand, Road’s road-right-of-way, fronting petitioner’s property. After the earthquake
gravel and other aggregates at Riverside, Camp 3, Tuba, Benguet. of 1990, the private road constructed by petitioner became impassable and it
was she who hired the equipment used to clear the same. She even leveled the
area where respondents were building their home. Based on the ocular
Mariano Suyam testified that sometime in 1981, petitioner caused the inspection, she said this area is within the 15-meter radius from the center of
construction of a private road leading to the Bued River from Kennon Road. the road. This area, she claims, was sold to her by the Spouses Jularbal.
He added that petitioner constructed two houses, the first was located along However, the agreement between them shows that what was sold to her were
the road-right-of-way of Kennon Road where respondents are now the improvements near her house which was 40 meters down from Kennon
constructing their house, while the second was located below the private road Road and the improvements along Kennon Road.23
around 40 to 60 meters down from Kennon Road. He explained that the first
house was used for sleeping quarters and resting center for laborers, while
petitioner used the second one as his quarters. He said William Banuca was Agustin Domingo next testified for respondents. He testified that in 1986,
hired as foreman in 1983 and that the latter and his family stayed in the upon the invitation of Gloria Banuca, he transferred his residence to sitio
second house. Riverside because of its proximity to his place of work. He stayed there for
good and even buried his father near his house. He said that in 1990, the
private road constructed by petitioner was covered by boulders, soil and rocks,
Tonsing Binay-an corroborated the testimony of Suyam as regards the two and it was Mrs. Banuca who initiated the clearing of the road. Finally, he
houses constructed by petitioner and added that petitioner was the manager of declared that since 1986, he never saw petitioner introduce any improvement
Salamander Enterprises and had a concession permit from the Bureau of in the area.
Mines to haul gravel and sand.

Respondent Juanito Valenciano revealed that he is the cousin of Gloria


Petitioner testified that he is a lawyer-businessman formerly engaged in Banuca. He narrated that in 1984, he went to Riverside to see the latter whose
trucking business, hauling sand and gravel, and operated under the name husband, William Banuca, was working as foreman of petitioner. At that time,
Salamander Enterprises.14 He narrated that while he was passing Kennon the lot under litigation was still a hill. It was Gloria Banuca who leveled the
Road, he discovered that a portion of the Bued River, Camp 3, Tuba Benguet, hill and told him to construct his house there. Finding the place to be an ideal
can be a potential source of supplies for his business. Though the area was place to build his house, he paid the Banucas P10,000.00 for the
steep and deep, he scouted a place where he can construct a road from Kennon improvements.
Road to the Bued River. In the course of cleaning the area, his workers
noticed that the place had been tilled. A certain Castillo Binay-an appeared
informing him that he was the occupant of the site of the proposed private He explained that before he started building his house, he sought the
road. After agreeing on the consideration, the former executed a Deed of permission of the Benguet District Engineer, DPWH, which the latter granted.
Waiver and Quitclaim15 over the land in his favor. In August 1998, he received a notice 24 to stop and desist from continuing the
construction of a permanent one-storey house made of hollow blocks and
cement since the condition was only to utilize light materials. Thereafter, a
Thereafter, the Office of the Highway District Engineer of Baguio, Ministry letter dated 22 January 1999 was sent to him informing him that the temporary
of Public Highways (now Department of Public Works and Highways permit issued to him for the improvement/utilization of a portion of the
[DPWH]) issued a permit in favor of petitioner to extract construction national road along Kennon Road had been revoked for non-submission of the
materials at Camp 3, Tuba, Benguet,16 which was followed by the issuance on waiver as required by the Office of the District Engineer and his non-
1 October 1981 of Commercial Permit No. 147 by the Office of the Mines compliance with the condition that no permanent structures are to be
Regional Officer, Mineral Region No. 1, Bureau of Mines and Geo-Sciences

64
constructed within the road-right-of-way. He, however, denied receiving said word from the plaintiff, she unilaterally declared that the place is now
letter. abandoned as she "invited and allowed" the defendants to live and construct
their house thereat.
Juan de Vera, a retired DPWH foreman, testified last for the respondents. He
claimed he witnessed the execution of the document 25 regarding the sale by Contrary to the assertion of the appellants, there was no abandonment simply
Adriano Jularbal to Gloria Banuca of improvements found near the house of because plaintiff-appellee continuously paid the corresponding taxes due
the latter in the amount of P1,000.00. thereon and that he promptly objected to the construction of the defendants-
appellants’ house. These are clear manifestations of his intention not to
abandon the property. Sad to say though that here is a former employer. By
The MCTC found that what is being contested is the possession of a portion
passing off such property to be hers is so unkind, unfair and against social
of the road-right-of way of Kennon Road which is located in front of a parcel
order. It is very clear that the Banucas knew of the prior possession of the
of land that petitioner bought by way of Deed of Waiver and Quitclaim from
plaintiff way back then so that they themselves never personally build
Castillo Binay-an. It held that petitioner had prior material possession over the
construction over the property. If they honestly believe that they now "own"
subject land. It ruled that the destruction of his house built thereon by the
the land, why will they still have to invite other people who are not their
earthquake in 1990, and later cannibalized without being reconstructed was
relatives to settle thereat? Why the preference of strangers over relatives? The
not tantamount to abandonment of the site by the petitioner because it was
Court does not believe that they did not receive any compensation for having
destroyed by a fortuitous event which was beyond his control. It explained
"allowed" strangers, the defendants included, to settle on the land.
that his possession over the land must be recognized by respondents who
came later after the earthquake. It brushed aside respondents’ allegation that
the land in dispute was abandoned by the latter after he stopped operating his From all the foregoing, Gloria is clearly in bad faith. And her being in bad
sand and gravel business in 1985 and never returned anymore, and when the faith must be corrected and if warranted, must be meted appropriate penalty. If
house erected on it was destroyed during the 1990 earthquake, it was no the Banucas are in bad faith, then the appellants cannot have better rights
longer reconstructed and was subsequently leveled or demolished by Gloria either. The Banucas transferred nothing to them. Defendants-appellants cannot
Banuca. However, it pronounced that respondents’ action to occupy the land even be considered as builders in good faith. It must be noted that they were
was done in good faith considering that their occupation of the land was with prohibited by the plaintiff from going further but they ignored it. They shall
the assurance of the seller (Gloria Banuca) and that they were armed with the lose what was built (Art. 449, Civil Code). Again, if the Banucas believe that
permit issued by the DPWH for him to construct his house thereon. they have an action or a right to deprive the plaintiff’s possession, why did
they not invoke judicial interference as required under Art. 536 of the same
code? Nonetheless, notwithstanding the fact of leveling without the
On 20 November 2000, the MCTC came out with its decision, the decretal
knowledge of the plaintiff-appellee, the same did not affect his possession
portion of which reads:
(Art. 537, Civil Code).28

WHEREFORE PREMISES CONSIDERED, decision is hereby rendered in


Via a petition for review, respondents appealed to the Court of Appeals. The
favor of plaintiff, FRISCO DOMALSIN, and against defendants, JUANITO
Court of Appeals made a sudden turn-around and reversed the decision under
VALENCIANO and AMALIA VALENCIANO, with the following:
review. Its decision dated 20 August 2002 reads in part:

1. Order to declare the injunction permanent.


[T]here is a need to clarify a few things. What is undisputed are the identity
and nature of the property subject of the action for forcible entry. The subject
2. Order the plaintiff as the actual possessor of the lot in question. of the action concerns a portion of the road-right-of-way along Kennon Road
just above the private road constructed by respondent. The problem, however,
is that petitioners Sps. Valenciano started constructing a house on the same
3. Order the defendant(s) to vacate and deliver the physical spot where a house belonging to respondent once stood. Both parties are now
possession voluntarily of the disputed land to plaintiff within 60 asserting that they are entitled to the possession of said lot. But the decision of
days from receipt of this decision. the lower court seems to imply that respondent’s right to possess the subject
property stems from his acquisition of the one-hectare property below it. That
4. Order defendant(s) to remove his structure within from receipt is not the case.
of this decision.
We must emphasize that the subject of the deed of quitclaim and waiver of
5. Order the defendant(s) to (sic) plaintiff the amount of rights of Castillo Binay-an was not the road-right-of-way but the sloping
P10,000.00, as litigation expenses. terrain below it. This was the property acquired by the respondent to have
access to the sand and gravel on the Bued River. It did not include the road-
right-of-way. As regards Gloria Banucas’s claims, the evidence show that her
6. Order defendant(s) to pay the cost of suit26 agreement with Jularbal involved only the improvements near her residence
down the private road and not the road-right-of-way. Since the subject
Respondents appealed the decision to the RTC. 27 In affirming the decision in property is a road-right-of-way, it forms part of the public dominion. It is not
toto the RTC ratiocinated: susceptible to private acquisition or ownership. Prolonged occupation thereof,
improvements introduced thereat or payment of the realty taxes thereon will
never ripen into ownership of said parcel of land. Thus, what We have are two
It may be well to consider that even after plaintiff’s business ceased operation, parties, neither of which can be owners, only possessors of the subject
he religiously paid the taxes due thereon. property. Beyond these two, only the government has a better right to the
subject property which right it may exercise at any time. This bears
Appellant’s theory that the plaintiff-appellee abandoned the property does not emphasizing because if either party has possessory rights to the subject
sit well and finds no support in the record. Notice that since 1985 up to mid- property, it is not predicated on ownership but only on their actual possession
1990, the Banucas never laid claim over the property taking into consideration of the subject property.
that they were already residents of the place. This only goes to show that they
acknowledged and respected the prior possession of the plaintiff-appellee. xxxx
Besides, what right has Gloria to cause the leveling of the property destroying
the natural contour thereof, to presume that plaintiff-appellee abandoned it
and to invite and allow other persons to settle thereat? Absolutely none. There is no doubt that respondent had prior physical possession of the subject
Knowing fully well that the plaintiff-appellee has prior possession of the property. He entered and acquired possession of the subject property when he
property, Gloria’s actions are unjustified, to say the least. Her consummated built his house thereon. The house was destroyed during the 1990 earthquake
act of leveling the property without the knowledge of the plaintiff-appellee is and respondent did not rebuild it. The mound on which it stood was later
viewed as a test to determine whether or not the latter is still interested in the leveled by Gloria Banuca and in 1998 petitioners Sps. Valenciano began
property. From then on until 1998 (but before the construction), the Banucas construction thereat. Petitioners Sps. Valenciano claim there was
still recognize the plaintiff’s possession. But as Gloria claims to have heard no abandonment, but the lower court ruled that respondent did not abandon the
65
subject property as he continued to pay the realty taxes thereon and objected (1) Those intended for public use such as roads, canals, rivers, torrents, ports
to petitioners Sps. Valenciano’s construction. We believe, and so hold, that at and bridges constructed by the State, banks, shores, roadsteads, and other of
this point in time, it is immaterial whether or not there was abandonment by similar character.
respondent. The fact remains that Gloria Banuca took possession of the
subject property soon after the earthquake. She leveled the mound and the
(2) Those which belong to the State, without being for public use, and are
ruins of respondent’s house, yet respondent remained silent. Respondent
intended for some public service or for the development of the national
objected only after petitioners Sps. Valenciano started construction of the
wealth.
house on the subject property. Respondent cannot now interpose an action for
forcible entry against petitioners Sps. Valenciano, which he should have filed
against Gloria Banuca, petitioners Sps. Valenciano’s predecessor-in-interest. Properties of public dominion are owned by the general public.34 Public use is
But more than a year had passed and his right to do so lapsed. Thus, "use that is not confined to privileged individuals, but is open to the indefinite
respondent’s prior possession is material only as against Gloria Banuca and public."35 As the land in controversy is a portion of Kennon Road which is for
only within a period of one year from the time she wrested possession of the the use of the people, there can be no dispute that same is part of public
property from respondent. dominion. This being the case, the parties cannot appropriate the land for
themselves. Thus, they cannot claim any right of possession over it. This is
clear from Article 530 of the Civil Code which provides:
We view with distate Gloria Banuca’s ingratitude toward her husband’s
former employer. Her actions smack of the proverbial hand being offered in
aid but the person to whom it is offered would rather have the whole arm ART. 530. Only things and rights which are susceptible of being appropriated
instead. This is an instance where it is the employees who commit injustice may be the object of possession.
against their employer. Nonetheless, petitioners Sps. Valenciano should not
suffer because of Gloria Banuca’s ingratitude for the former came across the
Notwithstanding the foregoing, it is proper to discuss the position of the Court
property in good faith.
of Appeals for comprehensive understanding of the facts and the law
involved.
But respondent is also reminded that he only has himself to blame. His failure
to assert his right for an unreasonable and unexplained length of time allowed
Petitioner maintains that the Court of Appeals erred when it ruled that he
Gloria Banuca to wrest possession from him. Especially in this case where
abandoned the land being disputed contrary to the rulings of the MCTC and
they do not and cannot own the subject property, actual possession becomes
RTC. The MCTC found there was no abandonment of the land because the
particularly important.29
house erected thereon was destroyed by a fortuitous event (earthquake), while
the RTC ruled there was no abandonment because petitioner paid taxes due on
The case was disposed as follows: the land and that he promptly objected to the construction of respondents’
house which are clear manifestations of his intention not to abandon the
property.
WHEREFORE, in view of the foregoing, the petition is GRANTED and the
decision of the Municipal Circuit Trial Court of tuba-Sablan dated November
20, 2000 as affirmed by the Regional Trial Court on January 23, 2002 is A reading of the decision of the Court of Appeals shows that it did not reverse
hereby REVERSED and SET ASIDE.30 the two lower courts on the issue of abandonment. It merely declared that such
issue is not material in the resolution of the case at bar. It faulted petitioner for
not asserting his right for a long time allowing Gloria Banuca to wrest the
The Motion for Reconsideration filed by petitioner was denied in a
possession of the land in question from petitioner by leveling the house he
resolution31 dated 20 May 2003.
built thereon and pronounced that actual possession becomes important in a
case where parties do not and cannot own the land in question.
Petitioner is now before us seeking redress. He assigns the following as the
errors committed by the Court of Appeals:
From the foregoing it appears that the Court of Appeals did not give weight or
importance to the fact that petitioner had prior physical possession over the
I. subject land. It anchored its decision on the fact that the parties do not and
cannot own the land and that respondents now have actual possession over it.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PRIVATE RESPONDENT (NOW PETITIONER) FRISCO DOMALSIN Ejectment proceedings are summary proceedings intended to provide an
ABANDONED THE PROPERTY SUBJECT OF THE LITIGATION. expeditious means of protecting actual possession or right to possession of
property. Title is not involved. The sole issue to be resolved is the question as
to who is entitled to the physical or material possession of the premises or
II.
possession de facto.36

THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND


The Court of Appeals erred when it preferred the present and actual
SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT
possession of respondents vis-à-vis the prior possession of petitioner on the
OF LA TRINIDAD, BENGUET, BRANCH 63 WHICH AFFIRMED THE
ground that the parties do not and cannot own the lot in question. Regardless
DECISION OF THE MUNICIPAL CIRCUIT TRIAL COURT OF TUBA-
of the actual condition of the title to the property, the party in peaceable, quiet
SABLAN.
possession shall not be thrown out by a strong hand, violence or terror.
Neither is the unlawful withholding of property allowed. Courts will always
At the outset, it must be made clear that the property subject of this case is a uphold respect for prior possession. Thus, a party who can prove prior
portion of the road-right-of way of Kennon Road which is located in front of a possession can recover such possession even against the owner himself.
parcel of land that petitioner bought by way of Deed of Waiver and Quitclaim Whatever may be the character of his possession, if he has in his favor prior
from Castillo Binay-an.32 The admission33 of petitioner in his Amended possession in time, he has the security that entitles him to remain on the
Complaint that respondents started constructing a building within the Kennon property until a person with a better right lawfully ejects him.37
Road road-right-of-way belies his claim that the lot in question is his.
The fact that the parties do not and cannot own the property under litigation
In light of this exposition, it is clear that neither the petitioner nor the does not mean that the issue to be resolved is no longer priority of possession.
respondents can own nor possess the subject property the same being part of The determining factor for one to be entitled to possession will be prior
the public dominion. Property of public dominion is defined by Article 420 of physical possession and not actual physical possession. Since title is never in
the Civil Code as follows: issue in a forcible entry case, the Court of Appeals should have based its
decision on who had prior physical possession. The main thing to be proven in
an action for forcible entry is prior possession and that same was lost through
ART. 420. The following things are property of public dominion:

66
force, intimidation, threat, strategy and stealth, so that it behooves the court to As regards the timeliness of the filing of the case for forcible entry, we find
restore possession regardless of title or ownership.38 that same was filed within the one-year prescriptive period. We have ruled
that where forcible entry was made clandestinely, the one-year prescriptive
period should be counted from the time the person deprived of possession
Inasmuch as prior physical possession must be respected, the Court of
demanded that the deforciant desist from such dispossession when the former
Appeals should have ruled squarely on the issue of abandonment because it
learned thereof.47 As alleged by petitioner in the Amended Complaint, he was
gave precedence to the actual present possession of respondents. If, indeed,
deprived of his possession over the land by force, strategy and stealth.
there was abandonment of the land under consideration by petitioner, only
Considering that one of the means employed was stealth because the intrusion
then should respondents be given the possession of the same since
was done by respondents without his knowledge and consent, the one-year
abandonment is one way by which a possessor may lose his possession. 39
period should be counted from the time he made the demand to respondents to
vacate the land upon learning of such dispossession. The record shows that
Abandonment of a thing is the voluntary renunciation of all rights which a upon being informed that respondents were constructing a building in the
person may have in a thing, with the intent to lose such thing. 40 A thing is subject land sometime in the first week of August 1998, petitioner
considered abandoned and possession thereof lost if the spes recuperandi (the immediately protested and advised the former to stop; but to no avail. The
hope of recovery) is gone and the animus revertendi (the intention of one-year period within which to file the forcible entry case had not yet expired
returning) is finally given up.41 when the ejectment suit was filed on 18 August 1998 with the MCTC.

In the case before us, we find that petitioner never abandoned the subject land. Despite the foregoing findings, this Court finds that the MCTC and the RTC,
His opposition to the construction of respondents’ house upon learning of the as well as the Court of Appeals, to be in error when they respectively declared
same and the subsequent filing of the instant case are clear indicia of non- that petitioner and respondents to be entitled to the possession of the land in
abandonment; otherwise, he could have just allowed the latter to continue with dispute. The parties should not be permitted to take possession of the land,
the construction. Moreover, the fact that the house petitioner built was much more, claim ownership thereof as said lot is part of the public dominion.
destroyed by the earthquake in 1990, was never rebuilt nor repaired and that
same was leveled to the ground by Gloria Banuca do not signify
WHEREFORE, the foregoing considered, the instant petition is hereby
abandonment. Although his house was damaged by the earthquake, Gloria
PARTIALLY GRANTED. Nonetheless, there being a finding that the subject
Banuca, the person who supposedly demolished said house, had no right to do
property is a part of the public dominion, of which neither party is entitled to
the same. Her act of removing the house and depriving petitioner of
own nor possess, the decisions of the Court of Appeals dated 20 August 2002,
possession of the land was an act of forcible entry. The entry of respondents in
the Regional Trial Court of La Trinidad, Benguet, dated 23 January 2002, and
1998 was likewise an act of forcible entry.
the Municipal Circuit Trial Court of Tuba-Sablan, Tuba, Benguet, dated 20
November 2000 are SET ASIDE. Respondents Juanito and Amalia
The next question is: Was the action filed the correct one and was it timely Valenciano are ordered to remove their structure on the subject land within
filed? sixty (60) days from receipt of this decision, and to vacate and deliver the
physical possession thereof to the Office of the District Engineer, Benguet
Engineering District, Department of Public Works and Highways.
Well-settled is the rule that what determines the nature of the action as well as
the court which has jurisdiction over the case are the allegations in the
complaint.42 In actions for forcible entry, the law tells us that two allegations SO ORDERED.
are mandatory for the municipal court to acquire jurisdiction: First, the
plaintiff must allege prior physical possession of the property. Second, he
G.R. No. 155650             July 20, 2006
must also allege that he was deprived of his possession by any of the means
provided for in Section 1, Rule 70 of the Rules of Court. 43 To effect the
ejectment of an occupant or deforciant on the land, the complaint should MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,
embody such a statement of facts as to bring the party clearly within the class vs.
of cases for which the statutes provide a remedy, as these proceedings are COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF
summary in nature. The complaint must show enough on its face to give the PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG PARAÑAQUE,
court jurisdiction without resort to parol evidence.44 CITY ASSESSOR OF PARAÑAQUE, and CITY TREASURER OF
PARAÑAQUE, respondents.
A look at the Amended Complaint filed by petitioner clearly shows a case for
forcible entry. Petitioner alleged therein that he has been in possession of the DECISION
subject land for the last nineteen years and that respondents, in the first week
of August 1998, without his permission and consent, entered the land by
CARPIO, J.:
means of force, strategy and stealth and started the construction of a building
thereon; and upon being informed thereof, he requested them to stop their
construction but respondents refused to vacate the land forcing him to file the The Antecedents
instant case to recover possession thereof.
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
The Court of Appeals pronounced that petitioner cannot interpose an action Aquino International Airport (NAIA) Complex in Parañaque City under
for forcible entry against respondents and that the same should have been filed Executive Order No. 903, otherwise known as the Revised Charter of the
against Gloria Banuca. It added that the right to file against the latter had Manila International Airport Authority ("MIAA Charter"). Executive Order
already lapsed because more than a year had passed by from the time she No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos.
wrestled possession of the property from the petitioner. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA
Charter.
We find such pronouncement to be flawed. An action of forcible entry and
detainer may be maintained only against one in possession at the As operator of the international airport, MIAA administers the land,
commencement of the action, and not against one who does not in fact hold improvements and equipment within the NAIA Complex. The MIAA Charter
the land.45 Under Section 1,46 Rule 70 of the Rules of Court, the action may be transferred to MIAA approximately 600 hectares of land, 3 including the
filed against persons unlawfully withholding or depriving possession or any runways and buildings ("Airport Lands and Buildings") then under the Bureau
person claiming under them. Considering that respondents are the ones in of Air Transportation.4 The MIAA Charter further provides that no portion of
present actual possession and are depriving petitioner of the possession of the the land transferred to MIAA shall be disposed of through sale or any other
land in question, it is proper that they be the ones to be named defendants in mode unless specifically approved by the President of the Philippines.5
the case. The fact that Gloria Banuca was supposedly the one who first
committed forcible entry when she allegedly demolished the house of
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC)
petitioner does not make her the proper party to be sued because she is no
issued Opinion No. 061. The OGCC opined that the Local Government Code
longer in possession or control of the land in controversy.
of 1991 withdrew the exemption from real estate tax granted to MIAA under
67
Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent benefit of the general public. Since the Airport Lands and Buildings are
City of Parañaque to pay the real estate tax imposed by the City. MIAA then devoted to public use and public service, the ownership of these properties
paid some of the real estate tax already due. remains with the State. The Airport Lands and Buildings are thus inalienable
and are not subject to real estate tax by local governments.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax
Delinquency from the City of Parañaque for the taxable years 1992 to 2001. MIAA also points out that Section 21 of the MIAA Charter specifically
MIAA's real estate tax delinquency is broken down as follows: exempts MIAA from the payment of real estate tax. MIAA insists that it is
also exempt from real estate tax under Section 234 of the Local Government
Code because the Airport Lands and Buildings are owned by the Republic. To
On 17 July 2001, the City of Parañaque, through its City Treasurer, issued
justify the exemption, MIAA invokes the principle that the government cannot
notices of levy and warrants of levy on the Airport Lands and Buildings. The
tax itself. MIAA points out that the reason for tax exemption of public
Mayor of the City of Parañaque threatened to sell at public auction the Airport
property is that its taxation would not inure to any public advantage, since in
Lands and Buildings should MIAA fail to pay the real estate tax delinquency.
such a case the tax debtor is also the tax creditor.
MIAA thus sought a clarification of OGCC Opinion No. 061.

Respondents invoke Section 193 of the Local Government Code,


On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC
which expressly withdrew the tax exemption privileges of "government-
Opinion No. 061. The OGCC pointed out that Section 206 of the Local
owned and-controlled corporations" upon the effectivity of the Local
Government Code requires persons exempt from real estate tax to show proof
Government Code. Respondents also argue that a basic rule of statutory
of exemption. The OGCC opined that Section 21 of the MIAA Charter is the
construction is that the express mention of one person, thing, or act excludes
proof that MIAA is exempt from real estate tax.
all others. An international airport is not among the exceptions mentioned in
Section 193 of the Local Government Code. Thus, respondents assert that
On 1 October 2001, MIAA filed with the Court of Appeals an original petition MIAA cannot claim that the Airport Lands and Buildings are exempt from
for prohibition and injunction, with prayer for preliminary injunction or real estate tax.
temporary restraining order. The petition sought to restrain the City of
Parañaque from imposing real estate tax on, levying against, and auctioning
Respondents also cite the ruling of this Court in Mactan International
for public sale the Airport Lands and Buildings. The petition was docketed as
Airport v. Marcos8 where we held that the Local Government Code has
CA-G.R. SP No. 66878.
withdrawn the exemption from real estate tax granted to international airports.
Respondents further argue that since MIAA has already paid some of the real
On 5 October 2001, the Court of Appeals dismissed the petition because estate tax assessments, it is now estopped from claiming that the Airport
MIAA filed it beyond the 60-day reglementary period. The Court of Appeals Lands and Buildings are exempt from real estate tax.
also denied on 27 September 2002 MIAA's motion for reconsideration and
supplemental motion for reconsideration. Hence, MIAA filed on 5 December
The Issue
2002 the present petition for review.7

This petition raises the threshold issue of whether the Airport Lands and
Meanwhile, in January 2003, the City of Parañaque posted notices of auction
Buildings of MIAA are exempt from real estate tax under existing laws. If so
sale at the Barangay Halls of Barangays Vitalez, Sto. Niño, and Tambo,
exempt, then the real estate tax assessments issued by the City of Parañaque,
Parañaque City; in the public market of Barangay La Huerta; and in the main
and all proceedings taken pursuant to such assessments, are void. In such
lobby of the Parañaque City Hall. The City of Parañaque published the notices
event, the other issues raised in this petition become moot.
in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a
newspaper of general circulation in the Philippines. The notices announced
the public auction sale of the Airport Lands and Buildings to the highest The Court's Ruling
bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall
Building of Parañaque City.
We rule that MIAA's Airport Lands and Buildings are exempt from real estate
tax imposed by local governments.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA
filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the
First, MIAA is not a government-owned or controlled corporation but
Issuance of a Temporary Restraining Order. The motion sought to restrain
an instrumentality of the National Government and thus exempt from local
respondents — the City of Parañaque, City Mayor of Parañaque, Sangguniang
taxation. Second, the real properties of MIAA are owned by the Republic of
Panglungsod ng Parañaque, City Treasurer of Parañaque, and the City
the Philippines and thus exempt from real estate tax.
Assessor of Parañaque ("respondents") — from auctioning the Airport Lands
and Buildings.
1. MIAA is Not a Government-Owned or Controlled Corporation
On 7 February 2003, this Court issued a temporary restraining order (TRO)
effective immediately. The Court ordered respondents to cease and desist Respondents argue that MIAA, being a government-owned or controlled
from selling at public auction the Airport Lands and Buildings. Respondents corporation, is not exempt from real estate tax. Respondents claim that the
received the TRO on the same day that the Court issued it. However, deletion of the phrase "any government-owned or controlled so exempt by its
respondents received the TRO only at 1:25 p.m. or three hours after the charter" in Section 234(e) of the Local Government Code withdrew the real
conclusion of the public auction. estate tax exemption of government-owned or controlled corporations. The
deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code
enumerating the entities exempt from real estate tax.
On 10 February 2003, this Court issued a Resolution confirming nunc pro
tunc the TRO.
There is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax. However, MIAA is not a government-owned or
On 29 March 2005, the Court heard the parties in oral arguments. In
controlled corporation. Section 2(13) of the Introductory Provisions of the
compliance with the directive issued during the hearing, MIAA, respondent
Administrative Code of 1987 defines a government-owned or controlled
City of Parañaque, and the Solicitor General subsequently submitted their
corporation as follows:
respective Memoranda.

SEC. 2. General Terms Defined. – x x x x


MIAA admits that the MIAA Charter has placed the title to the Airport Lands
and Buildings in the name of MIAA. However, MIAA points out that it
cannot claim ownership over these properties since the real owner of the (13) Government-owned or controlled corporation refers to any
Airport Lands and Buildings is the Republic of the Philippines. The MIAA agency organized as a stock or non-stock corporation, vested
Charter mandates MIAA to devote the Airport Lands and Buildings for the with functions relating to public needs whether governmental or
68
proprietary in nature, and owned by the Government directly or corporate powers. Section 2(10) of the Introductory Provisions of the
through its instrumentalities either wholly, or, where applicable as Administrative Code defines a government "instrumentality" as follows:
in the case of stock corporations, to the extent of at least fifty-one
(51) percent of its capital stock: x x x. (Emphasis supplied)
SEC. 2. General Terms Defined. –– x x x x

A government-owned or controlled corporation must be "organized as a


(10) Instrumentality refers to any agency of the National
stock or non-stock corporation." MIAA is not organized as a stock or non-
Government, not integrated within the department framework,
stock corporation. MIAA is not a stock corporation because it has no capital
vested with special functions or jurisdiction by law, endowed with
stock divided into shares. MIAA has no stockholders or voting shares.
some if not all corporate powers, administering special funds,
Section 10 of the MIAA Charter9 provides:
and enjoying operational autonomy, usually through a charter. x x
x (Emphasis supplied)
SECTION 10. Capital. — The capital of the Authority to be
contributed by the National Government shall be increased from
When the law vests in a government instrumentality corporate powers, the
Two and One-half Billion (P2,500,000,000.00) Pesos to Ten
instrumentality does not become a corporation. Unless the government
Billion (P10,000,000,000.00) Pesos to consist of:
instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also
(a) The value of fixed assets including airport facilities, runways corporate powers. Thus, MIAA exercises the governmental powers of eminent
and equipment and such other properties, movable and domain,12 police authority13 and the levying of fees and charges.14 At the same
immovable[,] which may be contributed by the National time, MIAA exercises "all the powers of a corporation under the Corporation
Government or transferred by it from any of its agencies, the Law, insofar as these powers are not inconsistent with the provisions of this
valuation of which shall be determined jointly with the Department Executive Order."15
of Budget and Management and the Commission on Audit on the
date of such contribution or transfer after making due allowances
Likewise, when the law makes a government instrumentality operationally
for depreciation and other deductions taking into account the loans
autonomous, the instrumentality remains part of the National Government
and other liabilities of the Authority at the time of the takeover of
machinery although not integrated with the department framework. The
the assets and other properties;
MIAA Charter expressly states that transforming MIAA into a "separate and
autonomous body"16 will make its operation more "financially viable."17
(b) That the amount of P605 million as of December 31, 1986
representing about seventy percentum (70%) of the unremitted
Many government instrumentalities are vested with corporate powers but they
share of the National Government from 1983 to 1986 to be
do not become stock or non-stock corporations, which is a necessary condition
remitted to the National Treasury as provided for in Section 11 of
before an agency or instrumentality is deemed a government-owned or
E. O. No. 903 as amended, shall be converted into the equity of the
controlled corporation. Examples are the Mactan International Airport
National Government in the Authority. Thereafter, the Government
Authority, the Philippine Ports Authority, the University of the Philippines
contribution to the capital of the Authority shall be provided in the
and Bangko Sentral ng Pilipinas. All these government instrumentalities
General Appropriations Act.
exercise corporate powers but they are not organized as stock or non-stock
corporations as required by Section 2(13) of the Introductory Provisions of the
Clearly, under its Charter, MIAA does not have capital stock that is divided Administrative Code. These government instrumentalities are sometimes
into shares. loosely called government corporate entities. However, they are not
government-owned or controlled corporations in the strict sense as understood
under the Administrative Code, which is the governing law defining the legal
Section 3 of the Corporation Code 10 defines a stock corporation as one whose
relationship and status of government entities.
"capital stock is divided into shares and x x x authorized to distribute to
the holders of such shares dividends x x x." MIAA has capital but it is not
divided into shares of stock. MIAA has no stockholders or voting shares. A government instrumentality like MIAA falls under Section 133(o) of the
Hence, MIAA is not a stock corporation. Local Government Code, which states:

MIAA is also not a non-stock corporation because it has no members. Section SEC. 133. Common Limitations on the Taxing Powers of Local
87 of the Corporation Code defines a non-stock corporation as "one where no Government Units. – Unless otherwise provided herein, the
part of its income is distributable as dividends to its members, trustees or exercise of the taxing powers of provinces, cities,
officers." A non-stock corporation must have members. Even if we assume municipalities, and barangays shall not extend to the levy of
that the Government is considered as the sole member of MIAA, this will not the following:
make MIAA a non-stock corporation. Non-stock corporations cannot
distribute any part of their income to their members. Section 11 of the MIAA
xxxx
Charter mandates MIAA to remit 20% of its annual gross operating income to
the National Treasury.11 This prevents MIAA from qualifying as a non-stock
corporation. (o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and local
government units.(Emphasis and underscoring supplied)
Section 88 of the Corporation Code provides that non-stock corporations are
"organized for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or similar Section 133(o) recognizes the basic principle that local governments cannot
purposes, like trade, industry, agriculture and like chambers." MIAA is not tax the national government, which historically merely delegated to local
organized for any of these purposes. MIAA, a public utility, is organized to governments the power to tax. While the 1987 Constitution now includes
operate an international and domestic airport for public use. taxation as one of the powers of local governments, local governments may
only exercise such power "subject to such guidelines and limitations as the
Congress may provide."18
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not
qualify as a government-owned or controlled corporation. What then is the
legal status of MIAA within the National Government? When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local governments.
The rule is that a tax is never presumed and there must be clear language in
MIAA is a government instrumentality vested with corporate powers to
the law imposing the tax. Any doubt whether a person, article or activity is
perform efficiently its governmental functions. MIAA is like any other
taxable is resolved against taxation. This rule applies with greater force when
government instrumentality, the only difference is that MIAA is vested with
local governments seek to tax national government instrumentalities.

69
Another rule is that a tax exemption is strictly construed against the taxpayer The Airport Lands and Buildings of MIAA are property of public dominion
claiming the exemption. However, when Congress grants an exemption to a and therefore owned by the State or the Republic of the Philippines. The
national government instrumentality from local taxation, such exemption is Civil Code provides:
construed liberally in favor of the national government instrumentality. As
this Court declared in Maceda v. Macaraig, Jr.:
ARTICLE 419. Property is either of public dominion or of private
ownership.
The reason for the rule does not apply in the case of exemptions
running to the benefit of the government itself or its agencies. In
ARTICLE 420. The following things are property of public
such case the practical effect of an exemption is merely to reduce
dominion:
the amount of money that has to be handled by government in the
course of its operations. For these reasons, provisions granting
exemptions to government agencies may be construed liberally, in (1) Those intended for public use, such as roads, canals, rivers,
favor of non tax-liability of such agencies.19 torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
There is, moreover, no point in national and local governments taxing each
other, unless a sound and compelling policy requires such transfer of public (2) Those which belong to the State, without being for public use,
funds from one government pocket to another. and are intended for some public service or for the development of
the national wealth. (Emphasis supplied)
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of local ARTICLE 421. All other property of the State, which is not of the
governments. The only exception is when the legislature clearly intended character stated in the preceding article, is patrimonial property.
to tax government instrumentalities for the delivery of essential public
services for sound and compelling policy considerations. There must be
ARTICLE 422. Property of public dominion, when no longer
express language in the law empowering local governments to tax national
intended for public use or for public service, shall form part of the
government instrumentalities. Any doubt whether such power exists is
patrimonial property of the State.
resolved against local governments.

No one can dispute that properties of public dominion mentioned in Article


Thus, Section 133 of the Local Government Code states that "unless
420 of the Civil Code, like "roads, canals, rivers, torrents, ports and
otherwise provided" in the Code, local governments cannot tax national
bridges constructed by the State," are owned by the State. The term
government instrumentalities. As this Court held in Basco v. Philippine
"ports" includes seaports and airports. The MIAA Airport Lands and
Amusements and Gaming Corporation:
Buildings constitute a "port" constructed by the State. Under Article 420 of
the Civil Code, the MIAA Airport Lands and Buildings are properties of
The states have no power by taxation or otherwise, to public dominion and thus owned by the State or the Republic of the
retard, impede, burden or in any manner control the Philippines.
operation of constitutional laws enacted by Congress to
carry into execution the powers vested in the federal
The Airport Lands and Buildings are devoted to public use because they
government. (MC Culloch v. Maryland, 4 Wheat 316, 4
are used by the public for international and domestic travel and
L Ed. 579)
transportation. The fact that the MIAA collects terminal fees and other
charges from the public does not remove the character of the Airport Lands
This doctrine emanates from the "supremacy" of the National and Buildings as properties for public use. The operation by the government
Government over local governments. of a tollway does not change the character of the road as one for public use.
Someone must pay for the maintenance of the road, either the public indirectly
through the taxes they pay the government, or only those among the public
"Justice Holmes, speaking for the Supreme Court, made
who actually use the road through the toll fees they pay upon using the road.
reference to the entire absence of power on the part of
The tollway system is even a more efficient and equitable manner of taxing
the States to touch, in that way (taxation) at least, the
the public for the maintenance of public roads.
instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state
or political subdivision can regulate a federal The charging of fees to the public does not determine the character of the
instrumentality in such a way as to prevent it from property whether it is of public dominion or not. Article 420 of the Civil Code
consummating its federal responsibilities, or even to defines property of public dominion as one "intended for public use." Even if
seriously burden it in the accomplishment of them." the government collects toll fees, the road is still "intended for public use" if
(Antieau, Modern Constitutional Law, Vol. 2, p. 140, anyone can use the road under the same terms and conditions as the rest of the
emphasis supplied) public. The charging of fees, the limitation on the kind of vehicles that can use
the road, the speed restrictions and other conditions for the use of the road do
not affect the public character of the road.
Otherwise, mere creatures of the State can defeat National policies
thru extermination of what local authorities may perceive to be
undesirable activities or enterprise using the power to tax as "a tool The terminal fees MIAA charges to passengers, as well as the landing fees
for regulation" (U.S. v. Sanchez, 340 US 42). MIAA charges to airlines, constitute the bulk of the income that maintains the
operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed
The power to tax which was called by Justice Marshall as the
user's tax. This means taxing those among the public who actually use a
"power to destroy" (Mc Culloch v. Maryland, supra) cannot be
public facility instead of taxing all the public including those who never use
allowed to defeat an instrumentality or creation of the very entity
the particular public facility. A user's tax is more equitable — a principle of
which has the inherent power to wield it. 20
taxation mandated in the 1987 Constitution. 21

2. Airport Lands and Buildings of MIAA are Owned by the Republic


The Airport Lands and Buildings of MIAA, which its Charter calls the
"principal airport of the Philippines for both international and domestic air
a. Airport Lands and Buildings are of Public Dominion traffic,"22 are properties of public dominion because they are intended for
public use. As properties of public dominion, they indisputably belong to
the State or the Republic of the Philippines.

70
b. Airport Lands and Buildings are Outside the Commerce of Man reservations for the use of the Republic of the Philippines or of any
of its branches, or of the inhabitants thereof, in accordance with
regulations prescribed for this purposes, or for quasi-public uses or
The Airport Lands and Buildings of MIAA are devoted to public use and thus
purposes when the public interest requires it, including
are properties of public dominion. As properties of public dominion, the
reservations for highways, rights of way for railroads, hydraulic
Airport Lands and Buildings are outside the commerce of man. The Court
power sites, irrigation systems, communal pastures or lequas
has ruled repeatedly that properties of public dominion are outside the
communales, public parks, public quarries, public fishponds,
commerce of man. As early as 1915, this Court already ruled in Municipality
working men's village and other improvements for the public
of Cavite v. Rojas that properties devoted to public use are outside the
benefit.
commerce of man, thus:

SECTION 88. The tract or tracts of land reserved under the


According to article 344 of the Civil Code: "Property for public
provisions of Section eighty-three shall be non-alienable and
use in provinces and in towns comprises the provincial and town
shall not be subject to occupation, entry, sale, lease, or other
roads, the squares, streets, fountains, and public waters, the
disposition until again declared alienable under the provisions
promenades, and public works of general service supported by said
of this Act or by proclamation of the President. (Emphasis and
towns or provinces."
underscoring supplied)

The said Plaza Soledad being a promenade for public use, the
Thus, unless the President issues a proclamation withdrawing the Airport
municipal council of Cavite could not in 1907 withdraw or exclude
Lands and Buildings from public use, these properties remain properties of
from public use a portion thereof in order to lease it for the sole
public dominion and are inalienable. Since the Airport Lands and Buildings
benefit of the defendant Hilaria Rojas. In leasing a portion of said
are inalienable in their present status as properties of public dominion, they
plaza or public place to the defendant for private use the plaintiff
are not subject to levy on execution or foreclosure sale. As long as the Airport
municipality exceeded its authority in the exercise of its powers by
Lands and Buildings are reserved for public use, their ownership remains with
executing a contract over a thing of which it could not dispose, nor
the State or the Republic of the Philippines.
is it empowered so to do.

The authority of the President to reserve lands of the public domain for public
The Civil Code, article 1271, prescribes that everything which is
use, and to withdraw such public use, is reiterated in Section 14, Chapter 4,
not outside the commerce of man may be the object of a contract,
Title I, Book III of the Administrative Code of 1987, which states:
and plazas and streets are outside of this commerce, as was
decided by the supreme court of Spain in its decision of February
12, 1895, which says: "Communal things that cannot be sold SEC. 14. Power to Reserve Lands of the Public and Private
because they are by their very nature outside of commerce are Domain of the Government. — (1) The President shall have the
those for public use, such as the plazas, streets, common lands, power to reserve for settlement or public use, and for specific
rivers, fountains, etc." (Emphasis supplied) 23 public purposes, any of the lands of the public domain, the use
of which is not otherwise directed by law. The reserved land
shall thereafter remain subject to the specific public purpose
Again in Espiritu v. Municipal Council, the Court declared that properties of
indicated until otherwise provided by law or proclamation;
public dominion are outside the commerce of man:

x x x x. (Emphasis supplied)
xxx Town plazas are properties of public dominion, to be
devoted to public use and to be made available to the public in
general. They are outside the commerce of man and cannot be There is no question, therefore, that unless the Airport Lands and Buildings
disposed of or even leased by the municipality to private parties. are withdrawn by law or presidential proclamation from public use, they are
While in case of war or during an emergency, town plazas may be properties of public dominion, owned by the Republic and outside the
occupied temporarily by private individuals, as was done and as commerce of man.
was tolerated by the Municipality of Pozorrubio, when the
emergency has ceased, said temporary occupation or use must also
c. MIAA is a Mere Trustee of the Republic
cease, and the town officials should see to it that the town plazas
should ever be kept open to the public and free from encumbrances
or illegal private constructions.24 (Emphasis supplied) MIAA is merely holding title to the Airport Lands and Buildings in trust for
the Republic. Section 48, Chapter 12, Book I of the Administrative Code
allows instrumentalities like MIAA to hold title to real properties owned
The Court has also ruled that property of public dominion, being outside the
by the Republic, thus:
commerce of man, cannot be the subject of an auction sale.25

SEC. 48. Official Authorized to Convey Real Property. —


Properties of public dominion, being for public use, are not subject to levy,
Whenever real property of the Government is authorized by law to
encumbrance or disposition through public or private sale. Any encumbrance,
be conveyed, the deed of conveyance shall be executed in behalf of
levy on execution or auction sale of any property of public dominion is void
the government by the following:
for being contrary to public policy. Essential public services will stop if
properties of public dominion are subject to encumbrances, foreclosures and
auction sale. This will happen if the City of Parañaque can foreclose and (1) For property belonging to and titled in the name of the
compel the auction sale of the 600-hectare runway of the MIAA for non- Republic of the Philippines, by the President, unless the authority
payment of real estate tax. therefor is expressly vested by law in another officer.

Before MIAA can encumber26 the Airport Lands and Buildings, the President (2) For property belonging to the Republic of the Philippines
must first withdraw from public use the Airport Lands and Buildings. but titled in the name of any political subdivision or of any
Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, corporate agency or instrumentality, by the executive head of
which "remains to this day the existing general law governing the the agency or instrumentality. (Emphasis supplied)
classification and disposition of lands of the public domain other than timber
and mineral lands,"27 provide:
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings
is clearer because even its executive head cannot sign the deed of conveyance
SECTION 83. Upon the recommendation of the Secretary of on behalf of the Republic. Only the President of the Republic can sign such
Agriculture and Natural Resources, the President may designate by deed of conveyance.28
proclamation any tract or tracts of land of the public domain as

71
d. Transfer to MIAA was Meant to Implement a Reorganization The transfer of the Airport Lands and Buildings from the Bureau of Air
Transportation to MIAA was not meant to transfer beneficial ownership of
these assets from the Republic to MIAA. The purpose was merely
The MIAA Charter, which is a law, transferred to MIAA the title to the
to reorganize a division in the Bureau of Air Transportation into a
Airport Lands and Buildings from the Bureau of Air Transportation of the
separate and autonomous body. The Republic remains the beneficial owner
Department of Transportation and Communications. The MIAA Charter
of the Airport Lands and Buildings. MIAA itself is owned solely by the
provides:
Republic. No party claims any ownership rights over MIAA's assets adverse
to the Republic.
SECTION 3. Creation of the Manila International Airport
Authority. — x x x x
The MIAA Charter expressly provides that the Airport Lands and Buildings
"shall not be disposed through sale or through any other mode unless
The land where the Airport is presently located as well as the specifically approved by the President of the Philippines." This only means
surrounding land area of approximately six hundred hectares, that the Republic retained the beneficial ownership of the Airport Lands and
are hereby transferred, conveyed and assigned to the Buildings because under Article 428 of the Civil Code, only the "owner has
ownership and administration of the Authority, subject to the right to x x x dispose of a thing." Since MIAA cannot dispose of the
existing rights, if any. The Bureau of Lands and other appropriate Airport Lands and Buildings, MIAA does not own the Airport Lands and
government agencies shall undertake an actual survey of the area Buildings.
transferred within one year from the promulgation of this
Executive Order and the corresponding title to be issued in the
At any time, the President can transfer back to the Republic title to the Airport
name of the Authority. Any portion thereof shall not be disposed
Lands and Buildings without the Republic paying MIAA any consideration.
through sale or through any other mode unless specifically
Under Section 3 of the MIAA Charter, the President is the only one who can
approved by the President of the Philippines. (Emphasis
authorize the sale or disposition of the Airport Lands and Buildings. This only
supplied)
confirms that the Airport Lands and Buildings belong to the Republic.

SECTION 22. Transfer of Existing Facilities and Intangible


e. Real Property Owned by the Republic is Not Taxable
Assets. — All existing public airport facilities, runways, lands,
buildings and other property, movable or immovable, belonging
to the Airport, and all assets, powers, rights, interests and Section 234(a) of the Local Government Code exempts from real estate tax
privileges belonging to the Bureau of Air any "[r]eal property owned by the Republic of the Philippines." Section 234(a)
Transportation relating to airport works or air operations, provides:
including all equipment which are necessary for the operation of
crash fire and rescue facilities, are hereby transferred to the
SEC. 234. Exemptions from Real Property Tax. — The following
Authority. (Emphasis supplied)
are exempted from payment of the real property tax:

SECTION 25. Abolition of the Manila International Airport as a


(a) Real property owned by the Republic of the Philippines or
Division in the Bureau of Air Transportation and Transitory
any of its political subdivisions except when the beneficial use
Provisions. — The Manila International Airport including the
thereof has been granted, for consideration or otherwise, to a
Manila Domestic Airport as a division under the Bureau of Air
taxable person;
Transportation is hereby abolished.

x x x. (Emphasis supplied)
x x x x.

This exemption should be read in relation with Section 133(o) of the same
The MIAA Charter transferred the Airport Lands and Buildings to MIAA
Code, which prohibits local governments from imposing "[t]axes, fees or
without the Republic receiving cash, promissory notes or even stock since
charges of any kind on the National Government, its agencies
MIAA is not a stock corporation.
and instrumentalities x x x." The real properties owned by the Republic are
titled either in the name of the Republic itself or in the name of agencies or
The whereas clauses of the MIAA Charter explain the rationale for the instrumentalities of the National Government. The Administrative Code
transfer of the Airport Lands and Buildings to MIAA, thus: allows real property owned by the Republic to be titled in the name of
agencies or instrumentalities of the national government. Such real properties
remain owned by the Republic and continue to be exempt from real estate tax.
WHEREAS, the Manila International Airport as the principal
airport of the Philippines for both international and domestic air
traffic, is required to provide standards of airport accommodation The Republic may grant the beneficial use of its real property to an agency or
and service comparable with the best airports in the world; instrumentality of the national government. This happens when title of the real
property is transferred to an agency or instrumentality even as the Republic
remains the owner of the real property. Such arrangement does not result in
WHEREAS, domestic and other terminals, general aviation and
the loss of the tax exemption. Section 234(a) of the Local Government Code
other facilities, have to be upgraded to meet the current and future
states that real property owned by the Republic loses its tax exemption only if
air traffic and other demands of aviation in Metro Manila;
the "beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person." MIAA, as a government instrumentality, is not a taxable
WHEREAS, a management and organization study has indicated person under Section 133(o) of the Local Government Code. Thus, even if we
that the objectives of providing high standards of assume that the Republic has granted to MIAA the beneficial use of the
accommodation and service within the context of a financially Airport Lands and Buildings, such fact does not make these real properties
viable operation, will best be achieved by a separate and subject to real estate tax.
autonomous body; and
However, portions of the Airport Lands and Buildings that MIAA leases to
WHEREAS, under Presidential Decree No. 1416, as amended by private entities are not exempt from real estate tax. For example, the land area
Presidential Decree No. 1772, the President of the Philippines is occupied by hangars that MIAA leases to private corporations is subject to
given continuing authority to reorganize the National real estate tax. In such a case, MIAA has granted the beneficial use of such
Government, which authority includes the creation of new land area for a consideration to a taxable person and therefore such land area
entities, agencies and instrumentalities of the Government[.] is subject to real estate tax. In Lung Center of the Philippines v. Quezon City,
(Emphasis supplied) the Court ruled:

72
Accordingly, we hold that the portions of the land leased to private governments do not extend to the national government, its agencies and
entities as well as those parts of the hospital leased to private instrumentalities, "[u]nless otherwise provided in this Code" as stated in the
individuals are not exempt from such taxes. On the other hand, the saving clause of Section 133. The saving clause refers to Section 234(a) on the
portions of the land occupied by the hospital and portions of the exception to the exemption from real estate tax of real property owned by the
hospital used for its patients, whether paying or non-paying, are Republic.
exempt from real property taxes.29
The minority, however, theorizes that unless exempted in Section 193 itself,
3. Refutation of Arguments of Minority all juridical persons are subject to tax by local governments. The minority
insists that the juridical persons exempt from local taxation are limited to the
three classes of entities specifically enumerated as exempt in Section 193.
The minority asserts that the MIAA is not exempt from real estate tax because
Thus, the minority states:
Section 193 of the Local Government Code of 1991 withdrew the tax
exemption of "all persons, whether natural or juridical" upon the
effectivity of the Code. Section 193 provides: x x x Under Section 193, the exemption is limited to (a) local water
districts; (b) cooperatives duly registered under Republic Act No.
6938; and (c) non-stock and non-profit hospitals and educational
SEC. 193. Withdrawal of Tax Exemption Privileges – Unless
institutions. It would be belaboring the obvious why the MIAA
otherwise provided in this Code, tax exemptions or incentives
does not fall within any of the exempt entities under Section 193.
granted to, or presently enjoyed by all persons, whether natural
(Emphasis supplied)
or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals The minority's theory directly contradicts and completely negates Section
and educational institutions are hereby withdrawn upon effectivity 133(o) of the Local Government Code. This theory will result in gross
of this Code. (Emphasis supplied) absurdities. It will make the national government, which itself is a juridical
person, subject to tax by local governments since the national government is
not included in the enumeration of exempt entities in Section 193. Under this
The minority states that MIAA is indisputably a juridical person. The
theory, local governments can impose any kind of local tax, and not only real
minority argues that since the Local Government Code withdrew the tax
estate tax, on the national government.
exemption of all juridical persons, then MIAA is not exempt from real estate
tax. Thus, the minority declares:
Under the minority's theory, many national government instrumentalities with
juridical personalities will also be subject to any kind of local tax, and not
It is evident from the quoted provisions of the Local
only real estate tax. Some of the national government instrumentalities vested
Government Code that the withdrawn exemptions from realty
by law with juridical personalities are: Bangko Sentral ng
tax cover not just GOCCs, but all persons. To repeat, the
Pilipinas,30 Philippine Rice Research Institute,31 Laguna Lake
provisions lay down the explicit proposition that the withdrawal of
realty tax exemption applies to all persons. The reference to or the
inclusion of GOCCs is only clarificatory or illustrative of the Development Authority,32 Fisheries Development Authority,33 Bases
explicit provision. Conversion Development Authority,34 Philippine Ports Authority,35 Cagayan
de Oro Port Authority, 36 San Fernando Port Authority, 37 Cebu Port
Authority,38 and Philippine National Railways.39
The term "All persons" encompasses the two classes of persons
recognized under our laws, natural and juridical persons.
Obviously, MIAA is not a natural person. Thus, the The minority's theory violates Section 133(o) of the Local Government Code
determinative test is not just whether MIAA is a GOCC, but which expressly prohibits local governments from imposing any kind of tax
whether MIAA is a juridical person at all. (Emphasis and on national government instrumentalities. Section 133(o) does not distinguish
underscoring in the original) between national government instrumentalities with or without juridical
personalities. Where the law does not distinguish, courts should not
distinguish. Thus, Section 133(o) applies to all national government
The minority posits that the "determinative test" whether MIAA is exempt
instrumentalities, with or without juridical personalities. The determinative
from local taxation is its status — whether MIAA is a juridical person or not.
test whether MIAA is exempt from local taxation is not whether MIAA is a
The minority also insists that "Sections 193 and 234 may be examined in
juridical person, but whether it is a national government instrumentality under
isolation from Section 133(o) to ascertain MIAA's claim of exemption."
Section 133(o) of the Local Government Code. Section 133(o) is the specific
provision of law prohibiting local governments from imposing any kind of tax
The argument of the minority is fatally flawed. Section 193 of the Local on the national government, its agencies and instrumentalities.
Government Code expressly withdrew the tax exemption of all juridical
persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of
Section 133 of the Local Government Code starts with the saving clause
the Local Government Code expressly provides otherwise,
"[u]nless otherwise provided in this Code." This means that unless the Local
specifically prohibiting local governments from imposing any kind of tax on
Government Code grants an express authorization, local governments have no
national government instrumentalities. Section 133(o) states:
power to tax the national government, its agencies and instrumentalities.
Clearly, the rule is local governments have no power to tax the national
SEC. 133. Common Limitations on the Taxing Powers of Local government, its agencies and instrumentalities. As an exception to this rule,
Government Units. – Unless otherwise provided herein, the local governments may tax the national government, its agencies and
exercise of the taxing powers of provinces, cities, municipalities, instrumentalities only if the Local Government Code expressly so provides.
and barangays shall not extend to the levy of the following:
The saving clause in Section 133 refers to the exception to the exemption in
xxxx Section 234(a) of the Code, which makes the national government subject to
real estate tax when it gives the beneficial use of its real properties to a taxable
entity. Section 234(a) of the Local Government Code provides:
(o) Taxes, fees or charges of any kinds on the National
Government, its agencies and instrumentalities, and local
government units. (Emphasis and underscoring supplied) SEC. 234. Exemptions from Real Property Tax – The following
are exempted from payment of the real property tax:
By express mandate of the Local Government Code, local governments
cannot impose any kind of tax on national government instrumentalities like (a) Real property owned by the Republic of the Philippines or any
the MIAA. Local governments are devoid of power to tax the national of its political subdivisions except when the beneficial use thereof
government, its agencies and instrumentalities. The taxing powers of local

73
has been granted, for consideration or otherwise, to a taxable the name of the national government, its agencies or instrumentalities, to real
person. estate tax if the beneficial use of such property is given to a taxable entity.

x x x. (Emphasis supplied) The minority also claims that the definition in the Administrative Code of the
phrase "government-owned or controlled corporation" is not controlling. The
minority points out that Section 2 of the Introductory Provisions of the
Under Section 234(a), real property owned by the Republic is exempt from
Administrative Code admits that its definitions are not controlling when it
real estate tax. The exception to this exemption is when the government gives
provides:
the beneficial use of the real property to a taxable entity.

SEC. 2. General Terms Defined. — Unless the specific words of


The exception to the exemption in Section 234(a) is the only instance when
the text, or the context as a whole, or a particular statute, shall
the national government, its agencies and instrumentalities are subject to any
require a different meaning:
kind of tax by local governments. The exception to the exemption applies only
to real estate tax and not to any other tax. The justification for the exception to
the exemption is that the real property, although owned by the Republic, is not xxxx
devoted to public use or public service but devoted to the private gain of a
taxable person.
The minority then concludes that reliance on the Administrative Code
definition is "flawed."
The minority also argues that since Section 133 precedes Section 193 and 234
of the Local Government Code, the later provisions prevail over Section 133.
The minority's argument is a non sequitur. True, Section 2 of the
Thus, the minority asserts:
Administrative Code recognizes that a statute may require a different meaning
than that defined in the Administrative Code. However, this does not
x x x Moreover, sequentially Section 133 antecedes Section 193 automatically mean that the definition in the Administrative Code does not
and 234. Following an accepted rule of construction, in case of apply to the Local Government Code. Section 2 of the Administrative Code
conflict the subsequent provisions should prevail. Therefore, clearly states that "unless the specific words x x x of a particular statute shall
MIAA, as a juridical person, is subject to real property taxes, the require a different meaning," the definition in Section 2 of the Administrative
general exemptions attaching to instrumentalities under Section Code shall apply. Thus, unless there is specific language in the Local
133(o) of the Local Government Code being qualified by Sections Government Code defining the phrase "government-owned or controlled
193 and 234 of the same law. (Emphasis supplied) corporation" differently from the definition in the Administrative Code, the
definition in the Administrative Code prevails.
The minority assumes that there is an irreconcilable conflict between Section
133 on one hand, and Sections 193 and 234 on the other. No one has urged The minority does not point to any provision in the Local Government Code
that there is such a conflict, much less has any one presenteda persuasive defining the phrase "government-owned or controlled corporation" differently
argument that there is such a conflict. The minority's assumption of an from the definition in the Administrative Code. Indeed, there is none. The
irreconcilable conflict in the statutory provisions is an egregious error for two Local Government Code is silent on the definition of the phrase "government-
reasons. owned or controlled corporation." The Administrative Code, however,
expressly defines the phrase "government-owned or controlled corporation."
The inescapable conclusion is that the Administrative Code definition of the
First, there is no conflict whatsoever between Sections 133 and 193 because
phrase "government-owned or controlled corporation" applies to the Local
Section 193 expressly admits its subordination to other provisions of the Code
Government Code.
when Section 193 states "[u]nless otherwise provided in this Code." By its
own words, Section 193 admits the superiority of other provisions of the
Local Government Code that limit the exercise of the taxing power in Section The third whereas clause of the Administrative Code states that the Code
193. When a provision of law grants a power but withholds such power on "incorporates in a unified document the major structural, functional and
certain matters, there is no conflict between the grant of power and the procedural principles and rules of governance." Thus, the Administrative
withholding of power. The grantee of the power simply cannot exercise the Code is the governing law defining the status and relationship of government
power on matters withheld from its power. departments, bureaus, offices, agencies and instrumentalities. Unless a statute
expressly provides for a different status and relationship for a specific
government unit or entity, the provisions of the Administrative Code prevail.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers
of Local Government Units." Section 133 limits the grant to local
governments of the power to tax, and not merely the exercise of a delegated The minority also contends that the phrase "government-owned or controlled
power to tax. Section 133 states that the taxing powers of local governments corporation" should apply only to corporations organized under the
"shall not extend to the levy" of any kind of tax on the national government, Corporation Code, the general incorporation law, and not to corporations
its agencies and instrumentalities. There is no clearer limitation on the taxing created by special charters. The minority sees no reason why government
power than this. corporations with special charters should have a capital stock. Thus, the
minority declares:
Since Section 133 prescribes the "common limitations" on the taxing powers
of local governments, Section 133 logically prevails over Section 193 which I submit that the definition of "government-owned or controlled
grants local governments such taxing powers. By their very meaning and corporations" under the Administrative Code refer to those
purpose, the "common limitations" on the taxing power prevail over the grant corporations owned by the government or its instrumentalities
or exercise of the taxing power. If the taxing power of local governments in which are created not by legislative enactment, but formed and
Section 193 prevails over the limitations on such taxing power in Section 133, organized under the Corporation Code through registration with
then local governments can impose any kind of tax on the national the Securities and Exchange Commission. In short, these are
government, its agencies and instrumentalities — a gross absurdity. GOCCs without original charters.

Local governments have no power to tax the national government, its agencies xxxx
and instrumentalities, except as otherwise provided in the Local Government
Code pursuant to the saving clause in Section 133 stating "[u]nless otherwise
It might as well be worth pointing out that there is no point in
provided in this Code." This exception — which is an exception to the
requiring a capital structure for GOCCs whose full ownership is
exemption of the Republic from real estate tax imposed by local governments
limited by its charter to the State or Republic. Such GOCCs are not
— refers to Section 234(a) of the Code. The exception to the exemption in
empowered to declare dividends or alienate their capital shares.
Section 234(a) subjects real property owned by the Republic, whether titled in

74
The contention of the minority is seriously flawed. It is not in accord with the development purposes — these government-owned or controlled corporations
Constitution and existing legislations. It will also result in gross absurdities. with special charters are usually organized as stock corporations just like
ordinary private corporations.
First, the Administrative Code definition of the phrase "government-owned or
controlled corporation" does not distinguish between one incorporated under In contrast, government instrumentalities vested with corporate powers and
the Corporation Code or under a special charter. Where the law does not performing governmental or public functions need not meet the test of
distinguish, courts should not distinguish. economic viability. These instrumentalities perform essential public services
for the common good, services that every modern State must provide its
citizens. These instrumentalities need not be economically viable since the
Second, Congress has created through special charters several government-
government may even subsidize their entire operations. These
owned corporations organized as stock corporations. Prime examples are the
instrumentalities are not the "government-owned or controlled corporations"
Land Bank of the Philippines and the Development Bank of the Philippines.
referred to in Section 16, Article XII of the 1987 Constitution.
The special charter40 of the Land Bank of the Philippines provides:

Thus, the Constitution imposes no limitation when the legislature creates


SECTION 81. Capital. — The authorized capital stock of the Bank
government instrumentalities vested with corporate powers but performing
shall be nine billion pesos, divided into seven hundred and eighty
essential governmental or public functions. Congress has plenary authority to
million common shares with a par value of ten pesos each, which
create government instrumentalities vested with corporate powers provided
shall be fully subscribed by the Government, and one hundred and
these instrumentalities perform essential government functions or public
twenty million preferred shares with a par value of ten pesos each,
services. However, when the legislature creates through special charters
which shall be issued in accordance with the provisions of Sections
corporations that perform economic or commercial activities, such entities —
seventy-seven and eighty-three of this Code. (Emphasis supplied)
known as "government-owned or controlled corporations" — must meet the
test of economic viability because they compete in the market place.
Likewise, the special charter 41 of the Development Bank of the Philippines
provides:
This is the situation of the Land Bank of the Philippines and the Development
Bank of the Philippines and similar government-owned or controlled
SECTION 7. Authorized Capital Stock – Par value. — The capital corporations, which derive their income to meet operating expenses solely
stock of the Bank shall be Five Billion Pesos to be divided into from commercial transactions in competition with the private sector. The
Fifty Million common shares with par value of P100 per share. intent of the Constitution is to prevent the creation of government-owned or
These shares are available for subscription by the National controlled corporations that cannot survive on their own in the market place
Government. Upon the effectivity of this Charter, the National and thus merely drain the public coffers.
Government shall subscribe to Twenty-Five Million common
shares of stock worth Two Billion Five Hundred Million which
Commissioner Blas F. Ople, proponent of the test of economic viability,
shall be deemed paid for by the Government with the net asset
explained to the Constitutional Commission the purpose of this test, as
values of the Bank remaining after the transfer of assets and
follows:
liabilities as provided in Section 30 hereof. (Emphasis supplied)

MR. OPLE: Madam President, the reason for this concern is really
Other government-owned corporations organized as stock corporations under
that when the government creates a corporation, there is a sense in
their special charters are the Philippine Crop Insurance
which this corporation becomes exempt from the test of economic
Corporation,42 Philippine International Trading Corporation,43 and the
performance. We know what happened in the past. If a government
Philippine National Bank44 before it was reorganized as a stock corporation
corporation loses, then it makes its claim upon the taxpayers'
under the Corporation Code. All these government-owned corporations
money through new equity infusions from the government and
organized under special charters as stock corporations are subject to real estate
what is always invoked is the common good. That is the reason
tax on real properties owned by them. To rule that they are not government-
why this year, out of a budget of P115 billion for the entire
owned or controlled corporations because they are not registered with the
government, about P28 billion of this will go into equity infusions
Securities and Exchange Commission would remove them from the reach of
to support a few government financial institutions. And this is all
Section 234 of the Local Government Code, thus exempting them from real
taxpayers' money which could have been relocated to agrarian
estate tax.
reform, to social services like health and education, to augment the
salaries of grossly underpaid public employees. And yet this is all
Third, the government-owned or controlled corporations created through going down the drain.
special charters are those that meet the two conditions prescribed in Section
16, Article XII of the Constitution. The first condition is that the government-
Therefore, when we insert the phrase "ECONOMIC VIABILITY"
owned or controlled corporation must be established for the common good.
together with the "common good," this becomes a restraint on
The second condition is that the government-owned or controlled corporation
future enthusiasts for state capitalism to excuse themselves from
must meet the test of economic viability. Section 16, Article XII of the 1987
the responsibility of meeting the market test so that they become
Constitution provides:
viable. And so, Madam President, I reiterate, for the committee's
consideration and I am glad that I am joined in this proposal by
SEC. 16. The Congress shall not, except by general law, provide Commissioner Foz, the insertion of the standard of "ECONOMIC
for the formation, organization, or regulation of private VIABILITY OR THE ECONOMIC TEST," together with the
corporations. Government-owned or controlled corporations may common good.45
be created or established by special charters in the interest of the
common good and subject to the test of economic viability.
Father Joaquin G. Bernas, a leading member of the Constitutional
(Emphasis and underscoring supplied)
Commission, explains in his textbook The 1987 Constitution of the Republic
of the Philippines: A Commentary:
The Constitution expressly authorizes the legislature to create "government-
owned or controlled corporations" through special charters only if these
The second sentence was added by the 1986 Constitutional
entities are required to meet the twin conditions of common good and
Commission. The significant addition, however, is the phrase "in
economic viability. In other words, Congress has no power to create
the interest of the common good and subject to the test of
government-owned or controlled corporations with special charters unless
economic viability." The addition includes the ideas that they must
they are made to comply with the two conditions of common good and
show capacity to function efficiently in business and that they
economic viability. The test of economic viability applies only to government-
should not go into activities which the private sector can do better.
owned or controlled corporations that perform economic or commercial
Moreover, economic viability is more than financial viability but
activities and need to compete in the market place. Being essentially economic
vehicles of the State for the common good — meaning for economic
75
also includes capability to make profit and generate benefits not SEC. 2. General Terms Defined. – x x x x
quantifiable in financial terms.46 (Emphasis supplied)
(10) Instrumentality refers to any agency of the National
Clearly, the test of economic viability does not apply to government entities Government, not integrated within the department framework,
vested with corporate powers and performing essential public services. The vested with special functions or jurisdiction by law, endowed with
State is obligated to render essential public services regardless of the some if not all corporate powers, administering special funds, and
economic viability of providing such service. The non-economic viability of enjoying operational autonomy, usually through a charter. x x x
rendering such essential public service does not excuse the State from (Emphasis supplied)
withholding such essential services from the public.
The fact alone that MIAA is endowed with corporate powers does not make
However, government-owned or controlled corporations with special charters, MIAA a government-owned or controlled corporation. Without a change in its
organized essentially for economic or commercial objectives, must meet the capital structure, MIAA remains a government instrumentality under Section
test of economic viability. These are the government-owned or controlled 2(10) of the Introductory Provisions of the Administrative Code. More
corporations that are usually organized under their special charters as stock importantly, as long as MIAA renders essential public services, it need not
corporations, like the Land Bank of the Philippines and the Development comply with the test of economic viability. Thus, MIAA is outside the scope
Bank of the Philippines. These are the government-owned or controlled of the phrase "government-owned or controlled corporations" under Section
corporations, along with government-owned or controlled corporations 16, Article XII of the 1987 Constitution.
organized under the Corporation Code, that fall under the definition of
"government-owned or controlled corporations" in Section 2(10) of the
The minority belittles the use in the Local Government Code of the phrase
Administrative Code.
"government-owned or controlled corporation" as merely "clarificatory or
illustrative." This is fatal. The 1987 Constitution prescribes explicit conditions
The MIAA need not meet the test of economic viability because the for the creation of "government-owned or controlled corporations." The
legislature did not create MIAA to compete in the market place. MIAA does Administrative Code defines what constitutes a "government-owned or
not compete in the market place because there is no competing international controlled corporation." To belittle this phrase as "clarificatory or illustrative"
airport operated by the private sector. MIAA performs an essential public is grave error.
service as the primary domestic and international airport of the Philippines.
The operation of an international airport requires the presence of personnel
To summarize, MIAA is not a government-owned or controlled corporation
from the following government agencies:
under Section 2(13) of the Introductory Provisions of the Administrative Code
because it is not organized as a stock or non-stock corporation. Neither is
1. The Bureau of Immigration and Deportation, to document the MIAA a government-owned or controlled corporation under Section 16,
arrival and departure of passengers, screening out those without Article XII of the 1987 Constitution because MIAA is not required to meet the
visas or travel documents, or those with hold departure orders; test of economic viability. MIAA is a government instrumentality vested with
corporate powers and performing essential public services pursuant to Section
2(10) of the Introductory Provisions of the Administrative Code. As a
2. The Bureau of Customs, to collect import duties or enforce the
government instrumentality, MIAA is not subject to any kind of tax by local
ban on prohibited importations;
governments under Section 133(o) of the Local Government Code. The
exception to the exemption in Section 234(a) does not apply to MIAA because
3. The quarantine office of the Department of Health, to enforce MIAA is not a taxable entity under the Local Government Code. Such
health measures against the spread of infectious diseases into the exception applies only if the beneficial use of real property owned by the
country; Republic is given to a taxable entity.

4. The Department of Agriculture, to enforce measures against the Finally, the Airport Lands and Buildings of MIAA are properties devoted to
spread of plant and animal diseases into the country; public use and thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
5. The Aviation Security Command of the Philippine National
Police, to prevent the entry of terrorists and the escape of
criminals, as well as to secure the airport premises from terrorist Art. 420. The following things are property of public dominion:
attack or seizure;
(1) Those intended for public use, such as roads, canals, rivers,
6. The Air Traffic Office of the Department of Transportation and torrents, ports and bridges constructed by the State, banks, shores,
Communications, to authorize aircraft to enter or leave Philippine roadsteads, and others of similar character;
airspace, as well as to land on, or take off from, the airport; and
(2) Those which belong to the State, without being for public use,
7. The MIAA, to provide the proper premises — such as runway and are intended for some public service or for the development of
and buildings — for the government personnel, passengers, and the national wealth. (Emphasis supplied)
airlines, and to manage the airport operations.
The term "ports x x x constructed by the State" includes airports and seaports.
All these agencies of government perform government functions essential to The Airport Lands and Buildings of MIAA are intended for public use, and at
the operation of an international airport. the very least intended for public service. Whether intended for public use or
public service, the Airport Lands and Buildings are properties of public
dominion. As properties of public dominion, the Airport Lands and Buildings
MIAA performs an essential public service that every modern State must are owned by the Republic and thus exempt from real estate tax under Section
provide its citizens. MIAA derives its revenues principally from the 234(a) of the Local Government Code.
mandatory fees and charges MIAA imposes on passengers and airlines. The
terminal fees that MIAA charges every passenger are regulatory or
administrative fees47 and not income from commercial transactions. 4. Conclusion

MIAA falls under the definition of a government instrumentality under Under Section 2(10) and (13) of the Introductory Provisions of the
Section 2(10) of the Introductory Provisions of the Administrative Code, Administrative Code, which governs the legal relation and status of
which provides: government units, agencies and offices within the entire government
machinery, MIAA is a government instrumentality and not a government-
owned or controlled corporation. Under Section 133(o) of the Local
76
Government Code, MIAA as a government instrumentality is not a taxable The assessed taxes had remained unpaid despite the demands made by the
person because it is not subject to "[t]axes, fees or charges of any kind" by municipality which prompted it, through Municipal Treasurer Florante M.
local governments. The only exception is when MIAA leases its real property Barredo, to give notice to petitioner on October 29, 1990 that the NFPC will
to a "taxable person" as provided in Section 234(a) of the Local Government be sold at public auction on November 30, 1990 in order that the municipality
Code, in which case the specific real property leased becomes subject to real will be able to collect on petitioner’s delinquent realty taxes which, as of June
estate tax. Thus, only portions of the Airport Lands and Buildings leased to 30, 1990, amounted to P23,128,304.51, inclusive of penalties.
taxable persons like private parties are subject to real estate tax by the City of
Parañaque.
Petitioner sought the deferment of the auction sale claiming that the NFPC is
owned by the Republic of the Philippines, and pursuant to Presidential Decree
Under Article 420 of the Civil Code, the Airport Lands and Buildings of (P.D.) No. 977, it (PFDA) is not a taxable entity.
MIAA, being devoted to public use, are properties of public dominion and
thus owned by the State or the Republic of the Philippines. Article 420
In view of the refusal of PFDA to pay the assessed realty taxes, the matter was
specifically mentions "ports x x x constructed by the State," which includes
referred to the Department of Finance (DOF). On July 14, 1990 the DOF
public airports and seaports, as properties of public dominion and owned by
stated that:
the Republic. As properties of public dominion owned by the Republic, there
is no doubt whatsoever that the Airport Lands and Buildings are expressly
exempt from real estate tax under Section 234(a) of the Local Government This Department takes cognizance of the allegations of [the Office
Code. This Court has also repeatedly ruled that properties of public dominion of the Mayor of Navotas] that PFDA has leased its properties to
are not subject to execution or foreclosure sale. beneficial users, such as "businessmen, private persons and entities
who are taxable persons." For this reason, it is imperative that the
Municipality should conduct an ocular inspection on the real
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed
properties (land and building owned by PFDA) in order to identify
Resolutions of the Court of Appeals of 5 October 2001 and 27 September
the properties actually leased and the taxable persons enjoying the
2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and
beneficial use thereof. The ocular inspection is necessary for
Buildings of the Manila International Airport Authority EXEMPT from the
reason that the real properties, the use of which has been granted to
real estate tax imposed by the City of Parañaque. We declare VOID all the
taxable persons, for consideration or otherwise, are subject to the
real estate tax assessments, including the final notices of real estate tax
payment of real property taxes which must be paid by the grantees
delinquencies, issued by the City of Parañaque on the Airport Lands and
pursuant to the provisions … of the Real Property Tax Code, as
Buildings of the Manila International Airport Authority, except for the
amended.
portions that the Manila International Airport Authority has leased to private
parties. We also declare VOID the assailed auction sale, and all its effects, of
the Airport Lands and Buildings of the Manila International Airport ... Therefore, it is imperative to determine who the actual users of
Authority. the properties concerned [are]. If used by a non-taxable person
other than PFDA itself, it remains to be non-taxable. Otherwise, if
said properties are being used by taxable persons, same becomes
No costs.SO ORDERED.
taxable properties. For this purpose, it is also incumbent upon
PFDA to furnish the Municipality copies of the deed of lease or
other relevant documents showing the leased properties and their
beneficial users for proper assessment.2

Notwithstanding the DOF’s instruction, respondent Municipality proceeded to


publish the notice of sale of NFPC in the November 2, 1990 issue of Balita, a
local newspaper.

G.R. No. 150301             October 2, 2007


On November 19, 1990, petitioner instituted Civil Case No. 1524 in the
Regional Trial Court (RTC) of Malabon, Metro Manila against respondent
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, petitioner, Municipality, its Municipal Treasurer and the Chairman of the Public Auction
vs. Sale Committee. Petitioner asked the RTC to enjoin the auction of the NFPC
THE HONORABLE COURT OF APPEALS, THE HONORABLE on the ground that the properties comprising the NFPC are owned by the
REGIONAL TRIAL COURT, BRANCH 169, MALABON, METRO Republic of the Philippines and are, thus, exempt from taxation. According to
MANILA, THE MUNICIPALITY OF NAVOTAS, METRO MANILA, petitioner, only a small portion of NFPC which had been leased to private
HON. FLORANTE M. BARREDO, in his official capacity as Municipal parties may be subjected to real property tax which should be paid by the
Treasurer of Navotas, Metro Manila, and HON. NORBERTO E. latter.
AZARCON, in his capacity as Chairman of the Public Auction Sale
Committee of Navotas, Metro Manila, respondent.
Respondent Municipality, on the other hand, insisted that: 1) the real
properties within NFPC are owned entirely by petitioner which, despite the
DECISION opportunity given, had failed to submit proof to the Municipal Assessor that
the properties are indeed owned by the Republic of the Philippines; 2) if the
properties in question really belong to the government, then the complaint
AZCUNA, J.: should have been instituted in the name of the Republic of the Philippines,
represented by the Office of the Solicitor General; and 3) the complaint is
This is a petition for review1 of the decision and resolution of the Court of fatally defective because of non-compliance with a condition precedent, which
Appeals (CA), dated July 19, 2001 and September 19, 2001, respectively, in is, payment of the disputed tax assessment under protest.
CA-G.R. CV No. 42472, entitled "Philippine Fisheries Development
Authority v. The Municipality of Navotas, Metro Manila, et al." On December 8, 1990, the RTC issued a writ of preliminary injunction
enjoining respondent Municipality from proceeding with the public auction.
The facts appear as follows:
On February 19, 1993, however, the RTC dismissed the case and dissolved
The controversy arose when respondent Municipality of Navotas assessed the the writ of preliminary injunction, thus:
real estate taxes allegedly due from petitioner Philippine Fisheries
Development Authority (PFDA) for the period 1981-1990 on properties under [T]he plaintiff [petitioner] failed to present convincing evidence to
its jurisdiction, management and operation located inside the Navotas Fishing support its claim of realty tax exemption and ownership of the
Port Complex (NFPC). property by the Republic of the Philippines as mandated by Sec. 9

77
of P.D. 464. Notwithstanding receipt of the notices of tax preserving, marketing and distribution of fish and fishery/aquatic
assessments from the defendants [public respondent], the plaintiff products through the establishment and operation of fish markets
did not avail of the remedies under the law by raising on appeal the and the efficient operation of fishing ports’ harbors and other
said tax assessments to the Local Board of Assessment Appeals, marketing facilities.8
then to the Central Board of Assessment Appeals and ultimately, to
the Court of Tax Appeals. Instead, the plaintiff continuously
...
ignored the notices of tax assessments on the pretext that the
properties inside the NFPC are exempt from payment of real estate
taxes as they are owned by the Republic of the Philippines. The PFMA was furthermore extended exemption from the
Assailing the validity of the tax assessments of the NFPC payment of income tax in this tenor:
properties is not the proper recourse for the plaintiff but to pay first
the tax assessments under protest and then raise the same on appeal
The authority shall be exempted from the payment of income tax.
to the Local Board of Assessment Appeals, then to the Central
Board of Assessment Appeals, then ultimately, to the Court of Tax
Appeals pursuant to the Real Property Tax Code. The foregoing exemption may, however, be entirely or partly lifted
by the President of the Philippines, upon recommendation of the
Secretary of Finance, not earlier than five years from the approval
The plaintiff failed in this regard, hence … the Municipality,
of this Decree, if the President shall find the authority to be self-
exercising its power to assess and collect taxes on real properties
sustaining and financially capable to pay such tax after providing
within its jurisdiction, did the right thing, that is, to schedule the
for debt service requirements of the authority and its projected
NFPC properties for public auction. Furthermore, while the
capital and operating expenditures.9
plaintiff is insisting that the NFPC properties are owned by the
Republic of the Philippines, and is therefore exempt from payment
of real estate taxes, yet it admitted that there are those lessees who Meanwhile, harbor operations at the Navotas Fishing Port
leased portion[s] of the complex, and [it was] even willing to Complex (NFPC) commenced on January 15, 1997 while the
submit [a] list of these lessees … for proper tax assessments. market operation started on April 3, 1977.

... On February 8, 1982, P.D. No. 977 was amended by Executive


Order No. 772. Insofar as material to the case at bar, the salient
features of the amendments introduced by the E.O. are:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the defendant [public respondent Municipality of
Navotas] and against the plaintiff, ordering: (a) The creation of the Philippine Fisheries Development Authority
(PFDA) … to replace the Philippine Fish Marketing Authority
(PFMA).
1. The DISMISSAL of this case;

...
2. The preliminary injunction previously issued in this
case DISSOLVED; and
(b) The capitalization of the PFDA has included the Navotas
Fishing Port Complex (NFPC).
3. The plaintiff to pay the defendant [public respondent]
Municipality the sum of P13,767.00 as actual damages.
...
SO ORDERED.3
(c) The NFPC has been transferred to the exclusive jurisdiction,
control, administration, and supervision of the PFDA.
The CA affirmed the ruling of the RTC in a Decision dated July 19, 2001, the
pertinent portions of which read:
...
The thrust of appellant PFDA’s arguments has shoved to the fore
the fact that the 67-hectare land on which the NFPC – Navotas There can, therefore, [be] no escaping the conclusion that the
Fishing Port Complex – stands was reclaimed from the sea which appellant PFDA became the owner of the Navotas Fishing Port
explains why it was bounded on the North by the Manila Bay, on Complex as of February 8, 1982. It cannot be any sooner because
the East by Roxas Boulevard, on the South by the Manila Bay and under P.D. No. 977, the NFPC was not made part of the capital of
on the West, by the breakwater. Even the Municipality’s counsel, the Philippine Fish Marketing Authority (PFMA), PFDA’s
Atty. Victorino Landas; Assessor, Arturo Coronel; and Treasurer, predecessor, as only the Navotas Fish Landing was made part of
Florante Barredo have admitted that much, as pointed out by such capital while the Navotas Fishing Port and Fish Market were
PFDA.4 Such being the origin of the land, its ownership by the transferred merely to the "exclusive jurisdiction, control,
State as property of public dominion5 can hardly be disputed. administration, and supervision" of the PFMA. It was not then
altogether clear if the Navotas Fishing Port Complex (NFPC) was
conveyed to the PFMA.
The "reclaimed land; breakwaters; piers; wharves and quaywalls;
and, fish market building forming part of the Navotas Fish Port"
were furthermore certified by the Undersecretary of Public Works ...
and Highways6 as belonging to the national government since they
were built using the proceeds of the loan agreement entered into by
and between the Republic of the Philippines and the Asian Indeed, it is quite true that a property continues to be part of the
Development Bank on December 12, 1971.7 public domain, and not available for alienation, private
appropriation or ownership, until it is withdrawn from being such
by the Government through the Executive Department or the
On August 11, 1976, the Philippine Fish Marketing Authority Legislative,10 and that it is not for the President to convey valuable
(PFMA) was created as a body corporate by P.D. No. 977 to carry real property of the Government on his own sole will as any such
out – conveyance requires executive and legislative concurrence.11

... the policy of the Government to promote the development of the But the stark reality is that at the time E.O. No, 772 was issued on
fishing industry and improve efficiency in the handling, February 8, 1982, President Marcos was exercising both executive

78
and legislative powers.12 Hence, his conveyance of the NFPC to Local government units, pursuant to the fiscal autonomy granted by the
form part of the capital of PFDA cannot but be valid. provisions of Republic Act No. 7160 or the 1991 Local Government Code,
can impose realty taxes on juridical persons19 subject to the limitations
enumerated in Section 133 of the Code:
The fact that the PFDA has up to now no certificate of title to the
NFPC nor has the PFDA declared it for tax purposes is of no
consequence. Such a certificate is merely an evidence of ownership SEC. 133. Common Limitations on the Taxing Power of Local
and not the title itself,13 while a tax declaration does not prove nor Government Units. – Unless otherwise provided herein, the
disprove ownership. What is significant is that the PFDA has exercise of the taxing powers of provinces, cities, municipalities,
openly declared and represented that it "owns, maintains and and barangays shall not extend to the levy of the following:
operates" the NFPC when it leased a portion thereof to the Frabelle
Fishing Corporation on March 13, 1989.
...

All told, the PFDA being the owner of the NFPC beginning
(o) taxes, fees, charges of any kind on the national government, its
February 8, 1982 is liable for the realty taxes due thereon, its tax
agencies and instrumentalities, and local government units.
exemption being only from the payment of income tax.14

Nonetheless, the above exemption does not apply when the beneficial use of
WHEREFORE, the appealed decision is AFFIRMED, without
the government property has been granted to a taxable person. Section 234 (a)
pronouncement as to costs.
of the Code states that real property owned by the Republic of the Philippines
or any of its political subdivisions is exempted from payment of the real
SO ORDERED.15 property tax "except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person."
Petitioner filed a motion for reconsideration but the same was denied by the
CA. Thus, as a rule, petitioner PFDA, being an instrumentality 20 of the national
government, is exempt from real property tax but the exemption does not
extend to the portions of the NFPC that were leased to taxable or private
Petitioner now raises the following arguments:
persons and entities for their beneficial use.

One, the CA acknowledged that the property in question is a reclaimed land.


This is in consonance with the ruling in  Philippine Fisheries Development
As such, it is a property of public dominion (Art. 420, Civil Code) and is
Authority v. Court of Appeals21 where this Court held that:
owned by the State. Notwithstanding this, the CA erroneously ruled that the
government had validly transferred ownership of the land to PFDA in 1982
when P.D. No. 977 was amended by E.O. No. 772 by virtue of which the On the basis of the parameters set in the MIAA [Manila
property became part of the assets of PFDA (Sec. 5 of E.O. No. 772); International Airport Authority v. Court of Appeals] 22 case, the
Authority should be classified as an instrumentality of the national
government. As such, it is generally exempt from payment of real
Two, as a reclaimed land, the port complex should be considered a reserved
property tax, except those portions which have been leased to
land. In NDC v. Cebu City,16 the Supreme Court held that a reserved land is a
private entities.
public land that has been withheld or kept back from sale or disposition. The
land remains an absolute property of the government. As its title remains with
the State, the reserved land is tax exempt; In the MIAA  case, petitioner Philippine Fisheries Development
Authority was cited as among the instrumentalities of the national
government …23
Three, in Government v. Cabangis17 and Lampria v. Director of Lands,18 this
Court declared that the land reclaimed from the sea, as a result of the
construction by the government of a breakwater fronting the place where it is Indeed, the Authority is not a GOCC 24 but an instrumentality of the
situated, belongs to the State in accordance with Article 5 of the Law of government. The Authority has a capital stock but it is not divided
Waters of 1866; into shares of stocks.25 Also, it has no stockholders or voting
shares. Hence, it is not a stock corporation. Neither it is a non-
stock corporation because it has no members.
Four, petitioner merely operates the area or the NFPC complex in favor of the
Republic of the Philippines. Section 4.A of P.D. No. 977, as amended by E.O.
No. 772, provides that PFDA shall: ...

[M]anage, administer, operate, improve and modernize, coordinate The real property tax assessments issued by the City of Iloilo
and otherwise govern the activities, operation and facilities in the should be upheld only with respect to the portions leased to private
fishing ports, markets and landings that may hereinafter be placed persons. In case the Authority fails to pay the real property taxes
under, or transferred to the Authority, and such other fish markets, due thereon, said portions cannot be sold at public auction to
fishing ports/harbors and infrastructure facilities as may be satisfy the tax delinquency.
established under this Decree; to investigate, prepare, adopt,
implement and execute a comprehensive plan for the overall
...
development of fishing port and market complexes and update
such plan as may be necessary from time to time; to construct or
authorize the construction in the land area under its jurisdiction, of The port built by the State in the Iloilo fishing complex is a
infrastructure facilities, factory buildings, warehouses, cold storage property of public dominion and cannot therefore be sold at public
and ice plants, and other structures related to the fishing industry or auction. Article 420 of the Civil Code provides:
necessary and useful in the conduct of its business or in the
attainment of the purpose and objectives of this Decree; to acquire,
ARTICLE 420. The following things are property of
hold and dispose real and personal property in the exercise of its
public dominion:
functions and powers.

(1) Those intended for public use, such as roads,


Lastly, the NFPC property is intended for public use and public service. As
canals, rivers, torrents, ports and bridges constructed
such, it is owned by the State, hence, exempt from real property tax.
by the State, banks, shores, roadsteads, and others of
similar character;
The issue is whether petitioner is liable to pay real property tax.
79
(2) Those which belong to the State, without being for The Facts
public use, and are intended for some public
service or for the development of national wealth.
The facts as found by the CBAA are as follows:

The Iloilo [F]ishing [P]ort [Complex/IFPC] which was constructed


The records show that the Lucena Fishing Port Complex (LFPC) is one of the
by the State for public use and/or public service falls within the
fishery infrastructure projects undertaken by the National Government under
term "port" in the aforecited provision. Being a property of public
the Nationwide Fish Port-Package. Located at Barangay Dalahican, Lucena
dominion the same cannot be subject to execution or foreclosure
City, the fish port was constructed on a reclaimed land with an area of 8.7
sale.26 … Whether there are improvements in the fishing port
hectares more or less, at a total cost of PHP 296,764,618.77 financed through
complex that should not be construed to be embraced within the
a loan (L/A PH-25 and 51) from the Overseas Economic Cooperation Fund
term ‘port’ involves evidentiary matters that cannot be addressed
(OECF) of Japan, dated November 9, 1978 and May 31, 1978, respectively.
in the present case. As for now, considering that the Authority is a
national government instrumentality, any doubt on whether the
entire IFPC may be levied upon to satisfy the tax delinquency The Philippine Fisheries Development Authority (PFDA) was created by
should be resolved against the City of Iloilo. virtue of P.D. 977 as amended by E.O. 772, with functions and powers to
(m)anage, operate, and develop the Navotas Fishing Port Complex and such
other fishing port complexes that may be established by the Authority.
Similarly, for the same reason, the NFPC cannot be sold at public auction in
Pursuant thereto, Petitioner-Appellant PFDA took over the management and
satisfaction of the tax delinquency assessments made by the Municipality of
operation of LFPC in February 1992.
Navotas on the entire complex.

On October 26, 1999, in a letter addressed to PFDA, the City Government of


Additionally, the land on which the NFPC property sits is a reclaimed land,
Lucena demanded payment of realty taxes on the LFPC property for the
which belongs to the State. In Chavez v. Public Estates Authority,27 the Court
period from 1993 to 1999 in the total amount of P39,397,880.00. This was
declared that reclaimed lands are lands of the public domain and cannot,
received by PFDA on November 24, 1999.
without Congressional fiat, be subject of a sale, public or private. 28

On October 17, 2000 another demand letter was sent by the Government of
In light of the above, petitioner is only liable to pay the amount
Lucena City on the same LFPC property, this time in the amount of
of P62,841,947.79 representing the total taxes due as of December 31, 2001
P45,660,080.00 covering the period from 1993 to 2000.
from PFDA-owned properties that were leased, as shown in the Summary of
Realty Taxes Due Properties Owned and/or Managed by PFDA as per Realty
Tax Order of Payment dated September 16, 2002.29 On December 18, 2000 Petitioner-Appellant filed its Appeal before the Local
Board of Assessment Appeals of Lucena City, which was dismissed for lack
of merit. On November 6, 2001 Petitioner-Appellant filed its motion for
WHEREFORE, the petition is GRANTED. The Decision and Resolution of
reconsideration; this was denied by the Appellee Local Board on December
the Court of Appeals, dated July 19, 2001 and September 19, 2001,
10, 2001.3
respectively, in CA-G.R. CV No. 42472 are SET ASIDE. The Realty Tax
Order of Payment issued by respondent Municipality of Navotas on
September 16, 2002 is declared VOID EXCEPT as to the amount PFDA appealed to the CBAA. In its Decision dated 5 October 2005, the
of P62,841,947.79 representing the total taxes due as of December 31, 2001 CBAA dismissed the appeal for lack of merit. The CBAA ruled:
on the properties leased by petitioner to private parties. Respondent
Municipality of Navotas is DIRECTED to refrain from levying on the
Ownership of LFPC however has, before hand, been handed over to the
Navotas Fishing Port Complex (NFPC) to satisfy the payment of the real
PFDA, as provided for under Sec. 11 of P.D. No. 977, as amended, and
property tax delinquency.
declared under the MCIAA case [Mactan Cebu International Airport
Authority v. Marcos, G.R. No. 120082, 11 September 1996, 261 SCRA 667].
No costs. The allegations therefore that PFDA is not the beneficial user of LFPC and
not a taxable person are rendered moot and academic by such ownership of
PFDA over LFPC.
SO ORDERED.

xxx
G.R. No. 178030               December 15, 2010

PFDA’s Charter, P.D. 977, provided for exemption from income tax under
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY
Par. 2, Sec. 10 thereof: "(t)he Authority shall be exempted from the payment
(PFDA), Petitioner,
of income tax". Nothing was said however about PFDA’s exemption from
vs.
payment of real property tax: PFDA therefore was not to lay claim for realty
CENTRAL BOARD OF ASSESSMENT APPEALS, LOCAL BOARD
tax exemption on its Fishing Port Complexes. Reading Sec. 40 of P.D. 464
OF ASSESSMENT APPEALS OF LUCENA CITY, CITY OF LUCENA,
and Sec. 234 of R.A. 7160 however, provided such ground: LFPC is owned
LUCENA CITY ASSESSOR AND LUCENA CITY
by the Republic of the Philippines, PFDA is only tasked to manage, operate,
TREASURER, Respondents.
and develop the same. Hence, LFPC is exempted from payment of realty tax.

DECISION
xxx

CARPIO, J.:
The ownership of LFPC as passed on by the Republic of the Philippines to
PFDA is bourne by Direct evidence: P.D. 977, as amended (supra). Therefore,
The Case Petitioner-Appellant’s claim for realty tax exemption on LFPC is untenable.

This petition for review1 assails the 9 May 2007 Decision 2 of the Court of Tax WHEREFORE, for all of the foregoing, the herein Appeal is hereby dismissed
Appeals in C.T.A. EB No. 193, affirming the 5 October 2005 Decision of the for lack of merit.
Central Board of Assessment Appeals (CBAA) in CBAA Case No. L-33. The
CBAA dismissed the appeal of petitioner Philippine Fisheries Development
SO ORDERED.4
Authority (PFDA) from the Decision of the Local Board of Assessment
Appeals (LBAA) of Lucena City, ordering PFDA to pay the real property
taxes imposed by the City Government of Lucena on the Lucena Fishing Port
Complex.
80
PFDA moved for reconsideration, which the CBAA denied in its Resolution Except as provided herein, any exemption from payment of real property tax
dated 7 June 2006.5 On appeal, the Court of Tax Appeals denied PFDA’s previously granted to, or presently enjoyed by, all persons, whether natural or
petition for review and affirmed the 5 October 2005 Decision of the CBAA. juridical, including all government-owned or -controlled corporations are
hereby withdrawn upon the effectivity of this Code.
Hence, this petition for review.
The Court of Tax Appeals held that as a government-owned or controlled
corporation, PFDA is subject to real property tax imposed by local
The Ruling of the Court of Tax Appeals
government units having jurisdiction over its real properties pursuant to
Section 232 of the Local Government Code. According to the Court of Tax
The Court of Tax Appeals held that PFDA is a government-owned or Appeals, Section 193 of the Local Government Code withdrew all tax
controlled corporation, and is therefore subject to the real property tax exemptions granted to government-owned or controlled corporations.
imposed by local government units pursuant to Section 232 in relation to Furthermore, Section 234 of the Local Government Code explicitly provides
Sections 193 and 234 of the Local Government Code. Furthermore, the Court that any exemption from payment of real property tax granted to government-
of Tax Appeals ruled that PFDA failed to prove that it is exempt from real owned or controlled corporations have already been withdrawn upon the
property tax pursuant to Section 234 of the Local Government Code or any of effectivity of the Local Government Code.
its provisions.
The ruling of the Court of Tax Appeals is anchored on the wrong premise that
The Issue the PFDA is a government-owned or controlled corporation. On the contrary,
this Court has already ruled that the PFDA is a government instrumentality
and not a government-owned or controlled corporation.
The sole issue raised in this petition is whether PFDA is liable for the real
property tax assessed on the Lucena Fishing Port Complex.
In the 2007 case of Philippine Fisheries Development Authority v. Court of
Appeals,6 the Court resolved the issue of whether the PFDA is a government-
The Ruling of the Court owned or controlled corporation or an instrumentality of the national
government. In that case, the City of Iloilo assessed real property taxes on the
The petition is meritorious. Iloilo Fishing Port Complex (IFPC), which was managed and operated by
PFDA. The Court held that PFDA is an instrumentality of the government and
is thus exempt from the payment of real property tax, thus:
In ruling that PFDA is not exempt from paying real property tax, the Court of
Tax Appeals cited Sections 193, 232, and 234 of the Local Government Code
which read: The Court rules that the Authority [PFDA] is not a GOCC but an
instrumentality of the national government which is generally exempt
from payment of real property tax. However, said exemption does not
Section 193. Withdrawal of Tax Exemption Privileges. ‒ Unless otherwise apply to the portions of the IFPC which the Authority leased to private
provided in this Code, tax exemptions or incentives granted to, or presently entities. With respect to these properties, the Authority is liable to pay
enjoyed by all persons, whether natural or juridical, including government- property tax. Nonetheless, the IFPC, being a property of public dominion
owned or -controlled corporations, except local water districts, cooperatives cannot be sold at public auction to satisfy the tax delinquency.
duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code. xxx

Section 232. Power to Levy Real Property Tax. ‒ A province or city or a Indeed, the Authority is not a GOCC but an instrumentality of the
municipality within the Metropolitan Manila Area may levy an annual ad government. The Authority has a capital stock but it is not divided into shares
valorem tax on real property such as land, building, machinery, and other of stocks. Also, it has no stockholders or voting shares. Hence it is not a stock
improvement not hereinafter specifically exempted. corporation. Neither is it a non-stock corporation because it has no members.

Section 234. Exemptions from Real Property Tax. ‒ The following are The Authority is actually a national government instrumentality which is
exempted from payment of the real property tax: defined as an agency of the national government, not integrated within the
department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds,
(a) Real property owned by the Republic of the Philippines or any and enjoying operational autonomy, usually through a charter. When the law
of its political subdivision except when the beneficial use thereof vests in a government instrumentality corporate powers, the instrumentality
has been granted, for consideration or otherwise, to a taxable does not become a corporation. Unless the government instrumentality is
person; organized as a stock or non-stock corporation, it remains a government
instrumentality exercising not only governmental but also corporate
(b) Charitable institutions, churches, parsonages or convents powers.7 (Emphasis supplied)1avvphi1
appurtenant thereto, mosques, nonprofit or religious cemeteries
and all lands, buildings and improvements actually, directly, and This ruling was affirmed by the Court in a subsequent PFDA case involving
exclusively used for religious, charitable or educational purposes; the Navotas Fishing Port Complex, which is also managed and operated by
the PFDA. In consonance with the previous ruling, the Court held in the
(c) All machineries and equipment that are actually, directly and subsequent PFDA case that the PFDA is a government instrumentality not
exclusively used by local water districts and government-owned or subject to real property tax except those portions of the Navotas Fishing Port
-controlled corporations engaged in the supply and distribution of Complex that were leased to taxable or private persons and entities for their
water and/or generation and transmission of electric power; beneficial use.8

(d) All real property owned by duly registered cooperatives as Similarly, we hold that as a government instrumentality, the PFDA is exempt
provided for under R.A. No. 6938; and from real property tax imposed on the Lucena Fishing Port Complex, except
those portions which are leased to private persons or entities.
(e) Machinery and equipment used for pollution control and
environmental protection. The exercise of the taxing power of local government units is subject to the
limitations enumerated in Section 133 of the Local Government Code. 9 Under
Section 133(o)10 of the Local Government Code, local government units have
no power to tax instrumentalities of the national government like the PFDA.

81
Thus, PFDA is not liable to pay real property tax assessed by the Office of the Petitioner Manila International Airport Authority (MIAA) operates and
City Treasurer of Lucena City on the Lucena Fishing Port Complex, except administers the Ninoy Aquino International Airport (NAIA) Complex under
those portions which are leased to private persons or entities. Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter
of the Manila International Airport Authority. EO 903 was issued on 21 July
1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of EO
Besides, the Lucena Fishing Port Complex is a property of public dominion
903, approximately 600 hectares of land, including the runways, the airport
intended for public use, and is therefore exempt from real property tax under
tower, and other airport buildings, were transferred to MIAA. The NAIA
Section 234(a)11 of the Local Government Code. Properties of public
Complex is located along the border between Pasay City and Parañaque City.
dominion are owned by the State or the Republic of the Philippines. 12 Thus,
Article 420 of the Civil Code provides:
On 28 August 2001, MIAA received Final Notices of Real Property Tax
Delinquency from the City of Pasay for the taxable years 1992 to 2001.
Art. 420. The following things are property of public dominion:
MIAA’s real property tax delinquency for its real properties located in NAIA
Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is
(1) Those intended for public use, such as roads, canals, rivers, tabulated as follows:
torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
On 24 August 2001, the City of Pasay, through its City Treasurer, issued
notices of levy and warrants of levy for the NAIA Pasay properties. MIAA
(2) Those which belong to the State, without being for public use, received the notices and warrants of levy on 28 August 2001. Thereafter, the
and are intended for some public service or for the development City Mayor of Pasay threatened to sell at public auction the NAIA Pasay
of the national wealth. (Emphasis supplied) properties if the delinquent real property taxes remain unpaid.

The Lucena Fishing Port Complex, which is one of the major infrastructure On 29 October 2001, MIAA filed with the Court of Appeals a petition for
projects undertaken by the National Government under the Nationwide prohibition and injunction with prayer for preliminary injunction or temporary
Fishing Ports Package, is devoted for public use and falls within the term restraining order. The petition sought to enjoin the City of Pasay from
"ports." The Lucena Fishing Port Complex "serves as PFDA’s commitment to imposing real property taxes on, levying against, and auctioning for public
continuously provide post-harvest infrastructure support to the fishing sale the NAIA Pasay properties.
industry, especially in areas where productivity among the various players in
the fishing industry need to be enhanced."13 As property of public dominion,
On 30 October 2002, the Court of Appeals dismissed the petition and upheld
the Lucena Fishing Port Complex is owned by the Republic of the Philippines
the power of the City of Pasay to impose and collect realty taxes on the NAIA
and thus exempt from real estate tax.
Pasay properties. MIAA filed a motion for reconsideration, which the Court of
Appeals denied. Hence, this petition.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision
dated 9 May 2007 of the Court of Tax Appeals in C.T.A. EB No. 193.
The Court of Appeals’ Ruling
We DECLARE the Lucena Fishing Port Complex EXEMPT from real
property tax imposed by the City of Lucena. We declare VOID all the real
property tax assessments issued by the City of Lucena on the Lucena Fishing The Court of Appeals held that Sections 193 and 234 of Republic Act No.
Port Complex managed by Philippine Fisheries Development 7160 or the Local Government Code, which took effect on 1 January 1992,
Authority, EXCEPT for the portions that the Philippine Fisheries withdrew the exemption from payment of real property taxes granted to
Development Authority has leased to private parties. natural or juridical persons, including government-owned or controlled
corporations, except local water districts, cooperatives duly registered under
Republic Act No. 6938, non-stock and non-profit hospitals and educational
SO ORDERED.
institutions. Since MIAA is a government-owned corporation, it follows that
its tax exemption under Section 21 of EO 903 has been withdrawn upon the
effectivity of the Local Government Code.

The Issue

The issue raised in this petition is whether the NAIA Pasay properties of
MIAA are exempt from real property tax.

The Court’s Ruling

G.R. No. 163072               April 2, 2009


The petition is meritorious.

MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner,


In ruling that MIAA is not exempt from paying real property tax, the Court of
vs.
Appeals cited Sections 193 and 234 of the Local Government Code which
CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY,
read:
CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY
ASSESSOR OF PASAY, Respondents.
SECTION 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently
DECISION
enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives
CARPIO, J.: duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code.
This is a petition for review on certiorari1 of the Decision2 dated 30 October
2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-
G.R. SP No. 67416. SECTION 234. Exemptions from Real Property Tax. – The following are
exempted from payment of the real property tax:
The Facts

82
(a) Real property owned by the Republic of the Philippines or any (2) Those which belong to the State, without being for public use,
of its political subdivisions except when the beneficial use thereof and are intended for some public service or for the development
has been granted, for consideration or otherwise to a taxable of the national wealth.
person;
The term "ports x x x constructed by the State" includes airports and seaports.
(b) Charitable institutions, churches, parsonages or convents The Airport Lands and Buildings of MIAA are intended for public use, and at
appurtenant thereto, mosques, non-profit or religious cemeteries the very least intended for public service. Whether intended for public use or
and all lands, buildings and improvements actually, directly, and public service, the Airport Lands and Buildings are properties of public
exclusively used for religious, charitable or educational purposes; dominion. As properties of public dominion, the Airport Lands and Buildings
are owned by the Republic and thus exempt from real estate tax under Section
234(a) of the Local Government Code.7 (Emphasis in the original)
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government owned or
controlled corporations engaged in the supply and distribution of The definition of "instrumentality"  under Section 2(10) of the Introductory
water and/or generation and transmission of electric power; Provisions of the Administrative Code of 1987 uses the phrase "includes x x x
government-owned or controlled corporations" which means that a
government "instrumentality" may or may not be a "government-owned or
(d) All real property owned by duly registered cooperatives as
controlled corporation." Obviously, the term government "instrumentality"
provided for under R.A. No. 6938; and
is broader than the term "government-owned or controlled corporation."
Section 2(10) provides:
(e) Machinery and equipment used for pollution control and
environment protection.
SEC. 2. General Terms Defined.– x x x

Except as provided herein, any exemption from payment of real property tax
(10) Instrumentality refers to any agency of the national Government, not
previously granted to, or presently enjoyed by, all persons, whether natural or
integrated within the department framework, vested with special functions or
juridical, including all government-owned or controlled corporations are
jurisdiction by law, endowed with some if not all corporate powers,
hereby withdrawn upon the effectivity of this Code.
administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered
The Court of Appeals held that as a government-owned corporation, MIAA’s institutions and government-owned or controlled corporations.
tax exemption under Section 21 of EO 903 has already been withdrawn upon
the effectivity of the Local Government Code in 1992.
The term "government-owned or controlled corporation" has a separate
definition under Section 2(13)8 of the Introductory Provisions of the
In Manila International Airport Authority v. Court of Appeals6 (2006 MIAA Administrative Code of 1987:
case), this Court already resolved the issue of whether the airport lands and
buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA
SEC. 2. General Terms Defined.– x x x
case originated from a petition for prohibition and injunction which MIAA
filed with the Court of Appeals, seeking to restrain the City of Parañaque from
imposing real property tax on, levying against, and auctioning for public sale (13) Government-owned or controlled corporation refers to any agency
the airport lands and buildings located in Parañaque City. The only difference organized as a stock or non-stock corporation, vested with functions relating
between the 2006 MIAA case and this case is that the 2006 MIAA case to public needs whether governmental or proprietary in nature, and owned by
involved airport lands and buildings located in Parañaque City while this case the Government directly or through its instrumentalities either wholly, or,
involved airport lands and buildings located in Pasay City. The 2006 MIAA where applicable as in the case of stock corporations, to the extent of at least
case and this case raised the same threshold issue: whether the local fifty-one (51) percent of its capital stock: Provided, That government-owned
government can impose real property tax on the airport lands, consisting or controlled corporations may further be categorized by the department of
mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 Budget, the Civil Service Commission, and the Commission on Audit for the
MIAA case, this Court held: purpose of the exercise and discharge of their respective powers, functions
and responsibilities with respect to such corporations.
To summarize, MIAA is not a government-owned or controlled corporation
under Section 2(13) of the Introductory Provisions of the Administrative Code The fact that two terms have separate definitions means that while a
because it is not organized as a stock or non-stock corporation. Neither is government "instrumentality" may include a "government-owned or
MIAA a government-owned or controlled corporation under Section 16, controlled corporation," there may be a government "instrumentality" that will
Article XII of the 1987 Constitution because MIAA is not required to meet the not qualify as a "government-owned or controlled corporation."
test of economic viability. MIAA is a government instrumentality vested with
corporate powers and performing essential public services pursuant to Section
A close scrutiny of the definition of "government-owned or controlled
2(10) of the Introductory Provisions of the Administrative Code. As a
corporation" in Section 2(13) will show that MIAA would not fall under such
government instrumentality, MIAA is not subject to any kind of tax by local
definition. MIAA is a government "instrumentality" that does not qualify
governments under Section 133(o) of the Local Government Code. The
as a "government-owned or controlled corporation." As explained in the
exception to the exemption in Section 234(a) does not apply to MIAA because
2006 MIAA case:
MIAA is not a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property owned by the
Republic is given to a taxable entity. A government-owned or controlled corporation must be "organized as a stock
or non-stock corporation." MIAA is not organized as a stock or non-stock
corporation. MIAA is not a stock corporation because it has no capital stock
Finally, the Airport Lands and Buildings of MIAA are properties devoted to
divided into shares. MIAA has no stockholders or voting shares. x x x
public use and thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides: Section 3 of the Corporation Code defines a stock corporation as one whose
"capital stock is divided into shares and x x x authorized to distribute to the
holders of such shares dividends x x x." MIAA has capital but it is not
Art. 420. The following things are property of public dominion:
divided into shares of stock. MIAA has no stockholders or voting shares.
Hence, MIAA is not a stock corporation.
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks,
xxx
shores, roadsteads, and others of similar character;

83
MIAA is also not a non-stock corporation because it has no members. Section G.R. No. 185023               August 24, 2011
87 of the Corporation Code defines a non-stock corporation as "one where no
part of its income is distributable as dividends to its members, trustees or
CITY OF PASIG, REPRESENTED BY THE CITY TREASURER and
officers." A non-stock corporation must have members. Even if we assume
THE CITY ASSESSOR, Petitioner,
that the Government is considered as the sole member of MIAA, this will not
vs.
make MIAA a non-stock corporation. Non-stock corporations cannot
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE
distribute any part of their income to their members. Section 11 of the MIAA
PRESIDENTIAL COMMISSION ON GOOD
Charter mandates MIAA to remit 20% of its annual gross operating income to
GOVERNMENT, Respondent.
the National Treasury. This prevents MIAA from qualifying as a non-stock
corporation.
DECISION
Section 88 of the Corporation Code provides that non-stock corporations are
"organized for charitable, religious, educational, professional, cultural, CARPIO, J.:
recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like trade, industry, agriculture and like chambers." MIAA is not
The Case
organized for any of these purposes. MIAA, a public utility, is organized to
operate an international and domestic airport for public use.
This is a petition1 for review on certiorari under Rule 45 of the Rules of Court.
The petition challenges the 17 October 2008 Decision 2 of the Court of
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not
Appeals in CA-G.R. SP No. 97498, affirming the 6 November 2006
qualify as a government-owned or controlled corporation. What then is the
Decision3 of the Regional Trial Court (RTC), National Capital Judicial
legal status of MIAA within the National Government?
Region, Pasig City, Branch 155, in SCA No. 2901.

MIAA is a government instrumentality vested with corporate powers to


The Facts
perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with
corporate powers. x x x Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of
land, with a total area of 18.4891 hectares, situated in Pasig City. The
properties are covered by Transfer Certificate of Title (TCT) Nos. 337158 and
When the law vests in a government instrumentality corporate powers, the
469702 and Tax Declaration Nos. E-030-01185 and E-030-01186 under the
instrumentality does not become a corporation. Unless the government
name of MPLDC. Portions of the properties are leased to different business
instrumentality is organized as a stock or non-stock corporation, it remains a
establishments.
government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of eminent
domain, police authority and the levying of fees and charges. At the same In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos),
time, MIAA exercises "all the powers of a corporation under the Corporation voluntarily surrendered MPLDC to the Republic of the Philippines.
Law, insofar as these powers are not inconsistent with the provisions of this
Executive Order."9
On 30 September 2002, the Pasig City Assessor’s Office sent MPLDC two
notices of tax delinquency for its failure to pay real property tax on the
Thus, MIAA is not a government-owned or controlled corporation but a properties for the period 1979 to 2001 totaling ₱256,858,555.86. In a letter
government instrumentality which is exempt from any kind of tax from the dated 29 October 2002, Independent Realty Corporation (IRC) President
local governments. Indeed, the exercise of the taxing power of local Ernesto R. Jalandoni (Jalandoni) and Treasurer Rosario Razon informed the
government units is subject to the limitations enumerated in Section 133 of Pasig City Treasurer that the tax for the period 1979 to 1986 had been paid,
the Local Government Code.10 Under Section 133(o)11 of the Local and that the properties were exempt from tax beginning 1987.
Government Code, local government units have no power to tax
instrumentalities of the national government like the MIAA. Hence, MIAA is
not liable to pay real property tax for the NAIA Pasay properties. In letters dated 10 July 2003 and 8 January 2004, the Pasig City Treasurer
informed MPLDC and IRC that the properties were not exempt from tax. In a
letter dated 16 February 2004, MPLDC General Manager Antonio Merelos
Furthermore, the airport lands and buildings of MIAA are properties of public (Merelos) and Jalandoni again informed the Pasig City Treasurer that the
dominion intended for public use, and as such are exempt from real property properties were exempt from tax. In a letter dated 11 March 2004, the Pasig
tax under Section 234(a) of the Local Government Code. However, under the City Treasurer again informed Merelos that the properties were not exempt
same provision, if MIAA leases its real property to a taxable person, the from tax.
specific property leased becomes subject to real property tax. 12 In this case,
only those portions of the NAIA Pasay properties which are leased to taxable
persons like private parties are subject to real property tax by the City of On 20 October 2005, the Pasig City Assessor’s Office sent MPLDC a notice
Pasay. of final demand for payment of tax for the period 1987 to 2005 totaling
₱389,027,814.48. On the same day, MPLDC paid ₱2,000,000 partial payment
under protest.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision
dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court
of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay On 9 November 2005, MPLDC received two warrants of levy on the
properties of the Manila International Airport Authority EXEMPT from real properties. On 1 December 2005, respondent Republic of the Philippines,
property tax imposed by the City of Pasay. We declare VOID all the real through the Presidential Commission on Good Government (PCGG), filed
property tax assessments, including the final notices of real property tax with the RTC a petition for prohibition with prayer for issuance of a
delinquencies, issued by the City of Pasay on the NAIA Pasay properties of temporary restraining order or writ of preliminary injunction to enjoin
the Manila International Airport Authority, except for the portions that the petitioner Pasig City from auctioning the properties and from collecting real
Manila International Airport Authority has leased to private parties. property tax.

No costs. On 2 December 2005, the Pasig City Treasurer offered the properties for sale
at public auction. Since there was no other bidder, Pasig City bought the
properties and was issued the corresponding certificates of sale.
SO ORDERED.
On 19 December 2005, PCGG filed with the RTC an amended petition for
certiorari, prohibition and mandamus against Pasig City. PCGG prayed that:
(1) the assessments for the payment of real property tax and penalty be

84
declared void; (2) the warrants of levy on the properties be declared void; (3) In the instant case, the taxable persons being referred to are the lessees
the public auction be declared void; (4) the issuance of certificates of sale be occupying and/or doing business therein and have beneficial use over portions
declared void; (5) Pasig City be prohibited from assessing MPLDC real within the "payanig" properties.
property tax and penalty; (6) Pasig City be prohibited from collecting real
property tax and penalty from MPLDC; (7) Pasig City be ordered to assess the
xxxx
actual occupants of the properties real property tax and penalty; and (8) Pasig
City be ordered to collect real property tax and penalty from the actual
occupants of the properties. Consequently, there can be no iota of doubt that respondent City of Pasig
abused its discretion by committing the acts sought to be annulled herein
despite knowledge of the fact that ownership over the subject properties
The RTC’s Ruling
belong to petitioner. But what is more appalling in the instant action is that
such abuse was capriciously committed by respondent City of Pasig against
In its 6 November 2006 Decision, the RTC granted the petition for certiorari, the sovereign State itself from where that atxing local government unit derives
prohibition and mandamus. The RTC held: its very existence. The spring cannot rise higher than its source.

The primordial issue to be resolved in the present case is whether or not xxxx
respondent City of Pasig, through the City Treasurer and the City Assessor,
acted with grave abuse of discretion amounting to lack or excess of
In sum, the acts of respondent in assessing real property taxes on properties
jurisdiction when it assessed, levied and sold in public auction the "payanig"
owned and controlled by the Republic of the Philippines, in collecting taxes
properties for non-payment of real property taxes.
from Mid-Pasig in lieu of the actual occupants or beneficial users of certain
portions thereof, and in auctioning said properties in favor of respondent,
However, before dwelling on the merits of the main issue, certain matters followed by the corresponding certificate of sale, are all unequivocally tainted
need to be addressed by the Court, to wit: with grave abuse of discretion amounting to lack or excess of jurisdiction.

1. Does the Court have jurisdiction over the instant petition? WHEREFORE, in the light of the foregoing, the instant Amended Petition is
hereby GRANTED.
2. Who owns the so-called "payanig" properties that were
subjected to payment of real property taxes by respondent? Accordingly, the following acts of respondent are hereby ANNULLED and
SET ASIDE.
The Court maintains that it is not precluded from assuming jurisdiction over
the instant amended petition which involves the legality of the assailed actions 1. the assessment dated September 30, 2002 for the payment of
by respondent in assessing and collecting real property tax on the properties real property taxes and penalties made by the City of Pasig on two
owned by the Republic of the Philippines. It is a jurisprudential doctrine that (2) parcels of land covered by TCT No. 337158 and TCT No.
the issue is purely legal when the authority of the respondent to assess and 469702 registered under the name of Mid-Pasig;
collect real property taxes on the subject properties is being questioned (Ty vs.
Trampe, 250 SCRA 500).
2. the warrants of levy dated November 8, 2005 issued thereon by
the City of Pasig;
xxxx
3. the subsequent public auction sale of subject properties held on
In the instant proceeding, there is no dispute that the properties are December 2, 2005 followed by the issuance of the corresponding
surrendered ill-gotten wealth of former President Marcos. As such, the same Certificate of Sale;
assumes [sic] a public character and thus belongs [sic] to the Republic of the
Philippines. x x x
FURTHER, the City of Pasig is hereby PROHIBITED from further:

xxxx
1. Assessing real property taxes and penalties charges [sic] on the
said properties;
Hence, upon the voluntary surrender by Jose Y. Campos, the controlling
owner of Mid-Pasig and Independent Realty Corporation, of the "payanig"
2. Collecting said taxes and penalty charges from the State;
properties to PCGG, a clear admission that these properties were part of the
ill-gotten wealth of former President Marcos was already evident. As such,
there was already constructive reconveyance to the State, which immediately 3. Disposing or encumbering the subject properties or any portion
placed these reconveyed properties under the control and stewardship of the thereof;
PCGG as representative of the Republic of the Philippines. Under such special
circumstance, these voluntary surrendered properties had already belonged to
FURTHER, the City of Pasig is hereby COMMANDED:
the State.

1. To return or effect the refund of the amount of Two Million


xxxx
Pesos (Php 2,000,000.00) paid under protest by Mid-Pasig Land
Development Corporation on October 20, 2005, or credit the same
Premised on the foregoing, the "payanig" properties, being part of the amount to any outstanding tax liability that said corporation may
recovered ill-gotten wealth of President Marcos, and therefore are owned by have with the City of Pasig; and
the State itself, are exempt from payment of real property taxes. It is only
when the beneficial use of said properties has been granted to a taxable person
2. To assess and collect from the actual occupants or beneficial
that the same may be subject to imposition of real property tax.
users of the subject properties, and not from the State, whatever
real property taxes and penalties that may be due on the respective
Furthermore, in real estate taxation, the unpaid tax attaches to the property and areas occupied by them.
is chargeable against the taxable person who had actual or beneficial use and
possession of it regardless of whether or not he is the owner (Testate Estate of
SO ORDERED.4
Concordia T. Lim vs. City of Manila, 182 SCRA 482).

Pasig City appealed to the Court of Appeals.

85
The Court of Appeals’ Ruling Republic Act No. 7160 or the Local Government Code of 1991, clearly sets
forth the administrative remedies available to a taxpayer or real property
owner who is not satisfied with the assessment or reasonableness of the real
In its 31 March 2008 Decision, 5 the Court of Appeals set aside the RTC’s 6
property tax sought to be collected. The Supreme Court outlined said
November 2006 Decision. The Court of Appeals held:
remedies, to wit:

We find nothing in PCGG’s petition that supports its claim regarding Pasig
Should the taxpayer/real property owner question the excessiveness or
City’s alleged grave abuse of discretion. It is undisputed that the subject
reasonableness of the assessment, Section 252 directs that the taxpayer
parcels of land are registered in the name of Mid-Pasig, a private entity.
should first pay the tax due before his protest can be entertained. There shall
Although the government, through the PCGG have [sic] sequestered Mid-
be annotated on the tax receipts the words "paid under protest." It is only
Pasig and all its assets including the subject parcels of land, the
after the taxpayer has paid the tax due that he may file a protest in writing
sequestration per se, did not operate to convert Mid-Pasig and its properties to
within thirty days from payment of the tax to the Provincial, City or Municipal
public property. "The power of the PCGG to sequester property claimed to be
Treasurer, who shall decide the protest within sixty days from receipt. In no
‘ill-gotten’ means to place or cause to be placed under its possession or
case is the local treasurer obliged to entertain the protest unless the tax due
control said property, or any building or office wherein any such property
has been paid.
and any records pertaining thereto may be found, including ‘business
enterprises and entities’ — for the purpose of preventing the destruction,
concealment or dissipation of, and otherwise conserving and preserving the If the local treasurer denies the protest or fails to act upon it within the 60-
same — until it can be determined, through appropriate judicial proceedings, day period provided for in Section 252, the taxpayer/real property owner may
whether the property was in truth ‘ill-gotten,’ i.e., acquired through or as a then appeal or directly file a verified petition with the LBAA within sixty days
result of improper or illegal use of or the conversion of funds belonging to the from denial of the protest or receipt of the notice of assessment, as provided
Government or any of its branches, instrumentalities, enterprises, banks or in Section 226 of R.A. No. 7160[.]
financial institutions, or by taking undue advantage of official position,
authority, relationship, connection or influence, resulting in unjust
And, if the taxpayer is not satisfied with the decision of the LBAA, he may
enrichment of the ostensible owner and great damage and prejudice to the
elevate the same to the CBAA, which exercises exclusive jurisdiction to hear
State." x x x As such, prior to a valid court declaration the "PCGG cannot
and decide all appeals from the decisions, orders and resolutions of the Local
perform acts of strict ownership of [sic] sequestered property. It is a mere
Boards involving contested assessments of real properties, claims for tax
conservator." In view thereof and the fact that Mid-Pasig and its properties
refund and/or tax credits or overpayments of taxes. An appeal may be taken to
have not been validly declared by the Sandiganbayan as "ill-gotten" wealth,
the CBAA by filing a notice of appeal within thirty days from receipt thereof.
the same are not yet public properties. The PCGG even admitted that the
transfer certificates of title covering the subject parcels of land in the name of
Mid-Pasig have not been cancelled due to an order of the Sandiganbayan. The From the Central Board Assessment Appeals, the dispute may then be taken to
trial court also found that the subject parcels of land are the subject of the Court of Tax Appeals by filing a verified petition for review under Rule 42
litigation between Ortigas and Company Limited Partnership and the PCGG of the Revised Rules of Court; to the Court of tax Appeals en banc; and finally
in Civil Case No. 0093 pending before the Sandiganbayan. These facts clearly to the Supreme Court via a petition for review on certiorari pursuant to Rule
show that the Sandiganbayan has not validly declared yet that the subject 45 of the Revised Rules of Court.
parcels of land are "ill-gotten" wealth. If so, they cannot be claimed yet as
properties of the State: they remain properties of a private entity. Thus, Pasig
We are not convinced with PCGG’s stance that their recourse of filing the
City through its City Assessor and City Treasurer did not act with grave abuse
petition for certiorari, prohibition and mandamus before the trial court is
of discretion when it issued real property tax assessment on the subject parcels
proper as they are questioning not merely the correctness of the tax
of land.
assessment but the actions of Pasig City, through its City Assessor and City
Treasurer, which were done in grave abuse of discretion amounting to lack or
Even admitting that the subject parcels of land are already owned by the State, excess of jurisdiction.
we still see no grave abuse of discretion on the part of Pasig City when it
issued the challenged tax assessment, for it is well settled that the test of
The well-established rule is that allegations in the complaint and the character
exemptions from taxation is the use of the property for purposes mentioned in
of the relief sought determine the nature of an action. A perusal of the petition
the Constitution. The owner of the property does not matter. Even if he is not
before the trial court plainly shows that what is actually being assailed is the
a tax-exempt entity, as long as the property is being used for religious,
correctness of the assessments made by the City Assessor of Pasig City on the
charitable or educational purposes, the property is exempt from tax.
subject parcels of land. PCGG claims, among others, that: 1) the subject
Conversely, even if the government owns the property, if the beneficial use
parcels of land are exempt from real property taxation as they are public
thereof has been granted, for consideration or otherwise, to a taxable person,
property; 2) even if the subject parcels of land are subject to tax, as the
the property is subject to tax. Here, the PCGG admitted that portions of the
beneficial use thereof was granted to private persons and entities, only the
subject properties were leased to private entities engaged in commercial
portion thereof used for commerce is subject to tax and the users thereof are
dealings. As well, the trial court found that lessees occupy different areas of
the ones liable to pay the tax; and 3) the right of Pasig City to collect the real
the subject parcels of land beginning 1992 until 2005. Therefore, considering
property taxes pertaining to 1987 to 1998 has already prescribed. These claims
that portions of the subject parcels of land are used for commercial purposes,
essentially involve questions of fact, which are improper in a petition for
the duty imposed by law to owners and administrators of real property to
certiorari, prohibition and mandamus; hence, the petition should have been
declare the same for tax purposes and the fact that the tax declarations over
brought, at the very first instance, to the Local Board Assessment Appeals,
the subject parcels of land are in the name of Mid-Pasig, again, Pasig City did
which has authority to rule on the objections of any interested party who is not
not act with grave abuse of discretion when it issued the challenged tax
satisfied with the action of the assessor. Under the doctrine of primacy of
assessment.
administrative remedies, an error in the assessment must be administratively
pursued to the exclusion of ordinary courts whose decisions would be void for
The foregoing snowball to one conclusion — the allegations in PCGG’s lack of jurisdiction.
petition imputing grave abuse of discretion on the part of Pasig City, acting
through the City Assessor and City Treasurer, in the assessment and collection
Granting that the assessor’s authority and the legality of the assessment are
of the taxes were made in order to justify the filing of the petition for
indeed an issue, the proper remedy is a suit for the refund of the real property
certiorari, prohibition and mandamus with the trial court.
tax after paying the same under protest. It must be pointed out that in order for
the trial court to resolve the instant petition, the issues of the correctness of the
The extraordinary remedies of certiorari, prohibition and mandamus may be tax assessment and collection must also necessarily be dealt with; hence, a
resorted to only when there is no other plain, available, speedy and adequate petition for certiorari, prohibition and mandamus is not the proper remedy. x x
remedy in the course of law. Where administrative remedies are available, x [T]he resolution of the issues raised in the instant case involve examination
petitions for the issuance of these peremptory writs do not lie in order to give and determination of relevant and material facts, i.e. facts relating to the
the administrative body the opportunity to decide the matter by itself correctly ownership of the subject parcels of land, the portion of the subject parcel of
and to prevent unnecessary and premature resort to courts. land used for commercial purposes and the identities of the lessees and the
users thereof. Since resolution of factual issues is not allowed in a petition for
86
certiorari, prohibition and mandamus, the trial court is precluded from The antecedent facts are stated by the Solicitor General as follows:
entertaining the petition.
xxxx
Finally, Section 252 of the R.A. No. 7160 requires payment under protest in
assailing real property tax assessment. Even an appeal shall not suspend the
"3. Sometime in the later part of August 1987, defendant Jose D. Campos, Jr.,
collection of the atx assessed without prejudice to a later adjustment pending
having been served with summons on August 5, 1987, filed with the
the outcome of the appeal. This principle is consistent with the time-honored
respondent Court an undated ‘Manifestation and Motion to Dismiss
principle that taxes are the lifeblood of the nation. But the PCGG failed to pay
Complaint with Respect to Jose D. Campos’ praying that he be removed as
the tax assessment prior to questioning it before the trial court; hence, the trial
party defendant from the complaint on the grounds that he had ‘voluntarily
court should have dismissed PCGG’s petition in line with the Supreme Court
surrendered or turned over any share in his name on [sic] any of the
pronouncement that a trial court has no jurisdiction to entertain a similar
corporations referred to, aside from disclaiming any interest, ownership or
petition absent payment under protest.
right thereon to the Government of the Republic of the Philippines’ and that
he was ‘entitled to the immunity granted by the Presidential Commission on
In conclusion and taking all the foregoing into account, we hold that the trial Good Government pursuant to Executive Order No. 14, under the
court had no jurisdiction to take cognizance and decide PCGG petition for Commission’s Resolution dated May 28, 1986 to Mr. Jose Y. Campos and his
certiorari, prohibition and mandamus; the trial court should have dismissed family’ he ‘being a member of the immediate family of Jose Y. Campos.’
the petition.6
xxxx
PCGG filed a motion for reconsideration. In its 17 October 2008 Decision, the
Court of Appeals reversed itself. The Court of Appeals held:
In the instant case, the PCGG issued a resolution dated May 28, 1986,
granting immunity from both civil and criminal prosecutions to Jose Y.
At the outset, although as a rule, administrative remedies must first be Campos and his family. The pertinent provisions of the resolution read as
exhausted before ersort to judicial action can prosper, there is a well-settled follows:
exception in cases where the controversy does not involve questions of fact
but only of law. We find that the Republic has shown a cause for the
"3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this
application of the foregoing exception. Essentially, the Republic has raised a
Commission, his voluntary surrender of the properties and assets disclosed
pure question of law — whether or not the City of Pasig has the power to
and declared by him to belong to deposed President Ferdinand E. Marcos to
impose real property tax on the subject properties, which are owned by the
the Government of the Republic of the Philippines, his full, complete and
State. It bears stressing that the Republic did not raise any question
truthful disclosures, and his commitment to pay a sum of money as
concerning the amount of the real property tax or the determination thereof.
determined by the Philippine Government, this Commission has decided and
Thus, having no plain, speedy, and adequate remedy in law, the Republic
agreed:
correctly resorted to judicial action via the petition for certiorari, prohibition,
and mandamus, to seek redress.
xxxx
We are convinced that the subject properties were not sequestered by the
government so as to amount to a deprivation of property without due process Undoubtedly, this resolution embodies a compromise agreement between the
of law; instead, they were voluntarily surrendered to the State by Campos, a PCGG on one hand and Jose Y. Campos on the other. Hence, in exchange for
self-admitted crony of the then President Marcos. The relinquishment of the the voluntary surrender of the ill-gotten properties acquired by the then
subject properties to the State as ill-gotten wealth of Marcos, as recognized by President Ferdinand E. Marcos and his family which were in Jose Campos’
the Supreme Court, makes a judicial declaration that the same were ill-gotten control, the latter and his family were given full immunity in both civil and
unnecessary. By virtue of said relinquishment, the State correctly exercised criminal prosecutions. x x x
dominion over the subject properties. Indubitably, the subject properties,
being ill-gotten wealth, belong to the State. x x x By its nature, ill-gotten
xxxx
wealth is owned by the State. As a matter of fact, the Republic continues to
exercise dominion over the subject properties.7
By virtue of the PCGG’s May 28, 1986 resolution, Jose Campos, Jr. was
given full immunity from both civil and criminal prosecutions in exchange for
Hence, the present petition.
the "full cooperation of Mr. Jose Y. Campos to this Commission, his
voluntary surrender of the properties and assets disclosed and declared by him
Issues to belong to deposed President Ferdinand E. Marcos to the Government of the
Republic of the Philippines, his full, complete and truthful disclosures, and his
commitment to pay a sum of money as determined by the Philippine
Pasig City raises as issues that the lower courts erred in granting PCGG’s
Government." In addition, Campos, Jr. had already waived and surrendered to
petition for certiorari, prohibition and mandamus and in ordering Pasig City to
the Republic his registered equity interest in the Marcos/Romualdez
assess and collect real property tax from the lessees of the properties.
corporations involved in the civil case.11

The Court’s Ruling


Even as the Republic of the Philippines is now the owner of the properties in
view of the voluntary surrender of MPLDC by its former registered owner,
The petition is partly meritorious. Campos, to the State, such transfer does not prevent a third party with a better
right from claiming such properties in the proper forum. In the meantime, the
Republic of the Philippines is the presumptive owner of the properties for
As correctly found by the RTC and the Court of Appeals, the Republic of the
taxation purposes.
Philippines owns the properties. Campos voluntarily surrendered MPLDC,
which owned the properties, to the Republic of the Philippines. In Republic of
the Philippines v. Sandiganbayan,8 the Court stated: Section 234(a) of Republic Act No. 7160 states that properties owned by the
Republic of the Philippines are exempt from real property tax "except when
the beneficial use thereof has been granted, for consideration or
x x x Jose Y. Campos, "a confessed crony of former President Ferdinand E.
otherwise, to a taxable person." Thus, the portions of the properties not
Marcos," voluntarily surrendered or turned over to the PCGG the properties,
leased to taxable entities are exempt from real estate tax while the portions of
assets and corporations he held in trust for the deposed President. Among the
the properties leased to taxable entities are subject to real estate tax. The law
corporations he surrendered were the Independent Realty Corporation and the
imposes the liability to pay real estate tax on the Republic of the Philippines
Mid-Pasig Land Development Corporation.9
for the portions of the properties leased to taxable entities. It is, of course,
assumed that the Republic of the Philippines passes on the real estate tax as
In Republic of the Philippines v. Sandiganbayan,10 the Court stated: part of the rent to the lessees.
87
In Philippine Fisheries Development Authority v. Central Board of x x x While portions of the hospital are used for the treatment of patients and
Assessment Appeals,12 the Court held: the dispensation of medical services to them, whether paying or non-paying,
other portions thereof are being leased to private individuals for their clinics
and a canteen. Further, a portion of the land is being leased to a private
In the 2007 case of Philippine Fisheries Development Authority v. Court of
individual for her business enterprise under the business name "Elliptical
Appeals, the Court resolved the issue of whether the PFDA is a government-
Orchids and Garden Center." Indeed, the petitioner’s evidence shows that it
owned or controlled corporation or an instrumentality of the national
collected ₱1,136,483.45 as rentals in 1991 and ₱1,679,999.28 for 1992 from
government. In that case, the City of Iloilo assessed real property taxes on
the said lessees.
the Iloilo Fishing Port Complex (IFPC), which was managed and
operated by PFDA. The Court held that PFDA is an instrumentality of
the government and is thus exempt from the payment of real property Accordingly, we hold that the portions of the land leased to private entities
tax, thus: as well as those parts of the hospital leased to private individuals are not
exempt from such taxes. On the other hand, the portions of the land occupied
by the hospital and portions of the hospital used for its patients, whether
The Court rules that the Authority is not a GOCC but an instrumentality
paying or non-paying, are exempt from real property taxes. 19 (Emphasis
of the national government which is generally exempt from payment of
supplied)
real property tax. However, said exemption does not apply to the portions
of the IFPC which the Authority leased to private entities. With respect to
these properties, the Authority is liable to pay property tax. Nonetheless, Article 420 of the Civil Code classifies as properties of public dominion those
the IFPC, being a property of public dominion cannot be sold at public auction that are "intended for public use, such as roads, canals, rivers, torrents, ports
to satisfy the tax delinquency. and bridges constructed by the State, banks, shores, roadsteads" and those that
"are intended for some public service or for the development of the national
wealth." Properties of public dominion are not only exempt from real estate
xxxx
tax, they are exempt from sale at public auction. In Heirs of Mario
Malabanan v. Republic,20 the Court held that, "It is clear that property of
This ruling was affirmed by the Court in a subsequent PFDA case involving public dominion, which generally includes property belonging to the State,
the Navotas Fishing Port Complex, which is also managed and operated by cannot be x x x subject of the commerce of man."21
the PFDA. In consonance with the previous ruling, the Court held in the
subsequent PFDA case that the PFDA is a government instrumentality
In Philippine Fisheries Development Authority v. Court of Appeals,22 the
not subject to real property tax except those portions of the Navotas
Court held:
Fishing Port Complex that were leased to taxable or private persons and
entities for their beneficial use.
x x x [T]he real property tax assessments issued by the City of Iloilo should be
upheld only with respect to the portions leased to private persons. In case the
Similarly, we hold that as a government instrumentality, the PFDA is exempt
Authority fails to pay the real property taxes due thereon, said portions
from real property tax imposed on the Lucena Fishing Port Complex, except
cannot be sold at public auction to satisfy the tax delinquency. In Chavez
those portions which are leased to private persons or entities. 13 (Emphasis
v. Public Estates Authority it was held that reclaimed lands are lands of the
supplied)
public dominion and cannot, without Congressional fiat, be subject of a
sale, public or private x x x.
In Government Service Insurance System v. City Treasurer of the City of
Manila,14 the Court held:
In the same vein, the port built by the State in the Iloilo fishing complex is
a property of the public dominion and cannot therefore be sold at public
x x x The tax exemption the property of the Republic or its auction. Article 420 of the Civil Code, provides:
instrumentalities carries ceases only if, as stated in Sec. 234(a) of the LGC
of 1991, "beneficial use thereof has been granted, for a consideration or
"Article 420. The following things are property of public dominion:
otherwise, to a taxable person." GSIS, as a government instrumentality, is
not a taxable juridical person under Sec. 133(o) of the LGC. GSIS,
however, lost in a sense that status with respect to the Katigbak property 1. Those intended for public use, such as roads, canals, rivers,
when it contracted its beneficial use to MHC, doubtless a taxable person. torrents, ports and bridges constructed by the State, banks, shores,
Thus, the real estate tax assessment of Php 54,826,599.37 covering 1992 to roadsteads, and others of similar character;
2002 over the subject Katigbak property is valid insofar as said tax
delinquency is concerned as assessed over said property.15 (Emphasis
2. Those which belong to the State, without being for public use,
supplied)
and are intended for some public service or for the development of
the national wealth."
In Manila International Airport Authority v. Court of Appeals,16 the Court
held:
The Iloilo fishing port which was constructed by the State for public use
and/or public service falls within the term "port" in the aforecited
x x x Section 234(a) of the Local Government Code states that real provision. Being a property of public dominion the same cannot be
property owned by the Republic loses its tax exemption only if the subject to execution or foreclosure sale. In like manner, the reclaimed land
"beneficial use thereof has been granted, for consideration or otherwise, on which the IFPC is built cannot be the object of a private or public sale
to a taxable person." MIAA, as a government instrumentality, is not a without Congressional authorization.23 (Emphasis supplied)
taxable person under Section 133(o) of the local Government Code. Thus,
even if we assume that the Republic has granted to MIAA the beneficial use
In Manila International Airport Authority,24 the Court held:
of the Airport Lands and Buildings, such fact does not make these real
properties subject to real estate tax.
x x x [T]he Airport Lands and Buildings of MIAA are properties devoted to
public use and thus are properties of public dominion. Properties of public
However, portions of the Airport Lands and Buildings that MIAA leases
dominion are owned by the State or the Republic. Article 420 of the Civil
to private entities are not exempt from real estate tax. For example, the
Code provides:
land area occupied by hangars that MIAA leases to private corporations
is subject to real estate tax. In such a case, MIAA has granted the
beneficial use of such land area for a consideration to a taxable person Art. 420. The following things are property of public dominion:
and therefore such land area is subject to real estate tax.17 (Emphasis
supplied)
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
18
In Lung Center of the Philippines v. Quezon City,  the Court held: roadsteads, and others of similar character;
88
(2) Those which belong to the State, without being for public use,
and are intended for some public service or for the development of
the national wealth.

The term "ports x x x constructed by the Sate" includes airports and seaports.
G.R. No. 161030               September 14, 2011
The Airport Lands and Buildings of MIAA are intended for public use, and at
the very least intended for public service. Whether intended for public use or
public service, the Airport Lands and Buildings are properties of public JOSE FERNANDO, JR., ZOILO FERNANDO, NORMA FERNANDO
dominion. As properties of public dominion, the the Airport lands and BANARES, ROSARIO FERNANDO TANGKENCGO, HEIRS OF
Buildings are owned by the Republic and thus exempt from real estate tax TOMAS FERNANDO, represented by ALFREDO V. FERNANDO,
under Section 234(a) of the Local Government Code. HEIRS OF GUILLERMO FERNANDO, represented by Ronnie H.
Fernando, HEIRS OF ILUMINADA FERNANDO, represented by
Benjamin Estrella and HEIRS OF GERMOGENA
xxxx
FERNANDO, Petitioners,
vs.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of LEON ACUNA, HERMOGENES FERNANDO, HEIRS OF SPOUSES
MIAA, being devoted to public use, are properties of public dominion and ANTONIO FERNANDO AND FELISA CAMACHO, represented by
thus owned by the State or the Republic of the Philippines. Article 420 HERMOGENES FERNANDO, Respondents.
specifically mentions "ports x x x constructed by the State," which includes
public airports and seaports, as properties of public dominion and owned by
DECISION
the Republic. As properties of public dominion owned by the Republic, there
is no doubt whatsoever that the Airport Lands and Buildings are expressly
exempt from real estate tax under Section 234(a) of the local Government LEONARDO-DE CASTRO, J.:
Code. This Court has also repeatedly ruled that properties of public
dominion are not subject to execution or foreclosure sale.25 (Emphasis
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
supplied)lawphi1
Civil Procedure seeking to reverse and set aside the Decision1 dated
November 24, 2003 of the Court of Appeals in CA-G.R. CV No. 75773,
In the present case, the parcels of land are not properties of public dominion entitled "Jose Fernando, Jr., et al. v. Heirs of Germogena Fernando, et al.,"
because they are not "intended for public use, such as roads, canals, rivers, which reversed and set aside the Decision 2 dated May 16, 2002 of Branch 84,
torrents, ports and bridges constructed by the State, banks, shores, Regional Trial Court (RTC) of Malolos, Bulacan in Civil Case No. 256-M-97.
roadsteads." Neither are they "intended for some public service or for the
development of the national wealth." MPLDC leases portions of the properties
At the heart of this controversy is a parcel of land covered by Original
to different business establishments. Thus, the portions of the properties
Certificate of Title (OCT) No. RO-487 (997)3 registered in the names of Jose
leased to taxable entities are not only subject to real estate tax, they can also
A. Fernando, married to Lucila Tinio, and Antonia A. Fernando, married to
be sold at public auction to satisfy the tax delinquency.
Felipe Galvez, and located in San Jose, Baliuag, Bulacan. When they died
intestate, the property remained undivided. Petitioners herein – namely, Jose
In sum, only those portions of the properties leased to taxable entities are Fernando, Jr., Zoilo Fernando, Norma Fernando Banares, Rosario Fernando
subject to real estate tax for the period of such leases. Pasig City must, Tangkencgo, the heirs of Tomas Fernando, the heirs of Guillermo Fernando,
therefore, issue to respondent new real property tax assessments covering the the heirs of Iluminada Fernando and the heirs of Germogena Fernando – are
portions of the properties leased to taxable entities. If the Republic of the the heirs and successors-in-interest of the deceased registered owners.
Philippines fails to pay the real property tax on the portions of the properties However, petitioners failed to agree on the division of the subject property
leased to taxable entities, then such portions may be sold at public auction to amongst themselves, even after compulsory conciliation before the Barangay
satisfy the tax delinquency. Lupon.

WHEREFORE, the petition is PARTIALLY GRANTED. The Court SETS Thus, petitioners, except for the heirs of Germogena Fernando, filed a
ASIDE the 17 October 2008 Decision of the Court of Appeals in CA-G.R. SP Complaint4 for partition on April 17, 1997 against the heirs of Germogena
No. 97498 and declares VOID the 30 September 2002 real property tax Fernando. In the Complaint, plaintiffs alleged, among others, that they and
assessment issued by Pasig City on the subject properties of Mid-Pasig Land defendants are common descendants and compulsory heirs of the late spouses
Development Corporation, the 8 November 2005 warrants of levy on the Jose A. Fernando and Lucila Tinio, and the late spouses Antonia A. Fernando
properties, and the 2 December 2005 auction sale. Pasig City and Felipe Galvez. They further claimed that their predecessors-in-interest
is DIRECTED to issue to respondent new real property tax assessments died intestate and without instructions as to the disposition of the property left
covering only the portions of the properties actually leased to taxable entities, by them covered by OCT No. RO-487 (997). There being no settlement, the
and only for the period of such leases. Interests and penalties on such new real heirs are asking for their rightful and lawful share because they wish to build
property tax assessment shall accrue only after receipt of such new assessment up their homes or set up their business in the respective portions that will be
by respondent. allotted to them. In sum, they prayed that the subject property be partitioned
into eight equal parts, corresponding to the hereditary interest of each group of
heirs.
SO ORDERED.

In their Answer5 filed on May 20, 1997, defendants essentially admitted all of


the allegations in the complaint. They alleged further that they are not
opposing the partition and even offered to share in the expenses that will be
incurred in the course of the proceedings.

In his Complaint in Intervention6 filed on January 12, 1998, respondent Leon


Acuna (Acuna) averred that in the Decision 7 dated November 29, 1929 of the
Cadastral Court of Baliuag, Bulacan, the portion of the property identified as
Lot 1303 was already adjudicated to: (a) Antonio Fernando, married to Felisa
Camacho; (b) spouses Jose Martinez and Gregoria Sison; (c) spouses Ignacio
de la Cruz and Salud Wisco; and (d) Jose Fernando, married to Lucila Tinio,
the petitioners’ predecessor-in-interest. He likewise claimed that in a 1930
Decision of the Cadastral Court, the portion identified as Lot 1302 was also
already adjudicated to other people as well.

89
Respondent Acuna further alleged that Salud Wisco, through her authorized over Lot 1303 is the title in the name of her ascendants and not said
attorney-in-fact, Amador W. Cruz, sold her lawful share denominated as Lot Decision.20
1303-D with an area of 3,818 square meters to Simeon P. Cunanan, 8 who in
turn sold the same piece of land to him as evidenced by a Deed of Sale. 9 He
On November 16, 2000, as previously directed by the trial court and agreed to
also belied petitioners’ assertion that the subject property has not been settled
by the parties, counsel for respondent Hermogenes prepared and submitted an
by the parties after the death of the original owners in view of the
English translation of the November 29, 1929 Decision. The same was
Decision10 dated July 30, 1980 of the Court of First Instance (CFI) of Baliuag,
admitted and marked in evidence as Exhibit "X" 21 as a common exhibit of the
Bulacan, in LRC Case No. 80-389 which ordered the Register of Deeds of
parties. The petitioners also presented Alfredo Borja, the Geodetic Engineer
Bulacan to issue the corresponding certificates of title to the claimants of the
who conducted a relocation survey of the subject property.
portion of the subject property designated as Lot 1302.11 Norma Fernando, one
of the petitioners in the instant case, even testified in LRC Case No. 80-389.
According to respondent Acuna, this circumstance betrayed bad faith on the After plaintiffs rested their case, respondent Hermogenes testified on
part of petitioners in filing the present case for partition. December 7, 2000. In his testimony, he claimed to know the plaintiffs and
defendants as they were allegedly his relatives and neighbors. He confirmed
that according to the November 29, 1929 Decision, portions of Lot 1303 was
Respondent Acuna likewise averred that the action for partition cannot
designated as Lots 1303-A, 1303-B, 1303-C and 1303-D which were
prosper since the heirs of the original owners of the subject property, namely
adjudicated to certain persons, including Jose Fernando, while the rest of Lot
Rosario, Jose Jr., Norma, Tomas, Guillermo, Leopoldo, Hermogena,
1303 was adjudicated to his parents, Antonio A. Fernando married to Felisa
Illuminada and Zoilo, all surnamed Fernando, and Lucila Tinio, purportedly
Camacho. According to respondent Hermogenes, his family’s tenant and the
had already sold their respective one-tenth (1/10) share each in the subject
latter’s children occupied the portion of Lot 1303 allotted to his (Hermogenes)
property to Ruperta Sto. Domingo Villasenor for the amount of ₱35,000.00 on
parents while the rest of Lot 1303 was occupied by the persons named in the
January 25, 1978 as evidenced by a "Kasulatan sa Bilihang Patuluyan." 12 He
said November 29, 1929 Decision. He admitted, however, that nobody among
added that he was in possession of the original copy of OCT No. RO-487
the purported possessors of Lot 1303 registered the lots assigned to them in
(997) and that he had not commenced the issuance of new titles to the
the Decision.22
subdivided lots because he was waiting for the owners of the other portions of
the subject property to bear their respective shares in the cost of titling.
On January 18, 2001, respondent Hermogenes presented a witness, Engineer
Camilo Vergara who testified that the subject land is divided into Lots 1302
Subsequently, a Motion for Intervention 13 was filed on June 23, 1998 by
and 1303 with a creek dividing the two lots known as Sapang Bayan. He also
respondent Hermogenes Fernando (Hermogenes), for himself and on behalf of
identified a Sketch Plan numbered as PSD-45657 and approved on November
the heirs of the late spouses, Antonio A. Fernando and Felisa Camacho.
11, 1955.23 During the hearing on January 30, 2001, respondent Hermogenes
According to him, in the July 30, 1980 Decision of the CFI of Bulacan, their
made an oral offer of his evidence and rested his case. On the same date,
predecessors-in-interest had already been adjudged owners of Lots 1302-A,
respondent Acuna, in lieu of his testimony, offered for the parties to simply
1302-F, 1302-G,14 1302-H and 1302-J of OCT No. RO-487 (997) and any
stipulate on the due execution and authenticity of the Deeds of Sale dated
adverse distribution of the properties would cause respondents damage and
April 6, 1979 and December 28, 1980, showing the transfer of Lot 1303-D
prejudice. He would also later claim, in his Answer-in-Intervention,15 that the
from Salud Wisco to Simeon Cunanan and subsequently to respondent Acuna.
instant case is already barred by res judicata and, should be dismissed.
When counsel for plaintiffs and defendants agreed to the stipulation, albeit
objecting to the purpose for which the deeds of sale were offered, the trial
In the interest of substantial justice, the trial court allowed the respondents to court admitted Acuna’s exhibits and Acuna rested his case.24
intervene in the case.
On February 15, 2001, plaintiffs recalled Norma Fernando as a rebuttal
The plaintiffs and defendants jointly moved to have the case submitted for witness. In her rebuttal testimony, she identified the tax declaration 25 over the
judgment on the pleadings on May 7, 1999. 16 However, the trial court denied said property in the name of Jose A. Fernando; an official receipt 26 dated
said motion in a Resolution17 dated August 23, 1999 primarily due to the October 3, 1997 issued by the Office of the Treasurer of the Municipality of
question regarding the ownership of the property to be partitioned, in light of Baliuag, Bulacan for payment of real property taxes from 1991 to 1997; and a
the intervention of respondents Acuna and Hermogenes who were claiming real property tax clearance27 dated October 6, 1997, to show that plaintiffs
legal right thereto. have allegedly been paying the real property taxes on the entire property
covered by OCT No. RO-487 (997). However, she further testified that they
were now willing to pay taxes only over the portion with an area of 44,234
In their Manifestation18 filed on April 12, 2000, petitioners affirmed their
square meters, which is included in their claim.28
execution of a Deed of Sale in favor of Ruperta Sto. Domingo Villasenor in
1978, wherein they sold to her 1,000 square meters from Lot 1303 for the sum
of ₱ 35,000.00. In a Decision dated May 16, 2002, the trial court ruled that plaintiffs and
defendants (petitioners herein) were indeed the descendants and successors-in-
interest of the registered owners, Jose A. Fernando (married to Lucila Tinio)
After the pre-trial conference, trial ensued. On September 19, 2000, petitioner
and Antonia Fernando (married to Felipe Galvez), of the property covered by
Elizabeth Alarcon testified that they (plaintiffs) are not claiming the entire
OCT No. RO-487 (997). After finding that the parties admitted that Lot 1302
property covered by OCT No. RO-487 (997) but only the area referred to as
was already distributed and titled in the names of third persons per the July
Lot 1303 and Sapang Bayan. She also admitted that Lot 1302 had already
30, 1980 Decision of the CFI of Baliuag, Bulacan the trial court proceeded to
been divided into ten (10) sublots and allocated to various owners pursuant to
rule on the allocation of Lot 1303 and Sapang Bayan.
the July 30, 1980 Decision of the CFI of Baliuag, Bulacan and these owners
already have their own titles. She likewise claimed that the entire area
consisting of Lot 1303 and Sapang Bayan is based on the subdivision plan of With respect to Lot 1303, the trial court found that the November 29, 1929
Lot 1303. She admitted that plaintiffs’ predecessor-in-interest was only Decision of the Cadastral Court, adjudicating said lot to different persons and
allocated a portion of Lot 1303 based on the said plan. However, she claimed limiting Jose Fernando’s share to Lot 1303-C, was never implemented nor
that the November 29, 1929 Decision subdividing Lot 1303 was never executed despite the lapse of more than thirty years. Thus, the said decision
implemented nor executed by the parties.19 has already prescribed and can no longer be executed. The trial court ordered
the reversion of Lot 1303 to the ownership of spouses Jose A. Fernando and
Lucila Tinio and spouses Antonia A. Fernando and Felipe Galvez under OCT
Petitioner Norma Fernando testified on October 3, 2000 that she is one of the
No. RO-487 (997) and allowed the partition of Lot 1303 among petitioners as
children of Jose A. Fernando and Lucila Tinio. She affirmed that plaintiffs
successors-in-interest of said registered owners. Excluded from the partition,
were only claiming Lot 1303 and Sapang Bayan. She also testified that
however, were the portions of the property which petitioners admitted had
Sapang Bayan was supposedly included in Lot 1302 and was previously a
been sold or transferred to Ruperta Sto. Domingo Villasenor and respondent
river until it dried up. Unlike Lot 1302, the rest of the property was
Acuna.
purportedly not distributed. She likewise averred that she is aware of a
November 29, 1929 Decision concerning the distribution of Lot 1303 issued
by the cadastral court but insisted that the basis of the claims of the petitioners As for the ownership of Sapang Bayan, the trial court found that the same had
not been alleged in the pleadings nor raised as an issue during the pre-trial
90
conference. Also, according to the trial court, the parties failed to clearly show lot be subdivided in accordance with the answers recorded in the instant
whether Sapang Bayan was previously a dry portion of either Lot 1302 or Lot cadastral record, and the sketch, Exh. "A", which is attached to the records.
1303. Neither was there any proof that Sapang Bayan was a river that just
dried up or that it was an accretion which the adjoining lots gradually received
A part or portion of the lot has been claimed by Antonio A. Fernando, of legal
from the effects of the current of water. It was likewise not established who
age, married to Felisa Camacho; another portion by the spouses Jose Martinez
were the owners of the lots adjoining Sapang Bayan. The trial court concluded
and Gregoria Sison; another portion by Antonia A. Fernando, of legal age,
that none of the parties had clearly and sufficiently established their claims
married to Felipe Galvez; another portion by Jose A. Fernando, of legal age,
over Sapang Bayan.
married to Lucila Tinio; and another portion by the spouses Ignacio de la Cruz
and Salud Wisco, both of legal age. The part claimed by the spouses Jose A.
The dispositive portion of the May 16, 2002 Decision of the trial court reads: Martinez and Gregoria Sison is Lot 1303-A of Exh. A; the part claimed by
Antonia A. Fernando is Lot 1303-B of said exhibit; the part claimed by Jose
A. Fernando is Lot 1303-C of said exhibit, and the part claimed by the spouses
WHEREFORE, all the foregoing considered, judgment is hereby rendered
Ignacio de la Cruz and Salud Wisco is Lot 1303-D of the aforementioned
ordering the reversion of Lot 1303, except the portions allotted to Acuna and
Exhibit.
Ruperta Sto. Domingo Villasenor, to the ownership of Jose Fernando and
Lucia Tinio and Antonia Fernando and Felipe Galvez under OCT No. 997 and
thereafter allowing the partition of said Lot 1303 among the plaintiffs and the The subdivision of said lot is hereby ordered, separating from the same the
defendants as successors-in-interest of Jose and Lucia as well as Antonia and portions that correspond to each of the claimants, which portions are known as
Felipe after the settlement of any inheritance tax, fees, dues and/or obligation Lots 1303-A, 1303-B, 1303-C, and 1303-D in the sketch, Exh. "A", and once
chargeable against their estate.29 subdivided, are adjudicated in favor of the spouses, Jose Martinez and
Gregoria Sison, of legal age, Lot No. 1303-A, in favor of Antonia A.
Fernando, of legal age, married to Felipe Galvez, Lot No. 1303-B; in favor of
All the parties, with the exception of respondent Acuna, elevated this case to
Jose A. Fernando, of legal age, married to Lucila Tinio, Lot 1303-C; in favor
the Court of Appeals which rendered the assailed November 24, 2003
of the spouses Ignacio de la Cruz and Salud Wisco, of legal age, Lot 1303-D;
Decision, the dispositive portion of which reads:
and the rest of Lot 1303 is adjudged in favor of Antonio A. Fernando married
to Felisa Camacho. It is likewise ordered that once the subdivision plan is
WHEREFORE, premises considered, the decision dated May 16, 2002, of the approved, the same be forwarded by the Director of Lands to this Court for its
Regional Trial Court of Malolos, Bulacan, Third Judicial Region, Branch 84, final decision.
in Civil Case No. 256-M-97, is hereby REVERSED and SET ASIDE and the
complaint dated April 17, 1997 filed by plaintiffs-appellants is dismissed.
It is ordered that the expense for mentioned subdivision, shall be for the
Costs against plaintiffs-appellants.30
account of the spouses Jose Martinez and Gregoria Sison, Antonia A.
Fernando, Jose A. Fernando, the spouses Ignacio de la Cruz and Salud Wisco,
Hence, plaintiffs and defendants in the court a quo elevated the matter for our and Antonio A. Fernando.32
review through the instant petition.
From the foregoing, it would appear that petitioners’ ascendants themselves
Petitioner raises the following issues for consideration: petitioned for the cadastral court to divide Lot 1303 among the parties to the
1929 case and they were only allocated Lots 1303-B and 1303-C. Still, as the
trial court noted, the November 29, 1929 Decision was never fully
1. Whether or not the ownership of Lot 1303 and the Sapang implemented in the sense that the persons named therein merely proceeded to
Bayan portion of the piece of land covered by O.C.T. No. RO-487 occupy the lots assigned to them without having complied with the other
(997) or Plan Psu-39080 should revert to the descendants and heirs directives of the cadastral court which would have led to the titling of the
of the late spouses Jose Fernando and Lucila Tinio and Antonia properties in their names. Nonetheless, it is undisputed that the persons named
Fernando, married to Felipe Galvez; in the said November 29, 1929 Decision and, subsequently, their heirs and
assigns have since been in peaceful and uncontested possession of their
2. Whether or not a title registered under the Torrens system, as the respective lots for more than seventy (70) years until the filing of the suit for
subject original certificate of title is the best evidence of ownership partition on April 17, 1997 by petitioners which is the subject matter of this
of land and is a notice against the world.31 case. Respondent Hermogenes, who testified that petitioners were his relatives
and neighbors, further affirmed before the trial court that the persons named in
the November 29, 1929 Decision took possession of their respective lots:
The petition is without merit.

It is noteworthy that petitioners do not dispute that the November 29, 1929
Petitioners based their claims to the disputed areas designated as Lot 1303 and Decision of the cadastral court already adjudicated the ownership of Lot 1303
Sapang Bayan on their ascendants’ title, OCT No. RO-487 (997), which was to persons other than the registered owners thereof. Petitioners would,
issued on February 26, 1927 in the name of Jose A. Fernando married to nonetheless, claim that respondents’ purported failure to execute the
Lucila Tinio and Antonia A. Fernando married to Felipe Galvez. The Court November 29, 1929 Decision over Lot 1303 (i.e., their failure to secure their
now rules on these claims in seriatim. own titles) meant that the entire Lot 1303 being still registered in the name of
their ascendants rightfully belongs to them. This is on the theory that
Petitioners’ claim with respect to Lot 1303 respondents’ right to have the said property titled in their names have long
prescribed.
As the records show, in the November 29, 1929 Decision of the Cadastral
Court of Baliuag, Bulacan (in Cadastral Record No. 14, GLRO Cad. Record On this point, we agree with the appellate court.
No. 781) which was written in Spanish, Lot 1303 had already been divided
and adjudicated to spouses Jose A. Fernando and Lucila Tinio; spouses Section 47 of Presidential Decree No. 1529, otherwise known as the Property
Antonia A. Fernando and Felipe Galvez; spouses Antonio A. Fernando and Registration Decree, states that "[n]o title to registered land in derogation of
Felisa Camacho; spouses Jose Martinez and Gregoria Sison; and spouses the title of the registered owner shall be acquired by prescription or adverse
Ignacio de la Cruz and Salud Wisco from whom respondent Acuna derived his possession." Thus, the Court has held that the right to recover possession of
title. The English translation of the said November 29, 1929 Decision was registered land is imprescriptible because possession is a mere consequence of
provided by respondent Hermogenes and was adopted by all the parties as a ownership.34
common exhibit designated as Exhibit "X." The agreed English translation of
said Decision reads:
However, in Heirs of Anacleto B. Nieto v. Municipality of Meycauayan,
Bulacan,35 the Court had recognized the jurisprudential thread regarding the
Lot No. 1303 – This lot is decreed in record No. 448, G.L.R.O. Record No. exception to the foregoing doctrine that while it is true that a Torrens title is
25414 and actually with Original Certificate No. 997 (exhibited today) in the
name of Jose A. Fernando and Antonia A. Fernando, who now pray that said
91
indefeasible and imprescriptible, the registered landowner may lose his right possession of the property. If a person claiming to be its owner is in actual
to recover possession of his registered property by reason of laches. possession of the property, the right to seek reconveyance, which in effect
seeks to quiet title to the property, does not prescribe. The reason is that the
one who is in actual possession of the land claiming to be its owner may wait
Thus, in Heirs of Batiog Lacamen v. Heirs of Laruan, 36 the Court had held that
until his possession is disturbed or his title is attacked before taking steps to
while a person may not acquire title to the registered property through
vindicate his right.44
continuous adverse possession, in derogation of the title of the original
registered owner, the heir of the latter, however, may lose his right to recover
back the possession of such property and the title thereto, by reason of laches. Petitioners’ claim with respect to Sapang Bayan

In the more recent case of Bartola M. Vda. De Tirona v. Encarnacion, 37 we As for the issue of the ownership of Sapang Bayan, we sustain the appellate
similarly held that while jurisprudence is settled on the imprescriptibility and court insofar as it ruled that petitioners failed to substantiate their ownership
indefeasibility of a Torrens title, there is equally an abundance of cases where over said area. However, we find that the Court of Appeals erred in ruling that
we unequivocally ruled that registered owners may lose their right to recover the principle of accretion is applicable. The said principle is embodied in
possession of property through the equitable principle of laches. Article 457 of the Civil Code which states that "[t]o the owners of lands
adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters." We have held that for
Laches means the failure or neglect for an unreasonable and unexplained
Article 457 to apply the following requisites must concur: (1) that the deposit
length of time to do that which, by observance of due diligence, could or
be gradual and imperceptible; (2) that it be made through the effects of the
should have been done earlier. It is negligence or omission to assert a right
current of the water; and (3) that the land where accretion takes place is
within a reasonable time, warranting the presumption that the party entitled to
adjacent to the banks of rivers. 45 The character of the Sapang Bayan property
assert his right either has abandoned or declined to assert it. Laches thus
was not shown to be of the nature that is being referred to in the provision
operates as a bar in equity.38 The essential elements of laches are: (a) conduct
which is an accretion known as alluvion as no evidence had been presented to
on the part of the defendant, or of one under whom he claims, giving rise to
support this assertion.
the situation complained of; (b) delay in asserting complainant’s rights after
he had knowledge of defendant’s acts and after he has had the opportunity to
sue; (c) lack of knowledge or notice by defendant that the complainant will In fact from the transcripts of the proceedings, the parties could not agree how
assert the right on which he bases his suit; and (d) injury or prejudice to the Sapang Bayan came about. Whether it was a gradual deposit received from
defendant in the event the relief is accorded to the complainant.39 the river current or a dried-up creek bed connected to the main river could not
be ascertained.
In view of respondents’ decades long possession and/or ownership of their
respective lots by virtue of a court judgment and the erstwhile registered Even assuming that Sapang Bayan was a dried-up creek bed, under Article
owners’ inaction and neglect for an unreasonable and unexplained length of 420, paragraph 146 and Article 502, paragraph 147 of the Civil Code, rivers and
time in pursuing the recovery of the land, assuming they retained any right to their natural beds are property of public dominion. In the absence of any
recover the same, it is clear that respondents’ possession may no longer be provision of law vesting ownership of the dried-up river bed in some other
disturbed. The right of the registered owners as well as their successors-in- person, it must continue to belong to the State.
interest to recover possession of the property is already a stale demand and,
thus, is barred by laches.
We ruled on this issue in Republic v. Court of Appeals,48 to wit:

In the same vein, we uphold the finding of the Court of Appeals that the title
The lower court cannot validly order the registration of Lots 1 and 2 in the
of petitioners’ ascendants wrongfully included lots belonging to third
names of the private respondents. These lots were portions of the bed of the
persons.40 Indeed, petitioners’ ascendants appeared to have acknowledged this
Meycauayan river and are therefore classified as property of the public
fact as they were even the ones that prayed for the cadastral court to subdivide
domain under Article 420 paragraph 1 and Article 502, paragraph 1 of the
Lot 1303 as evident in the November 29, 1929 Decision. We concur with the
Civil Code of the Philippines. They are not open to registration under the
Court of Appeals that petitioners’ ascendants held the property erroneously
Land Registration act. The adjudication of the lands in question as private
titled in their names under an implied trust for the benefit of the true owners.
property in the names of the private respondents is null and void.49 1avvphi1
Article 1456 of the Civil Code provides:

Furthermore, in Celestial v. Cachopero, 50 we similarly ruled that a dried-up


ART. 1456. If property is acquired through mistake or fraud, the person
creek bed is property of public dominion:
obtaining it is, by force of law, considered a trustee of an implied trust for the
benefit of the person from whom the property comes.
A creek, like the Salunayan Creek, is a recess or arm extending from a river
and participating in the ebb and flow of the sea. As such, under Articles
As aptly observed by the appellate court, the party thus aggrieved has the right
420(1) and 502(1) of the Civil Code, the Salunayan Creek, including its
to recover his or their title over the property by way of reconveyance while the
natural bed, is property of the public domain which is not susceptible to
same has not yet passed to an innocent purchaser for value. 41 As we held in
private appropriation and acquisitive prescription. And, absent any declaration
Medizabel v. Apao,42 the essence of an action for reconveyance is that the
by the government, that a portion of the creek has dried-up does not, by itself,
certificate of title is respected as incontrovertible. What is sought is the
alter its inalienable character.51
transfer of the property, in this case its title, which has been wrongfully or
erroneously registered in another person's name, to its rightful owner or to one
with a better right. It is settled in jurisprudence that mere issuance of the Therefore, on the basis of the law and jurisprudence on the matter, Sapang
certificate of title in the name of any person does not foreclose the possibility Bayan cannot be adjudged to any of the parties in this case.
that the real property may be under co-ownership with persons not named in
the certificate or that the registrant may only be a trustee or that other parties
WHEREFORE, premises considered, the petition is hereby DENIED. The
may have acquired interest subsequent to the issuance of the certificate of
assailed Decision dated November 24, 2003 of the Court of Appeals in CA-
title.43
G.R. CV No. 75773 is hereby AFFIRMED. Costs against petitioners.

We cannot subscribe to petitioners’ argument that whatever rights or claims


SO ORDERED.
respondents may have under the November 29, 1929 Decision has prescribed
for their purported failure to fully execute the same. We again concur with the
Court of Appeals in this regard. An action for reconveyance of registered land G.R. No. 191109               July 18, 2012
based on implied trust prescribes in ten (10) years, the point of reference being
the date of registration of the deed or the date of the issuance of the certificate
of title over the property. However, this Court has ruled that the ten-year REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE
prescriptive period applies only when the person enforcing the trust is not in RECLAMATION AUTHORITY (PRA), Petitioner,

92
vs. On April 25, 2003, the RTC denied PRA’s prayer for the issuance of a writ of
CITY OF PARANAQUE, Respondent. preliminary injunction for being moot and academic considering that the
auction sale of the subject properties on April 7, 2003 had already been
consummated.
DECISION

On August 3, 2009, after an exchange of several pleadings and the failure of


MENDOZA, J.:
both parties to arrive at a compromise agreement, PRA filed a Motion for
Leave to File and Admit Attached Supplemental Petition which sought to
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of declare as null and void the assessment for real property taxes, the levy based
Civil Procedure, on pure questions of law, assailing the January 8, 2010 on the said assessment, the public auction sale conducted on April 7, 2003,
Order1 of the Regional Trial Court, Branch 195, Parafiaque City (RTC), which and the Certificates of Sale issued pursuant to the auction sale.
ruled that petitioner Philippine Reclamation Authority (PRA) is a
government-owned and controlled corporation (GOCC), a taxable entity, and,
On January 8, 2010, the RTC rendered its decision dismissing PRA’s petition.
therefore, . not exempt from payment of real property taxes. The pertinent
In ruling that PRA was not exempt from payment of real property taxes, the
portion of the said order reads:
RTC reasoned out that it was a GOCC under Section 3 of P.D. No. 1084. It
was organized as a stock corporation because it had an authorized capital
In view of the finding of this court that petitioner is not exempt from payment stock divided into no par value shares. In fact, PRA admitted its corporate
of real property taxes, respondent Parañaque City Treasurer Liberato M. personality and that said properties were registered in its name as shown by
Carabeo did not act xxx without or in excess of jurisdiction, or with grave the certificates of title. Therefore, as a GOCC, local tax exemption is
abuse of discretion amounting to lack or in excess of jurisdiction in issuing the withdrawn by virtue of Section 193 of Republic Act (R.A.) No. 7160 Local
warrants of levy on the subject properties. Government Code (LGC) which was the prevailing law in 2001 and 2002 with
respect to real property taxation. The RTC also ruled that the tax exemption
claimed by PRA under E.O. No. 654 had already been expressly repealed by
WHEREFORE, the instant petition is dismissed. The Motion for Leave to File R.A. No. 7160 and that PRA failed to comply with the procedural
and Admit Attached Supplemental Petition is denied and the supplemental requirements in Section 206 thereof.
petition attached thereto is not admitted.

Not in conformity, PRA filed this petition for certiorari assailing the January
The Public Estates Authority (PEA) is a government corporation created by 8, 2010 RTC Order based on the following GROUNDS
virtue of Presidential Decree (P.D.) No. 1084 (Creating the Public Estates
Authority, Defining its Powers and Functions, Providing Funds Therefor and
For Other Purposes) which took effect on February 4, I

1977 to provide a coordinated, economical and efficient reclamation of lands, THE TRIAL COURT GRAVELY ERRED IN FINDING THAT
and the administration and operation of lands belonging to, managed and/or PETITIONER IS LIABLE TO PAY REAL PROPERTY TAX ON THE
operated by, the government with the object of maximizing their utilization SUBJECT RECLAIMED LANDS CONSIDERING
and hastening their development consistent with public interest.
THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF
On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by THE NATIONAL GOVERNMENT AND IS, THEREFORE, EXEMPT
then President Ferdinand Marcos, PEA was designated as the agency FROM PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS
primarily responsible for integrating, directing and coordinating all 234(A) AND 133(O) OF REPUBLIC ACT 7160 OR THE LOCAL
reclamation projects for and on behalf of the National Government. GOVERNMENT CODE VIS-À-VIS MANILA INTERNATIONAL
AIRPORT AUTHORITY V. COURT OF APPEALS.
On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O.
No. 380 transforming PEA into PRA, which shall perform all the powers and II
functions of the PEA relating to reclamation activities.
THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER
By virtue of its mandate, PRA reclaimed several portions of the foreshore and THAT RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN
offshore areas of Manila Bay, including those located in Parañaque City, and AND, HENCE, EXEMPT FROM REAL PROPERTY TAX.
was issued Original Certificates of Title (OCT Nos. 180, 202, 206, 207, 289,
557, and 559) and Transfer Certificates of Title (TCT Nos. 104628, 7312,
PRA asserts that it is not a GOCC under Section 2(13) of the Introductory
7309, 7311, 9685, and 9686) over the reclaimed lands.
Provisions of the Administrative Code. Neither is it a GOCC under Section
16, Article XII of the 1987 Constitution because it is not required to meet the
On February 19, 2003, then Parañaque City Treasurer Liberato M. Carabeo test of economic viability. Instead, PRA is a government instrumentality
(Carabeo) issued Warrants of Levy on PRA’s reclaimed properties (Central vested with corporate powers and performing an essential public service
Business Park and Barangay San Dionisio) located in Parañaque City based pursuant to Section 2(10) of the Introductory Provisions of the Administrative
on the assessment for delinquent real property taxes made by then Parañaque Code. Although it has a capital stock divided into shares, it is not authorized
City Assessor Soledad Medina Cue for tax years 2001 and 2002. to distribute dividends and allotment of surplus and profits to its stockholders.
Therefore, it may not be classified as a stock corporation because it lacks the
second requisite of a stock corporation which is the distribution of dividends
On March 26, 2003, PRA filed a petition for prohibition with prayer for and allotment of surplus and profits to the stockholders.
temporary restraining order (TRO) and/or writ of preliminary injunction
against Carabeo before the RTC.
It insists that it may not be classified as a non-stock corporation because it has
no members and it is not organized for charitable, religious, educational,
On April 3, 2003, after due hearing, the RTC issued an order denying PRA’s professional, cultural, recreational, fraternal, literary, scientific, social, civil
petition for the issuance of a temporary restraining order. service, or similar purposes, like trade, industry, agriculture and like chambers
as provided in Section 88 of the Corporation Code.
On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not to
proceed with the public auction of the subject reclaimed properties on April 7, Moreover, PRA points out that it was not created to compete in the market
2003. In response, Carabeo sent a letter stating that the public auction could place as there was no competing reclamation company operated by the private
not be deferred because the RTC had already denied PRA’s TRO application. sector. Also, while PRA is vested with corporate powers under P.D. No. 1084,
such circumstance does not make it a corporation but merely an incorporated
instrumentality and that the mere fact that an incorporated instrumentality of
93
the National Government holds title to real property does not make said corporate powers. Likewise, when the law makes a government
instrumentality a GOCC. Section 48, Chapter 12, Book I of the Administrative instrumentality operationally autonomous, the instrumentality remains part of
Code of 1987 recognizes a scenario where a piece of land owned by the the National Government machinery although not integrated with the
Republic is titled in the name of a department, agency or instrumentality. department framework.

Thus, PRA insists that, as an incorporated instrumentality of the National When the law vests in a government instrumentality corporate powers, the
Government, it is exempt from payment of real property tax except when the instrumentality does not necessarily become a corporation. Unless the
beneficial use of the real property is granted to a taxable person. PRA claims government instrumentality is organized as a stock or non-stock corporation,
that based on Section 133(o) of the LGC, local governments cannot tax the it remains a government instrumentality exercising not only governmental but
national government which delegate to local governments the power to tax. also corporate powers.

It explains that reclaimed lands are part of the public domain, owned by the Many government instrumentalities are vested with corporate powers but they
State, thus, exempt from the payment of real estate taxes. Reclaimed lands do not become stock or non-stock corporations, which is a necessary condition
retain their inherent potential as areas for public use or public service. While before an agency or instrumentality is deemed a GOCC. Examples are the
the subject reclaimed lands are still in its hands, these lands remain public Mactan International Airport Authority, the Philippine Ports Authority, the
lands and form part of the public domain. Hence, the assessment of real University of the Philippines, and Bangko Sentral ng Pilipinas. All these
property taxes made on said lands, as well as the levy thereon, and the public government instrumentalities exercise corporate powers but they are not
sale thereof on April 7, 2003, including the issuance of the certificates of sale organized as stock or non-stock corporations as required by Section 2(13) of
in favor of the respondent Parañaque City, are invalid and of no force and the Introductory Provisions of the Administrative Code. These government
effect. instrumentalities are sometimes loosely called government corporate entities.
They are not, however, GOCCs in the strict sense as understood under the
Administrative Code, which is the governing law defining the legal
On the other hand, the City of Parañaque (respondent) argues that PRA since
relationship and status of government entities.2
its creation consistently represented itself to be a GOCC. PRA’s very own
charter (P.D. No. 1084) declared it to be a GOCC and that it has entered into
several thousands of contracts where it represented itself to be a GOCC. In Correlatively, Section 3 of the Corporation Code defines a stock corporation
fact, PRA admitted in its original and amended petitions and pre-trial brief as one whose "capital stock is divided into shares and x x x authorized to
filed with the RTC of Parañaque City that it was a GOCC. distribute to the holders of such shares dividends x x x." Section 87 thereof
defines a non-stock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or officers." Further,
Respondent further argues that PRA is a stock corporation with an authorized
Section 88 provides that non-stock corporations are "organized for charitable,
capital stock divided into 3 million no par value shares, out of which 2 million
religious, educational, professional, cultural, recreational, fraternal, literary,
shares have been subscribed and fully paid up. Section 193 of the LGC of
scientific, social, civil service, or similar purposes, like trade, industry,
1991 has withdrawn tax exemption privileges granted to or presently enjoyed
agriculture and like chambers."
by all persons, whether natural or juridical, including GOCCs.

Two requisites must concur before one may be classified as a stock


Hence, since PRA is a GOCC, it is not exempt from the payment of real
corporation, namely: (1) that it has capital stock divided into shares; and (2)
property tax.
that it is authorized to distribute dividends and allotments of surplus and
profits to its stockholders. If only one requisite is present, it cannot be
THE COURT’S RULING properly classified as a stock corporation. As for non-stock corporations, they
must have members and must not distribute any part of their income to said
members.3
The Court finds merit in the petition.

In the case at bench, PRA is not a GOCC because it is neither a stock nor a
Section 2(13) of the Introductory Provisions of the Administrative Code of non-stock corporation. It cannot be considered as a stock corporation because
1987 defines a GOCC as follows: although it has a capital stock divided into no par value shares as provided in
Section 74 of P.D. No. 1084, it is not authorized to distribute dividends,
SEC. 2. General Terms Defined. – x x x x surplus allotments or profits to stockholders. There is no provision whatsoever
in P.D. No. 1084 or in any of the subsequent executive issuances pertaining to
PRA, particularly, E.O. No. 525,5 E.O. No. 6546 and EO No. 7987 that
(13) Government-owned or controlled corporation refers to any agency authorizes PRA to distribute dividends, surplus allotments or profits to its
organized as a stock or non-stock corporation, vested with functions relating stockholders.
to public needs whether governmental or proprietary in nature, and owned by
the Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at least PRA cannot be considered a non-stock corporation either because it does not
fifty-one have members. A non-stock corporation must have members. 8 Moreover, it
was not organized for any of the purposes mentioned in Section 88 of the
Corporation Code. Specifically, it was created to manage all government
(51) percent of its capital stock: x x x. reclamation projects.

On the other hand, Section 2(10) of the Introductory Provisions of the Furthermore, there is another reason why the PRA cannot be classified as a
Administrative Code defines a government "instrumentality" as follows: GOCC. Section 16, Article XII of the 1987 Constitution provides as follows:

SEC. 2. General Terms Defined. –– x x x x Section 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-
(10) Instrumentality refers to any agency of the National Government, not owned or controlled corporations may be created or established by special
integrated within the department framework, vested with special functions or charters in the interest of the common good and subject to the test of
jurisdiction by law, endowed with some if not all corporate powers, economic viability.
administering special funds, and enjoying operational autonomy, usually
through a charter. x x x The fundamental provision above authorizes Congress to create GOCCs
through special charters on two conditions: 1) the GOCC must be established
From the above definitions, it is clear that a GOCC must be "organized as a for the common good; and 2) the GOCC must meet the test of economic
stock or non-stock corporation" while an instrumentality is vested by law with viability. In this case, PRA may have passed the first condition of common
good but failed the second one - economic viability. Undoubtedly, the purpose
94
behind the creation of PRA was not for economic or commercial activities. instrumentalities are not the "government-owned or controlled corporations"
Neither was it created to compete in the market place considering that there referred to in Section 16, Article XII of the 1987 Constitution.
were no other competing reclamation companies being operated by the private
sector. As mentioned earlier, PRA was created essentially to perform a public
Thus, the Constitution imposes no limitation when the legislature creates
service considering that it was primarily responsible for a coordinated,
government instrumentalities vested with corporate powers but performing
economical and efficient reclamation, administration and operation of lands
essential governmental or public functions. Congress has plenary authority to
belonging to the government with the object of maximizing their utilization
create government instrumentalities vested with corporate powers provided
and hastening their development consistent with the public interest. Sections 2
these instrumentalities perform essential government functions or public
and 4 of P.D. No. 1084 reads, as follows:
services. However, when the legislature creates through special charters
corporations that perform economic or commercial activities, such entities —
Section 2. Declaration of policy. It is the declared policy of the State to known as "government-owned or controlled corporations" — must meet the
provide for a coordinated, economical and efficient reclamation of lands, and test of economic viability because they compete in the market place.
the administration and operation of lands belonging to, managed and/or
operated by the government, with the object of maximizing their utilization
This is the situation of the Land Bank of the Philippines and the Development
and hastening their development consistent with the public interest.
Bank of the Philippines and similar government-owned or controlled
corporations, which derive their incometo meet operating expenses solely
Section 4. Purposes. The Authority is hereby created for the following from commercial transactions in competition with the private sector. The
purposes: intent of the Constitution is to prevent the creation of government-owned or
controlled corporations that cannot survive on their own in the market place
and thus merely drain the public coffers.
(a) To reclaim land, including foreshore and submerged areas, by
dredging, filling or other means, or to acquire reclaimed land;
Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
(b) To develop, improve, acquire, administer, deal in, subdivide,
follows:
dispose, lease and sell any and all kinds of lands, buildings, estates
and other forms of real property, owned, managed, controlled
and/or operated by the government. MR. OPLE: Madam President, the reason for this concern is really that when
the government creates a corporation, there is a sense in which this
corporation becomes exempt from the test of economic performance. We
(c) To provide for, operate or administer such services as may be
know what happened in the past. If a government corporation loses, then it
necessary for the efficient, economical and beneficial utilization of
makes its claim upon the taxpayers' money through new equity infusions from
the above properties.
the government and what is always invoked is the common good. That is the
reason why this year, out of a budget of P115 billion for the entire
The twin requirement of common good and economic viability was lengthily government, about P28 billion of this will go into equity infusions to support a
discussed in the case of Manila International Airport Authority v. Court of few government financial institutions. And this is all taxpayers' money which
Appeals,9 the pertinent portion of which reads: could have been relocated to agrarian reform, to social services like health and
education, to augment the salaries of grossly underpaid public employees.
And yet this is all going down the drain.
Third, the government-owned or controlled corporations created through
special charters are those that meet the two conditions prescribed in Section
16, Article XII of the Constitution. Therefore, when we insert the phrase "ECONOMIC VIABILITY" together
with the "common good," this becomes a restraint on future enthusiasts for
state capitalism to excuse themselves from the responsibility of meeting the
The first condition is that the government-owned or controlled corporation market test so that they become viable. And so, Madam President, I reiterate,
must be established for the common good. The second condition is that the for the committee's consideration and I am glad that I am joined in this
government-owned or controlled corporation must meet the test of economic proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC
viability. Section 16, Article XII of the 1987 Constitution provides: VIABILITY OR THE ECONOMIC TEST," together with the common
good.1âwphi1
SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government- Father Joaquin G. Bernas, a leading member of the Constitutional
owned or controlled corporations may be created or established by special Commission, explains in his textbook The 1987 Constitution of the Republic
charters in the interest of the common good and subject to the test of of the Philippines: A Commentary:
economic viability.

The second sentence was added by the 1986 Constitutional Commission. The
The Constitution expressly authorizes the legislature to create "government- significant addition, however, is the phrase "in the interest of the common
owned or controlled corporations" through special charters only if these good and subject to the test of economic viability." The addition includes the
entities are required to meet the twin conditions of common good and ideas that they must show capacity to function efficiently in business and that
economic viability. In other words, Congress has no power to create they should not go into activities which the private sector can do better.
government-owned or controlled corporations with special charters unless Moreover, economic viability is more than financial viability but also includes
they are made to comply with the two conditions of common good and capability to make profit and generate benefits not quantifiable in financial
economic viability. The test of economic viability applies only to government- terms.
owned or controlled corporations that perform economic or commercial
activities and need to compete in the market place. Being essentially economic
vehicles of the State for the common good — meaning for economic Clearly, the test of economic viability does not apply to government entities
development purposes — these government-owned or controlled corporations vested with corporate powers and performing essential public services. The
with special charters are usually organized as stock corporations just like State is obligated to render essential public services regardless of the
ordinary private corporations. economic viability of providing such service. The non-economic viability of
rendering such essential public service does not excuse the State from
withholding such essential services from the public.
In contrast, government instrumentalities vested with corporate powers and
performing governmental or public functions need not meet the test of
economic viability. These instrumentalities perform essential public services However, government-owned or controlled corporations with special charters,
for the common good, services that every modern State must provide its organized essentially for economic or commercial objectives, must meet the
citizens. These instrumentalities need not be economically viable since the test of economic viability. These are the government-owned or controlled
government may even subsidize their entire operations. These corporations that are usually organized under their special charters as stock
corporations, like the Land Bank of the Philippines and the Development
95
Bank of the Philippines. These are the government-owned or controlled Section 133(o) recognizes the basic principle that local governments cannot
corporations, along with government-owned or controlled corporations tax the national government, which historically merely delegated to local
organized under the Corporation Code, that fall under the definition of governments the power to tax. While the 1987 Constitution now includes
"government-owned or controlled corporations" in Section 2(10) of the taxation as one of the powers of local governments, local governments may
Administrative Code. [Emphases supplied] only exercise such power "subject to such guidelines and limitations as the
Congress may provide."
This Court is convinced that PRA is not a GOCC either under Section 2(3) of
the Introductory Provisions of the Administrative Code or under Section 16, When local governments invoke the power to tax on national government
Article XII of the 1987 Constitution. The facts, the evidence on record and instrumentalities, such power is construed strictly against local governments.
jurisprudence on the issue support the position that PRA was not organized The rule is that a tax is never presumed and there must be clear language in
either as a stock or a non-stock corporation. Neither was it created by the law imposing the tax. Any doubt whether a person, article or activity is
Congress to operate commercially and compete in the private market. Instead, taxable is resolved against taxation. This rule applies with greater force when
PRA is a government instrumentality vested with corporate powers and local governments seek to tax national government instrumentalities.
performing an essential public service pursuant to Section 2(10) of the
Introductory Provisions of the Administrative Code. Being an incorporated
Another rule is that a tax exemption is strictly construed against the taxpayer
government instrumentality, it is exempt from payment of real property tax.
claiming the exemption. However, when Congress grants an exemption to a
national government instrumentality from local taxation, such exemption is
Clearly, respondent has no valid or legal basis in taxing the subject reclaimed construed liberally in favor of the national government instrumentality. As
lands managed by PRA. On the other hand, Section 234(a) of the LGC, in this Court declared in Maceda v. Macaraig, Jr.:
relation to its Section 133(o), exempts PRA from paying realty taxes and
protects it from the taxing powers of local government units.
The reason for the rule does not apply in the case of exemptions running to the
benefit of the government itself or its agencies. In such case the practical
Sections 234(a) and 133(o) of the LGC provide, as follows: effect of an exemption is merely to reduce the amount of money that has to be
handled by government in the course of its operations. For these reasons,
provisions granting exemptions to government agencies may be construed
SEC. 234. Exemptions from Real Property Tax – The following are exempted
liberally, in favor of non tax-liability of such agencies.
from payment of the real property tax:

There is, moreover, no point in national and local governments taxing each
(a) Real property owned by the Republic of the Philippines or any of its
other, unless a sound and compelling policy requires such transfer of public
political subdivisions except when the beneficial use thereof has been granted,
funds from one government pocket to another.
for consideration or otherwise, to a taxable person.

There is also no reason for local governments to tax national government


xxxx
instrumentalities for rendering essential public services to inhabitants of local
governments. The only exception is when the legislature clearly intended to
SEC. 133. Common Limitations on the Taxing Powers of Local Government tax government instrumentalities for the delivery of essential public services
Units. – Unless otherwise provided herein, the exercise of the taxing powers for sound and compelling policy considerations. There must be express
of provinces, cities, municipalities, and barangays shall not extend to the levy language in the law empowering local governments to tax national
of the following: government instrumentalities. Any doubt whether such power exists is
resolved against local governments.
xxxx
Thus, Section 133 of the Local Government Code states that "unless otherwise
provided" in the Code, local governments cannot tax national government
(o) Taxes, fees or charges of any kinds on the National Government, its instrumentalities. As this Court held in Basco v. Philippine Amusements and
agencies and instrumentalities, and local government units. [Emphasis Gaming Corporation:
supplied]

The states have no power by taxation or otherwise, to retard, impede, burden


It is clear from Section 234 that real property owned by the Republic of the or in any manner control the operation of constitutional laws enacted by
Philippines (the Republic) is exempt from real property tax unless the Congress to carry into execution the powers vested in the federal government.
beneficial use thereof has been granted to a taxable person. In this case, there (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
is no proof that PRA granted the beneficial use of the subject reclaimed lands
to a taxable entity. There is no showing on record either that PRA leased the
subject reclaimed properties to a private taxable entity. This doctrine emanates from the "supremacy" of the National Government
over local governments.
This exemption should be read in relation to Section 133(o) of the same Code,
which prohibits local governments from imposing "taxes, fees or charges of "Justice Holmes, speaking for the Supreme Court, made reference to the entire
any kind on the National Government, its agencies and instrumentalities x x absence of power on the part of the States to touch, in that way (taxation) at
x." The Administrative Code allows real property owned by the Republic to least, the instrumentalities of the United States (Johnson v. Maryland, 254 US
be titled in the name of agencies or instrumentalities of the national 51) and it can be agreed that no state or political subdivision can regulate a
government. Such real properties remain owned by the Republic and continue federal instrumentality in such a way as to prevent it from consummating its
to be exempt from real estate tax. federal responsibilities, or even to seriously burden it in the accomplishment
of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis
supplied)
Indeed, the Republic grants the beneficial use of its real property to an agency
or instrumentality of the national government. This happens when the title of
the real property is transferred to an agency or instrumentality even as the Otherwise, mere creatures of the State can defeat National policies thru
Republic remains the owner of the real property. Such arrangement does not extermination of what local authorities may perceive to be undesirable
result in the loss of the tax exemption, unless "the beneficial use thereof has activities or enterprise using the power to tax as "a tool for regulation." (U.S.
been granted, for consideration or otherwise, to a taxable person."10 v. Sanchez, 340 US 42)

The rationale behind Section 133(o) has also been explained in the case of the The power to tax which was called by Justice Marshall as the "power to
Manila International Airport Authority,11 to wit: destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power to
wield it. [Emphases supplied]
96
The Court agrees with PRA that the subject reclaimed lands are still part of (1)The President shall have the power to reserve for settlement or public use,
the public domain, owned by the State and, therefore, exempt from payment and for specific public purposes, any of the lands of the public domain, the use
of real estate taxes. of which is not otherwise directed by law. The reserved land shall thereafter
remain subject to the specific public purpose indicated until otherwise
provided by law or proclamation.
Section 2, Article XII of the 1987 Constitution reads in part, as follows:

Reclaimed lands such as the subject lands in issue are reserved lands for
Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
public use. They are properties of public dominion. The ownership of such
and other mineral oils, all forces of potential energy, fisheries, forests or
lands remains with the State unless they are withdrawn by law or presidential
timber, wildlife, flora and fauna, and other natural resources are owned by the
proclamation from public use.
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 Under Section 2, Article XII of the 1987 Constitution, the foreshore and
may directly undertake such activities, or it may enter into co-production, submerged areas of Manila Bay are part of the "lands of the public domain,
joint venture, or production-sharing agreements with Filipino citizens, or waters x x x and other natural resources" and consequently "owned by the
corporations or associations at least 60 per centum of whose capital is owned State." As such, foreshore and submerged areas "shall not be alienated,"
by such citizens. Such agreements may be for a period not exceeding twenty- unless they are classified as "agricultural lands" of the public domain. The
five years, renewable for not more than twenty-five years, and under such mere reclamation of these areas by PEA does not convert these inalienable
terms and conditions as may provided by law. In cases of water rights for natural resources of the State into alienable or disposable lands of the public
irrigation, water supply, fisheries, or industrial uses other than the domain. There must be a law or presidential proclamation officially
development of waterpower, beneficial use may be the measure and limit of classifying these reclaimed lands as alienable or disposable and open to
the grant. disposition or concession. Moreover, these reclaimed lands cannot be
classified as alienable or disposable if the law has reserved them for some
public or quasi-public use.
Similarly, Article 420 of the Civil Code enumerates properties belonging to
the State:
As the Court has repeatedly ruled, properties of public dominion are not
subject to execution or foreclosure sale. 14 Thus, the assessment, levy and
Art. 420. The following things are property of public dominion:
foreclosure made on the subject reclaimed lands by respondent, as well as the
issuances of certificates of title in favor of respondent, are without basis.
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the
roadsteads, and others of similar character;
Regional Trial Court, Branch 195, Parañaque City, is REVERSED and SET
ASIDE. All reclaimed properties owned by the Philippine Reclamation
(2) Those which belong to the State, without being for public use, Authority are hereby declared EXEMPT from real estate taxes. All real estate
and are intended for some public service or for the development of tax assessments, including the final notices of real estate tax delinquencies,
the national wealth. [Emphases supplied] issued by the City of Parañaque on the subject reclaimed properties; the
assailed auction sale, dated April 7, 2003; and the Certificates of Sale
subsequently issued by the Parañaque City Treasurer in favor of the City of
Here, the subject lands are reclaimed lands, specifically portions of the Parañaque, are all declared VOID.
foreshore and offshore areas of Manila Bay. As such, these lands remain
public lands and form part of the public domain. In the case of Chavez v.
Public Estates Authority and AMARI Coastal Development Corporation, 12 the SO ORDERED.
Court held that foreshore and submerged areas irrefutably belonged to the
public domain and were inalienable unless reclaimed, classified as alienable
G.R. No. 191667               April 17, 2013
lands open to disposition and further declared no longer needed for public
LAND BANK OF THE PHILIPPINES, Petitioner,
service. The fact that alienable lands of the public domain were transferred to
vs.
the PEA (now PRA) and issued land patents or certificates of title in PEA’s
EDUARDO M. CACAYURAN, Respondent.
name did not automatically make such lands private. This Court also held
therein that reclaimed lands retained their inherent potential as areas for public
use or public service. DECISION

As the central implementing agency tasked to undertake reclamation projects PERLAS-BERNABE, J.:


nationwide, with authority to sell reclaimed lands, PEA took the place of
DENR as the government agency charged with leasing or selling reclaimed
Assailed in this Petition for Review on Certiorari 1 is the March 26, 2010
lands of the public domain. The reclaimed lands being leased or sold by PEA
Decision2 of the Court of Appeals (CA) in CA-G.R. CV. No. 89732 which
are not private lands, in the same manner that DENR, when it disposes of
affirmed with modification the April 10, 2007 Decision3 of the Regional Trial
other alienable lands, does not dispose of private lands but alienable lands of
Court (RTC) of Agoo, La Union, Branch 31, declaring inter alia the nullity of
the public domain. Only when qualified private parties acquire these lands
the loan agreements entered into by petitioner Land Bank of the Philippines
will the lands become private lands. In the hands of the government agency
(Land Bank) and the Municipality of Agoo, La Union (Municipality).
tasked and authorized to dispose of alienable of disposable lands of the public
domain, these lands are still public, not private lands.
The Facts
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the
public domain" as well as "any and all kinds of lands." PEA can hold both From 2005 to 2006, the Municipality’s Sangguniang Bayan (SB) passed
lands of the public domain and private lands. Thus, the mere fact that certain resolutions to implement a multi-phased plan (Redevelopment Plan) to
alienable lands of the public domain like the Freedom Islands are transferred redevelop the Agoo Public Plaza (Agoo Plaza) where the Imelda Garden and
to PEA and issued land patents or certificates of title in PEA's name does not Jose Rizal Monument were situated.
automatically make such lands private.13
To finance phase 1 of the said plan, the SB initially passed Resolution No. 68-
Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of 20054 on April 19, 2005, authorizing then Mayor Eufranio Eriguel (Mayor
the Administrative Code of 1987, thus: Eriguel) to obtain a loan from Land Bank and incidental thereto, mortgage a
2,323.75 square meter lot situated at the southeastern portion of the Agoo
Plaza (Plaza Lot) as collateral. To serve as additional security, it further
SEC 14. Power to Reserve Lands of the Public and Private Dominion of the
authorized the assignment of a portion of its internal revenue allotment (IRA)
Government.-
97
and the monthly income from the proposed project in favor of Land found that the Plaza Lot is proscribed from collateralization given its nature as
Bank.5 The foregoing terms were confirmed, approved and ratified on October property for public use.24
4, 2005 through Resolution No. 139-2005.6 Consequently, on November 21,
2005, Land Bank extended a ₱4,000,000.00 loan in favor of the Municipality
Aggrieved, Land Bank filed its Notice of Appeal on April 23, 2007. 25 On the
(First Loan),7 the proceeds of which were used to construct ten (10) kiosks at
other hand, the Implicated Officers’ appeal was deemed abandoned and
the northern and southern portions of the Imelda Garden. After completion,
dismissed for their failure to file an appellants’ brief despite due notice. 26 In
these kiosks were rented out.8
this regard, only Land Bank’s appeal was given due course by the CA.

On March 7, 2006, the SB passed Resolution No. 58-2006, 9 approving the


Ruling of the CA
construction of a commercial center on the Plaza Lot as part of phase II of the
Redevelopment Plan. To finance the project, Mayor Eriguel was again
authorized to obtain a loan from Land Bank, posting as well the same In its Decision dated March 26, 2010,27 the CA affirmed with modification the
securities as that of the First Loan. All previous representations and warranties RTC’s ruling, excluding Vice Mayor Eslao from any personal liability arising
of Mayor Eriguel related to the negotiation and obtention of the new from the Subject Loans.28
loan10 were ratified on September 5, 2006 through Resolution No. 128-
2006.11 In consequence, Land Bank granted a second loan in favor of the
It held, among others, that: (1) Cacayuran had locus standi to file his
Municipality on October 20, 2006 in the principal amount of ₱28,000,000.00
complaint, considering that (a) he was born, raised and a bona fide resident of
(Second Loan).12
the Municipality; and (b) the issue at hand involved public interest of
transcendental importance;29 (2) Resolution Nos. 68-2005, 139-2005, 58-2006,
Unlike phase 1 of the Redevelopment Plan, the construction of the 128-2006 and all other related resolutions (Subject Resolutions) were
commercial center at the Agoo Plaza was vehemently objected to by some invalidly passed due to the SB’s non-compliance with certain sections of
residents of the Municipality. Led by respondent Eduardo Cacayuran Republic Act No. 7160, otherwise known as the "Local Government Code of
(Cacayuran), these residents claimed that the conversion of the Agoo Plaza 1991" (LGC); (3) the Plaza Lot, which served as collateral for the Subject
into a commercial center, as funded by the proceeds from the First and Second Loans, is property of public dominion and thus, cannot be appropriated either
Loans (Subject Loans), were "highly irregular, violative of the law, and by the State or by private persons;30 and (4) the Subject Loans are ultra vires
detrimental to public interests, and will result to wanton desecration of the because they were transacted without proper authority and their
said historical and public park."13 The foregoing was embodied in a collateralization constituted improper disbursement of public funds.
Manifesto,14 launched through a signature campaign conducted by the
residents and Cacayuran.
Dissatisfied, Land Bank filed the instant petition.

In addition, Cacayuran wrote a letter 15 dated December 8, 2006 addressed to


Issues Before the Court
Mayor Eriguel, Vice Mayor Antonio Eslao (Vice Mayor Eslao), and the
members of the SB namely, Violeta Laroya-Balbin, Jaime Boado, Jr., Rogelio
De Vera, James Dy, Crisogono Colubong, Ricardo Fronda, Josephus Komiya, The following issues have been raised for the Court’s resolution: (1) whether
Erwina Eriguel, Felizardo Villanueva, and Gerard Mamuyac (Implicated Cacayuran has standing to sue; (2) whether the Subject Resolutions were
Officers), expressing the growing public clamor against the conversion of the validly passed; and (3) whether the Subject Loans are ultra vires.
Agoo Plaza into a commercial center. He then requested the foregoing officers
to furnish him certified copies of various documents related to the
aforementioned conversion including, among others, the resolutions The Court’s Ruling
approving the Redevelopment Plan as well as the loan agreements for the sake
of public information and transparency. The petition lacks merit.

Unable to get any response, Cacayuran, invoking his right as a taxpayer, filed A. Cacayuran’s standing to sue
a Complaint16 against the Implicated Officers and Land Bank, assailing,
among others, the validity of the Subject Loans on the ground that the Plaza
Lot used as collateral thereof is property of public dominion and therefore, Land Bank claims that Cacayuran did not have any standing to contest the
beyond the commerce of man.17 construction of the APC as it was funded through the proceeds coming from
the Subject Loans and not from public funds. Besides, Cacayuran was not
even a party to any of the Subject Loans and is thus, precluded from
Upon denial of the Motion to Dismiss dated December 27, 2006, 18 the questioning the same.
Implicated Officers and Land Bank filed their respective Answers.
The argument is untenable.
For its part, Land Bank claimed that it is not privy to the Implicated Officers’
acts of destroying the Agoo Plaza. It further asserted that Cacayuran did not
have a cause of action against it since he was not privy to any of the Subject It is hornbook principle that a taxpayer is allowed to sue where there is a
Loans.19 claim that public funds are illegally disbursed, or that public money is being
deflected to any improper purpose, or that there is wastage of public funds
through the enforcement of an invalid or unconstitutional law. A person suing
During the pendency of the proceedings, the construction of the commercial as a taxpayer, however, must show that the act complained of directly
center was completed and the said structure later became known as the Agoo’s involves the illegal disbursement of public funds derived from taxation. In
People Center (APC). other words, for a taxpayer’s suit to prosper, two requisites must be met
namely, (1) public funds derived from taxation are disbursed by a political
On May 8, 2007, the SB passed Municipal Ordinance No. 02- subdivision or instrumentality and in doing so, a law is violated or some
2007,20 declaring the area where the APC stood as patrimonial property of the irregularity is committed; and (2) the petitioner is directly affected by the
Municipality. alleged act.31

The Ruling of the RTC Records reveal that the foregoing requisites are present in the instant case.

In its Decision dated April 10, 2007, 21 the RTC ruled in favor of Cacayuran, First, although the construction of the APC would be primarily sourced from
declaring the nullity of the Subject Loans.22 It found that the resolutions the proceeds of the Subject Loans, which Land Bank insists are not taxpayer’s
approving the said loans were passed in a highly irregular manner and thus, money, there is no denying that public funds derived from taxation are bound
ultra vires; as such, the Municipality is not bound by the same. 23 Moreover, it to be expended as the Municipality assigned a portion of its IRA as a security
for the foregoing loans. Needless to state, the Municipality’s IRA, which

98
serves as the local government unit’s just share in the national taxes, 32 is in the Noticeably, the passage of the Subject Resolutions was also tainted with other
nature of public funds derived from taxation. The Court believes, however, irregularities, such as (1) the SB’s failure to submit the Subject Resolutions to
that although these funds may be posted as a security, its collateralization the Sangguniang Panlalawigan of La Union for its review contrary to Section
should only be deemed effective during the incumbency of the public officers 56 of the LGC;41 and (2) the lack of publication and posting in contravention
who approved the same, else those who succeed them be effectively deprived of Section 59 of the LGC.42
of its use.
In fine, Land Bank cannot rely on the Subject Resolutions as basis to validate
In any event, it is observed that the proceeds from the Subject Loans had the Subject Loans.
already been converted into public funds by the Municipality’s receipt thereof.
Funds coming from private sources become impressed with the characteristics
C. Ultra vires nature of the Subject
of public funds when they are under official custody.33

Loans
Accordingly, the first requisite has been clearly met.

Neither can Land Bank claim that the Subject Loans do not constitute ultra
Second, as a resident-taxpayer of the Municipality, Cacayuran is directly
vires acts of the officers who approved the same.
affected by the conversion of the Agoo Plaza which was funded by the
proceeds of the Subject Loans. It is well-settled that public plazas are
properties for public use34 and therefore, belongs to the public dominion. 35 As Generally, an ultra vires act is one committed outside the object for which a
such, it can be used by anybody and no one can exercise over it the rights of a corporation is created as defined by the law of its organization and therefore
private owner.36 In this light, Cacayuran had a direct interest in ensuring that beyond the powers conferred upon it by law. 43 There are two (2) types of ultra
the Agoo Plaza would not be exploited for commercial purposes through the vires acts. As held in Middletown Policemen's Benevolent Association v.
APC’s construction. Moreover, Cacayuran need not be privy to the Subject Township of Middletown:44
Loans in order to proffer his objections thereto. In Mamba v. Lara, it has been
held that a taxpayer need not be a party to the contract to challenge its
There is a distinction between an act utterly beyond the jurisdiction of a
validity; as long as taxes are involved, people have a right to question
municipal corporation and the irregular exercise of a basic power under the
contracts entered into by the government.37
legislative grant in matters not in themselves jurisdictional. The former are
ultra vires in the primary sense and void; the latter, ultra vires only in a
Therefore, as the above-stated requisites obtain in this case, Cacayuran has secondary sense which does not preclude ratification or the application of the
standing to file the instant suit. doctrine of estoppel in the interest of equity and essential justice. (Emphasis
and underscoring supplied)
B. Validity of the Subject Resolutions
In other words, an act which is outside of the municipality’s jurisdiction is
considered as a void ultra vires act, while an act attended only by an
Land Bank avers that the Subject Resolutions provided ample authority for
irregularity but remains within the municipality’s power is considered as an
Mayor Eriguel to contract the Subject Loans. It posits that Section 444(b)(1)
ultra vires act subject to ratification and/or validation. To the former belongs
(vi) of the LGC merely requires that the municipal mayor be authorized by the
municipal contracts which (a) are entered into beyond the express, implied or
SB concerned and that such authorization need not be embodied in an
inherent powers of the local government unit; and (b) do not comply with the
ordinance.38
substantive requirements of law e.g., when expenditure of public funds is to
be made, there must be an actual appropriation and certificate of availability
A careful perusal of Section 444(b)(1)(vi) of the LGC shows that while the of funds; while to the latter belongs those which (a) are entered into by the
authorization of the municipal mayor need not be in the form of an ordinance, improper department, board, officer of agent; and (b)do not comply with the
the obligation which the said local executive is authorized to enter into must formal requirements of a written contract e.g., the Statute of Frauds.45
be made pursuant to a law or ordinance, viz:
Applying these principles to the case at bar, it is clear that the Subject Loans
Sec. 444. The Chief Executive: Powers, Duties, Functions and Compensation. belong to the first class of ultra vires acts deemed as void.
-
Records disclose that the said loans were executed by the Municipality for the
xxxx purpose of funding the conversion of the Agoo Plaza into a commercial center
pursuant to the Redevelopment Plan. However, the conversion of the said
plaza is beyond the Municipality’s jurisdiction considering the property’s
(b) For efficient, effective and economical governance the purpose of which is
nature as one for public use and thereby, forming part of the public dominion.
the general welfare of the municipality and its inhabitants pursuant to Section
Accordingly, it cannot be the object of appropriation either by the State or by
16 of this Code, the municipal mayor shall:
private persons.46 Nor can it be the subject of lease or any other contractual
undertaking.47 In Villanueva v. Castañeda, Jr.,48 citing Espiritu v. Municipal
xxxx Council of Pozorrubio,49 the Court pronounced that:

(vi) Upon authorization by the sangguniang bayan, represent the municipality x x x Town plazas are properties of public dominion, to be devoted to public
in all its business transactions and sign on its behalf all bonds, contracts, and use and to be made available to the public in general. They are outside the
obligations, and such other documents made pursuant to law or ordinance; commerce of man and cannot be disposed of or even leased by the
(Emphasis and underscoring supplied) municipality to private parties.1âwphi1

In the present case, while Mayor Eriguel’s authorization to contract the In this relation, Article 1409(1) of the Civil Code provides that a contract
Subject Loans was not contained – as it need not be contained – in the form of whose purpose is contrary to law, morals, good customs, public order or
an ordinance, the said loans and even the Redevelopment Plan itself were not public policy is considered void 50 and as such, creates no rights or obligations
approved pursuant to any law or ordinance but through mere resolutions. The or any juridical relations. 51 Consequently, given the unlawful purpose behind
distinction between ordinances and resolutions is well-perceived. While the Subject Loans which is to fund the commercialization of the Agoo Plaza
ordinances are laws and possess a general and permanent character, pursuant to the Redevelopment Plan, they are considered as ultra vires in the
resolutions are merely declarations of the sentiment or opinion of a primary sense thus, rendering them void and in effect, non-binding on the
lawmaking body on a specific matter and are temporary in nature. 39 As Municipality.
opposed to ordinances, "no rights can be conferred by and be inferred from a
resolution."40 In this accord, it cannot be denied that the SB violated Section
444(b)(1)(vi) of the LGC altogether.
99
At this juncture, it is equally observed that the land on which the Agoo Plaza (OCT) No. 291, issued on October 17, 1906 by the Registry of Deeds of
is situated cannot be converted into patrimonial property – as the SB tried to Rizal.8 Maricaban covered several parcels of land with a total area of over
when it passed Municipal Ordinance No. 02-200752 – absent any express grant 2,544 hectares spread out over Makati, Pasig, Taguig, Pasay, and Parañaque.9
by the national government.53 As public land used for public use, the
foregoing lot rightfully belongs to and is subject to the administration and
Following the purchase of Maricaban by the government of the United States
control of the Republic of the Philippines. 54 Hence, without the said grant, the
of America (USA) early in the American colonial period, to be converted into
Municipality has no right to claim it as patrimonial property.
the military reservation known as Fort William Mckinley, Transfer Certificate
of Title (TCT) No. 192 was issued in the name of the USA to cancel OCT No.
Nevertheless, while the Subject Loans cannot bind the Municipality for being 291.10 The US government later transferred 30 has. of Maricaban to the
ultra vires, the officers who authorized the passage of the Subject Resolutions Manila Railroad Company, for which TCT No. 192 was cancelled by TCT
are personally liable. Case law states that public officials can be held Nos. 1218 and 1219, the first in the name of the Manila Railroad Company for
personally accountable for acts claimed to have been performed in connection 30 has., and the second in the name of the USA for the rest of the Maricaban
with official duties where they have acted ultra vires,55 as in this case. property.11

WHEREFORE, the petition is DENIED. Accordingly, the March 26, 2010 On January 29, 1914, TCT No. 1219 was cancelled and replaced by TCT No.
Decision of the Court of Appeals in CA-G.R. CV. No. 89732 is hereby 1688, and later that year, on September 15, 1914, TCT No. 1688 was
AFFIRMED. cancelled and replaced by TCT No. 2288, both times in the name of the
USA.12 On December 6, 1956, the USA formally ceded Fort William
Mckinley to the Republic of the Philippines (Republic), and on September 11,
SO ORDERED.
1958, TCT No. 2288 was cancelled and replaced by TCT No. 61524, this time
in the name of the Republic.13 On July 12, 1957, President Carlos P. Garcia
G.R. No. 192896               July 24, 2013 issued Proclamation No. 423 withdrawing from sale or settlement the tracts of
land within Fort William Mckinley, now renamed Fort Bonifacio, and
reserving them for military purposes.14
DREAM VILLAGE NEIGHBORHOOD ASSOCIATION, INC.,
represented by its Incumbent President, GREG SERIEGO, Petitioner,
vs. On January 7, 1986, President Ferdinand E. Marcos issued Proclamation No.
BASES DEVELOPMENT AUTHORITY, Respondent. 2476 declaring certain portions of Fort Bonifacio alienable and disposable 15 in
the manner provided under Republic Act (R.A.) Nos. 274 and 730, in relation
to the Public Land Act,16 thus allowing the sale to the settlers of home lots in
DECISION Upper Bicutan, Lower Bicutan, Signal Village, and Western Bicutan.17

REYES, J.: On October 16, 1987, President Corazon C. Aquino issued Proclamation No.
172 amending Proclamation No. 2476 by limiting to Lots 1 and 2 of the
Before us on Petition for Review 1 under Rule 45 of the Rules of Court is the survey Swo-13-000298 the areas in Western Bicutan open for disposition. 18
Decision2 dated September 10, 2009 and Resolution3 dated July 13, 2010 of
the Court of Appeals (CA) in CA-G.R. SP No. 85228 nullifying and setting On March 13, 1992, R.A. No. 7227 was passed 19 creating the Bases
aside for lack of jurisdiction the Resolution 4 dated April 28, 2004 of the Conversion and Development Authority (BCDA) to oversee and accelerate
Commission on the Settlement of Land Problems (COSLAP) in COS LAP the conversion of Clark and Subic military reservations and their extension
Case No. 99-500. The fallo of the assailed COS LAP Resolution reads, as camps (John Hay Station, Wallace Air Station, O’Donnell Transmitter Station,
follows: San Miguel Naval Communications Station and Capas Relay Station) to
productive civilian uses. Section 820 of the said law provides that the capital of
WHEREFORE, premises considered, judgment is hereby rendered as follows: the BCDA will be provided from sales proceeds or transfers of lots in nine (9)
military camps in Metro Manila, including 723 has. of Fort Bonifacio. The
law, thus, expressly authorized the President of the Philippines "to sell the
1. Declaring the subject property, covering an area of 78,466 above lands, in whole or in part, which are hereby declared alienable and
square meters, now being occupied by the members of the Dream disposable pursuant to the provisions of existing laws and regulations
Village Neighborhood Association, Inc. to be outside of Swo-00- governing sales of government properties,"21 specifically to raise capital for
0001302 BCDA property. the BCDA. Titles to the camps were transferred to the BCDA for this
purpose,22 and TCT No. 61524 was cancelled on January 3, 1995 by TCT Nos.
2. In accordance with the tenets of social justice, members of said 23888, 23887, 23886, 22460, 23889, 23890, and 23891, now in the name of
association are advised to apply for sales patent on their respective the BCDA.23
occupied lots with the Land Management Bureau, DENR-NCR,
pursuant to R.A. Nos. 274 and 730. Excepted from disposition by the BCDA are: a) approximately 148.80 has.
reserved for the National Capital Region (NCR) Security Brigade, Philippine
3. Directing the Land Management Bureau-DENR-NCR to process Army officers’ housing area, and Philippine National Police jails and support
the sales patent application of complainants pursuant to existing services (presently known as Camp Bagong Diwa); b) approximately 99.91
laws and regulation. has. in Villamor Air Base for the Presidential Airlift Wing, one squadron of
helicopters for the NCR and respective security units; c) twenty one (21) areas
segregated by various presidential proclamations; and d) a proposed 30.15
4. The peaceful possession of actual occupants be respected by the has. as relocation site for families to be affected by the construction of
respondents. Circumferential Road 5 and Radial Road 4, provided that the boundaries and
technical description of these exempt areas shall be determined by an actual
SO ORDERED.5 ground survey.24

Antecedent Facts Now charging the BCDA of wrongfully asserting title to Dream Village and
unlawfully subjecting its members to summary demolition, resulting in unrest
and tensions among the residents,25 on November 22, 1999, the latter filed a
Petitioner Dream Village Neighborhood Association, Inc. (Dream Village) letter-complaint with the COSLAP to seek its assistance in the verification
claims to represent more than 2,000 families who have been occupying a survey of the subject 78,466-sq m property, which they claimed is within Lot
78,466-square meter lot in Western Bicutan, Taguig City since 1985 "in the 1 of Swo-13-000298 and thus is covered by Proclamation No. 172. They
concept of owners continuously, exclusively and notoriously." 6 The lot used to claim that they have been occupying the area for thirty (30) years "in the
be part of the Hacienda de Maricaban (Maricaban), owned by Dolores Casal y concept of owners continuously, exclusively and notoriously for several
Ochoa and registered under a Torrens title, 7 Original Certificate of Title years," and have built their houses of sturdy materials thereon and introduced
100
paved roads, drainage and recreational and religious facilities. Dream Village, that Section 3(2) of E.O. No. 561 authorizes it to "assume jurisdiction and
thus, asserts that the lot is not among those transferred to the BCDA under resolve land problems or disputes which are critical and explosive in nature
R.A. No. 7227, and therefore patent applications by the occupants should be considering, for instance, the large number of parties involved, the presence or
processed by the Land Management Bureau (LMB). emergence of social tension or unrest, or other similar critical situations
requiring immediate action," even as Section 3(2)(d) of E.O. No. 561 also
allows it to take cognizance of "petitions for classification, release and/or
On August 15, 2000, Dream Village formalized its complaint by filing an
subdivision of lands of the public domain," exactly the ultimate relief sought
Amended Petition26 in the COSLAP. Among the reliefs it sought were:
by Dream Village. Rationalizing that it was created precisely to provide a
more effective mechanism for the expeditious settlement of land problems "in
d. DECLARING the subject property as alienable and disposable general," the COSLAP invoked as its authority the 1990 case of Bañaga v.
by virtue of applicable laws; COSLAP,33 where this Court said:

e. Declaring the portion of Lot 1 of subdivision Plan SWO-13- It is true that Executive Order No. 561 provides that the COSLAP may take
000298, situated in the barrio of Western Bicutan, Taguig, Metro cognizance of cases which are "critical and explosive in nature considering,
Manila, which is presently being occupied by herein petitioner as for instance, the large number of parties involved, the presence or emergence
within the coverage of Proclamation Nos. 2476 and 172 and of social tension or unrest, or other similar critical situations requiring
outside the claim of AFP-RSBS INDUSTRIAL PARK COMPLEX immediate action." However, the use of the word "may" does not mean that
and/or BASES CONVESION DEVELOPMENT AUTHORITY. the COSLAP’s jurisdiction is merely confined to the above mentioned cases.
The provisions of the said Executive Order are clear that the COSLAP was
created as a means of providing a more effective mechanism for the
f. ORDERING the Land Management Bureau to process the expeditious settlement of land problems in general, which are frequently the
application of the ASSOCIATION members for the purchase of source of conflicts among settlers, landowners and cultural minorities.
their respective lots under the provisions of Acts Nos. 274 and 730. Besides, the COSLAP merely took over from the abolished PACLAP whose
(Underscoring supplied) functions, including its jurisdiction, power and authority to act on, decide and
resolve land disputes (Sec. 2, P.D. No. 832) were all assumed by it. The said
Respondent BCDA in its Answer28 dated November 23, 2000 questioned the Executive Order No. 561 containing said provision, being enacted only on
jurisdiction of the COSLAP to hear Dream Village’s complaint, while September 21, 1979, cannot affect the exercise of jurisdiction of the PACLAP
asserting its title to the subject property pursuant to R.A. No. 7227. It argued Provincial Committee of Koronadal on September 20, 1978. Neither can it
that under Executive Order (E.O.) No. 561 which created the COSLAP, its affect the decision of the COSLAP which merely affirmed said exercise of
task is merely to coordinate the various government offices and agencies jurisdiction.34
involved in the settlement of land problems or disputes, adding that BCDA
does not fall in the enumeration in Section 3 of E.O. No. 561, it being neither In its Motion for Reconsideration 35 filed on May 20, 2004, the BCDA
a pastureland-lease holder, a timber concessionaire, or a government questioned the validity of the survey results since it was conducted without its
reservation grantee, but the holder of patrimonial government property which representatives present, at the same time denying that it received a notification
cannot be the subject of a petition for classification, release or subdivision by of the DENR verification survey.36 It maintained that there is no basis for the
the occupants of Dream Village. COSLAP’s finding that the members of Dream Village were in open,
continuous, and adverse possession in the concept of owner, because not only
In its Resolution 29 dated April 28, 2004, the COSLAP narrated that it called a is the property not among those declared alienable and disposable, but it is a
mediation conference on March 22, 2001, during which the parties agreed to titled patrimonial property of the State.37
have a relocation/verification survey conducted of the subject lot. On April 4,
2001, the COSLAP wrote to the Department of Environment and Natural In the Order38 dated June 17, 2004, the COSLAP denied BCDA’s Motion for
Resources (DENR)-Community Environment and Natural Resources Office- Reconsideration, insisting that it had due notice of the verification survey,
NCR requesting the survey, which would also include Swo-00-0001302, while also noting that although the BCDA wanted to postpone the verification
covering the adjacent AFP-RSBS Industrial Park established by Proclamation survey due to its tight schedule, it actually stalled the survey when it failed to
No. 1218 on May 8, 1998 as well as the abandoned Circumferential Road 5 suggest an alternative survey date to ensure its presence.
(C-5 Road).30

CA Ruling
On April 1, 2004, the COSLAP received the final report of the verification
survey and a blueprint copy of the survey plan from Atty. Rizaldy Barcelo,
Regional Technical Director for Lands of DENR. Specifically, Item No. 3 of On Petition for Review39 to the CA, the BCDA argued that the dispute is
the DENR report states: outside the jurisdiction of the COSLAP because of the land’s history of
private ownership and because it is registered under an indefeasible Torrens
title40; that Proclamation No. 172 covers only Lots 1 and 2 of Swo-13-000298
3. Lot-1, Swo-000298 is inside Proclamation 172. Dream Village in Western Bicutan, whereas Dream Village occupies Lots 10, 11 and part of
Neighborhood Association, Inc. is outside Lot-1, Swo-13-000298 and inside 13 of Swo-00-0001302, which also belongs to the BCDA 41; that the COSLAP
Lot-10, 11 & Portion of Lot 13, Swo-00-0001302 with an actual area of resolution is based on an erroneous DENR report stating that Dream Village is
78,466 square meters. Likewise, the area actually is outside Swo-00-0001302 outside of BCDA, because Lots 10, 11, and portion of Lot 13 of Swo-00-
of BCDA.31 (Emphasis ours and underscoring supplied) 0001302 are within the DA42; that the COSLAP was not justified in ignoring
BCDA’s request to postpone the survey to the succeeding year because the
COSLAP Ruling presence of its representatives in such an important verification survey was
indispensable for the impartiality of the survey aimed at resolving a highly
volatile situation43; that the COSLAP is a mere coordinating administrative
On the basis of the DENR’s verification survey report, the COSLAP resolved agency with limited jurisdiction44; and, that the present case is not among
that Dream Village lies outside of BCDA, and particularly, outside of Swo- those enumerated in Section 3 of E.O. No. 56145.
00-0001302, and thus directed the LMB of the DENR to process the
applications of Dream Village’s members for sales patent, noting that in view
of the length of time that they "have been openly, continuously and The COSLAP, on the other hand, maintained that Section 3(2)(e) of E.O. No.
notoriously occupying the subject property in the concept of an owner, x x x 561 provides that it may assume jurisdiction and resolve land problems or
they are qualified to apply for sales patent on their respective occupied lots disputes in "other similar land problems of grave urgency and
pursuant to R.A. Nos. 274 and 730 in relation to the provisions of the Public magnitude,"46 and the present case is one such problem.
Land Act."32
The CA in its Decision47 dated September 10, 2009 ruled that the COSLAP
On the question of its jurisdiction over the complaint, the COSLAP cited the has no jurisdiction over the complaint because the question of whether Dream
likelihood that the summary eviction by the BCDA of more than 2,000 Village is within the areas declared as available for disposition in
families in Dream Village could stir up serious social unrest, and maintained Proclamation No. 172 is beyond its competence to determine, even as the land
101
in dispute has been under a private title since 1906, and presently its title is Barangay Survey Plan Date Approved
held by a government agency, the BCDA, in contrast to the case of Bañaga
relied upon by Dream Village, where the disputed land was part of the public
1. Lower Bicutan SWO-13-000253 October 21, 1986
domain and the disputants were applicants for sales patent thereto.

2. Signal Village SWO-13-000258 May 13, 1986


Dream Village’s motion for reconsideration was denied in the appellate
court’s Order48 of July 13, 2010.
3. Upper Bicutan SWO-13-000258 May 13, 1986
Petition for Review in the Supreme Court
4. Western Bicutan SWO-13-000298 January 15, 198753
On petition for review on certiorari to this Court, Dream Village interposes
the following issues: However, the survey plan for Western Bicutan, Swo-13-000298, shows that
Lots 3, 4, 5 and 6 thereof are inside the area segregated for the Libingan ng
mga Bayani under Proclamation No. 208, which then leaves only Lots 1 and 2
A
of Swo-13-000298 as available for disposition. For this reason, it was
necessary to amend Proclamation No. 2476. Thus, in Proclamation No. 172
IN ANNULLING THE RESOLUTION OF COSLAP IN COSLAP CASE only Lots 1 and 2 of Swo-13-000298 are declared alienable and disposable.54
NO. 99-500, THE HONORABLE CA DECIDED THE CASE IN A
MANNER NOT CONSISTENT WITH LAW AND APPLICABLE
The DENR verification survey report states that Dream Village is not situated
DECISIONS OF THIS HONORABLE COURT;
in Lot 1 of Swo-13-000298 but actually occupies Lots 10, 11 and part of 13 of
Swo-00-0001302: "x x x Dream Village is outside Lot1, SWO-13-000298 and
B inside Lot 10, 11 & portion of Lot 13, SWO-00-0001302 with an actual area
of 78466 square meters. The area is actually is [sic] outside SWO-00-0001302
of BCDA."55 Inexplicably and gratuitously, the DENR also states that the area
THE HONORABLE CA ERRED IN RULING THAT COSLAP HAD NO
is outside of BCDA, completely oblivious that the BCDA holds title over the
JURISDICTION OVER THE CONTROVERSY BETWEEN THE PARTIES
entire Fort Bonifacio, even as the BCDA asserts that Lots 10, 11 and 13 of
HEREIN.49
SWO-00-0001302 are part of the abandoned right-of-way of C-5 Road. This
area is described as lying north of Lot 1 of Swo-13-000298 and of Lots 3, 4, 5
The Court’s Ruling and 6 of Swo-13-000298 (Western Bicutan) inside the Libingan ng mga
Bayani, and the boundary line of Lot 1 mentioned as C-5 Road is really the
proposed alignment of C-5 Road, which was abandoned when, as constructed,
We find no merit in the petition. it was made to traverse northward into the Libingan ng mga Bayani. Dream
Village has not disputed this assertion.
The BCDA holds title to Fort Bonifacio.
The mere fact that the original plan for C-5 Road to cross Swo-00-0001302
That the BCDA has title to Fort Bonifacio has long been decided with finality. was abandoned by deviating it northward to traverse the southern part of
In Samahan ng Masang Pilipino sa Makati, Inc. v. BCDA, 50 it was Libingan ng mga Bayani does not signify abandonment by the government of
categorically ruled as follows: the bypassed lots, nor that these lots would then become alienable and
disposable. They remain under the title of the BCDA, even as it is significant
that under Section 8(d) of R.A. No. 7227, a relocation site of 30.5 has. was to
First, it is unequivocal that the Philippine Government, and now the BCDA, be reserved for families affected by the construction of C-5 Road. It is
has title and ownership over Fort Bonifacio. The case of Acting Registrars of nowhere claimed that Lots 10, 11 and 13 of Swo-00-0001302 are part of the
Land Titles and Deeds of Pasay City, Pasig and Makati is final and conclusive said relocation site. These lots border C-5 Road in the south, 56 making them
on the ownership of the then Hacienda de Maricaban estate by the Republic of commercially valuable to BCDA, a farther argument against a claim that the
the Philippines. Clearly, the issue on the ownership of the subject lands in Fort government has abandoned them to Dream Village.
Bonifacio is laid to rest. Other than their view that the USA is still the owner
of the subject lots, petitioner has not put forward any claim of ownership or
interest in them.51 While property of the State or any of its subdivisions patrimonial in
character may be the object of prescription, those "intended for
some public service or for the development of the national
The facts in Samahan ng Masang Pilipino sa Makati are essentially not much wealth" are considered property of public dominion and therefore not
different from the controversy below. There, 20,000 families were long-time susceptible to acquisition by prescription.
residents occupying 98 has. of Fort Bonifacio in Makati City, who vainly
sought to avert their eviction and the demolition of their houses by the BCDA
upon a claim that the land was owned by the USA under TCT No. 2288. The Article 1113 of the Civil Code provides that "property of the State or any of
Supreme Court found that TCT No. 2288 had in fact been cancelled by TCT its subdivisions not patrimonial in character shall not be the object of
No. 61524 in the name of the Republic, which title was in turn cancelled on prescription." Articles 420 and 421 identify what is property of public
January 3, 1995 by TCT Nos. 23888, 23887, 23886, 22460, 23889, 23890, dominion and what is patrimonial property:
and 23891, all in the name of the BCDA. The Court ruled that the BCDA’s
aforesaid titles over Fort Bonifacio are valid, indefeasible and beyond Art. 420. The following things are property of public dominion:
question, since TCT No. 61524 was cancelled in favor of BCDA pursuant to
an explicit authority under R.A. No. 7227, the legal basis for BCDA’s
takeover and management of the subject lots.52 (1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character;
Dream Village sits on the
abandoned C-5 Road, which lies
outside the area declared in (2) Those which belong to the State, without being for public use,
Proclamation Nos. 2476 and 172 as and are intended for some public service or for the development of
alienable and disposable. the national wealth.

Pursuant to Proclamation No. 2476, the following surveys were conducted by Art. 421. All other property of the State, which is not of the character stated in
the Bureau of Lands to delimit the boundaries of the areas excluded from the the preceding article, is patrimonial property.
coverage of Proclamation No. 423:

102
One question laid before us is whether the area occupied by Dream Village is may still lose his right to recover the possession of his registered property by
susceptible of acquisition by prescription. In Heirs of Mario Malabanan v. reason of laches,63 nowhere has Dream Village alleged or proved laches,
Republic,57 it was pointed out that from the moment R.A. No. 7227 was which has been defined as such neglect or omission to assert a right, taken in
enacted, the subject military lands in Metro Manila conjunction with lapse of time and other circumstances causing prejudice to
an adverse party, as will operate as a bar in equity. Put any way, it is a delay
in the assertion of a right which works disadvantage to another because of the
became alienable and disposable. However, it was also clarified that the said
inequity founded on some change in the condition or relations of the property
lands did not thereby become patrimonial, since the BCDA law makes the
or parties. It is based on public policy which, for the peace of society, ordains
express reservation that they are to be sold in order to raise funds for the
that relief will be denied to a stale demand which otherwise could be a valid
conversion of the former American bases in Clark and Subic. The Court noted
claim.64
that the purpose of the law can be tied to either "public service" or "the
development of national wealth" under Article 420(2) of the Civil Code, such
that the lands remain property of the public dominion, albeit their status is The subject property having been
now alienable and disposable. The Court then explained that it is only upon expressly reserved for a specific
their sale to a private person or entity as authorized by the BCDA law that public purpose, the COSLAP
they become private property and cease to be property of the public cannot exercise jurisdiction over the
dominion:58 complaint of the Dream Village
settlers.
For as long as the property belongs to the State, although already classified as
alienable or disposable, it remains property of the public dominion if when it BCDA has repeatedly asserted that the COSLAP has no jurisdiction to hear
is "intended for some public service or for the development of the national Dream Village’s complaint. Concurring, the CA has ruled that questions as to
wealth."59 the physical identity of Dream Village and whether it lies in Lots 10, 11 and
13 of Swo-00-0001302, or whether Proclamation No. 172 has released the
disputed area for disposition are issues which are "manifestly beyond the
Thus, under Article 422 of the Civil Code, public domain lands become
scope of the COSLAP’s jurisdiction vis-á-vis Paragraph 2, Section 3 of E.O.
patrimonial property only if there is a declaration that these are alienable or
No. 561,"65 rendering its Resolution a patent nullity and its pronouncements
disposable, together with an express government manifestation that the
void. Thus, the CA said, under Section 3 of E.O. No. 561, the COSLAP’s duty
property is already patrimonial or no longer retained for public service or the
would have been to refer the conflict to another tribunal or agency of
development of national wealth. Only when the property has become
government in view of the serious ramifications of the disputed claims:
patrimonial can the prescriptive period for the acquisition of property of the
public dominion begin to run. Also under Section 14(2) of Presidential Decree
(P.D.) No. 1529, it is provided that before acquisitive prescription can In fine, it is apparent that the COSLAP acted outside its jurisdiction in taking
commence, the property sought to be registered must not only be classified as cognizance of the case. It would have been more prudent if the COSLAP has
alienable and disposable, it must also be expressly declared by the State that it [sic] just referred the controversy to the proper forum in order to fully thresh
is no longer intended for public service or the development of the national out the ramifications of the dispute at bar. As it is, the impugned Resolution is
wealth, or that the property has been converted into patrimonial. Absent such a patent nullity since the tribunal which rendered it lacks jurisdiction. Thus,
an express declaration by the State, the land remains to be property of public the pronouncements contained therein are void. "We have consistently ruled
dominion.60 that a judgment for want of jurisdiction is no judgment at all. It cannot be the
source of any right or the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal
Since the issuance of Proclamation No. 423 in 1957, vast portions of the
effect."66 (Citation omitted)
former Maricaban have been legally disposed to settlers, besides those
segregated for public or government use. Proclamation No. 1217 (1973)
established the Maharlika Village in Bicutan, Taguig to serve the needs of We add that Fort Bonifacio has been reserved for a declared specific public
resident Muslims of Metro Manila; Proclamation No. 2476 (1986), as purpose under R.A. No. 7227, which unfortunately for Dream Village does
amended by Proclamation No. 172 (1987), declared more than 400 has. of not encompass the present demands of its members. Indeed, this purpose was
Maricaban in Upper and Lower Bicutan, Signal Village, and Western Bicutan the very reason why title to Fort Bonifacio has been transferred to the BCDA,
as alienable and disposable; Proclamation No. 518 (1990) formally exempted and it is this very purpose which takes the dispute out of the direct jurisdiction
from Proclamation No. 423 the Barangays of Cembo, South Cembo, West of the COSLAP. A review of the history of the COSLAP will readily clarify
Rembo, East Rembo, Comembo, Pembo and Pitogo, comprising 314 has., and that its jurisdiction is limited to disputes over public lands not reserved or
declared them open for disposition. declared for a public use or purpose.

The above proclamations notwithstanding, Fort Bonifacio remains property of On July 31, 1970, President Marcos issued E.O. No. 251 creating the
public dominion of the State, because although declared alienable and Presidential Action Committee on Land Problems (PACLAP) to expedite and
disposable, it is reserved for some public service or for the development of the coordinate the investigation and resolution of all kinds of land disputes
national wealth, in this case, for the conversion of military reservations in the between settlers, streamline and shorten administrative procedures, adopt bold
country to productive civilian uses.61 Needless to say, the acquisitive and decisive measures to solve land problems, or recommend other
prescription asserted by Dream Village has not even begun to run. solutions.67 E.O. No. 305, issued on March 19, 1971, reconstituted the
PACLAP and gave it exclusive jurisdiction over all cases involving public
lands and other lands of the public domain, 68 as well as adjudicatory powers
Ownership of a land registered
phrased in broad terms: "To investigate, coordinate, and resolve expeditiously
under a Torrens title cannot be lost
land disputes, streamline administrative proceedings, and, in general, to adopt
by prescription or adverse
bold and decisive measures to solve problems involving public lands and
possession.
lands of the public domain."69

Dream Village has been unable to dispute BCDA’s claim that Lots 10, 11 and
On November 27, 1975, P.D. No. 832 reorganized the PACLAP and enlarged
part of 13 of Swo-00-0001302 are the abandoned right-of-way of C-5 Road,
its functions and duties. Section 2 thereof even granted it quasi judicial
which is within the vast titled territory of Fort Bonifacio. We have already
functions, to wit:
established that these lots have not been declared alienable and disposable
under Proclamation Nos. 2476 or 172.
Sec. 2. Functions and duties of the PACLAP. – The PACLAP shall have the
following functions and duties:
Moreover, it is a settled rule that lands under a Torrens title cannot be
acquired by prescription or adverse possession. 62 Section 47 of P.D. No. 1529,
the Property Registration Decree, expressly provides that no title to registered 1. Direct and coordinate the activities, particularly the investigation
land in derogation of the title of the registered owner shall be acquired by work, of the various government agencies and agencies involved in
prescription or adverse possession. And, although the registered landowner land problems or disputes, and streamline administrative

103
procedures to relieve small settlers and landholders and members specifically mentioned in its enabling statute, E.O. No. 561. The Supreme
of cultural minorities of the expense and time-consuming delay Court said:
attendant to the solution of such problems or disputes;
Administrative agencies, like the COSLAP, are tribunals of limited
2. Refer for immediate action any land problem or dispute brought jurisdiction and, as such, could wield only such as are specifically granted to
to the attention of the PACLAP, to any member agency having them by the enabling statutes. x x x.
jurisdiction thereof: Provided, That when the Executive Committee
decides to act on a case, its resolution, order or decision thereon
xxxx
shall have the force and effect of a regular administrative
resolution, order or decision, and shall be binding upon the parties
therein involved and upon the member agency having jurisdiction Under the law, E.O. No. 561, the COSLAP has two options in acting on a land
thereof; dispute or problem lodged before it, namely, (a) refer the matter to the agency
having appropriate jurisdiction for settlement/resolution; or (b) assume
jurisdiction if the matter is one of those enumerated in paragraph 2(a) to (e) of
xxxx
the law, if such case is critical and explosive in nature, taking into account the
large number of the parties involved, the presence or emergence of social
4. Evolve and implement a system of procedure for the speedy investigation tension or unrest, or other similar critical situations requiring immediate
and resolution of land disputes or problems at provincial level, if possible. action. In resolving whether to assume jurisdiction over a case or to refer the
(Underscoring supplied) same to the particular agency concerned, the COSLAP has to consider the
nature or classification of the land involved, the parties to the case, the nature
of the questions raised, and the need for immediate and urgent action thereon
On September 21, 1979, E.O. No. 561 abolished the PACLAP and created the
to prevent injuries to persons and damage or destruction to property. The law
COSLAP to be a more effective administrative body to provide a mechanism
does not vest jurisdiction on the COSLAP over any land dispute or
for the expeditious settlement of land problems among small settlers,
problem.72 (Citation omitted)
landowners and members of the cultural minorities to avoid social
unrest.70 Paragraph 2, Section 3 of E.O No. 561 now specifically enumerates
the instances when the COSLAP can exercise its adjudicatory functions: The Longino ruling has been consistently cited in subsequent COSLAP cases,
among them Davao New Town Development Corp. v. COSLAP, 73 Barranco
v. COSLAP,74 NHA v. COSLAP,75 Cayabyab v. de Aquino,76 Ga, Jr. v.
Sec. 3. Powers and Functions. — The Commission shall have the following
Tubungan,77 Machado v. Gatdula,78 and Vda. de Herrera v. Bernardo.79
powers and functions:

Thus, in Machado, it was held that the COSLAP cannot invoke Section 3(2)
1. Coordinate the activities, particularly the investigation work, of
(e) of E.O. No. 561 to assume jurisdiction over "other similar land problems
the various government offices and agencies involved in the
of grave urgency," since the statutory construction principle of ejusdem
settlement of land problems or disputes, and streamline
generis prescribes that where general words follow an enumeration of persons
administrative procedures to relieve small settlers and landholders
or things, by words of a particular and specific meaning, such general words
and members of cultural minorities of the expense and time
are not to be construed in their widest extent but are to be held as applying
consuming delay attendant to the solution of such problems or
only to persons or things of the same kind as those specifically
disputes;
mentioned.80 Following this rule, COSLAP’s jurisdiction is limited to disputes
involving lands in which the government has a proprietary or regulatory
2. Refer and follow-up for immediate action by the agency having interest,81 or public lands covered with a specific license from the government
appropriate jurisdiction any land problem or dispute referred to the such as a pasture lease agreements, a timber concessions, or a reservation
Commission: Provided, That the Commission may, in the grants,82 and where moreover, the dispute is between occupants/squatters and
following cases, assume jurisdiction and resolve land problems or pasture lease agreement holders or timber concessionaires; between
disputes which are critical and explosive in nature considering, for occupants/squatters and government reservation grantees; and between
instance, the large number of the parties involved, the presence or occupants/squatters and public land claimants or applicants.
emergence of social tension or unrest, or other similar critical
situations requiring immediate action:
In Longino, the parties competed to lease a property of the Philippine National
Railways. The high court rejected COSLAP’s jurisdiction, noting that the
(a) Between occupants/squatters and pasture lease disputed lot is not public land, and neither party was a squatter, patent lease
agreement holders or timber concessionaires; agreement holder, government reservation grantee, public land claimant or
occupant, or a member of any cultural minority, nor was the dispute critical
and explosive in nature so as to generate social tension or unrest, or a critical
(b) Between occupants/squatters and government situation which required immediate action.83
reservation grantees;

In Davao New Town Development Corp., it was held that the COSLAP has
(c) Between occupants/squatters and public land no concurrent jurisdiction with the Department of Agrarian Reform (DAR) in
claimants or applicants; respect of disputes concerning the implementation of agrarian reform laws,
since "the grant of exclusive and primary jurisdiction over agrarian reform
(d) Petitions for classification, release and/or matters on the DAR implies that no other court, tribunal, or agency is
subdivision of lands of the public domain; and authorized to resolve disputes properly cognizable by the DAR." 84 Thus,
instead of hearing and resolving the case, COSLAP should have simply
referred private respondents’ complaint to the DAR or DARAB. According to
(e) Other similar land problems of grave urgency and the Court:
magnitude.

The abovementioned proviso Section (3)(2) of E.O. No. 561, which vests
xxxx COSLAP the power to resolve land disputes, does not confer upon COSLAP
blanket authority to assume every matter referred to it. Its jurisdiction is
Citing the constant threat of summary eviction and demolition by the BCDA confined only to disputes over lands in which the government has proprietary
and the seriousness and urgency of the reliefs sought in its Amended Petition, or regulatory interest. Moreover, the land dispute in Bañaga involved parties
Dream Village insists that the COSLAP was justified in assuming jurisdiction with conflicting free patent applications which was within the authority of
of COSLAP Case No. 99-500. But in Longino v. Atty. General, 71 it was held PACLAP to resolve, unlike that of the instant case which is exclusively
that as an administrative agency, COSLAP’s jurisdiction is limited to cases cognizable by the DAR.85

104
In Barranco, COSLAP issued a writ to demolish structures encroaching into which has been expressly reserved by law for a specific public purpose other
private property.1âwphi1 The Supreme court ruled that COSLAP may resolve than for settlement. Thus, as we have advised in Longino, the law does not
only land disputes "involving public lands or lands of the public domain or vest jurisdiction on the COSLAP over any land dispute or problem, but it has
those covered with a specific license from the government such as a pasture to consider the nature or classification of the land involved, the parties to the
lease agreement, a timber concession, or a reservation grant."86 case, the nature of the questions raised, and the need for immediate and urgent
action thereon to prevent injuries to persons and damage or destruction to
property.
In NHA, it was held that COSLAP has no jurisdiction over a boundary dispute
between two local government units, that its decision is an utter nullity
correctible by certiorari, that it can never become final and any writ of WHEREFORE, premises considered, the petition is DENIED.
execution based on it is void, and all acts performed pursuant to it and all
claims emanating from it have no legal effect.87
SO ORDERED.

In Cayabyab, it was held that "the jurisdiction of COSLAP does not extend to
G.R. No. L40474 August 29, 1975
disputes involving the ownership of private lands, or those already covered by
CEBU OXYGEN & ACETYLENE CO., INC., petitioner,
a certificate of title, as these fall exactly within the jurisdiction of the courts
vs.
and other administrative agencies."88
HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th
Judicial District, and JOSE L. ESPELETA, Assistant Provincial Fiscal,
In Ga, Jr., it was reiterated that the COSLAP has no jurisdiction over Province of Cebu, representing the Solicitor General's Office and the
controversies relating to ownership and possession of private lands, and thus, Bureau of Lands, respondents.
the failure of respondents to properly appeal from the COSLAP decision
before the appropriate court was held not fatal to the petition for certiorari that
CONCEPCION, Jr., J.:
they eventually filed with the CA. The latter remedy remained available
despite the lapse of the period to appeal from the void COSLAP decision. 89
This is a petition for the review of the order of the Court of First Instance of
Cebu dismissing petitioner's application for registration of title over a parcel
In Machado, the high court ruled that COSLAP has no jurisdiction in disputes
of land situated in the City of Cebu.
over private lands between private parties, reiterating the essential rules
contained in Section 3 of E.O. No. 561 governing the exercise by COSLAP of
its jurisdiction, to wit: The parcel of land sought to be registered was only a portion of M. Borces
Street, Mabolo, Cebu City. On September 23, 1968, the City Council of Cebu,
through Resolution No. 2193, approved on October 3, 1968, declared the
Under these terms, the COSLAP has two different rules in acting on a land
terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned
dispute or problem lodged before it, e.g., COSLAP can assume jurisdiction
road, the same not being included in the City Development
only if the matter is one of those enumerated in paragraph 2(a) to (e) of the
Plan.1 Subsequently, on December 19, 1968, the City Council of Cebu passed
law. Otherwise, it should refer the case to the agency having appropriate
Resolution No. 2755, authorizing the Acting City Mayor to sell the land
jurisdiction for settlement or resolution. In resolving whether to assume
through a public bidding.2 Pursuant thereto, the lot was awarded to the herein
jurisdiction over a case or to refer it to the particular agency concerned, the
petitioner being the highest bidder and on March 3, 1969, the City of Cebu,
COSLAP considers: (a) the nature or classification of the land involved; (b)
through the Acting City Mayor, executed a deed of absolute sale to the herein
the parties to the case; (c) the nature of the questions raised; and (d) the need
petitioner for a total consideration of P10,800.00.3 By virtue of the aforesaid
for immediate and urgent action thereon to prevent injury to persons and
deed of absolute sale, the petitioner filed an application with the Court of First
damage or destruction to property. The terms of the law clearly do not vest on
instance of Cebu to have its title to the land registered.4
the COSLAP the general power to assume jurisdiction over any land dispute
or problem. Thus, under EO 561, the instances when the COSLAP may
resolve land disputes are limited only to those involving public lands or those On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to
covered by a specific license from the government, such as pasture lease dismiss the application on the ground that the property sought to be registered
agreements, timber concessions, or reservation grants. 90 (Citations omitted) being a public road intended for public use is considered part of the public
domain and therefore outside the commerce of man. Consequently, it cannot
be subject to registration by any private individual.5
In Vda. de Herrera, the COSLAP assumed jurisdiction over a complaint for
"interference, disturbance, unlawful claim, harassment and trespassing" over a
private parcel of land. The CA ruled that the parties were estopped to question After hearing the parties, on October 11, 1974 the trial court issued an order
COSLAP’s jurisdiction since they participated actively in the proceedings. dismissing the petitioner's application for registration of title. 6 Hence, the
The Supreme Court, noting from the complaint that the case actually involved instant petition for review.
a claim of title and possession of private land, ruled that the RTC or the MTC
has jurisdiction since the dispute did not fall under Section 3, paragraph 2 (a)
For the resolution of this case, the petitioner poses the following questions:
to (e) of E.O. No. 561, was not critical and explosive in nature, did not involve
a large number of parties, nor was there social tension or unrest present or
emergent.91 (1) Does the City Charter of Cebu City (Republic Act
No. 3857) under Section 31, paragraph 34, give the City
of Cebu the valid right to declare a road as abandoned?
In the case at bar, COSLAP has invoked Bañaga to assert its jurisdiction.
and
There, Guillermo Bañaga had filed a free patent application with the Bureau
of Lands over a public land with an area of 30 has. Gregorio Daproza
(Daproza) also filed a patent application for the same property. The opposing (2) Does the declaration of the road, as abandoned,
claims and protests of the claimants remained unresolved by the Bureau of make it the patrimonial property of the City of Cebu
Lands, and neither did it conduct an investigation. Daproza wrote to the which may be the object of a common contract?
COSLAP, which then opted to exercise jurisdiction over the controversy. The
high court sustained COSLAP, declaring that its jurisdiction is not confined to
the cases mentioned in paragraph 2(a) to (e) of E.O. No. 561, but includes (1) The pertinent portions of the Revised Charter of Cebu City provides:
land problems in general, which are frequently the source of conflicts among
settlers, landowners and cultural minorities. Section 31. Legislative Powers. Any provision of law
and executive order to the contrary notwithstanding, the
But as the Court has since clarified in Longino and in the other cases City Council shall have the following legislative
aforecited, the land dispute in Bañaga was between private individuals who powers:
were free patent applicants over unregistered public lands. In contrast, the
present petition involves land titled to and managed by a government agency xxx xxx xxx

105
(34) ...; to close any city road, street or alley, boulevard, proceedings which effectively prevent the participation of Filipino
avenue, park or square. Property thus withdrawn from citizens and entities in the bidding process.
public servitude may be used or conveyed for any
purpose for which other real property belonging to the
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard
City may be lawfully used or conveyed.
by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary
Macaraig, et al. was filed, the respondents were required to file a
From the foregoing, it is undoubtedly clear that the City of Cebu is comment by the Court's resolution dated February 22, 1990. The two
empowered to close a city road or street. In the case of Favis vs. City of petitions were consolidated on March 27, 1990 when the memoranda of
Baguio,7 where the power of the city Council of Baguio City to close city the parties in the Laurel case were deliberated upon.
streets and to vacate or withdraw the same from public use was similarly
assailed, this court said:
The Court could not act on these cases immediately because the
respondents filed a motion for an extension of thirty (30) days to file
5. So it is, that appellant may not challenge the city comment in G.R. No. 92047, followed by a second motion for an extension
council's act of withdrawing a strip of Lapu-Lapu Street of another thirty (30) days which we granted on May 8, 1990, a third
at its dead end from public use and converting the motion for extension of time granted on May 24, 1990 and a fourth
remainder thereof into an alley. These are acts well motion for extension of time which we granted on June 5, 1990 but calling
within the ambit of the power to close a city street. The the attention of the respondents to the length of time the petitions have
city council, it would seem to us, is the authority been pending. After the comment was filed, the petitioner in G.R. No.
competent to determine whether or not a certain 92047 asked for thirty (30) days to file a reply. We noted his motion and
property is still necessary for public use. resolved to decide the two (2) cases.

Such power to vacate a street or alley is discretionary. I


And the discretion will not ordinarily be controlled or
interfered with by the courts, absent a plain case of
The subject property in this case is one of the four (4) properties in Japan
abuse or fraud or collusion. Faithfulness to the public
acquired by the Philippine government under the Reparations
trust will be presumed. So the fact that some private
Agreement entered into with Japan on May 9, 1956, the other lots being:
interests may be served incidentally will not invalidate
the vacation ordinance.
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku,
Tokyo which has an area of approximately 2,489.96 square meters, and is
(2) Since that portion of the city street subject of petitioner's application for
at present the site of the Philippine Embassy Chancery;
registration of title was withdrawn from public use, it follows that such
withdrawn portion becomes patrimonial property which can be the object of
an ordinary contract. (2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an
area of around 764.72 square meters and categorized as a commercial lot
now being used as a warehouse and parking lot for the consulate staff;
Article 422 of the Civil Code expressly provides that "Property of public
and
dominion, when no longer intended for public use or for public service, shall
form part of the patrimonial property of the State."
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho,
Shinohara, Nada-ku, Kobe, a residential lot which is now vacant.
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very
clear and unequivocal terms, states that: "Property thus withdrawn from public
servitude may be used or conveyed for any purpose for which other real The properties and the capital goods and services procured from the
property belonging to the City may be lawfully used or conveyed." Japanese government for national development projects are part of the
indemnification to the Filipino people for their losses in life and property
and their suffering during World War II.
Accordingly, the withdrawal of the property in question from public use and
its subsequent sale to the petitioner is valid. Hence, the petitioner has a
registerable title over the lot in question. The Reparations Agreement provides that reparations valued at $550
million would be payable in twenty (20) years in accordance with annual
schedules of procurements to be fixed by the Philippine and Japanese
WHEREFORE, the order dated October 11, 1974, rendered by the respondent
governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the
court in Land Reg. Case No. N-948, LRC Rec. No. N-44531 is hereby set
Reparations Law, prescribes the national policy on procurement and
aside, and the respondent court is hereby ordered to proceed with the hearing
utilization of reparations and development loans. The procurements are
of the petitioner's application for registration of title.
divided into those for use by the government sector  and those for private
parties in projects as the then National Economic Council shall
SO ORDERED. determine. Those intended for the private sector shall be made available
by sale to Filipino citizens or to one hundred (100%) percent Filipino-
owned entities in national development projects.
G.R. No. 92013 July 25, 1990.

The Roppongi property was acquired from the Japanese government


G.R. No. 92047 July 25, 1990
under the Second Year Schedule and listed under the heading
"Government Sector", through Reparations Contract No. 300 dated June
GUTIERREZ, JR., J.: 27, 1958. The Roppongi property consists of the land and building "for
the Chancery of the Philippine Embassy" (Annex M-D to Memorandum
for Petitioner, p. 503). As intended, it became the site of the Philippine
These are two petitions for prohibition seeking to enjoin respondents, Embassy until the latter was transferred to Nampeidai on July 22, 1976
their representatives and agents from proceeding with the bidding for the when the Roppongi building needed major repairs. Due to the failure of
sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome our government to provide necessary funds, the Roppongi property has
Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted remained undeveloped since that time.
the prayer for a temporary restraining order effective February 20, 1990.
One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of
mandamus to compel the respondents to fully disclose to the public the A proposal was presented to President Corazon C. Aquino by former
basis of their decision to push through with the sale of the Roppongi Philippine Ambassador to Japan, Carlos J. Valdez, to make the property
property inspire of strong public opposition and to explain the the subject of a lease agreement with a Japanese firm - Kajima
Corporation — which shall construct two (2) buildings in Roppongi and
106
one (1) building in Nampeidai and renovate the present Philippine properties were acquired for "sites for chancery, diplomatic, and
Chancery in Nampeidai. The consideration of the construction would be consular quarters, buildings and other improvements" (Second Year
the lease to the foreign corporation of one (1) of the buildings to be Reparations Schedule). The petitioner states that they continue to be
constructed in Roppongi and the two (2) buildings in Nampeidai. The intended for a necessary service. They are held by the State in
other building in Roppongi shall then be used as the Philippine Embassy anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it
Chancery. At the end of the lease period, all the three leased buildings cannot be appropriated, is outside the commerce of man, or to put it in
shall be occupied and used by the Philippine government. No change of more simple terms, it cannot be alienated nor be the subject matter of
ownership or title shall occur. (See Annex "B" to Reply to Comment) The contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]).
Philippine government retains the title all throughout the lease period Noting the non-use of the Roppongi property at the moment, the
and thereafter. However, the government has not acted favorably on this petitioner avers that the same remains property of public dominion so
proposal which is pending approval and ratification between the parties. long as the government has not used it for other purposes nor adopted
Instead, on August 11, 1986, President Aquino created a committee to any measure constituting a removal of its original purpose or use.
study the disposition/utilization of Philippine government properties in
Tokyo and Kobe, Japan through Administrative Order No. 3, followed by
The respondents, for their part, refute the petitioner's contention by
Administrative Orders Numbered 3-A, B, C and D.
saying that the subject property is not governed by our Civil Code but by
the laws of Japan where the property is located. They rely upon the rule
On July 25, 1987, the President issued Executive Order No. 296 entitling of lex situs  which is used in determining the applicable law regarding the
non-Filipino citizens or entities to avail of separations' capital goods and acquisition, transfer and devolution of the title to a property. They also
services in the event of sale, lease or disposition. The four properties in invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the
Japan including the Roppongi were specifically mentioned in the first Secretary of Justice which used the lex situs in explaining the
"Whereas" clause. inapplicability of Philippine law regarding a property situated in Japan.

Amidst opposition by various sectors, the Executive branch of the The respondents add that even assuming for the sake of argument that
government has been pushing, with great vigor, its decision to sell the the Civil Code is applicable, the Roppongi property has ceased to become
reparations properties starting with the Roppongi lot. The property has property of public dominion. It has become patrimonial property because
twice been set for bidding at a minimum floor price of $225 million. The it has not been used for public service or for diplomatic purposes for over
first bidding was a failure since only one bidder qualified. The second thirteen (13) years now (Citing Article 422, Civil Code) and because
one, after postponements, has not yet materialized. The last scheduled the intention by the Executive Department and the Congress to convert it
bidding on February 21, 1990 was restrained by his Court. Later, the to private use  has been manifested by overt acts, such as, among others:
rules on bidding were changed such that the $225 million floor price (1) the transfer of the Philippine Embassy to Nampeidai (2) the issuance
became merely a suggested floor price. of administrative orders for the possibility of alienating the four
government properties in Japan; (3) the issuance of Executive Order No.
296; (4) the enactment by the Congress of Rep. Act No. 6657 [the
The Court finds that each of the herein petitions raises distinct issues.
Comprehensive Agrarian Reform Law] on June 10, 1988 which contains
The petitioner in G.R. No. 92013 objects to the alienation of the Roppongi
a provision stating that funds may be taken from the sale of Philippine
property to anyone while the petitioner in G.R. No. 92047 adds as a
properties in foreign countries; (5) the holding of the public bidding of
principal objection the alleged unjustified bias of the Philippine
the Roppongi property but which failed; (6) the deferment by the Senate
government in favor of selling the property to non-Filipino citizens and
in Resolution No. 55 of the bidding to a future date; thus an
entities. These petitions have been consolidated and are resolved at the
acknowledgment by the Senate of the government's intention to remove
same time for the objective is the same - to stop the sale of the Roppongi
the Roppongi property from the public service purpose; and (7) the
property.
resolution of this Court dismissing the petition in Ojeda v. Bidding
Committee, et al., G.R. No. 87478 which sought to enjoin the second
The petitioner in G.R. No. 92013 raises the following issues: bidding of the Roppongi property scheduled on March 30, 1989.

(1) Can the Roppongi property and others of its kind be alienated by the III
Philippine Government?; and
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on
(2) Does the Chief Executive, her officers and agents, have the authority the constitutionality of Executive Order No. 296. He had earlier filed a
and jurisdiction, to sell the Roppongi property? petition in G.R. No. 87478 which the Court dismissed on August 1, 1989.
He now avers that the executive order contravenes the constitutional
mandate to conserve and develop the national patrimony stated in the
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the Preamble of the 1987 Constitution. It also allegedly violates:
authority of the government to alienate the Roppongi property assails the
constitutionality of Executive Order No. 296 in making the property
available for sale to non-Filipino citizens and entities. He also questions (1) The reservation of the ownership and acquisition of alienable lands of
the bidding procedures of the Committee on the Utilization or Disposition the public domain to Filipino citizens. (Sections 2 and 3, Article XII,
of Philippine Government Properties in Japan for being discriminatory Constitution; Sections 22 and 23 of Commonwealth Act 141).i•t•c-aüsl
against Filipino citizens and Filipino-owned entities by denying them the
right to be informed about the bidding requirements.
(2) The preference for Filipino citizens in the grant of rights, privileges
and concessions covering the national economy and patrimony (Section
II 10, Article VI, Constitution);

In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property (3) The protection given to Filipino enterprises against unfair competition
and the related lots were acquired as part of the reparations from the and trade practices;
Japanese government for diplomatic and consular use by the Philippine
government. Vice-President Laurel states that the Roppongi property is
(4) The guarantee of the right of the people to information on all matters
classified as one of public dominion, and not of private ownership under
of public concern (Section 7, Article III, Constitution);
Article 420 of the Civil Code (See infra).

(5) The prohibition against the sale to non-Filipino citizens or entities not
The petitioner submits that the Roppongi property comes under
wholly owned by Filipino citizens of capital goods received by the
"property intended for public service" in paragraph 2 of the above
Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No.
provision. He states that being one of public dominion, no ownership by
1789); and
any one can attach to it, not even by the State. The Roppongi and related

107
(6) The declaration of the state policy of full public disclosure of all Has the intention of the government regarding the use of the property
transactions involving public interest (Section 28, Article III, been changed because the lot has been Idle for some years? Has it become
Constitution). patrimonial?

Petitioner Ojeda warns that the use of public funds in the execution of an The fact that the Roppongi site has not been used for a long time for
unconstitutional executive order is a misapplication of public funds He actual Embassy service does not automatically convert it to patrimonial
states that since the details of the bidding for the Roppongi property property. Any such conversion happens only if the property is withdrawn
were never publicly disclosed until February 15, 1990 (or a few days from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA
before the scheduled bidding), the bidding guidelines are available only in 481 [1975]). A property continues to be part of the public domain, not
Tokyo, and the accomplishment of requirements and the selection of available for private appropriation or ownership until there is a formal
qualified bidders should be done in Tokyo, interested Filipino citizens or declaration on the part of the government to withdraw it from being such
entities owned by them did not have the chance to comply with Purchase (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold
for a minimum price of $225 million from which price capital gains tax
The respondents enumerate various pronouncements by concerned
under Japanese law of about 50 to 70% of the floor price would still be
public officials insinuating a change of intention. We emphasize, however,
deducted.
that an abandonment of the intention to use the Roppongi property for
public service and to make it patrimonial property under Article 422 of
IV the Civil Code must be definite Abandonment cannot be inferred from the
non-use alone specially if the non-use was attributable not to the
government's own deliberate and indubitable will but to a lack of
The petitioners and respondents in both cases do not dispute the fact that
financial support to repair and improve the property (See Heirs of Felino
the Roppongi site and the three related properties were through
Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a
reparations agreements, that these were assigned to the government
certain and positive act based on correct legal premises.
sector and that the Roppongi property itself was specifically designated
under the Reparations Agreement to house the Philippine Embassy.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not
relinquishment of the Roppongi property's original purpose. Even the
The nature of the Roppongi lot as property for public service is expressly
failure by the government to repair the building in Roppongi is not
spelled out. It is dictated by the terms of the Reparations Agreement and
abandonment since as earlier stated, there simply was a shortage of
the corresponding contract of procurement which bind both the
government funds. The recent Administrative Orders authorizing a study
Philippine government and the Japanese government.
of the status and conditions of government properties in Japan were
merely directives for investigation but did not in any way signify a clear
There can be no doubt that it is of public dominion unless it is intention to dispose of the properties.
convincingly shown that the property has become patrimonial. This, the
respondents have failed to do.
Executive Order No. 296, though its title declares an "authority to sell",
does not have a provision in its text expressly authorizing the sale of the
As property of public dominion, the Roppongi lot is outside the four properties procured from Japan for the government sector. The
commerce of man. It cannot be alienated. Its ownership is a special executive order does not declare that the properties lost their public
collective ownership for general use and enjoyment, an application to the character. It merely intends to make the properties available to
satisfaction of collective needs, and resides in the social group. The foreigners and not to Filipinos alone in case of a sale, lease or other
purpose is not to serve the State as a juridical person, but the citizens; it disposition. It merely eliminates the restriction under Rep. Act No. 1789
is intended for the common and public welfare and cannot be the object that reparations goods may be sold only to Filipino citizens and one
of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, hundred (100%) percent Filipino-owned entities. The text of Executive
Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, Order No. 296 provides:
p. 26).
Section 1. The provisions of Republic Act No. 1789,
The applicable provisions of the Civil Code are: as amended, and of other laws to the contrary
notwithstanding, the above-mentioned properties
can be made available for sale, lease or any other
ART. 419. Property is either of public dominion or manner of disposition to non-Filipino citizens or to
of private ownership. entities owned by non-Filipino citizens.

ART. 420. The following things are property of Executive Order No. 296 is based on the wrong premise or assumption
public dominion that the Roppongi and the three other properties were earlier converted
into alienable real properties. As earlier stated, Rep. Act No. 1789
(1) Those intended for public use, such as roads, differentiates the procurements for the government sector and the private
canals, rivers, torrents, ports and bridges sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector
constructed by the State, banks shores roadsteads, properties can be sold to end-users who must be Filipinos or entities
and others of similar character; owned by Filipinos. It is this nationality provision which was amended by
Executive Order No. 296.
(2) Those which belong to the State, without being
for public use, and are intended for some public Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as
service or for the development of the national one of the sources of funds for its implementation, the proceeds of the
wealth. disposition of the properties of the Government in foreign countries, did
not withdraw the Roppongi property from being classified as one of
public dominion when it mentions Philippine properties abroad. Section
ART. 421. All other property of the State, which is 63 (c) refers to properties which are alienable and not to those reserved
not of the character stated in the preceding article, is for public use or service. Rep Act No. 6657, therefore, does not authorize
patrimonial property. the Executive Department to sell the Roppongi property. It merely
enumerates possible sources of future funding to augment (as and when
The Roppongi property is correctly classified under paragraph 2 of needed) the Agrarian Reform Fund created under Executive Order No.
Article 420 of the Civil Code as property belonging to the State and 299. Obviously any property outside of the commerce of man cannot be
intended for some public service. tapped as a source of funds.

108
The respondents try to get around the public dominion character of the same. Such deed, instrument, or contract shall be
Roppongi property by insisting that Japanese law and not our Civil Code executed and signed by the President of the
should apply. Philippines on behalf of the Government of the
Philippines unless the Government of the
Philippines unless the authority therefor be
It is exceedingly strange why our top government officials, of all people,
expressly vested by law in another officer.
should be the ones to insist that in the sale of extremely valuable
(Emphasis supplied)
government property, Japanese law and not Philippine law should
prevail. The Japanese law - its coverage and effects, when enacted, and
exceptions to its provision — is not presented to the Court It is simply The requirement has been retained in Section 48, Book I of the
asserted that the lex loci rei sitae or Japanese law should apply without Administrative Code of 1987 (Executive Order No. 292).
stating what that law provides. It is a ed on faith that Japanese law would
allow the sale.
SEC. 48. Official Authorized to Convey Real Property.
— Whenever real property of the Government
We see no reason why a conflict of law rule should apply when no conflict is authorized by law to be conveyed, the deed of
of law situation exists. A conflict of law situation arises only when: (1) conveyance shall be executed in behalf of the
There is a dispute over the title or ownership  of an immovable, such that government by the following:
the capacity to take and transfer immovables, the formalities of
conveyance, the essential validity and effect of the transfer, or the
(1) For property belonging to and titled in the name
interpretation and effect of a conveyance, are to be determined (See
of the Republic of the Philippines, by the President,
Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A
unless the authority therefor is expressly vested by
foreign law on land ownership and its conveyance is asserted to conflict
law in another officer.
with a domestic law on the same matters. Hence, the need to determine
which law should apply.
(2) For property belonging to the Republic of the
Philippines but titled in the name of any political
In the instant case, none of the above elements exists.
subdivision or of any corporate agency or
instrumentality, by the executive head of the agency
The issues are not concerned with validity of ownership or title. There is or instrumentality. (Emphasis supplied)
no question that the property belongs to the Philippines. The issue is the
authority of the respondent officials to validly dispose of property
It is not for the President to convey valuable real property of the
belonging to the State. And the validity of the procedures adopted to
government on his or her own sole will. Any such conveyance must be
effect its sale. This is governed by Philippine Law. The rule of lex
authorized and approved by a law enacted by the Congress. It requires
situs does not apply.
executive and legislative concurrence.

The assertion that the opinion of the Secretary of Justice sheds light on
Resolution No. 55 of the Senate dated June 8, 1989, asking for the
the relevance of the lex situs rule is misplaced. The opinion does not
deferment of the sale of the Roppongi property does not withdraw the
tackle the alienability of the real properties procured through reparations
property from public domain much less authorize its sale. It is a mere
nor the existence in what body of the authority to sell them. In discussing
resolution; it is not a formal declaration abandoning the public character
who are capable of acquiring the lots, the Secretary merely explains that
of the Roppongi property. In fact, the Senate Committee on Foreign
it is the foreign law which should determine who can acquire the
Relations is conducting hearings on Senate Resolution No. 734 which
properties so that the constitutional limitation on acquisition of lands of
raises serious policy considerations and calls for a fact-finding
the public domain to Filipino citizens and entities wholly owned by
investigation of the circumstances behind the decision to sell the
Filipinos is inapplicable. We see no point in belaboring whether or not
Philippine government properties in Japan.
this opinion is correct. Why should we discuss who can acquire the
Roppongi lot when there is no showing that it can be sold?
The resolution of this Court in  Ojeda v. Bidding Committee, et al.,
supra,  did not pass upon the constitutionality of Executive Order No. 296.
The subsequent approval on October 4, 1988 by President Aquino of the
Contrary to respondents' assertion, we did not uphold the authority of
recommendation by the investigating committee to sell the Roppongi
the President to sell the Roppongi property. The Court stated that the
property was premature or, at the very least, conditioned on a valid
constitutionality of the executive order was not the real issue and that
change in the public character of the Roppongi property. Moreover, the
resolving the constitutional question was "neither necessary nor finally
approval does not have the force and effect of law since the President
determinative of the case." The Court noted that "[W]hat petitioner
already lost her legislative powers. The Congress had already convened
ultimately questions is the use of the proceeds of the disposition of the
for more than a year.
Roppongi property." In emphasizing that "the decision of the Executive
to dispose of the Roppongi property to finance the CARP ... cannot be
Assuming for the sake of argument, however, that the Roppongi property questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did
is no longer of public dominion, there is another obstacle to its sale by the not acknowledge the fact that the property became alienable nor did it
respondents. indicate that the President was authorized to dispose of the Roppongi
property. The resolution should be read to mean that in case the
Roppongi property is re-classified to be patrimonial and alienable by
There is no law authorizing its conveyance.
authority of law, the proceeds of a sale may be used for national economic
development projects including the CARP.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Moreover, the sale in 1989 did not materialize. The petitions before us
Section 79 (f ) Conveyances and contracts to which question the proposed 1990 sale of the Roppongi property. We are
the Government is a party. — In cases in which the resolving the issues raised in these petitions, not the issues raised in 1989.
Government of the Republic of the Philippines is a
party to any deed or other instrument conveying the
Having declared a need for a law or formal declaration to withdraw the
title to real estate or to any other property the value
Roppongi property from public domain to make it alienable and a need
of which is in excess of one hundred thousand pesos,
for legislative authority to allow the sale of the property, we see no
the respective Department Secretary shall prepare
compelling reason to tackle the constitutional issues raised by petitioner
the necessary papers which, together with the
Ojeda.
proper recommendations, shall be submitted to the
Congress of the Philippines for approval by the

109
The Court does not ordinarily pass upon constitutional questions unless
these questions are properly raised in appropriate cases and their
resolution is necessary for the determination of the case (People v. Vera,
G.R. No. L-52518               August 13, 1991
65 Phil. 56 [1937]). The Court will not pass upon a constitutional question
although properly presented by the record if the case can be disposed of
on some other ground such as the application of a statute or general law INTERNATIONAL HARDWOOD AND VENEER COMPANY OF THE
(Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad PHILIPPINES, petitioner-appellee,
Commission v. Pullman Co., 312 U.S. 496 [1941]). vs.
UNIVERSITY OF THE PHILIPPINES and JOSE C. CAMPOS,
JR., respondents-appellants.
The petitioner in G.R. No. 92013 states why the Roppongi property
should not be sold:
DAVIDE, JR., J.:
The Roppongi property is not just like any piece of
property. It was given to the Filipino people in From an adverse decision of the then Court of First Instance (now RTC)
reparation for the lives and blood of Filipinos who Laguna dated 3 June 1968 in a special civil action for declaratory relief with
died and suffered during the Japanese military injunction, Civil Case No. SC-650 entitled International Hardwood and
occupation, for the suffering of widows and orphans Veneer Company of the Philippines vs. University of the Philippines and Jose
who lost their loved ones and kindred, for the homes Campos, the dispositive portion of which reads:
and other properties lost by countless Filipinos
during the war. The Tokyo properties are a
WHEREFORE, the Court hereby renders judgment in favor of
monument to the bravery and sacrifice of the
petitioner and against the respondents:
Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino
heroes, we do not expect economic or financial (a) Declaring that Rep. Act No. 3990 does not empower the
benefits from them. But who would think of selling University of the Philippines, in lieu of the Bureau of Internal
these monuments? Filipino honor and national Revenue and Bureau of Forestry, to scale, measure and seal the
dignity dictate that we keep our properties in Japan timber cut by the petitioner within the tract of land referred to in
as memorials to the countless Filipinos who died and said Act, and collect the corresponding forest charges prescribed
suffered. Even if we should become paupers we by the National Internal Revenue Code therefor; and
should not think of selling them. For it would be as
if we sold the lives and blood and tears of our
countrymen. (Rollo- G.R. No. 92013, p.147) (b) Dismissing the respondents' counterclaim.

The petitioner in G.R. No. 92047 also states: respondents appealed to the Court of Appeals. The appeal was docketed as
C.A.-G.R. No. 49409-R.

Roppongi is no ordinary property. It is one ceded by


the Japanese government in atonement for its past After the parties filed their respective Briefs in 1971, the Court of Appeals
belligerence for the valiant sacrifice of life and limb (Sixth Division) promulgated on 28 December 1979 a resolution elevating the
and for deaths, physical dislocation and economic case to this Court as the "entire case hinges on the interpretation and
devastation the whole Filipino people endured in construction of Republic Act 3990 as it applies to a set of facts which are not
World War II. disputed by the parties and therefore, is a legal question.1

It is for what it stands for, and for what it could Civil Case No. SC-650 was filed by petitioner Hardwood before the trial court
never bring back to life, that its significance today on 28 June 1966.2 Petitioner seeks therein a declaration that respondent
remains undimmed, inspire of the lapse of 45 years University of the Philippines (hereafter referred to as UP) does not have the
since the war ended, inspire of the passage of 32 right to supervise and regulate the cutting and removal of timber and other
years since the property passed on to the Philippine forest products, to scale, measure and seal the timber cut and/or to collect
government. forest charges, reforestation fees and royalties from petitioner and/or impose
any other duty or burden upon the latter in that portion of its concession,
covered by License Agreement No. 27-A issued on 1 February 1963, ceded in
Roppongi is a reminder that cannot — should not — full ownership to the UP by Republic Act No. 3990; asks that respondents be
be dissipated ... (Rollo-92047, p. 9) enjoined from committing the acts complained of and prays that respondents
be required to pay petitioner the sum of P100,000.00 as damages and costs of
the suit.
It is indeed true that the Roppongi property is valuable not so much
because of the inflated prices fetched by real property in Tokyo but more
so because of its symbolic value to all Filipinos — veterans and civilians Its motion to dismiss on the ground of improper venue having been
alike. Whether or not the Roppongi and related properties will eventually unfavorably acted upon, and pursuant to the order of the trial court of 26
be sold is a policy determination where both the President and Congress August 1967, respondents filed their Answer on 13 September 1987, 3 wherein
must concur. Considering the properties' importance and value, the laws they interpose the affirmative defenses of, among others, improper venue and
on conversion and disposition of property of public dominion must be that the petition states no cause of action; they further set up a counterclaim
faithfully followed. for the payment of it by petitioner of forest charges on the forest products cut
and felled within the area ceded to UP under R.A. No. 3990 from 18 June
1964, with surcharges and interests as provided in the National Internal
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are
Revenue Code.
GRANTED. A writ of prohibition is issued enjoining the respondents
from proceeding with the sale of the Roppongi property in Tokyo, Japan.
The February 20, 1990 Temporary Restraining Order is made Petitioner filed a Reply and Answer to Counterclaim.4
PERMANENT.
On 18 October 1967, the parties submitted a Joint Stipulation of Facts and
SO ORDERED. Joint Submission of the Case for Judgment,5 which reads as follows:

COME NOW the parties in the above entitled case by the


undersigned counsel, and respectfully submit the following JOINT

110
STIPULATION OF FACTS AND JOINT SUBMISSION OF THE which parcel of land is more particularly described as follows, to
CASE FOR JUDGMENT, without prejudice to the presentation of wit:
evidence by either party:
x x x           x x x          x x x
x x x           x x x          x x x
IN WITNESS WHEREOF, I have hereunto set my hand and
2. Plaintiff is, among others, engaged in the manufacture, caused the seal of the Republic of the Philippines to be affixed.
processing and exportation of plywood and was, for said purpose,
granted by the Government an exclusive license for a period of 25
Done in the City of Manila this 25th day of September, in the year
years expiring on February 1, 1985, to cut, collect and remove
of Our Lord, nineteen hundred and sixty-one, and of the
timber from that portion of timber land located in the
Independence of the Philippines, the sixteenth.
Municipalities of Infanta, Mauban and Sampaloc Province of
Quezon and in the Municipalities of Siniloan, Pangil, Paete, Cavite
and Calauan, Province of Laguna under License Agreement No. (SGD.) CARLOS P. GARCIA
27-A (Amendment) issued and promulgated by the Government President of the Philippines
through the Secretary of Agriculture and Natural Resources on
January 11, 1960. ... ;
x x x           x x x          x x x

3. That aforementioned Timber License No. 27-A (Amendment) is


7. That on or about June 18, 1964, during the effectivity of the
a renewal of the Timber License Agreement No. 27-A previously
aforementioned License Agreement No. 27-A (Amendment) of
granted by the Government to the plaintiff on June 4, 1953 to
July 11, 1960, Republic Act No. 3990 was enacted by the Congress
February 1, 1963. ... ;
of the Philippines and approved by the President of the Philippines,
which Republic Act provides as follows:
4. Plaintiff, since June 4, 1953, continuously up to the present, has
been in peaceful possession of said timber concession and had
AN ACT TO ESTABLISH A CENTRAL
been felling cutting and removing timber therefrom pursuant to the
EXPERIMENT STATION FOR THE UNIVERSITY
aforementioned Timber License Agreement No. 27-A
OF THE PHILIPPINES.
(Amendment) of January 11, 1960;

Be it enacted by the Senate and the House of Representatives of


5. Plaintiff, on the strength of the License Agreement executed by
the Philippines in Congress assembled:
the Government on June 4,1953 (License Agreement No. 27-A)
and of the License Agreement No. 27-A (Amendment) of January
11, 1960, has constructed roads and other improvements and SECTION 1. There is hereby established a central
installations of the aforementioned area subject to the grant and experiment station for the use of the University of the
purchased equipment in implementation of the conditions Philippines in connection with its research and
contained in the aforementioned License Agreement and has in extension functions, particularly by the College of
connection therewith spent more than P7,000,000.00 as Agriculture, College of Veterinary Medicine and
follows: ... ; College of Arts and Sciences.

6. Sometime on September 25, 1961, during the effectivity of SEC. 2. For this purpose, the parcel of the public
License Agreement No. 27-A (Amendment) of January 11, 1960, domain consisting of three thousand hectares, more or
the President of the Philippines issued Executive Proclamation No. less, located in the Municipality of Paete, Province of
791 which reads as follows: Laguna, the precise boundaries of which are stated in
Executive Proclamation 791, Series of 1961, is hereby
ceded and transferred in full ownership to the
x x x           x x x          x x x
University of the Philippines, subject to any existing
concessions, if any.
RESERVING FOR THE COLLEGE OF AGRICULTURE, UNIVERSITY
OF THE PHILIPPINES, AS EXPERIMENT STATION FOR THE
SEC. 3. All operations and activities carried on in the
PROPOSED DAIRY RESEARCH AND TRAINING INSTITUTE AN
central experiment station shall be exempt from
taxation, local or general, any provision of law to the
FOR AGRICULTURAL RESEARCH AND contrary notwithstanding, and any incidental receipts or
PRODUCTION STUDIES OF THIS COLLEGE A income therefrom shall pertain to the general fund of
CERTAIN PARCEL OF LAND OF THE PUBLIC the University of the Philippines.
DOMAIN, SITUATED PARTLY IN THE
MUNICIPALITIES OF PAETE AND PAKIL
SEC. 4. This Act shall take effect upon its approval.
,PROVINCE OF LAGUNA, AND PARTLY IN THE
Approved, June 18, 1964.
MUNICIPALITY OF INFANTA, PROVINCE OF
QUEZON, ISLAND OF LUZON.
8. That on the strength of the provisions of Republic Act No. 3990,
and prior to the institution of the present suit, defendants have
Upon the recommendation of the Secretary of Agriculture and
demanded, verbally as well as in writing to plaintiff-.
Natural Resources and pursuant to the authority vested in me by
law, I, Carlos P. Garcia, President of the Philippines, do hereby
withdraw from sale or settlement and reserve for the College of (a) That the forest charges due and payable by plaintiff
Agriculture, University of the Philippines, as experiment station under the License Agreement 27-A (Amendment)
for the proposed Dairy Research and production studies of this referred to in paragraph 2 hereof be paid to the
College, a certain parcel of land of the Public domain situated University of the Philippines, instead of the Bureau of
partly in the municipalities of Paete and Pakil province of Laguna, Internal Revenue; and
and partly in the municipality of Infants, Province of Quezon,
Island of Luzon, subject to private rights, if any there be, and to the
condition that the disposition of timber and other forest products (b) That the selling of any timber felled or cut by
found therein shall be subject to the forestry laws and regulations, plaintiff within the boundaries of the Central

111
Experiment Station as defined in Republic Act No. The District Forester
3990 be performed by personnel of the University of Bureau of Forestry
the Philippines. Sta. Cruz, Laguna

9. That the position of the plaintiff oil the demand of the Dear Sir:
defendants was fully discussed in the letter dated April 29, 1966 of
plaintiffs lawyer addressed to the President of the University of the
Enclosed is a copy of a letter to the Commissioner of
Philippines, copy of which is hereto attached as Annex "A" hereof.
Internal Revenue concerning the right of the University
of the Philippines to collect forest charges from the
10. That in line with its position as stated in paragraph thereof, existing logging concessionaire at the Laguna Land
plaintiff has refused to allow entry to personnel of the University Grant (formerly Paete Land Grant). This tract of forest
of the Philippines to the Central Experiment Station area assigned land containing some 3,500 hectares was ceded to the
thereto for the purpose of supervising the felling cutting and University of the Philippines in full ownership by
removal of timber therein and scaling any such timber cut and Republic Act No. 3990, approved in June, 1964. In
felled prior to removal view thereof, the University of the Philippines
requested that its authority over said land be recognized
and that the existing concessionaire, International
11. That in view of the stand taken by plaintiff and in Relation to
Hardwood and Veneer Company of the Philippines, in
the implemetation of Republic Act No. 3990 the defendant
turn pay its forest charges directly to the University
Business Executive sent the letter quoted below to the
instead of to the national government.
Commissioner of Internal Revenue:

Please take note of page "2" of the enclosed letter of the


12. That in reply to the above letter of defendant Business
Commissioner of Internal Revenue on the official
Executive dated February 8, 1966, the Commissioner of Internal
ruling of the Bureau of Internal Revenue to the
Revenue issued the following letter-ruling dated March 11, 1966:
following points raised by the University:

In accordance with Section 266 of the Tax Code as


1. That the University of the Philippines
amplified by Section 15(a) of Revenue Regulations No.
may now directly collect forest charges from
85, the Forest Products Regulations, forest products,
INTERWOOD, the existing logging
cut, gathered and removed from registered private
concessionaire.
woodlands are not subject to forest charges, but they
must be invoiced when removed to another
municipality or for commercial purposes in the manner 2. That forest charges paid by
prescribed by the regulations. As the Paete Land Grant INTERWOOD to the Bureau of Forestry
was ceded by law to the U.P. in full private ownership from June, 1964 up to April, 1966 shall be
and as the grant is manifestly to be considered refunded to the University of the
registered, no forest charges are actually due and Philippines. In this manner, INTERWOOD
payable on the timber cut and removed therefrom. The is requested to file a claim for the refund in
forest charges purportedly to be paid by any the amount heretofore paid by it to be
concessionaire under any licensing agreement entered remitted to the University of the Philippines.
or to be entered into by the U.P. are, therefore, to be
considered not as the charges contemplated by the
On the basis of this letter to the Commissioner of
National Internal Revenue Code but as part of the
Internal Revenue, it is understood that forest charges on
royalties payable by the concessionaires for the
timber cut from the Laguna Land Grant as scaled by
exploitation of the timber resources of the land grant.
scalers of the University of the Philippines shall now be
paid directly to the University of the Philippines. In
Accordingly, you queries are answered viz: another ruling by the Commissioner of Internal
Revenue, the University, particularly the Laguna Land
Grant, is exempted from all kinds of Internal Revenue
1. The University may directly collect the
taxes.
supposed forest charges payable by
concessionaires of the land grant.
Very truly yours,
2. The forest charges paid by International
Hardwood and Veneer Company of the (Sgd.) Jose C. Campos, Jr.
Philippines may be refunded provided that a Business Executive
formal claim for the refund thereof is made
within two years from the date of payment.
14. That the above quoted letter of defendant Business Executive
The proper claimant shall be International
dated April 18, 1966 was duly endorsed by the District Forester of
Hardwood and not the University.
the province of Laguna to the Director of Forestry.

Very truly yours,


15. That on or about June 7, 19667 the Assistant Director of
Forestry addressed to plaintiff the letter dated June 7, 1966, which
(Sgd.) MISAEL P. VERA states as follows:
Commissioner of Internal Revenue
Sirs:
13. That subsequently, defendant Business Executive sent the letter
quoted below to the District Forester of the province of Laguna
This is in connection with your request for this Office
una dated April 18, 1 966:
to comment on your reply to the letter of Mr. Jose C.
Campos, Jr. of the University of the Philippines.
April 18, 1966

112
In your reply to the letter of Mr. Campos, it is stated not as the charged contemplated by the National
that the University of the Philippines is claiming the Internal Revenue Code but as part of the royalties
right: payable by the concessionaires for the exploitation of
the timber resources of the land grant, you may turn
over the scaling work therein to the scalers of the U.P.
(a) To scale, measure and seal the timber cut
inside the area covered by the U.P. Land
Grant at Paete, Laguna; However, you should guard against the use of such
licensing agreements entered or to be entered into by
the U.P. as a means of smuggling forest products from
(b) To collect the corresponding forest
the neighboring public forests.
charges;

Very truly yours,


(c) To collect royalties aside from the forest
charges; and
(SGD.) ANTONIO A. QUEJADA
(d) To exercise in effect all the authority
vested by law upon the Bureau of Forestry x x x           x x x          x x x
in the cutting, removal and disposition of the
timber from said area, and the authority of
On the basis of the above JOINT STIPULATION OF FACTS, the pleadings
the Bureau of Internal Revenue respecting
filed in the case, and whatever additional evidence may be presented by the
the measurement and scaling of the logs and
parties, the parties hereto, through counsel, jointly move and pray of this
the collection of the corresponding forest
Honorable Court that judgment be rendered granting full and appropriate
charges and other fees in connection
relief, on the following issues:
therewith.

1. Whether plaintiff, as of the date of present case was filed, should


This office is in full accord with your arguments against
pay forest charges due and payable under its timber License
the claim of the University of the Philippines to have
Agreement No. 27-A (Amendment) as set forth in paragraph 2
acquired the above rights. We believe that the right
hereof', to the Bureau of Internal Revenue, or to the University of
vested the INTERWOOD by virtue of number License
the Philippines; and
Agreement No. 27-A (Amendment) to utilize the timber
inside subject area is still binding and should therefore,
be respected. It is on the basis of this acknowledgment 2. In the event that it be found by this Honorable Court that said
that we sent your client our letter of November 4,1965 forest charges are to be paid to the University of the Philippines,
requesting him to comment on the application of the whether or not the University of the Philippines is entitled to
State University for a Special Timber License over the supervise, through its duly appointed personnel, the logging,
said area. telling and removal of timber within the Central Experiment
Station area as described in Republic Act No. 3990, and to scale
the timber thus felled and cut.
16. That acting on the endorsement referred to in paragraph l4, the
Director of Bureau of Forestry issued the letter ruling quoted
below, dated June 30,1966: Manila for Laguna, September 29,1967.

x x x           x x x          x x x Upon the foregoing Stipulation of Facts, the trial court rendered its judgment
on 3 June 1968 in favor of the petitioner, the dispositive portion of which is
quoted at the beginning of this decision. In deciding the case against UP, it
June 30, 1966
held:

District Forester
... the court finds that the respondents' demand on the petitioner
Sta. Cruz, Laguna
has no legal basis. In the first place, the cession in full ownership
of the tract of land referred to in the Act was expressly made
(Thru the Regional Director of Forestry, Manila) 'subject to any existing concessions.' Inasmuch as at the time of the
enactment of the Act, the petitioner's timber concession over the
tract of land was existing and would continue to exist until
Sir:
February 1, 1985, the University of the Philippines will acquire
full ownership' and exclusive jurisdiction to control and administer
This concerns your inquiry contained in the 3rd the property only after February 1, 1985. The cession of the
paragraph of your letter dated April 26, 1966, property to the University of the Philippines is akin to the donation
designated as above, as to whether or not you shall turn of a parcel of land, subject to usufruct. The donee acquires full
over the scaling work for logs cut from the area of the ownership thereof only upon the termination of the usufruct. At the
International Hardwood & Veneer Company of the time of the donation, all what the donee acquires is the 'naked'
Philippines in the Pacto Land Grant to Scalers of the ownership of the property donated. In the second place, the
University of the Philippines. respondents' demand cannot be valid unless the provisions of Sees.
262 to 276 of the National Internal Revenue Code regarding the
measuring of timber cut from the forest and the collection of the
In view of the ruling of the Commissioner of Internal prescribed forest charges by the Bureau of Internal Revenue and
Revenue that the Paete Land Grant, which embraces the Bureau of Forestry are first amended. In their arguments, the
area of the International Hardwood & Veneer Company respondents tried to stretch the scope of the provisions of Republic
of the Philippines, is considered a registered private Act No. 3990 in order to include therein such amendment of the
woodland of the University of the Philippines and provisions of the National Internal Revenue Code and Revised
therefore no forest charges are actually due and payable Administrative Code, but they failed to convince the Court, not
on the timber cut and removed therefrom, and in view only because of the first reason above stated, but also because it
further of the ruling of said Commissioner that the clearly appears that such amendment is not intended in Republic
forest charges purportedly to be paid by any Act No. 3990, which does not contain even a remote allusion
concessionaire under any licensing agreement entered thereto in its title or a general amendatory provision at the end. In
or to be entered into by the U.P. are to be considered
113
the third place, under Republic Act No. 3990, the University of the conform to the evidence and to raise these issues may
Philippines cannot legally use the tract of land ceded to it for be made upon motion of any party at any time, even
purposes other than those therein expressly provided, namely, 'for after judgment; but failure to so amend does not affect
the use of the University of the Philippines in connection with its the result of the trial by these issues. ...
research and extension functions, particularly by the College of
Agriculture, College of Veterinary Medicine and College of Arts
The stipulation of facts and the agreement as to the issues unquestionably
and Sciences.' Hence, upon the expiration of the petitioner's timber
satisfy the requisites for declaratory relief. (a) there must be a justiciable
concession, the University of the Philippines cannot even legally
controversy; (b) the controversy must be between persons whose interests are
renew it or grant timber concession over the whole tract of land or
adverse; (c) the party seeking declaratory relief must have a legal interest in
over portions thereof to other private individuals and exercise the
the controversy; and (d) the issue invoked must be ape for judicial
functions of the Bureau of Internal Revenue and Bureau of
determination.7
Forestry by scaling and measuring the timber cut within the area
and collecting from them the forest charges prescribed by the
National Internal Revenue Code. There is a justiciable controversy where there is an actual controversy, or
the ripening seeds of one exists between the parties, all of whom are sui
juris and before the court, and that the declaration sought will help in ending
Respondents claim in their Brief that the trial court erred:
the controversy. A doubt becomes a justiciable controversy when it is
translated into a claim of right which is actually contested.8
I
2. On the second assigned error, respondents assert that: (a) Under R.A. No.
... WHEN IT DID NOT DISMISS THE PETITION FOR 3990, the Republic of the Philippines may effect collection of forest charges
DECLARATORY RELIEF WITH INJUNCTION INSPITE OF through the University of the Philippines because the License Agreement does
ITS INHERENT JURISDICTIONAL DEFECTS THAT SHOULD not expressly provide that the forest charges shall be paid to the Bureau of
WARRANT A DISMISSAL. Internal Revenue; in the absence of a specific contractual provision limiting it
to a particular agency in collecting forest charges owing to it, the Republic
may effect such collection through another agency. (b) Having been vested
II
with administrative jurisdiction over and being the owner of the tract of land
in question, the UP acquired full control and benefit of the timber and other
... WHEN IT DECLARED THAT REPUBLIC ACT NO. 3990 resources within the area. Timber areas within the ceded property but outside
DOES NOT EMPOWER THE RESPONDENT UNIVERSITY OF the concession of petitioner can be fully exploited by UP. However, in respect
THE PHILIPPINES, IN LIEU OF THE BUREAU OF to timber areas within the ceded property but covered by the concession of
INTERNAL REVENUE AND BUREAU OF FORESTRY, TO petitioner, only forest charges (or more appropriately, royalties) may be
SCALE, MEASURE AND SEAL THE TIMBER CUT BY THE enjoyed by UP until the expiration of petitioner's license. To deny it such
PETITIONER WITHIN THE TRACT OF LAND REFERRED TO charges would render its "full ownership" empty and futile. (c) The UP is
IN SAID ACT, AND COLLECT THE CORRESPONDING clearly entitled to the income derived from the tract of land ceded to it, for
FOREST CHARGES PRESCRIBED BY THE NATIONAL Section 3 of R.A. No. 3990 expressly provides:
INTERNAL REVENUE CODE.
All operations and activities carried on in the central
1. The first assigned error is without merit. In the Joint Stipulation of Facts, experiment station shall be exempt from taxation, local
the parties jointly move and pray that the trial court render judgment granting or general, any provision of law to the contrary
full and appropriate remedy on the following issues: notwithstanding, and any incidental receipts or income
therefrom shall pertain to the general fund of the
University of the Philippines. (emphasis supplied for
1. Whether plaintiff, as of the date of present case was emphasis).
filed, should pay forest charges due and payable under
its Timber License Agreement No. 27-A (Amendment)
as set forth in paragraph 2 hereof, to the Bureau of (d) As provided by R.A. No. 3990, the UP is duty bound to operate and
Internal Revenue, or to the University of the maintain a central experiment station; since this law does not provide for
Philippines; and appropriations for such purpose, it is clearly the legislative intention that the
establishment and maintenance thereof must be financed by the earnings or
income from the area, which can only come from the timber and the royalties
2. In the event that it be found by this Honorable Court or charges payable therefrom. This is in accordance with the general principle
that said forest charges are to be paid to the University that a grant of authority or jurisdiction extends to all incidents that may arise
of the Philippines, whether or not the University of the in connection with the matter over which jurisdiction is exercised. (e)
Philippines is entitled to supervise, through its duly Supervision of the License Agreement in favor of petitioner by UP was
appointed personnel, the logging, felling and removal intended by R.A. No. 3990. (f) Finally, the two government agencies affected
of timber within the Central Experiment Station area as by R.A. No. 3990 have issued specific rulings recognizing the authority of UP
described in Republic Act No. 3990, and to scale the to collect royalties or charges and to supervise petitioner's logging operations.
timber thus felled

Petitioner refutes the foregoing arguments of respondents by asserting that: (a)


These issues bring the matter within the scope of an action for declaratory The UP has not been granted by R.A. No. 3990 the authority to collect forest
relief under Section 1, Rule 64 of the Rules of Court and render meaningless charges or the authority to supervise the operation by the petitioner of the
the appeal to the rule laid down in Sarmiento, et al. vs. Caparas, et al.6 that timber concession affected by said Act.
declaratory relief cannot be joined by injunction, because herein petitioner, for
all legal intents and purposes, abandoned it by its failure to raise it in the
Stipulation of Facts. Thus, what attains is an amendment to both pleadings The rule is well-settled that legislative grants must be construed strictly in
(the complaint and the answer), which is authorized by Section 5, Rule 10 of favor of the public and most strongly against the grantee, and nothing will be
the Rules of Court. Said section pertinently provides: included in the grant except that which is granted expressly or by clear
implication. Under Section 262 of the Tax Code, as amended, the duties
incident to the measuring of forest products and the collection of the charges
SEC. 5. Amendment to conform to or authorize thereon shall be discharged by the Bureau of Internal Revenue under the
presentation of evidence.— When issues not raised by regulations of the Department of Finance. The reforestation fee shall be
the pleadings are tried by express or implied consent of collected by the Bureau of Forestry.9 The supervision and regulation of the use
the parties, they shall be treated in all respect, as if they of forest products and of the cutting and removal of forest products are vested
had been raised in the pleadings. Such amendment of upon the Bureau of Forestry. 10 R.A. No. 3990 does not expressly, or even
the pleadings as may be necessary to cause them to impliedly, grant the UP any authority to collect from the holders of timber
114
concessions on the area ceded to it forest charges due and payable to the of the very nature of the transfer as aforestated. Consequently, even the
Government under the Tax Code, or to enforce its provisions relating to Bureau of Internal Revenue automatically lost its authority and jurisdiction to
charges on forest products or to supervise the operations of the concessions by measure the timber cut from the subject area and to collect forestry charges
the holders thereof; (b) The cession in full ownership of the land in question and other fees due thereon.
was expressly made "subject to any concession, if any", and that petitioner's
concession would continue until 1 February 1985; the UP then would acquire
The foregoing disposes of the contention of petitioner that R.A. No. 3990 does
full ownership and exclusive jurisdiction to control and administer the
not grant the UP the authority to collect forest charges and to supervise the
property only after 1 February 1985. The position of UP is akin to that of a
operations of its concession insofar as the property of the UP within it is
donee of a parcel of land subject to usufruct. (c) The rulings of the
concerned. Its argument that it has acquired vested rights to operate its
Commissioner of Internal Revenue and the Acting Director of the Bureau of
concession under the supervision and control of the Bureau of Forestry is
Forestry are patently incorrect; moreover, said agencies do not have the power
preposterous. The grantor, Republic of the Philippines, was by no means
to interpret the law, which is primarily a function of the judiciary. (d) Finally,
bound under the License to perpetuate the Bureau as its agent. Neither is there
it has acquired a vested right to operate the timber concession under the
force to its contention that legislative grants must be construed strictly in
supervision and control of the Bureau of Forestry.
favor of the public and most strongly against the grantee. The grant under
R.A. No. 3990 is transfer of absolute, full and entire ownership which leaves
There is merit in the second assigned error. no room for a strict interpretation against the grantee, the UP. The reservation
therein made is in favor of the private party pursuant to the license, which is
nevertheless protected. It is the concession in favor of the petitioner which
Under Proclamation No. 791, dated 25 September 1961, a parcel of land of the
should, on the contrary, be bound by the rule.
public domain described therein, with an area of 3,500 hectares, which is the
very parcel of land subject of R.A. No. 3990, was withdrawn from sale or
settlement and was reserved for the College of Agriculture of the UP as It follows then that respondent UP is entitled to supervise, through its duly
experiment station for the proposed Dairy Research and Training Institute and appointed personnel, the logging, felling and removal of timber within the
for research and production studies of said college, subject however to private area covered by R.A. No. 3990.
rights, if any, and to the condition that the disposition of timber and other
forest products found thereon shall be subject to forestry laws and regulations.
IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered
REVERSING the decision of the trial court in Civil Case No. C-650, rendered
The above reservation is within the area covered by petitioner's timber license. on 3 June 1968; DECLARING that forest charges due from and payable by
petitioner for timber cut pursuant to its License Agreement No. 27-A
(Amendment) within the area ceded and transferred to the University of the
Pursuant, however, to R.A. No. 3990 which establishes a central experiment
Philippine pursuant to R.A. No. 3990 shall be paid to the University of the
station for the use of the UP in connection with its research and extension
Philippines; DECLARING that the University of the Philippines is entitled to
functions, particularly by the College of Agriculture, College of Veterinary
supervise, through its duly appointed personnel, the logging, felling and
Medicine and College of Arts and Sciences, the above "reserved" area was
removal of timber within the aforesaid area covered by R.A. No. 3990.
"ceded and transferred in full ownership to the University of the Philippines
subject to any existing concessions, if any."
Costs against petitioner.
When it ceded and transferred the property to UP, the Republic of the
Philippines completely removed it from the public domain and, more SO ORDERED.
specifically, in respect to the areas covered by the timber license of petitioner,
removed and segregated it from a public forest; it divested itself of its rights
G.R. No. 133250           July 9, 2002
and title thereto and relinquished and conveyed the same to the UP; and made
FRANCISCO I. CHAVEZ, petitioner,
the latter the absolute owner thereof, subject only to the existing concession.
vs.
That the law intended a transfer of the absolute ownership is unequivocally
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY
evidenced by its use of the word "full" to describe it. Full means entire,
DEVELOPMENT CORPORATION, respondents.
complete, or possessing all particulars, or not wanting in any essential
quality.11 The proviso regarding existing concessions refers to the timber
license of petitioner. All that it means, however, is that the right of petitioner CARPIO, J.:
as a timber licensee must not be affected, impaired or diminished; it must be
respected. But, insofar as the Republic of the Philippines is concerned, all its
This is an original Petition for Mandamus with prayer for a writ of
rights as grantor of the license were effectively assigned, ceded and conveyed
preliminary injunction and a temporary restraining order. The petition seeks to
to UP as a consequence of the above transfer of full ownership. This is further
compel the Public Estates Authority ("PEA" for brevity) to disclose all facts
home out by Section 3 of R.A. No. 3990 which provides, inter alia, that "any
on PEA's then on-going renegotiations with Amari Coastal Bay and
incidental receipts or income therefrom shall pertain to the general fund of the
Development Corporation ("AMARI" for brevity) to reclaim portions of
University of the Philippines. Having been effectively segregated and
Manila Bay. The petition further seeks to enjoin PEA from signing a new
removed from the public domain or from a public forest and, in effect,
agreement with AMARI involving such reclamation.
converted into a registered private woodland, the authority and jurisdiction of
the Bureau of Forestry over it were likewise terminated. This is obvious from
the fact that the condition in Proclamation No. 971 to the effect that the The Facts
disposition of timber shall be subject to forestry laws and regulations is not
reproduced iii R.A. No. 3990. The latter does not likewise provide that it is
subject to the conditions set forth in the proclamation. An owner has the right On November 20, 1973, the government, through the Commissioner of Public
to enjoy and dispose of a thing without other limitations than those established Highways, signed a contract with the Construction and Development
by law.12 The right to enjoy includes the jus utendi or the right to receive from Corporation of the Philippines ("CDCP" for brevity) to reclaim certain
the thing what it produces, and the jus abutendi or the right to consume the foreshore and offshore areas of Manila Bay. The contract also included the
thing by its use.13 As provided for in Article 441 of the Civil Code, to the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP
owner belongs the natural fruits, the industrial fruits and the civil fruits. There obligated itself to carry out all the works in consideration of fifty percent of
are, however, exceptions to this rules, as where the property is subject to a the total reclaimed land.
usufruct, in which case the usufructuary gets the fruits. 14 In the instant case,
that exception is made for the petitioner as licensee or grantee of the On February 4, 1977, then President Ferdinand E. Marcos issued Presidential
concession, which has been given the license to cut, collect, and remove Decree No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land,
timber from the area ceded and transferred to UP until I February including foreshore and submerged areas," and "to develop, improve, acquire,
1985.1âwphi1 However, it has the correlative duty and obligation to pay the x x x lease and sell any and all kinds of lands." 1 On the same date, then
forest charges, or royalties, to the new owner, the UP, at the same rate as President Marcos issued Presidential Decree No. 1085 transferring to PEA the
provided for in the Agreement. The charges should not be paid anymore to the "lands reclaimed in the foreshore and offshore of the Manila Bay" 2 under the
Republic of the Philippines through the Bureau of Internal Revenue because Manila-Cavite Coastal Road and Reclamation Project (MCCRRP).
115
On December 29, 1981, then President Marcos issued a memorandum On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published
directing PEA to amend its contract with CDCP, so that "[A]ll future works in reports that there were on-going renegotiations between PEA and AMARI
MCCRRP x x x shall be funded and owned by PEA." Accordingly, PEA and under an order issued by then President Fidel V. Ramos. According to these
CDCP executed a Memorandum of Agreement dated December 29, 1981, reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired
which stated: Navy Officer Sergio Cruz composed the negotiating panel of PEA.

"(i) CDCP shall undertake all reclamation, construction, and such On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for
other works in the MCCRRP as may be agreed upon by the parties, Prohibition with Application for the Issuance of a Temporary Restraining
to be paid according to progress of works on a unit price/lump sum Order and Preliminary Injunction docketed as G.R. No. 132994 seeking to
basis for items of work to be agreed upon, subject to price nullify the JVA. The Court dismissed the petition "for unwarranted disregard
escalation, retention and other terms and conditions provided for in of judicial hierarchy, without prejudice to the refiling of the case before the
Presidential Decree No. 1594. All the financing required for such proper court."12
works shall be provided by PEA.
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a
xxx taxpayer, filed the instant Petition for Mandamus with Prayer for the Issuance
of a Writ of Preliminary Injunction and Temporary Restraining Order.
Petitioner contends the government stands to lose billions of pesos in the sale
(iii) x x x CDCP shall give up all its development rights and
by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly
hereby agrees to cede and transfer in favor of PEA, all of the
disclose the terms of any renegotiation of the JVA, invoking Section 28,
rights, title, interest and participation of CDCP in and to all the
Article II, and Section 7, Article III, of the 1987 Constitution on the right of
areas of land reclaimed by CDCP in the MCCRRP as of December
the people to information on matters of public concern. Petitioner assails the
30, 1981 which have not yet been sold, transferred or otherwise
sale to AMARI of lands of the public domain as a blatant violation of Section
disposed of by CDCP as of said date, which areas consist of
3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands
approximately Ninety-Nine Thousand Four Hundred Seventy
of the public domain to private corporations. Finally, petitioner asserts that he
Three (99,473) square meters in the Financial Center Area covered
seeks to enjoin the loss of billions of pesos in properties of the State that are
by land pledge No. 5 and approximately Three Million Three
of public dominion.
Hundred Eighty Two Thousand Eight Hundred Eighty Eight
(3,382,888) square meters of reclaimed areas at varying elevations
above Mean Low Water Level located outside the Financial Center After several motions for extension of time, 13 PEA and AMARI filed their
Area and the First Neighborhood Unit."3 Comments on October 19, 1998 and June 25, 1998, respectively. Meanwhile,
on December 28, 1998, petitioner filed an Omnibus Motion: (a) to require
PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for
On January 19, 1988, then President Corazon C. Aquino issued Special Patent
issuance of a temporary restraining order; and (c) to set the case for hearing on
No. 3517, granting and transferring to PEA "the parcels of land so reclaimed
oral argument. Petitioner filed a Reiterative Motion for Issuance of a TRO
under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP)
dated May 26, 1999, which the Court denied in a Resolution dated June 22,
containing a total area of one million nine hundred fifteen thousand eight
1999.
hundred ninety four (1,915,894) square meters." Subsequently, on April 9,
1988, the Register of Deeds of the Municipality of Parañaque issued Transfer
Certificates of Title Nos. 7309, 7311, and 7312, in the name of PEA, covering In a Resolution dated March 23, 1999, the Court gave due course to the
the three reclaimed islands known as the "Freedom Islands" located at the petition and required the parties to file their respective memoranda.
southern portion of the Manila-Cavite Coastal Road, Parañaque City. The
Freedom Islands have a total land area of One Million Five Hundred Seventy
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture
Eight Thousand Four Hundred and Forty One (1,578,441) square meters or
Agreement ("Amended JVA," for brevity). On May 28, 1999, the Office of
157.841 hectares.
the President under the administration of then President Joseph E. Estrada
approved the Amended JVA.
On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for
brevity) with AMARI, a private corporation, to develop the Freedom Islands.
Due to the approval of the Amended JVA by the Office of the President,
The JVA also required the reclamation of an additional 250 hectares of
petitioner now prays that on "constitutional and statutory grounds the
submerged areas surrounding these islands to complete the configuration in
renegotiated contract be declared null and void."14
the Master Development Plan of the Southern Reclamation Project-MCCRRP.
PEA and AMARI entered into the JVA through negotiation without public
bidding.4 On April 28, 1995, the Board of Directors of PEA, in its Resolution The Issues
No. 1245, confirmed the JVA.5 On June 8, 1995, then President Fidel V.
Ramos, through then Executive Secretary Ruben Torres, approved the JVA.6
The issues raised by petitioner, PEA15 and AMARI16 are as follows:

On November 29, 1996, then Senate President Ernesto Maceda delivered a


I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN
privilege speech in the Senate and denounced the JVA as the "grandmother of
THE PETITION ARE MOOT AND ACADEMIC BECAUSE OF
all scams." As a result, the Senate Committee on Government Corporations
SUBSEQUENT EVENTS;
and Public Enterprises, and the Committee on Accountability of Public
Officers and Investigations, conducted a joint investigation. The Senate
Committees reported the results of their investigation in Senate Committee II. WHETHER THE PETITION MERITS DISMISSAL FOR
Report No. 560 dated September 16, 1997. 7 Among the conclusions of their FAILING TO OBSERVE THE PRINCIPLE GOVERNING THE
report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the HIERARCHY OF COURTS;
JVA are lands of the public domain which the government has not classified
as alienable lands and therefore PEA cannot alienate these lands; (2) the
certificates of title covering the Freedom Islands are thus void, and (3) the III. WHETHER THE PETITION MERITS DISMISSAL FOR
JVA itself is illegal. NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES;

On December 5, 1997, then President Fidel V. Ramos issued Presidential IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING
Administrative Order No. 365 creating a Legal Task Force to conduct a study THIS SUIT;
on the legality of the JVA in view of Senate Committee Report No. 560. The
members of the Legal Task Force were the Secretary of Justice, 8 the Chief V. WHETHER THE CONSTITUTIONAL RIGHT TO
Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The INFORMATION INCLUDES OFFICIAL INFORMATION ON
Legal Task Force upheld the legality of the JVA, contrary to the conclusions ON-GOING NEGOTIATIONS BEFORE A FINAL
reached by the Senate Committees.11 AGREEMENT;
116
VI. WHETHER THE STIPULATIONS IN THE AMENDED purchase. Neither AMARI nor PEA can claim judicial confirmation of their
JOINT VENTURE AGREEMENT FOR THE TRANSFER TO titles because the lands covered by the Amended JVA are newly reclaimed or
AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO still to be reclaimed. Judicial confirmation of imperfect title requires open,
BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND continuous, exclusive and notorious occupation of agricultural lands of the
public domain for at least thirty years since June 12, 1945 or earlier. Besides,
the deadline for filing applications for judicial confirmation of imperfect title
VII. WHETHER THE COURT IS THE PROPER FORUM FOR
expired on December 31, 1987.20
RAISING THE ISSUE OF WHETHER THE AMENDED JOINT
VENTURE AGREEMENT IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT. Lastly, there is a need to resolve immediately the constitutional issue raised in
this petition because of the possible transfer at any time by PEA to AMARI of
title and ownership to portions of the reclaimed lands. Under the Amended
The Court's Ruling
JVA, PEA is obligated to transfer to AMARI the latter's seventy percent
proportionate share in the reclaimed areas as the reclamation progresses. The
First issue: whether the principal reliefs prayed for in the petition are moot Amended JVA even allows AMARI to mortgage at any time
and academic because of subsequent events. the entire reclaimed area to raise financing for the reclamation project.21

The petition prays that PEA publicly disclose the "terms and conditions of the Second issue: whether the petition merits dismissal for failing to observe the
on-going negotiations for a new agreement." The petition also prays that the principle governing the hierarchy of courts.
Court enjoin PEA from "privately entering into, perfecting and/or executing
any new agreement with AMARI."
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking
relief directly from the Court. The principle of hierarchy of courts applies
PEA and AMARI claim the petition is now moot and academic because generally to cases involving factual questions. As it is not a trier of facts, the
AMARI furnished petitioner on June 21, 1999 a copy of the signed Amended Court cannot entertain cases involving factual issues. The instant case,
JVA containing the terms and conditions agreed upon in the renegotiations. however, raises constitutional issues of transcendental importance to the
Thus, PEA has satisfied petitioner's prayer for a public disclosure of the public.22 The Court can resolve this case without determining any factual issue
renegotiations. Likewise, petitioner's prayer to enjoin the signing of the related to the case. Also, the instant case is a petition for mandamus which
Amended JVA is now moot because PEA and AMARI have already signed falls under the original jurisdiction of the Court under Section 5, Article VIII
the Amended JVA on March 30, 1999. Moreover, the Office of the President of the Constitution. We resolve to exercise primary jurisdiction over the
has approved the Amended JVA on May 28, 1999. instant case.

Petitioner counters that PEA and AMARI cannot avoid the constitutional issue Third issue: whether the petition merits dismissal for non-exhaustion of
by simply fast-tracking the signing and approval of the Amended JVA before administrative remedies.
the Court could act on the issue. Presidential approval does not resolve the
constitutional issue or remove it from the ambit of judicial review.
PEA faults petitioner for seeking judicial intervention in compelling PEA to
disclose publicly certain information without first asking PEA the needed
We rule that the signing of the Amended JVA by PEA and AMARI and its information. PEA claims petitioner's direct resort to the Court violates the
approval by the President cannot operate to moot the petition and divest the principle of exhaustion of administrative remedies. It also violates the rule that
Court of its jurisdiction. PEA and AMARI have still to implement the mandamus may issue only if there is no other plain, speedy and adequate
Amended JVA. The prayer to enjoin the signing of the Amended JVA on remedy in the ordinary course of law.
constitutional grounds necessarily includes preventing its implementation if in
the meantime PEA and AMARI have signed one in violation of the
PEA distinguishes the instant case from Tañada v. Tuvera 23 where the Court
Constitution. Petitioner's principal basis in assailing the renegotiation of the
granted the petition for mandamus even if the petitioners there did not initially
JVA is its violation of Section 3, Article XII of the Constitution, which
demand from the Office of the President the publication of the presidential
prohibits the government from alienating lands of the public domain to private
decrees. PEA points out that in Tañada, the Executive Department had
corporations. If the Amended JVA indeed violates the Constitution, it is the
an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1
duty of the Court to enjoin its implementation, and if already implemented, to
of Commonwealth Act No. 63825 to publish the presidential decrees. There
annul the effects of such unconstitutional contract.
was, therefore, no need for the petitioners in Tañada to make an initial
demand from the Office of the President. In the instant case, PEA claims it has
The Amended JVA is not an ordinary commercial contract but one which no affirmative statutory duty to disclose publicly information about its
seeks to transfer title and ownership to 367.5 hectares of reclaimed lands renegotiation of the JVA. Thus, PEA asserts that the Court must apply the
and submerged areas of Manila Bay to a single private corporation. It now principle of exhaustion of administrative remedies to the instant case in view
becomes more compelling for the Court to resolve the issue to insure the of the failure of petitioner here to demand initially from PEA the needed
government itself does not violate a provision of the Constitution intended to information.
safeguard the national patrimony. Supervening events, whether intended or
accidental, cannot prevent the Court from rendering a decision if there is a
The original JVA sought to dispose to AMARI public lands held by PEA, a
grave violation of the Constitution. In the instant case, if the Amended JVA
government corporation. Under Section 79 of the Government Auditing
runs counter to the Constitution, the Court can still prevent the transfer of title
Code,26 the disposition of government lands to private parties requires public
and ownership of alienable lands of the public domain in the name of
bidding. PEA was under a positive legal duty to disclose to the public the
AMARI. Even in cases where supervening events had made the cases moot,
terms and conditions for the sale of its lands. The law obligated PEA to
the Court did not hesitate to resolve the legal or constitutional issues raised to
make this public disclosure even without demand from petitioner or from
formulate controlling principles to guide the bench, bar, and the public.17
anyone. PEA failed to make this public disclosure because the original JVA,
like the Amended JVA, was the result of a negotiated contract, not of a public
Also, the instant petition is a case of first impression. All previous decisions bidding. Considering that PEA had an affirmative statutory duty to make the
of the Court involving Section 3, Article XII of the 1987 Constitution, or its public disclosure, and was even in breach of this legal duty, petitioner had the
counterpart provision in the 1973 Constitution, 18 covered agricultural right to seek direct judicial intervention.
lands sold to private corporations which acquired the lands from private
parties. The transferors of the private corporations claimed or could claim the
Moreover, and this alone is determinative of this issue, the principle of
right to judicial confirmation of their imperfect titles 19 under Title II of
exhaustion of administrative remedies does not apply when the issue involved
Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant case,
is a purely legal or constitutional question. 27 The principal issue in the instant
AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and
case is the capacity of AMARI to acquire lands held by PEA in view of the
submerged areas for non-agricultural purposes by purchase under PD No.
constitutional ban prohibiting the alienation of lands of the public domain to
1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by
AMARI under the Amended JVA constitute the consideration for the
117
private corporations. We rule that the principle of exhaustion of administrative Further, in Albano v. Reyes, we said that while expenditure of
remedies does not apply in the instant case. public funds may not have been involved under the questioned
contract for the development, management and operation of the
Manila International Container Terminal, 'public interest [was]
Fourth issue: whether petitioner has locus standi to bring this suit
definitely involved considering the important role [of the subject
contract] . . . in the economic development of the country and the
PEA argues that petitioner has no standing to institute mandamus proceedings magnitude of the financial consideration involved.' We concluded
to enforce his constitutional right to information without a showing that PEA that, as a consequence, the disclosure provision in the Constitution
refused to perform an affirmative duty imposed on PEA by the Constitution. would constitute sufficient authority for upholding the petitioner's
PEA also claims that petitioner has not shown that he will suffer any concrete standing.
injury because of the signing or implementation of the Amended JVA. Thus,
there is no actual controversy requiring the exercise of the power of judicial
Similarly, the instant petition is anchored on the right of the people
review.
to information and access to official records, documents and papers
— a right guaranteed under Section 7, Article III of the 1987
The petitioner has standing to bring this taxpayer's suit because the petition Constitution. Petitioner, a former solicitor general, is a Filipino
seeks to compel PEA to comply with its constitutional duties. There are two citizen. Because of the satisfaction of the two basic requisites laid
constitutional issues involved here. First is the right of citizens to information down by decisional law to sustain petitioner's legal standing, i.e.
on matters of public concern. Second is the application of a constitutional (1) the enforcement of a public right (2) espoused by a Filipino
provision intended to insure the equitable distribution of alienable lands of the citizen, we rule that the petition at bar should be allowed."
public domain among Filipino citizens. The thrust of the first issue is to
compel PEA to disclose publicly information on the sale of government lands
We rule that since the instant petition, brought by a citizen, involves the
worth billions of pesos, information which the Constitution and statutory law
enforcement of constitutional rights - to information and to the equitable
mandate PEA to disclose. The thrust of the second issue is to prevent PEA
diffusion of natural resources - matters of transcendental public importance,
from alienating hundreds of hectares of alienable lands of the public domain
the petitioner has the requisite locus standi.
in violation of the Constitution, compelling PEA to comply with a
constitutional duty to the nation.
Fifth issue: whether the constitutional right to information includes official
information on on-going negotiations before a final agreement.
Moreover, the petition raises matters of transcendental importance to the
public. In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a
taxpayer's suit on matters of transcendental importance to the public, thus - Section 7, Article III of the Constitution explains the people's right to
information on matters of public concern in this manner:
"Besides, petitioner emphasizes, the matter of recovering the ill-
gotten wealth of the Marcoses is an issue of 'transcendental "Sec. 7. The right of the people to information on matters of public
importance to the public.' He asserts that ordinary taxpayers have a concern shall be recognized. Access to official records, and to
right to initiate and prosecute actions questioning the validity of documents, and papers pertaining to official acts, transactions,
acts or orders of government agencies or instrumentalities, if the or decisions, as well as to government research data used as basis
issues raised are of 'paramount public interest,' and if they for policy development, shall be afforded the citizen, subject to
'immediately affect the social, economic and moral well being of such limitations as may be provided by law." (Emphasis supplied)
the people.'
The State policy of full transparency in all transactions involving public
Moreover, the mere fact that he is a citizen satisfies the interest reinforces the people's right to information on matters of public
requirement of personal interest, when the proceeding involves the concern. This State policy is expressed in Section 28, Article II of the
assertion of a public right, such as in this case. He invokes several Constitution, thus:
decisions of this Court which have set aside the procedural matter
of locus standi, when the subject of the case involved public
"Sec. 28. Subject to reasonable conditions prescribed by law, the
interest.
State adopts and implements a policy of full public disclosure of
all its transactions involving public interest." (Emphasis supplied)
xxx
These twin provisions of the Constitution seek to promote transparency in
In Tañada v. Tuvera, the Court asserted that when the issue policy-making and in the operations of the government, as well as provide the
concerns a public right and the object of mandamus is to obtain the people sufficient information to exercise effectively other constitutional
enforcement of a public duty, the people are regarded as the real rights. These twin provisions are essential to the exercise of freedom of
parties in interest; and because it is sufficient that petitioner is a expression. If the government does not disclose its official acts, transactions
citizen and as such is interested in the execution of the laws, he and decisions to citizens, whatever citizens say, even if expressed without any
need not show that he has any legal or special interest in the result restraint, will be speculative and amount to nothing. These twin provisions are
of the action. In the aforesaid case, the petitioners sought to also essential to hold public officials "at all times x x x accountable to the
enforce their right to be informed on matters of public concern, a people,"29 for unless citizens have the proper information, they cannot hold
right then recognized in Section 6, Article IV of the 1973 public officials accountable for anything. Armed with the right information,
Constitution, in connection with the rule that laws in order to be citizens can participate in public discussions leading to the formulation of
valid and enforceable must be published in the Official Gazette or government policies and their effective implementation. An informed
otherwise effectively promulgated. In ruling for the petitioners' citizenry is essential to the existence and proper functioning of any
legal standing, the Court declared that the right they sought to be democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30 –
enforced 'is a public right recognized by no less than the
fundamental law of the land.'
"An essential element of these freedoms is to keep open a
continuing dialogue or process of communication between the
Legaspi v. Civil Service Commission, while reiterating Tañada, government and the people. It is in the interest of the State that the
further declared that 'when a mandamus proceeding involves the channels for free political discussion be maintained to the end that
assertion of a public right, the requirement of personal interest is the government may perceive and be responsive to the people's
satisfied by the mere fact that petitioner is a citizen and, therefore, will. Yet, this open dialogue can be effective only to the extent that
part of the general 'public' which possesses the right.' the citizenry is informed and thus able to formulate its will
intelligently. Only when the participants in the discussion are
aware of the issues and have access to information relating thereto
can such bear fruit."
118
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the same restrictions on disclosure of information in general, as
the right to information is limited to "definite propositions of the discussed earlier – such as on matters involving national security,
government." PEA maintains the right does not include access to "intra- diplomatic or foreign relations, intelligence and other classified
agency or inter-agency recommendations or communications during the stage information." (Emphasis supplied)
when common assertions are still in the process of being formulated or are in
the 'exploratory stage'."
Contrary to AMARI's contention, the commissioners of the 1986
Constitutional Commission understood that the right to
Also, AMARI contends that petitioner cannot invoke the right at the pre- information "contemplates inclusion of negotiations leading to the
decisional stage or before the closing of the transaction. To support its consummation of the transaction." Certainly, a consummated contract is not
contention, AMARI cites the following discussion in the 1986 Constitutional a requirement for the exercise of the right to information. Otherwise, the
Commission: people can never exercise the right if no contract is consummated, and if one
is consummated, it may be too late for the public to expose its
defects.1âwphi1.nêt
"Mr. Suarez. And when we say 'transactions' which should be
distinguished from contracts, agreements, or treaties or whatever,
does the Gentleman refer to the steps leading to the consummation Requiring a consummated contract will keep the public in the dark until the
of the contract, or does he refer to the contract itself? contract, which may be grossly disadvantageous to the government or even
illegal, becomes a fait accompli. This negates the State policy of full
transparency on matters of public concern, a situation which the framers of the
Mr. Ople: The 'transactions' used here, I suppose is generic and
Constitution could not have intended. Such a requirement will prevent the
therefore, it can cover both steps leading to a contract and
citizenry from participating in the public discussion of any proposed contract,
already a consummated contract, Mr. Presiding Officer.
effectively truncating a basic right enshrined in the Bill of Rights. We can
allow neither an emasculation of a constitutional right, nor a retreat by the
Mr. Suarez: This contemplates inclusion of negotiations leading State of its avowed "policy of full disclosure of all its transactions involving
to the consummation of the transaction. public interest."

Mr. Ople: Yes, subject only to reasonable safeguards on the The right covers three categories of information which are "matters of public
national interest. concern," namely: (1) official records; (2) documents and papers pertaining to
official acts, transactions and decisions; and (3) government research data
used in formulating policies. The first category refers to any document that is
Mr. Suarez: Thank you."32 (Emphasis supplied) part of the public records in the custody of government agencies or officials.
The second category refers to documents and papers recording, evidencing,
AMARI argues there must first be a consummated contract before petitioner establishing, confirming, supporting, justifying or explaining official acts,
can invoke the right. Requiring government officials to reveal their transactions or decisions of government agencies or officials. The third
deliberations at the pre-decisional stage will degrade the quality of decision- category refers to research data, whether raw, collated or processed, owned by
making in government agencies. Government officials will hesitate to express the government and used in formulating government policies.
their real sentiments during deliberations if there is immediate public
dissemination of their discussions, putting them under all kinds of pressure The information that petitioner may access on the renegotiation of the JVA
before they decide. includes evaluation reports, recommendations, legal and expert opinions,
minutes of meetings, terms of reference and other documents attached to such
We must first distinguish between information the law on public bidding reports or minutes, all relating to the JVA. However, the right to information
requires PEA to disclose publicly, and information the constitutional right to does not compel PEA to prepare lists, abstracts, summaries and the like
information requires PEA to release to the public. Before the consummation relating to the renegotiation of the JVA.34 The right only affords access to
of the contract, PEA must, on its own and without demand from anyone, records, documents and papers, which means the opportunity to inspect and
disclose to the public matters relating to the disposition of its property. These copy them. One who exercises the right must copy the records, documents and
include the size, location, technical description and nature of the property papers at his expense. The exercise of the right is also subject to reasonable
being disposed of, the terms and conditions of the disposition, the parties regulations to protect the integrity of the public records and to minimize
qualified to bid, the minimum price and similar information. PEA must disruption to government operations, like rules specifying when and how to
prepare all these data and disclose them to the public at the start of the conduct the inspection and copying.35
disposition process, long before the consummation of the contract, because the
Government Auditing Code requires public bidding. If PEA fails to make this The right to information, however, does not extend to matters recognized as
disclosure, any citizen can demand from PEA this information at any time privileged information under the separation of powers. 36 The right does not
during the bidding process. also apply to information on military and diplomatic secrets, information
affecting national security, and information on investigations of crimes by law
Information, however, on on-going evaluation or review of bids or proposals enforcement agencies before the prosecution of the accused, which courts
being undertaken by the bidding or review committee is not immediately have long recognized as confidential.37 The right may also be subject to other
accessible under the right to information. While the evaluation or review is limitations that Congress may impose by law.
still on-going, there are no "official acts, transactions, or decisions" on the
bids or proposals. However, once the committee makes its official There is no claim by PEA that the information demanded by petitioner is
recommendation, there arises a "definite proposition" on the part of the privileged information rooted in the separation of powers. The information
government. From this moment, the public's right to information attaches, and does not cover Presidential conversations, correspondences, or discussions
any citizen can access all the non-proprietary information leading to such during closed-door Cabinet meetings which, like internal deliberations of the
definite proposition. In Chavez v. PCGG,33 the Court ruled as follows: Supreme Court and other collegiate courts, or executive sessions of either
house of Congress,38 are recognized as confidential. This kind of information
"Considering the intent of the framers of the Constitution, we cannot be pried open by a co-equal branch of government. A frank exchange
believe that it is incumbent upon the PCGG and its officers, as well of exploratory ideas and assessments, free from the glare of publicity and
as other government representatives, to disclose sufficient public pressure by interested parties, is essential to protect the independence of
information on any proposed settlement they have decided to take decision-making of those tasked to exercise Presidential, Legislative and
up with the ostensible owners and holders of ill-gotten wealth. Judicial power.39 This is not the situation in the instant case.
Such information, though, must pertain to definite propositions of
the government, not necessarily to intra-agency or inter-agency We rule, therefore, that the constitutional right to information includes official
recommendations or communications during the stage when information on on-going negotiations before a final contract. The
common assertions are still in the process of being formulated or information, however, must constitute definite propositions by the
are in the "exploratory" stage. There is need, of course, to observe government and should not cover recognized exceptions like privileged
119
information, military and diplomatic secrets and similar matters affecting 2. That belonging exclusively to the State which, without being of
national security and public order.40 Congress has also prescribed other general public use, is employed in some public service, or in the
limitations on the right to information in several legislations.41 development of the national wealth, such as walls, fortresses, and
other works for the defense of the territory, and mines, until
granted to private individuals."
Sixth issue: whether stipulations in the Amended JVA for the transfer to
AMARI of lands, reclaimed or to be reclaimed, violate the Constitution.
Property devoted to public use referred to property open for use by the public.
In contrast, property devoted to public service referred to property used for
The Regalian Doctrine
some specific public service and open only to those authorized to use the
property.
The ownership of lands reclaimed from foreshore and submerged areas is
rooted in the Regalian doctrine which holds that the State owns all lands and
Property of public dominion referred not only to property devoted to public
waters of the public domain. Upon the Spanish conquest of the Philippines,
use, but also to property not so used but employed to develop the national
ownership of all "lands, territories and possessions" in the Philippines passed
wealth. This class of property constituted property of public dominion
to the Spanish Crown.42 The King, as the sovereign ruler and representative of
although employed for some economic or commercial activity to increase the
the people, acquired and owned all lands and territories in the Philippines
national wealth.
except those he disposed of by grant or sale to private individuals.

Article 341 of the Civil Code of 1889 governed the re-classification of


The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine
property of public dominion into private property, to wit:
substituting, however, the State, in lieu of the King, as the owner of all lands
and waters of the public domain. The Regalian doctrine is the foundation of
the time-honored principle of land ownership that "all lands that were not "Art. 341. Property of public dominion, when no longer devoted to
acquired from the Government, either by purchase or by grant, belong to the public use or to the defense of the territory, shall become a part of
public domain."43 Article 339 of the Civil Code of 1889, which is now Article the private property of the State."
420 of the Civil Code of 1950, incorporated the Regalian doctrine.
This provision, however, was not self-executing. The legislature, or the
Ownership and Disposition of Reclaimed Lands executive department pursuant to law, must declare the property no longer
needed for public use or territorial defense before the government could lease
or alienate the property to private parties.45
The Spanish Law of Waters of 1866 was the first statutory law governing the
ownership and disposition of reclaimed lands in the Philippines. On May 18,
1907, the Philippine Commission enacted Act No. 1654 which provided for Act No. 1654 of the Philippine Commission
the lease, but not the sale, of reclaimed lands of the government to
corporations and individuals. Later, on November 29, 1919, the Philippine
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which
Legislature approved Act No. 2874, the Public Land Act, which
regulated the lease of reclaimed and foreshore lands. The salient provisions of
authorized the lease, but not the sale, of reclaimed lands of the government
this law were as follows:
to corporations and individuals. On November 7, 1936, the National
Assembly passed Commonwealth Act No. 141, also known as the Public Land
Act, which authorized the lease, but not the sale, of reclaimed lands of the "Section 1. The control and disposition of the foreshore as
government to corporations and individuals. CA No. 141 continues to this defined in existing law, and the title to all Government or public
day as the general law governing the classification and disposition of lands of lands made or reclaimed by the Government by dredging or
the public domain. filling or otherwise throughout the Philippine Islands, shall be
retained by the Government without prejudice to vested rights and
without prejudice to rights conceded to the City of Manila in the
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Luneta Extension.

Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and
Section 2. (a) The Secretary of the Interior shall cause all
all waters within the maritime zone of the Spanish territory belonged to the
Government or public lands made or reclaimed by the Government
public domain for public use. 44 The Spanish Law of Waters of 1866 allowed
by dredging or filling or otherwise to be divided into lots or blocks,
the reclamation of the sea under Article 5, which provided as follows:
with the necessary streets and alleyways located thereon, and shall
cause plats and plans of such surveys to be prepared and filed with
"Article 5. Lands reclaimed from the sea in consequence of works the Bureau of Lands.
constructed by the State, or by the provinces, pueblos or private
persons, with proper permission, shall become the property of the
(b) Upon completion of such plats and plans the Governor-
party constructing such works, unless otherwise provided by the
General shall give notice to the public that such parts of the
terms of the grant of authority."
lands so made or reclaimed as are not needed for public
purposes will be leased for commercial and business purposes, x
Under the Spanish Law of Waters, land reclaimed from the sea belonged to x x.
the party undertaking the reclamation, provided the government issued the
necessary permit and did not reserve ownership of the reclaimed land to the
xxx
State.

(e) The leases above provided for shall be disposed of to the


Article 339 of the Civil Code of 1889 defined property of public dominion as
highest and best bidder therefore, subject to such regulations and
follows:
safeguards as the Governor-General may by executive order
prescribe." (Emphasis supplied)
"Art. 339. Property of public dominion is –
Act No. 1654 mandated that the government should retain title to all lands
1. That devoted to public use, such as roads, canals, rivers, reclaimed by the government. The Act also vested in the government control
torrents, ports and bridges constructed by the State, riverbanks, and disposition of foreshore lands. Private parties could lease lands reclaimed
shores, roadsteads, and that of a similar character; by the government only if these lands were no longer needed for public
purpose. Act No. 1654 mandated public bidding in the lease of government
reclaimed lands. Act No. 1654 made government reclaimed lands sui
generis in that unlike other public lands which the government could sell to
120
private parties, these reclaimed lands were available only for lease to private lands included in class (d) may be disposed of by sale or lease
parties. under the provisions of this Act." (Emphasis supplied)

Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Section 6 of Act No. 2874 authorized the Governor-General to "classify lands
Waters of 1866. Act No. 1654 did not prohibit private parties from reclaiming of the public domain into x x x alienable or disposable" 47 lands. Section 7 of
parts of the sea under Section 5 of the Spanish Law of Waters. Lands the Act empowered the Governor-General to "declare what lands are open to
reclaimed from the sea by private parties with government permission disposition or concession." Section 8 of the Act limited alienable or
remained private lands. disposable lands only to those lands which have been "officially delimited and
classified."
Act No. 2874 of the Philippine Legislature
Section 56 of Act No. 2874 stated that lands "disposable under this title 48 shall
be classified" as government reclaimed, foreshore and marshy lands, as well
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the
as other lands. All these lands, however, must be suitable for residential,
Public Land Act.46 The salient provisions of Act No. 2874, on reclaimed
commercial, industrial or other productive non-agricultural purposes. These
lands, were as follows:
provisions vested upon the Governor-General the power to classify inalienable
lands of the public domain into disposable lands of the public domain. These
"Sec. 6. The Governor-General, upon the recommendation of the provisions also empowered the Governor-General to classify further such
Secretary of Agriculture and Natural Resources, shall from time disposable lands of the public domain into government reclaimed, foreshore
to time classify the lands of the public domain into – or marshy lands of the public domain, as well as other non-agricultural lands.

(a) Alienable or disposable, Section 58 of Act No. 2874 categorically mandated that disposable lands of
the public domain classified as government reclaimed, foreshore and marshy
lands "shall be disposed of to private parties by lease only and not
(b) Timber, and otherwise." The Governor-General, before allowing the lease of these lands to
private parties, must formally declare that the lands were "not necessary for
(c) Mineral lands, x x x. the public service." Act No. 2874 reiterated the State policy to lease and not to
sell government reclaimed, foreshore and marshy lands of the public domain,
a policy first enunciated in 1907 in Act No. 1654. Government reclaimed,
Sec. 7. For the purposes of the government and disposition of foreshore and marshy lands remained sui generis, as the only alienable or
alienable or disposable public lands, the Governor-General, upon disposable lands of the public domain that the government could not sell to
recommendation by the Secretary of Agriculture and Natural private parties.
Resources, shall from time to time declare what lands are open to
disposition or concession under this Act."
The rationale behind this State policy is obvious. Government reclaimed,
foreshore and marshy public lands for non-agricultural purposes retain their
Sec. 8. Only those lands shall be declared open to disposition or inherent potential as areas for public service. This is the reason the
concession which have been officially delimited or classified x x government prohibited the sale, and only allowed the lease, of these lands to
x. private parties. The State always reserved these lands for some future public
service.
xxx
Act No. 2874 did not authorize the reclassification of government reclaimed,
Sec. 55. Any tract of land of the public domain which, being foreshore and marshy lands into other non-agricultural lands under Section 56
neither timber nor mineral land, shall be classified as suitable for (d). Lands falling under Section 56 (d) were the only lands for non-
residential purposes or for commercial, industrial, or other agricultural purposes the government could sell to private parties. Thus, under
productive purposes other than agricultural purposes, and shall Act No. 2874, the government could not sell government reclaimed, foreshore
be open to disposition or concession, shall be disposed of under the and marshy lands to private parties, unless the legislature passed a law
provisions of this chapter, and not otherwise. allowing their sale.49

Sec. 56. The lands disposable under this title shall be classified Act No. 2874 did not prohibit private parties from reclaiming parts of the sea
as follows: pursuant to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed
from the sea by private parties with government permission remained private
lands.
(a) Lands reclaimed by the Government by dredging,
filling, or other means;
Dispositions under the 1935 Constitution
(b) Foreshore;
On May 14, 1935, the 1935 Constitution took effect upon its ratification by
the Filipino people. The 1935 Constitution, in adopting the Regalian doctrine,
(c) Marshy lands or lands covered with water declared in Section 1, Article XIII, that –
bordering upon the shores or banks of navigable lakes
or rivers;
"Section 1. All agricultural, timber, and mineral lands of the public
domain, waters, minerals, coal, petroleum, and other mineral oils,
(d) Lands not included in any of the foregoing classes. all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation,
x x x. 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
Sec. 58. The lands comprised in classes (a), (b), and (c) of section to any existing right, grant, lease, or concession at the time of the
fifty-six shall be disposed of to private parties by lease only and inauguration of the Government established under this
not otherwise, as soon as the Governor-General, upon Constitution. Natural resources, with the exception of public
recommendation by the Secretary of Agriculture and Natural agricultural land, shall not be alienated, and no license,
Resources, shall declare that the same are not necessary for the concession, or lease for the exploitation, development, or
public service and are open to disposition under this chapter. The utilization of any of the natural resources shall be granted for a
period exceeding twenty-five years, renewable for another twenty-
121
five years, except as to water rights for irrigation, water supply, and may at any time and in like manner transfer such lands from
fisheries, or industrial uses other than the development of water one class to another,53 for the purpose of their administration and
power, in which cases beneficial use may be the measure and limit disposition.
of the grant." (Emphasis supplied)
Sec. 7. For the purposes of the administration and disposition of
The 1935 Constitution barred the alienation of all natural resources except alienable or disposable public lands, the President, upon
public agricultural lands, which were the only natural resources the State recommendation by the Secretary of Agriculture and Commerce,
could alienate. Thus, foreshore lands, considered part of the State's natural shall from time to time declare what lands are open to disposition
resources, became inalienable by constitutional fiat, available only for lease or concession under this Act.
for 25 years, renewable for another 25 years. The government could alienate
foreshore lands only after these lands were reclaimed and classified as
Sec. 8. Only those lands shall be declared open to disposition or
alienable agricultural lands of the public domain. Government reclaimed and
concession which have been officially delimited and
marshy lands of the public domain, being neither timber nor mineral lands,
classified and, when practicable, surveyed, and which have not
fell under the classification of public agricultural lands.50 However,
been reserved for public or quasi-public uses, nor appropriated by
government reclaimed and marshy lands, although subject to classification as
the Government, nor in any manner become private property, nor
disposable public agricultural lands, could only be leased and not sold to
those on which a private right authorized and recognized by this
private parties because of Act No. 2874.
Act or any other valid law may be claimed, or which, having been
reserved or appropriated, have ceased to be so. x x x."
The prohibition on private parties from acquiring ownership of government
reclaimed and marshy lands of the public domain was only a statutory
Thus, before the government could alienate or dispose of lands of the public
prohibition and the legislature could therefore remove such prohibition. The
domain, the President must first officially classify these lands as alienable or
1935 Constitution did not prohibit individuals and corporations from
disposable, and then declare them open to disposition or concession. There
acquiring government reclaimed and marshy lands of the public domain that
must be no law reserving these lands for public or quasi-public uses.
were classified as agricultural lands under existing public land laws. Section
2, Article XIII of the 1935 Constitution provided as follows:
The salient provisions of CA No. 141, on government reclaimed, foreshore
and marshy lands of the public domain, are as follows:
"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 "Sec. 58. Any tract of land of the public domain which, being
lands by purchase in excess of one hundred and forty hectares, neither timber nor mineral land, is intended to be used for
or by lease in excess of one thousand and twenty-four hectares, residential purposes or for commercial, industrial, or other
or by homestead in excess of twenty-four hectares. Lands adapted productive purposes other than agricultural, and is open to
to grazing, not exceeding two thousand hectares, may be leased to disposition or concession, shall be disposed of under the
an individual, private corporation, or association." (Emphasis provisions of this chapter and not otherwise.
supplied)
Sec. 59. The lands disposable under this title shall be classified
Still, after the effectivity of the 1935 Constitution, the legislature did not as follows:
repeal Section 58 of Act No. 2874 to open for sale to private parties
government reclaimed and marshy lands of the public domain. On the
(a) Lands reclaimed by the Government by dredging,
contrary, the legislature continued the long established State policy of
filling, or other means;
retaining for the government title and ownership of government reclaimed and
marshy lands of the public domain.
(b) Foreshore;
Commonwealth Act No. 141 of the Philippine National Assembly
(c) Marshy lands or lands covered with water
bordering upon the shores or banks of navigable lakes
On November 7, 1936, the National Assembly approved Commonwealth Act
or rivers;
No. 141, also known as the Public Land Act, which compiled the then existing
laws on lands of the public domain. CA No. 141, as amended, remains to this
day the existing general law governing the classification and disposition of (d) Lands not included in any of the foregoing classes.
lands of the public domain other than timber and mineral lands.51
Sec. 60. Any tract of land comprised under this title may be leased
Section 6 of CA No. 141 empowers the President to classify lands of the or sold, as the case may be, to any person, corporation, or
public domain into "alienable or disposable"52 lands of the public domain, association authorized to purchase or lease public lands for
which prior to such classification are inalienable and outside the commerce of agricultural purposes. x x x.
man. Section 7 of CA No. 141 authorizes the President to "declare what lands
are open to disposition or concession." Section 8 of CA No. 141 states that the
government can declare open for disposition or concession only lands that are Sec. 61. The lands comprised in classes (a), (b), and (c) of section
"officially delimited and classified." Sections 6, 7 and 8 of CA No. 141 read fifty-nine shall be disposed of to private parties by lease only and
as follows: not otherwise, as soon as the President, upon recommendation by
the Secretary of Agriculture, shall declare that the same are not
necessary for the public service and are open to disposition under
"Sec. 6. The President, upon the recommendation of the this chapter. The lands included in class (d) may be disposed of
Secretary of Agriculture and Commerce, shall from time to time by sale or lease under the provisions of this Act." (Emphasis
classify the lands of the public domain into – supplied)

(a) Alienable or disposable, Section 61 of CA No. 141 readopted, after the effectivity of the 1935
Constitution, Section 58 of Act No. 2874 prohibiting the sale of government
reclaimed, foreshore and marshy disposable lands of the public domain. All
(b) Timber, and
these lands are intended for residential, commercial, industrial or other non-
agricultural purposes. As before, Section 61 allowed only the lease of such
(c) Mineral lands, lands to private parties. The government could sell to private parties only
lands falling under Section 59 (d) of CA No. 141, or those lands for non-
agricultural purposes not classified as government reclaimed, foreshore and
122
marshy disposable lands of the public domain. Foreshore lands, however, shall not apply to grants, donations, or transfers made to a
became inalienable under the 1935 Constitution which only allowed the lease province, municipality or branch or subdivision of the Government
of these lands to qualified private parties. for the purposes deemed by said entities conducive to the public
interest; but the land so granted, donated, or transferred to a
province, municipality or branch or subdivision of the
Section 58 of CA No. 141 expressly states that disposable lands of the public
Government shall not be alienated, encumbered, or otherwise
domain intended for residential, commercial, industrial or other productive
disposed of in a manner affecting its title, except when
purposes other than agricultural "shall be disposed of under the provisions of
authorized by Congress: x x x." (Emphasis supplied)
this chapter and not otherwise." Under Section 10 of CA No. 141, the term
"disposition" includes lease of the land. Any disposition of government
reclaimed, foreshore and marshy disposable lands for non-agricultural The congressional authority required in Section 60 of CA No. 141 mirrors the
purposes must comply with Chapter IX, Title III of CA No. 141,54 unless a legislative authority required in Section 56 of Act No. 2874.
subsequent law amended or repealed these provisions.
One reason for the congressional authority is that Section 60 of CA No. 141
In his concurring opinion in the landmark case of Republic Real Estate exempted government units and entities from the maximum area of public
Corporation v. Court of Appeals,55 Justice Reynato S. Puno summarized lands that could be acquired from the State. These government units and
succinctly the law on this matter, as follows: entities should not just turn around and sell these lands to private parties in
violation of constitutional or statutory limitations. Otherwise, the transfer of
lands for non-agricultural purposes to government units and entities could be
"Foreshore lands are lands of public dominion intended for public
used to circumvent constitutional limitations on ownership of alienable or
use. So too are lands reclaimed by the government by dredging,
disposable lands of the public domain. In the same manner, such transfers
filling, or other means. Act 1654 mandated that the control and
could also be used to evade the statutory prohibition in CA No. 141 on the
disposition of the foreshore and lands under water remained in the
sale of government reclaimed and marshy lands of the public domain to
national government. Said law allowed only the 'leasing' of
private parties. Section 60 of CA No. 141 constitutes by operation of law a
reclaimed land. The Public Land Acts of 1919 and 1936 also
lien on these lands.57
declared that the foreshore and lands reclaimed by the government
were to be "disposed of to private parties by lease only and not
otherwise." Before leasing, however, the Governor-General, upon In case of sale or lease of disposable lands of the public domain falling under
recommendation of the Secretary of Agriculture and Natural Section 59 of CA No. 141, Sections 63 and 67 require a public bidding.
Resources, had first to determine that the land reclaimed was not Sections 63 and 67 of CA No. 141 provide as follows:
necessary for the public service. This requisite must have been met
before the land could be disposed of. But even then, the foreshore
"Sec. 63. Whenever it is decided that lands covered by this chapter
and lands under water were not to be alienated and sold to
are not needed for public purposes, the Director of Lands shall ask
private parties. The disposition of the reclaimed land was only by
the Secretary of Agriculture and Commerce (now the Secretary of
lease. The land remained property of the State." (Emphasis
Natural Resources) for authority to dispose of the same. Upon
supplied)
receipt of such authority, the Director of Lands shall give notice by
public advertisement in the same manner as in the case of leases or
As observed by Justice Puno in his concurring opinion, "Commonwealth Act sales of agricultural public land, x x x.
No. 141 has remained in effect at present."
Sec. 67. The lease or sale shall be made by oral bidding; and
The State policy prohibiting the sale to private parties of government adjudication shall be made to the highest bidder. x x x."
reclaimed, foreshore and marshy alienable lands of the public domain, first (Emphasis supplied)
implemented in 1907 was thus reaffirmed in CA No. 141 after the 1935
Constitution took effect. The prohibition on the sale of foreshore lands,
Thus, CA No. 141 mandates the Government to put to public auction all
however, became a constitutional edict under the 1935 Constitution.
leases or sales of alienable or disposable lands of the public domain.58
Foreshore lands became inalienable as natural resources of the State, unless
reclaimed by the government and classified as agricultural lands of the public
domain, in which case they would fall under the classification of government Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal
reclaimed lands. Section 5 of the Spanish Law of Waters of 1866. Private parties could still
reclaim portions of the sea with government permission. However,
the reclaimed land could become private land only if classified as alienable
After the effectivity of the 1935 Constitution, government reclaimed and
agricultural land of the public domain open to disposition under CA No.
marshy disposable lands of the public domain continued to be only leased and
141. The 1935 Constitution prohibited the alienation of all natural resources
not sold to private parties.56 These lands remained sui generis, as the only
except public agricultural lands.
alienable or disposable lands of the public domain the government could not
sell to private parties.
The Civil Code of 1950
Since then and until now, the only way the government can sell to private
parties government reclaimed and marshy disposable lands of the public The Civil Code of 1950 readopted substantially the definition of property of
domain is for the legislature to pass a law authorizing such sale. CA No. 141 public dominion found in the Civil Code of 1889. Articles 420 and 422 of the
does not authorize the President to reclassify government reclaimed and Civil Code of 1950 state that –
marshy lands into other non-agricultural lands under Section 59 (d). Lands
classified under Section 59 (d) are the only alienable or disposable lands for
"Art. 420. The following things are property of public dominion:
non-agricultural purposes that the government could sell to private parties.

(1) Those intended for public use, such as roads, canals, rivers,
Moreover, Section 60 of CA No. 141 expressly requires congressional
torrents, ports and bridges constructed by the State, banks, shores,
authority before lands under Section 59 that the government previously
roadsteads, and others of similar character;
transferred to government units or entities could be sold to private parties.
Section 60 of CA No. 141 declares that –
(2) Those which belong to the State, without being for public use,
and are intended for some public service or for the development of
"Sec. 60. x x x The area so leased or sold shall be such as shall, in
the national wealth.
the judgment of the Secretary of Agriculture and Natural
Resources, be reasonably necessary for the purposes for which
such sale or lease is requested, and shall not exceed one hundred x x x.
and forty-four hectares: Provided, however, That this limitation
123
Art. 422. Property of public dominion, when no longer intended Thus, under the 1973 Constitution, private corporations could hold alienable
for public use or for public service, shall form part of the lands of the public domain only through lease. Only individuals could now
patrimonial property of the State." acquire alienable lands of the public domain, and private corporations
became absolutely barred from acquiring any kind of alienable land of the
public domain. The constitutional ban extended to all kinds of alienable lands
Again, the government must formally declare that the property of public
of the public domain, while the statutory ban under CA No. 141 applied only
dominion is no longer needed for public use or public service, before the same
to government reclaimed, foreshore and marshy alienable lands of the public
could be classified as patrimonial property of the State.59 In the case of
domain.
government reclaimed and marshy lands of the public domain, the declaration
of their being disposable, as well as the manner of their disposition, is
governed by the applicable provisions of CA No. 141. PD No. 1084 Creating the Public Estates Authority

Like the Civil Code of 1889, the Civil Code of 1950 included as property of On February 4, 1977, then President Ferdinand Marcos issued Presidential
public dominion those properties of the State which, without being for public Decree No. 1084 creating PEA, a wholly government owned and controlled
use, are intended for public service or the "development of the national corporation with a special charter. Sections 4 and 8 of PD No. 1084, vests
wealth." Thus, government reclaimed and marshy lands of the State, even if PEA with the following purposes and powers:
not employed for public use or public service, if developed to enhance the
national wealth, are classified as property of public dominion.
"Sec. 4. Purpose. The Authority is hereby created for the following
purposes:
Dispositions under the 1973 Constitution
(a) To reclaim land, including foreshore and submerged areas,
The 1973 Constitution, which took effect on January 17, 1973, likewise by dredging, filling or other means, or to acquire reclaimed land;
adopted the Regalian doctrine. Section 8, Article XIV of the 1973
Constitution stated that –
(b) To develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands, buildings,
"Sec. 8. All lands of the public domain, waters, minerals, coal, estates and other forms of real property, owned, managed,
petroleum and other mineral oils, all forces of potential energy, controlled and/or operated by the government;
fisheries, wildlife, and other natural resources of the Philippines
belong to the State. With the exception of agricultural, industrial
(c) To provide for, operate or administer such service as may be
or commercial, residential, and resettlement lands of the public
necessary for the efficient, economical and beneficial utilization of
domain, natural resources shall not be alienated, and no license,
the above properties.
concession, or lease for the exploration, development, exploitation,
or utilization of any of the natural resources shall be granted for a
period exceeding twenty-five years, renewable for not more than Sec. 5. Powers and functions of the Authority. The Authority shall,
twenty-five years, except as to water rights for irrigation, water in carrying out the purposes for which it is created, have the
supply, fisheries, or industrial uses other than the development of following powers and functions:
water power, in which cases, beneficial use may be the measure
and the limit of the grant." (Emphasis supplied)
(a)To prescribe its by-laws.

The 1973 Constitution prohibited the alienation of all natural resources with
xxx
the exception of "agricultural, industrial or commercial, residential, and
resettlement lands of the public domain." In contrast, the 1935 Constitution
barred the alienation of all natural resources except "public agricultural (i) To hold lands of the public domain in excess of the area
lands." However, the term "public agricultural lands" in the 1935 Constitution permitted to private corporations by statute.
encompassed industrial, commercial, residential and resettlement lands of the
public domain.60 If the land of public domain were neither timber nor mineral
land, it would fall under the classification of agricultural land of the public (j) To reclaim lands and to construct work across, or otherwise,
domain. Both the 1935 and 1973 Constitutions, therefore, prohibited the any stream, watercourse, canal, ditch, flume x x x.
alienation of all natural resources except agricultural lands of the public
domain. xxx

The 1973 Constitution, however, limited the alienation of lands of the public (o) To perform such acts and exercise such functions as may be
domain to individuals who were citizens of the Philippines. Private necessary for the attainment of the purposes and objectives herein
corporations, even if wholly owned by Philippine citizens, were no longer specified." (Emphasis supplied)
allowed to acquire alienable lands of the public domain unlike in the 1935
Constitution. Section 11, Article XIV of the 1973 Constitution declared that –
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas
of the public domain. Foreshore areas are those covered and uncovered by the
"Sec. 11. The Batasang Pambansa, taking into account ebb and flow of the tide.61 Submerged areas are those permanently under
conservation, ecological, and development requirements of the water regardless of the ebb and flow of the tide.62 Foreshore and submerged
natural resources, shall determine by law the size of land of the areas indisputably belong to the public domain63 and are inalienable unless
public domain which may be developed, held or acquired by, or reclaimed, classified as alienable lands open to disposition, and further
leased to, any qualified individual, corporation, or association, and declared no longer needed for public service.
the conditions therefor. No private corporation or association
may hold alienable lands of the public domain except by lease not
to exceed one thousand hectares in area nor may any citizen hold The ban in the 1973 Constitution on private corporations from acquiring
such lands by lease in excess of five hundred hectares or acquire alienable lands of the public domain did not apply to PEA since it was then,
by purchase, homestead or grant, in excess of twenty-four hectares. and until today, a fully owned government corporation. The constitutional ban
No private corporation or association may hold by lease, applied then, as it still applies now, only to "private corporations and
concession, license or permit, timber or forest lands and other associations." PD No. 1084 expressly empowers PEA "to hold lands of the
timber or forest resources in excess of one hundred thousand public domain" even "in excess of the area permitted to private corporations
hectares. However, such area may be increased by the Batasang by statute." Thus, PEA can hold title to private lands, as well as title to lands
Pambansa upon recommendation of the National Economic and of the public domain.
Development Authority." (Emphasis supplied)

124
In order for PEA to sell its reclaimed foreshore and submerged alienable lands `No private corporation or association may hold alienable lands of
of the public domain, there must be legislative authority empowering PEA to the public domain except by lease, not to exceed one thousand
sell these lands. This legislative authority is necessary in view of Section 60 hectares in area.'
of CA No.141, which states –
If we recall, this provision did not exist under the 1935
"Sec. 60. x x x; but the land so granted, donated or transferred to a Constitution, but this was introduced in the 1973 Constitution. In
province, municipality, or branch or subdivision of the effect, it prohibits private corporations from acquiring alienable
Government shall not be alienated, encumbered or otherwise public lands. But it has not been very clear in jurisprudence what
disposed of in a manner affecting its title, except when authorized the reason for this is. In some of the cases decided in 1982 and
by Congress; x x x." (Emphasis supplied) 1983, it was indicated that the purpose of this is to prevent large
landholdings. Is that the intent of this provision?
Without such legislative authority, PEA could not sell but only lease its
reclaimed foreshore and submerged alienable lands of the public domain. MR. VILLEGAS: I think that is the spirit of the provision.
Nevertheless, any legislative authority granted to PEA to sell its reclaimed
alienable lands of the public domain would be subject to the constitutional ban
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo,
on private corporations from acquiring alienable lands of the public domain.
there were instances where the Iglesia ni Cristo was not allowed to
Hence, such legislative authority could only benefit private individuals.
acquire a mere 313-square meter land where a chapel stood
because the Supreme Court said it would be in violation of this."
Dispositions under the 1987 Constitution (Emphasis supplied)

The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional
adopted the Regalian doctrine. The 1987 Constitution declares that all natural ban in this way:
resources are "owned by the State," and except for alienable agricultural lands
of the public domain, natural resources cannot be alienated. Sections 2 and 3,
"Indeed, one purpose of the constitutional prohibition against
Article XII of the 1987 Constitution state that –
purchases of public agricultural lands by private corporations is to
equitably diffuse land ownership or to encourage 'owner-
"Section 2. All lands of the public domain, waters, minerals, coal, cultivatorship and the economic family-size farm' and to prevent a
petroleum and other mineral oils, all forces of potential energy, recurrence of cases like the instant case. Huge landholdings by
fisheries, forests or timber, wildlife, flora and fauna, and other corporations or private persons had spawned social unrest."
natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be
However, if the constitutional intent is to prevent huge landholdings, the
alienated. The exploration, development, and utilization of natural
Constitution could have simply limited the size of alienable lands of the
resources shall be under the full control and supervision of the
public domain that corporations could acquire. The Constitution could have
State. x x x.
followed the limitations on individuals, who could acquire not more than 24
hectares of alienable lands of the public domain under the 1973 Constitution,
Section 3. Lands of the public domain are classified into and not more than 12 hectares under the 1987 Constitution.
agricultural, forest or timber, mineral lands, and national parks.
Agricultural lands of the public domain may be further classified
If the constitutional intent is to encourage economic family-size farms,
by law according to the uses which they may be
placing the land in the name of a corporation would be more effective in
devoted. Alienable lands of the public domain shall be limited to
preventing the break-up of farmlands. If the farmland is registered in the name
agricultural lands. Private corporations or associations may not
of a corporation, upon the death of the owner, his heirs would inherit shares in
hold such alienable lands of the public domain except by lease,
the corporation instead of subdivided parcels of the farmland. This would
for a period not exceeding twenty-five years, renewable for not
prevent the continuing break-up of farmlands into smaller and smaller plots
more than twenty-five years, and not to exceed one thousand
from one generation to the next.
hectares in area. Citizens of the Philippines may lease not more
than five hundred hectares, or acquire not more than twelve
hectares thereof by purchase, homestead, or grant. In actual practice, the constitutional ban strengthens the constitutional
limitation on individuals from acquiring more than the allowed area of
alienable lands of the public domain. Without the constitutional ban,
Taking into account the requirements of conservation, ecology, and
individuals who already acquired the maximum area of alienable lands of the
development, and subject to the requirements of agrarian reform,
public domain could easily set up corporations to acquire more alienable
the Congress shall determine, by law, the size of lands of the
public lands. An individual could own as many corporations as his means
public domain which may be acquired, developed, held, or leased
would allow him. An individual could even hide his ownership of a
and the conditions therefor." (Emphasis supplied)
corporation by putting his nominees as stockholders of the corporation. The
corporation is a convenient vehicle to circumvent the constitutional limitation
The 1987 Constitution continues the State policy in the 1973 Constitution on acquisition by individuals of alienable lands of the public domain.
banning private corporations from acquiring any kind of alienable land of
the public domain. Like the 1973 Constitution, the 1987 Constitution allows
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer
private corporations to hold alienable lands of the public domain only
ownership of only a limited area of alienable land of the public domain to a
through lease. As in the 1935 and 1973 Constitutions, the general law
qualified individual. This constitutional intent is safeguarded by the provision
governing the lease to private corporations of reclaimed, foreshore and
prohibiting corporations from acquiring alienable lands of the public domain,
marshy alienable lands of the public domain is still CA No. 141.
since the vehicle to circumvent the constitutional intent is removed. The
available alienable public lands are gradually decreasing in the face of an
The Rationale behind the Constitutional Ban ever-growing population. The most effective way to insure faithful adherence
to this constitutional intent is to grant or sell alienable lands of the public
domain only to individuals. This, it would seem, is the practical benefit arising
The rationale behind the constitutional ban on corporations from acquiring,
from the constitutional ban.
except through lease, alienable lands of the public domain is not well
understood. During the deliberations of the 1986 Constitutional Commission,
the commissioners probed the rationale behind this ban, thus: The Amended Joint Venture Agreement

"FR. BERNAS: Mr. Vice-President, my questions have reference The subject matter of the Amended JVA, as stated in its second Whereas
to page 3, line 5 which says: clause, consists of three properties, namely:
125
1. "[T]hree partially reclaimed and substantially eroded islands "Section 2. All lands of the public domain, waters, minerals, coal,
along Emilio Aguinaldo Boulevard in Paranaque and Las Pinas, petroleum, and other mineral oils, all forces of potential energy,
Metro Manila, with a combined titled area of 1,578,441 square fisheries, forests or timber, wildlife, flora and fauna, and other
meters;" natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be
alienated. x x x.
2. "[A]nother area of 2,421,559 square meters contiguous to the
three islands;" and
xxx
3. "[A]t AMARI's option as approved by PEA, an additional 350
hectares more or less to regularize the configuration of the Section 3. x x x Alienable lands of the public domain shall be
reclaimed area."65 limited to agricultural lands. Private corporations or associations
may not hold such alienable lands of the public domain except
by lease, x x x."(Emphasis supplied)
PEA confirms that the Amended JVA involves "the development of the
Freedom Islands and further reclamation of about 250 hectares x x x," plus an
option "granted to AMARI to subsequently reclaim another 350 hectares x x Classification of Reclaimed Foreshore and Submerged Areas
x."66
PEA readily concedes that lands reclaimed from foreshore or submerged areas
In short, the Amended JVA covers a reclamation area of 750 hectares. Only of Manila Bay are alienable or disposable lands of the public domain. In its
157.84 hectares of the 750-hectare reclamation project have been Memorandum,67 PEA admits that –
reclaimed, and the rest of the 592.15 hectares are still submerged areas
forming part of Manila Bay.
"Under the Public Land Act (CA 141, as amended), reclaimed
lands are classified as alienable and disposable lands of the
Under the Amended JVA, AMARI will reimburse PEA the sum of public domain:
P1,894,129,200.00 for PEA's "actual cost" in partially reclaiming the Freedom
Islands. AMARI will also complete, at its own expense, the reclamation of the
'Sec. 59. The lands disposable under this title shall be
Freedom Islands. AMARI will further shoulder all the reclamation costs of all
classified as follows:
the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and
PEA will share, in the proportion of 70 percent and 30 percent, respectively,
the total net usable area which is defined in the Amended JVA as the total (a) Lands reclaimed by the government by dredging,
reclaimed area less 30 percent earmarked for common areas. Title to filling, or other means;
AMARI's share in the net usable area, totaling 367.5 hectares, will be issued
in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that –
x x x.'" (Emphasis supplied)

"x x x, PEA shall have the duty to execute without delay the
Likewise, the Legal Task Force68 constituted under Presidential
necessary deed of transfer or conveyance of the title pertaining to
Administrative Order No. 365 admitted in its Report and Recommendation to
AMARI's Land share based on the Land Allocation Plan. PEA,
then President Fidel V. Ramos, "[R]eclaimed lands are classified as
when requested in writing by AMARI, shall then cause the
alienable and disposable lands of the public domain."69 The Legal Task
issuance and delivery of the proper certificates of title covering
Force concluded that –
AMARI's Land Share in the name of AMARI, x x x; provided,
that if more than seventy percent (70%) of the titled area at any
given time pertains to AMARI, PEA shall deliver to AMARI only "D. Conclusion
seventy percent (70%) of the titles pertaining to AMARI, until
such time when a corresponding proportionate area of additional
land pertaining to PEA has been titled." (Emphasis supplied) Reclaimed lands are lands of the public domain. However, by
statutory authority, the rights of ownership and disposition over
reclaimed lands have been transferred to PEA, by virtue of which
Indisputably, under the Amended JVA AMARI will acquire and own a PEA, as owner, may validly convey the same to any qualified
maximum of 367.5 hectares of reclaimed land which will be titled in its person without violating the Constitution or any statute.
name.
The constitutional provision prohibiting private corporations from
To implement the Amended JVA, PEA delegated to the unincorporated PEA- holding public land, except by lease (Sec. 3, Art. XVII, 70 1987
AMARI joint venture PEA's statutory authority, rights and privileges to Constitution), does not apply to reclaimed lands whose ownership
reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the has passed on to PEA by statutory grant."
Amended JVA states that –
Under Section 2, Article XII of the 1987 Constitution, the foreshore and
"PEA hereby contributes to the joint venture its rights and submerged areas of Manila Bay are part of the "lands of the public domain,
privileges to perform Rawland Reclamation and Horizontal waters x x x and other natural resources" and consequently "owned by the
Development as well as own the Reclamation Area, thereby State." As such, foreshore and submerged areas "shall not be alienated,"
granting the Joint Venture the full and exclusive right, authority unless they are classified as "agricultural lands" of the public domain. The
and privilege to undertake the Project in accordance with the mere reclamation of these areas by PEA does not convert these inalienable
Master Development Plan." natural resources of the State into alienable or disposable lands of the public
domain. There must be a law or presidential proclamation officially
classifying these reclaimed lands as alienable or disposable and open to
The Amended JVA is the product of a renegotiation of the original JVA dated
disposition or concession. Moreover, these reclaimed lands cannot be
April 25, 1995 and its supplemental agreement dated August 9, 1995.
classified as alienable or disposable if the law has reserved them for some
public or quasi-public use.71
The Threshold Issue
Section 8 of CA No. 141 provides that "only those lands shall be declared
The threshold issue is whether AMARI, a private corporation, can acquire and open to disposition or concession which have been officially delimited and
own under the Amended JVA 367.5 hectares of reclaimed foreshore and classified."72 The President has the authority to classify inalienable lands of
submerged areas in Manila Bay in view of Sections 2 and 3, Article XII of the the public domain into alienable or disposable lands of the public domain,
1987 Constitution which state that: pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia, 73 the Executive

126
Department attempted to sell the Roppongi property in Tokyo, Japan, which which it emerged, belonged to the State. Thus, a private person reclaiming
was acquired by the Philippine Government for use as the Chancery of the from the sea without permission from the State could not acquire ownership of
Philippine Embassy. Although the Chancery had transferred to another the reclaimed land which would remain property of public dominion like the
location thirteen years earlier, the Court still ruled that, under Article 422 74 of sea it replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the
the Civil Code, a property of public dominion retains such character until time-honored principle of land ownership that "all lands that were not
formally declared otherwise. The Court ruled that – acquired from the government, either by purchase or by grant, belong to the
public domain."77
"The fact that the Roppongi site has not been used for a long time
for actual Embassy service does not automatically convert it to Article 5 of the Spanish Law of Waters must be read together with laws
patrimonial property. Any such conversion happens only if the subsequently enacted on the disposition of public lands. In particular, CA No.
property is withdrawn from public use (Cebu Oxygen and 141 requires that lands of the public domain must first be classified as
Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property alienable or disposable before the government can alienate them. These lands
continues to be part of the public domain, not available for must not be reserved for public or quasi-public purposes.78 Moreover, the
private appropriation or ownership 'until there is a formal contract between CDCP and the government was executed after the effectivity
declaration on the part of the government to withdraw it from of the 1973 Constitution which barred private corporations from acquiring any
being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." kind of alienable land of the public domain. This contract could not have
(Emphasis supplied) converted the Freedom Islands into private lands of a private corporation.

PD No. 1085, issued on February 4, 1977, authorized the issuance of special Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws
land patents for lands reclaimed by PEA from the foreshore or submerged authorizing the reclamation of areas under water and revested solely in the
areas of Manila Bay. On January 19, 1988 then President Corazon C. Aquino National Government the power to reclaim lands. Section 1 of PD No. 3-A
issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares declared that –
comprising the partially reclaimed Freedom Islands. Subsequently, on April 9,
1999 the Register of Deeds of the Municipality of Paranaque issued TCT Nos.
"The provisions of any law to the contrary notwithstanding, the
7309, 7311 and 7312 in the name of PEA pursuant to Section 103 of PD No.
reclamation of areas under water, whether foreshore or inland,
1529 authorizing the issuance of certificates of title corresponding to land
shall be limited to the National Government or any person
patents. To this day, these certificates of title are still in the name of PEA.
authorized by it under a proper contract. (Emphasis supplied)

PD No. 1085, coupled with President Aquino's actual issuance of a special


x x x."
patent covering the Freedom Islands, is equivalent to an official proclamation
classifying the Freedom Islands as alienable or disposable lands of the public
domain. PD No. 1085 and President Aquino's issuance of a land patent also PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because
constitute a declaration that the Freedom Islands are no longer needed for reclamation of areas under water could now be undertaken only by the
public service. The Freedom Islands are thus alienable or disposable lands National Government or by a person contracted by the National Government.
of the public domain, open to disposition or concession to qualified parties. Private parties may reclaim from the sea only under a contract with the
National Government, and no longer by grant or permission as provided in
Section 5 of the Spanish Law of Waters of 1866.
At the time then President Aquino issued Special Patent No. 3517, PEA had
already reclaimed the Freedom Islands although subsequently there were
partial erosions on some areas. The government had also completed the Executive Order No. 525, issued on February 14, 1979, designated PEA as the
necessary surveys on these islands. Thus, the Freedom Islands were no longer National Government's implementing arm to undertake "all reclamation
part of Manila Bay but part of the land mass. Section 3, Article XII of the projects of the government," which "shall be undertaken by the PEA or
1987 Constitution classifies lands of the public domain into "agricultural, through a proper contract executed by it with any person or entity." Under
forest or timber, mineral lands, and national parks." Being neither timber, such contract, a private party receives compensation for reclamation services
mineral, nor national park lands, the reclaimed Freedom Islands necessarily rendered to PEA. Payment to the contractor may be in cash, or in kind
fall under the classification of agricultural lands of the public domain. Under consisting of portions of the reclaimed land, subject to the constitutional ban
the 1987 Constitution, agricultural lands of the public domain are the only on private corporations from acquiring alienable lands of the public domain.
natural resources that the State may alienate to qualified private parties. All The reclaimed land can be used as payment in kind only if the reclaimed land
other natural resources, such as the seas or bays, are "waters x x x owned by is first classified as alienable or disposable land open to disposition, and then
the State" forming part of the public domain, and are inalienable pursuant to declared no longer needed for public service.
Section 2, Article XII of the 1987 Constitution.
The Amended JVA covers not only the Freedom Islands, but also an
AMARI claims that the Freedom Islands are private lands because CDCP, additional 592.15 hectares which are still submerged and forming part of
then a private corporation, reclaimed the islands under a contract dated Manila Bay. There is no legislative or Presidential act classifying these
November 20, 1973 with the Commissioner of Public Highways. AMARI, submerged areas as alienable or disposable lands of the public domain open
citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the to disposition. These submerged areas are not covered by any patent or
ownership of reclaimed lands may be given to the party constructing the certificate of title. There can be no dispute that these submerged areas form
works, then it cannot be said that reclaimed lands are lands of the public part of the public domain, and in their present state are inalienable and
domain which the State may not alienate."75 Article 5 of the Spanish Law of outside the commerce of man. Until reclaimed from the sea, these submerged
Waters reads as follows: areas are, under the Constitution, "waters x x x owned by the State," forming
part of the public domain and consequently inalienable. Only when actually
reclaimed from the sea can these submerged areas be classified as public
"Article 5. Lands reclaimed from the sea in consequence of works
agricultural lands, which under the Constitution are the only natural resources
constructed by the State, or by the provinces, pueblos or private
that the State may alienate. Once reclaimed and transformed into public
persons, with proper permission, shall become the property of the
agricultural lands, the government may then officially classify these lands as
party constructing such works, unless otherwise provided by the
alienable or disposable lands open to disposition. Thereafter, the government
terms of the grant of authority." (Emphasis supplied)
may declare these lands no longer needed for public service. Only then can
these reclaimed lands be considered alienable or disposable lands of the public
Under Article 5 of the Spanish Law of Waters of 1866, private parties could domain and within the commerce of man.
reclaim from the sea only with "proper permission" from the State. Private
parties could own the reclaimed land only if not "otherwise provided by the
The classification of PEA's reclaimed foreshore and submerged lands into
terms of the grant of authority." This clearly meant that no one could reclaim
alienable or disposable lands open to disposition is necessary because PEA is
from the sea without permission from the State because the sea is property of
tasked under its charter to undertake public services that require the use of
public dominion. It also meant that the State could grant or withhold
lands of the public domain. Under Section 5 of PD No. 1084, the functions of
ownership of the reclaimed land because any reclaimed land, like the sea from
127
PEA include the following: "[T]o own or operate railroads, tramways and As manager, conservator and overseer of the natural resources of the State,
other kinds of land transportation, x x x; [T]o construct, maintain and operate DENR exercises "supervision and control over alienable and disposable public
such systems of sanitary sewers as may be necessary; [T]o construct, maintain lands." DENR also exercises "exclusive jurisdiction on the management and
and operate such storm drains as may be necessary." PEA is empowered to disposition of all lands of the public domain." Thus, DENR decides whether
issue "rules and regulations as may be necessary for the proper use by private areas under water, like foreshore or submerged areas of Manila Bay, should be
parties of any or all of the highways, roads, utilities, buildings and/or any of reclaimed or not. This means that PEA needs authorization from DENR
its properties and to impose or collect fees or tolls for their use." Thus, part of before PEA can undertake reclamation projects in Manila Bay, or in any part
the reclaimed foreshore and submerged lands held by the PEA would actually of the country.
be needed for public use or service since many of the functions imposed on
PEA by its charter constitute essential public services.
DENR also exercises exclusive jurisdiction over the disposition of all lands of
the public domain. Hence, DENR decides whether reclaimed lands of PEA
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be should be classified as alienable under Sections 681 and 782 of CA No. 141.
primarily responsible for integrating, directing, and coordinating all Once DENR decides that the reclaimed lands should be so classified, it then
reclamation projects for and on behalf of the National Government." The recommends to the President the issuance of a proclamation classifying the
same section also states that "[A]ll reclamation projects shall be approved by lands as alienable or disposable lands of the public domain open to
the President upon recommendation of the PEA, and shall be undertaken by disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr.
the PEA or through a proper contract executed by it with any person or entity; countersigned Special Patent No. 3517 in compliance with the Revised
x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, Administrative Code and Sections 6 and 7 of CA No. 141.
PEA became the primary implementing agency of the National Government to
reclaim foreshore and submerged lands of the public domain. EO No. 525
In short, DENR is vested with the power to authorize the reclamation of areas
recognized PEA as the government entity "to undertake the reclamation of
under water, while PEA is vested with the power to undertake the physical
lands and ensure their maximum utilization in promoting public welfare and
reclamation of areas under water, whether directly or through private
interests."79 Since large portions of these reclaimed lands would obviously be
contractors. DENR is also empowered to classify lands of the public domain
needed for public service, there must be a formal declaration segregating
into alienable or disposable lands subject to the approval of the President. On
reclaimed lands no longer needed for public service from those still needed for
the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable
public service.1âwphi1.nêt
lands of the public domain.

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall
Clearly, the mere physical act of reclamation by PEA of foreshore or
belong to or be owned by the PEA," could not automatically operate to
submerged areas does not make the reclaimed lands alienable or disposable
classify inalienable lands into alienable or disposable lands of the public
lands of the public domain, much less patrimonial lands of PEA. Likewise, the
domain. Otherwise, reclaimed foreshore and submerged lands of the public
mere transfer by the National Government of lands of the public domain to
domain would automatically become alienable once reclaimed by PEA,
PEA does not make the lands alienable or disposable lands of the public
whether or not classified as alienable or disposable.
domain, much less patrimonial lands of PEA.

The Revised Administrative Code of 1987, a later law than either PD No.
Absent two official acts – a classification that these lands are alienable or
1084 or EO No. 525, vests in the Department of Environment and Natural
disposable and open to disposition and a declaration that these lands are not
Resources ("DENR" for brevity) the following powers and functions:
needed for public service, lands reclaimed by PEA remain inalienable lands of
the public domain. Only such an official classification and formal declaration
"Sec. 4. Powers and Functions. The Department shall: can convert reclaimed lands into alienable or disposable lands of the public
domain, open to disposition under the Constitution, Title I and Title III 83 of
CA No. 141 and other applicable laws.84
(1) x x x

PEA's Authority to Sell Reclaimed Lands


xxx

PEA, like the Legal Task Force, argues that as alienable or disposable lands of
(4) Exercise supervision and control over forest lands, alienable
the public domain, the reclaimed lands shall be disposed of in accordance with
and disposable public lands, mineral resources and, in the process
CA No. 141, the Public Land Act. PEA, citing Section 60 of CA No. 141,
of exercising such control, impose appropriate taxes, fees, charges,
admits that reclaimed lands transferred to a branch or subdivision of the
rentals and any such form of levy and collect such revenues for the
government "shall not be alienated, encumbered, or otherwise disposed of in a
exploration, development, utilization or gathering of such
manner affecting its title, except when authorized by Congress: x x
resources;
x."85 (Emphasis by PEA)

xxx
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised
Administrative Code of 1987, which states that –
(14) Promulgate rules, regulations and guidelines on the
issuance of licenses, permits, concessions, lease agreements and
"Sec. 48. Official Authorized to Convey Real Property. Whenever
such other privileges concerning the development, exploration
real property of the Government is authorized by law to be
and utilization of the country's marine, freshwater, and brackish
conveyed, the deed of conveyance shall be executed in behalf of
water and over all aquatic resources of the country and shall
the government by the following: x x x."
continue to oversee, supervise and police our natural resources;
cancel or cause to cancel such privileges upon failure, non-
compliance or violations of any regulation, order, and for all other Thus, the Court concluded that a law is needed to convey any real property
causes which are in furtherance of the conservation of natural belonging to the Government. The Court declared that -
resources and supportive of the national interest;
"It is not for the President to convey real property of the
(15) Exercise exclusive jurisdiction on the management and government on his or her own sole will. Any such conveyance
disposition of all lands of the public domain and serve as the sole must be authorized and approved by a law enacted by the
agency responsible for classification, sub-classification, surveying Congress. It requires executive and legislative concurrence."
and titling of lands in consultation with appropriate (Emphasis supplied)
agencies."80 (Emphasis supplied)

128
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative alienable lands of the public domain does not apply to the sale of PEA's
authority allowing PEA to sell its reclaimed lands. PD No. 1085, issued on patrimonial lands.
February 4, 1977, provides that –
PEA may also sell its alienable or disposable lands of the public domain to
"The land reclaimed in the foreshore and offshore area of private individuals since, with the legislative authority, there is no longer any
Manila Bay pursuant to the contract for the reclamation and statutory prohibition against such sales and the constitutional ban does not
construction of the Manila-Cavite Coastal Road Project between apply to individuals. PEA, however, cannot sell any of its alienable or
the Republic of the Philippines and the Construction and disposable lands of the public domain to private corporations since Section 3,
Development Corporation of the Philippines dated November 20, Article XII of the 1987 Constitution expressly prohibits such sales. The
1973 and/or any other contract or reclamation covering the same legislative authority benefits only individuals. Private corporations remain
area is hereby transferred, conveyed and assigned to the barred from acquiring any kind of alienable land of the public domain,
ownership and administration of the Public Estates including government reclaimed lands.
Authority established pursuant to PD No. 1084; Provided,
however, That the rights and interests of the Construction and
The provision in PD No. 1085 stating that portions of the reclaimed lands
Development Corporation of the Philippines pursuant to the
could be transferred by PEA to the "contractor or his assignees" (Emphasis
aforesaid contract shall be recognized and respected.
supplied) would not apply to private corporations but only to individuals
because of the constitutional ban. Otherwise, the provisions of PD No. 1085
Henceforth, the Public Estates Authority shall exercise the rights would violate both the 1973 and 1987 Constitutions.
and assume the obligations of the Republic of the Philippines
(Department of Public Highways) arising from, or incident to, the
The requirement of public auction in the sale of reclaimed lands
aforesaid contract between the Republic of the Philippines and the
Construction and Development Corporation of the Philippines.
Assuming the reclaimed lands of PEA are classified as alienable or disposable
lands open to disposition, and further declared no longer needed for public
In consideration of the foregoing transfer and assignment, the
service, PEA would have to conduct a public bidding in selling or leasing
Public Estates Authority shall issue in favor of the Republic of the
these lands. PEA must observe the provisions of Sections 63 and 67 of CA
Philippines the corresponding shares of stock in said entity with an
No. 141 requiring public auction, in the absence of a law exempting PEA
issued value of said shares of stock (which) shall be deemed fully
from holding a public auction.88 Special Patent No. 3517 expressly states that
paid and non-assessable.
the patent is issued by authority of the Constitution and PD No. 1084,
"supplemented by Commonwealth Act No. 141, as amended." This is an
The Secretary of Public Highways and the General Manager of the acknowledgment that the provisions of CA No. 141 apply to the disposition of
Public Estates Authority shall execute such contracts or reclaimed alienable lands of the public domain unless otherwise provided by
agreements, including appropriate agreements with the law. Executive Order No. 654,89 which authorizes PEA "to determine the kind
Construction and Development Corporation of the Philippines, as and manner of payment for the transfer" of its assets and properties, does not
may be necessary to implement the above. exempt PEA from the requirement of public auction. EO No. 654 merely
authorizes PEA to decide the mode of payment, whether in kind and in
installment, but does not authorize PEA to dispense with public auction.
Special land patent/patents shall be issued by the Secretary of
Natural Resources in favor of the Public Estates Authority
without prejudice to the subsequent transfer to the contractor or Moreover, under Section 79 of PD No. 1445, otherwise known as the
his assignees of such portion or portions of the land reclaimed or Government Auditing Code, the government is required to sell valuable
to be reclaimed as provided for in the above-mentioned contract. government property through public bidding. Section 79 of PD No. 1445
On the basis of such patents, the Land Registration Commission mandates that –
shall issue the corresponding certificate of title." (Emphasis
supplied)
"Section 79. When government property has become
unserviceable for any cause, or is no longer needed, it shall, upon
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, application of the officer accountable therefor, be inspected by the
provides that - head of the agency or his duly authorized representative in the
presence of the auditor concerned and, if found to be valueless or
unsaleable, it may be destroyed in their presence. If found to be
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned
valuable, it may be sold at public auction to the highest
by the PEA which shall be responsible for its administration,
bidder under the supervision of the proper committee on award or
development, utilization or disposition in accordance with the
similar body in the presence of the auditor concerned or other
provisions of Presidential Decree No. 1084. Any and all income
authorized representative of the Commission, after advertising by
that the PEA may derive from the sale, lease or use of reclaimed
printed notice in the Official Gazette, or for not less than three
lands shall be used in accordance with the provisions of
consecutive days in any newspaper of general circulation, or
Presidential Decree No. 1084."
where the value of the property does not warrant the expense of
publication, by notices posted for a like period in at least three
There is no express authority under either PD No. 1085 or EO No. 525 for public places in the locality where the property is to be sold. In the
PEA to sell its reclaimed lands. PD No. 1085 merely transferred "ownership event that the public auction fails, the property may be sold at a
and administration" of lands reclaimed from Manila Bay to PEA, while EO private sale at such price as may be fixed by the same committee
No. 525 declared that lands reclaimed by PEA "shall belong to or be owned or body concerned and approved by the Commission."
by PEA." EO No. 525 expressly states that PEA should dispose of its
reclaimed lands "in accordance with the provisions of Presidential Decree No.
It is only when the public auction fails that a negotiated sale is allowed, in
1084," the charter of PEA.
which case the Commission on Audit must approve the selling price. 90 The
Commission on Audit implements Section 79 of the Government Auditing
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, Code through Circular No. 89-29691 dated January 27, 1989. This circular
administer, deal in, subdivide, dispose, lease and sell any and all kinds of emphasizes that government assets must be disposed of only through public
lands x x x owned, managed, controlled and/or operated by the auction, and a negotiated sale can be resorted to only in case of "failure of
government."87 (Emphasis supplied) There is, therefore, legislative authority public auction."
granted to PEA to sell its lands, whether patrimonial or alienable lands of
the public domain. PEA may sell to private parties its patrimonial
At the public auction sale, only Philippine citizens are qualified to bid for
properties in accordance with the PEA charter free from constitutional
PEA's reclaimed foreshore and submerged alienable lands of the public
limitations. The constitutional ban on private corporations from acquiring

129
domain. Private corporations are barred from bidding at the auction sale of individual, portions of the reclaimed land, not exceeding 12 hectares 96 of non-
any kind of alienable land of the public domain. agricultural lands, may be conveyed to him in ownership in view of the
legislative authority allowing such conveyance. This is the only way these
provisions of the BOT Law and the Local Government Code can avoid a
PEA originally scheduled a public bidding for the Freedom Islands on
direct collision with Section 3, Article XII of the 1987 Constitution.
December 10, 1991. PEA imposed a condition that the winning bidder should
reclaim another 250 hectares of submerged areas to regularize the shape of the
Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in Registration of lands of the public domain
favor of the winning bidder. 92 No one, however, submitted a bid. On
December 23, 1994, the Government Corporate Counsel advised PEA it could
Finally, PEA theorizes that the "act of conveying the ownership of the
sell the Freedom Islands through negotiation, without need of another public
reclaimed lands to public respondent PEA transformed such lands of the
bidding, because of the failure of the public bidding on December 10, 1991.93
public domain to private lands." This theory is echoed by AMARI which
maintains that the "issuance of the special patent leading to the eventual
However, the original JVA dated April 25, 1995 covered not only the issuance of title takes the subject land away from the land of public domain
Freedom Islands and the additional 250 hectares still to be reclaimed, it also and converts the property into patrimonial or private property." In short, PEA
granted an option to AMARI to reclaim another 350 hectares. The original and AMARI contend that with the issuance of Special Patent No. 3517 and the
JVA, a negotiated contract, enlarged the reclamation area to 750 corresponding certificates of titles, the 157.84 hectares comprising the
hectares.94 The failure of public bidding on December 10, 1991, involving Freedom Islands have become private lands of PEA. In support of their
only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750 theory, PEA and AMARI cite the following rulings of the Court:
hectares, almost double the area publicly auctioned. Besides, the failure of
public bidding happened on December 10, 1991, more than three years before
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held –
the signing of the original JVA on April 25, 1995. The economic situation in
the country had greatly improved during the intervening period.
"Once the patent was granted and the corresponding certificate of
title was issued, the land ceased to be part of the public domain and
Reclamation under the BOT Law and the Local Government Code
became private property over which the Director of Lands has
neither control nor jurisdiction."
The constitutional prohibition in Section 3, Article XII of the 1987
Constitution is absolute and clear: "Private corporations or associations may
2. Lee Hong Hok v. David,98 where the Court declared -
not hold such alienable lands of the public domain except by lease, x x x."
Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and
AMARI as legislative authority to sell reclaimed lands to private parties, "After the registration and issuance of the certificate and duplicate
recognizes the constitutional ban. Section 6 of RA No. 6957 states – certificate of title based on a public land patent, the land covered
thereby automatically comes under the operation of Republic Act
496 subject to all the safeguards provided therein."3. Heirs of
"Sec. 6. Repayment Scheme. - For the financing, construction,
Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled
operation and maintenance of any infrastructure projects
-
undertaken through the build-operate-and-transfer arrangement or
any of its variations pursuant to the provisions of this Act, the
project proponent x x x may likewise be repaid in the form of a "While the Director of Lands has the power to review homestead
share in the revenue of the project or other non-monetary patents, he may do so only so long as the land remains part of the
payments, such as, but not limited to, the grant of a portion or public domain and continues to be under his exclusive control; but
percentage of the reclaimed land, subject to the constitutional once the patent is registered and a certificate of title is issued, the
requirements with respect to the ownership of the land: x x x." land ceases to be part of the public domain and becomes private
(Emphasis supplied) property over which the Director of Lands has neither control nor
jurisdiction."
A private corporation, even one that undertakes the physical reclamation of a
government BOT project, cannot acquire reclaimed alienable lands of the 4. Manalo v. Intermediate Appellate Court,100 where the Court held
public domain in view of the constitutional ban. –

Section 302 of the Local Government Code, also mentioned by PEA and "When the lots in dispute were certified as disposable on May 19,
AMARI, authorizes local governments in land reclamation projects to pay the 1971, and free patents were issued covering the same in favor of
contractor or developer in kind consisting of a percentage of the reclaimed the private respondents, the said lots ceased to be part of the public
land, to wit: domain and, therefore, the Director of Lands lost jurisdiction over
the same."
"Section 302. Financing, Construction, Maintenance, Operation,
and Management of Infrastructure Projects by the Private Sector. x 5.Republic v. Court of Appeals,101 where the Court stated –
xx
"Proclamation No. 350, dated October 9, 1956, of President
xxx Magsaysay legally effected a land grant to the Mindanao Medical
Center, Bureau of Medical Services, Department of Health, of the
whole lot, validly sufficient for initial registration under the Land
In case of land reclamation or construction of industrial estates, the
Registration Act. Such land grant is constitutive of a 'fee simple'
repayment plan may consist of the grant of a portion or percentage
title or absolute title in favor of petitioner Mindanao Medical
of the reclaimed land or the industrial estate constructed."
Center. Thus, Section 122 of the Act, which governs the
registration of grants or patents involving public lands, provides
Although Section 302 of the Local Government Code does not contain a that 'Whenever public lands in the Philippine Islands belonging to
proviso similar to that of the BOT Law, the constitutional restrictions on land the Government of the United States or to the Government of the
ownership automatically apply even though not expressly mentioned in the Philippines are alienated, granted or conveyed to persons or to
Local Government Code. public or private corporations, the same shall be brought forthwith
under the operation of this Act (Land Registration Act, Act 496)
and shall become registered lands.'"
Thus, under either the BOT Law or the Local Government Code, the
contractor or developer, if a corporate entity, can only be paid with leaseholds
on portions of the reclaimed land. If the contractor or developer is an

130
The first four cases cited involve petitions to cancel the land patents and the directly from government agencies limitless areas of lands which, prior to
corresponding certificates of titles issued to private parties. These four cases such law, are concededly public lands.
uniformly hold that the Director of Lands has no jurisdiction over private
lands or that upon issuance of the certificate of title the land automatically
Under EO No. 525, PEA became the central implementing agency of the
comes under the Torrens System. The fifth case cited involves the registration
National Government to reclaim foreshore and submerged areas of the public
under the Torrens System of a 12.8-hectare public land granted by the
domain. Thus, EO No. 525 declares that –
National Government to Mindanao Medical Center, a government unit under
the Department of Health. The National Government transferred the 12.8-
hectare public land to serve as the site for the hospital buildings and other "EXECUTIVE ORDER NO. 525
facilities of Mindanao Medical Center, which performed a public service. The
Court affirmed the registration of the 12.8-hectare public land in the name of
Designating the Public Estates Authority as the Agency Primarily
Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is
Responsible for all Reclamation Projects
an example of a public land being registered under Act No. 496 without the
land losing its character as a property of public dominion.
Whereas, there are several reclamation projects which are ongoing
or being proposed to be undertaken in various parts of the country
In the instant case, the only patent and certificates of title issued are those in
which need to be evaluated for consistency with national
the name of PEA, a wholly government owned corporation performing public
programs;
as well as proprietary functions. No patent or certificate of title has been
issued to any private party. No one is asking the Director of Lands to cancel
PEA's patent or certificates of title. In fact, the thrust of the instant petition is Whereas, there is a need to give further institutional support to the
that PEA's certificates of title should remain with PEA, and the land covered Government's declared policy to provide for a coordinated,
by these certificates, being alienable lands of the public domain, should not be economical and efficient reclamation of lands;
sold to a private corporation.
Whereas, Presidential Decree No. 3-A requires that all reclamation
Registration of land under Act No. 496 or PD No. 1529 does not vest in the of areas shall be limited to the National Government or any person
registrant private or public ownership of the land. Registration is not a mode authorized by it under proper contract;
of acquiring ownership but is merely evidence of ownership previously
conferred by any of the recognized modes of acquiring ownership.
Registration does not give the registrant a better right than what the registrant Whereas, a central authority is needed to act on behalf of the
had prior to the registration.102 The registration of lands of the public domain National Government which shall ensure a coordinated and
under the Torrens system, by itself, cannot convert public lands into private integrated approach in the reclamation of lands;
lands.103
Whereas, Presidential Decree No. 1084 creates the Public
Jurisprudence holding that upon the grant of the patent or issuance of the Estates Authority as a government corporation to undertake
certificate of title the alienable land of the public domain automatically reclamation of lands and ensure their maximum utilization in
becomes private land cannot apply to government units and entities like PEA. promoting public welfare and interests; and
The transfer of the Freedom Islands to PEA was made subject to the
provisions of CA No. 141 as expressly stated in Special Patent No. 3517 Whereas, Presidential Decree No. 1416 provides the President with
issued by then President Aquino, to wit: continuing authority to reorganize the national government
including the transfer, abolition, or merger of functions and offices.
"NOW, THEREFORE, KNOW YE, that by authority of the
Constitution of the Philippines and in conformity with the NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
provisions of Presidential Decree No. 1084, supplemented by the Philippines, by virtue of the powers vested in me by the
Commonwealth Act No. 141, as amended, there are hereby Constitution and pursuant to Presidential Decree No. 1416, do
granted and conveyed unto the Public Estates Authority the hereby order and direct the following:
aforesaid tracts of land containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four (1,915,894)
square meters; the technical description of which are hereto Section 1. The Public Estates Authority (PEA) shall be primarily
attached and made an integral part hereof." (Emphasis supplied) responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National
Government. All reclamation projects shall be approved by the
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters President upon recommendation of the PEA, and shall be
not covered by PD No. 1084. Section 60 of CA No. 141 prohibits, "except undertaken by the PEA or through a proper contract executed by it
when authorized by Congress," the sale of alienable lands of the public with any person or entity; Provided, that, reclamation projects of
domain that are transferred to government units or entities. Section 60 of CA any national government agency or entity authorized under its
No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien charter shall be undertaken in consultation with the PEA upon
affecting title" of the registered land even if not annotated on the certificate of approval of the President.
title.104 Alienable lands of the public domain held by government entities
under Section 60 of CA No. 141 remain public lands because they cannot be
alienated or encumbered unless Congress passes a law authorizing their x x x ."
disposition. Congress, however, cannot authorize the sale to private
corporations of reclaimed alienable lands of the public domain because of the As the central implementing agency tasked to undertake reclamation projects
constitutional ban. Only individuals can benefit from such law. nationwide, with authority to sell reclaimed lands, PEA took the place of
DENR as the government agency charged with leasing or selling reclaimed
The grant of legislative authority to sell public lands in accordance with lands of the public domain. The reclaimed lands being leased or sold by PEA
Section 60 of CA No. 141 does not automatically convert alienable lands of are not private lands, in the same manner that DENR, when it disposes of
the public domain into private or patrimonial lands. The alienable lands of the other alienable lands, does not dispose of private lands but alienable lands of
public domain must be transferred to qualified private parties, or to the public domain. Only when qualified private parties acquire these lands
government entities not tasked to dispose of public lands, before these lands will the lands become private lands. In the hands of the government agency
can become private or patrimonial lands. Otherwise, the constitutional ban tasked and authorized to dispose of alienable of disposable lands of the
will become illusory if Congress can declare lands of the public domain as public domain, these lands are still public, not private lands.
private or patrimonial lands in the hands of a government agency tasked to
dispose of public lands. This will allow private corporations to acquire Furthermore, PEA's charter expressly states that PEA "shall hold lands of the
public domain" as well as "any and all kinds of lands." PEA can hold both

131
lands of the public domain and private lands. Thus, the mere fact that "Sec. 48. Official Authorized to Convey Real Property. Whenever
alienable lands of the public domain like the Freedom Islands are transferred real property of the Government is authorized by law to be
to PEA and issued land patents or certificates of title in PEA's name does not conveyed, the deed of conveyance shall be executed in behalf of
automatically make such lands private. the government by the following:

To allow vast areas of reclaimed lands of the public domain to be transferred (1) x x x
to PEA as private lands will sanction a gross violation of the constitutional
ban on private corporations from acquiring any kind of alienable land of the
(2) For property belonging to the Republic of the Philippines, but
public domain. PEA will simply turn around, as PEA has now done under
titled in the name of any political subdivision or of any corporate
the Amended JVA, and transfer several hundreds of hectares of these
agency or instrumentality, by the executive head of the agency or
reclaimed and still to be reclaimed lands to a single private corporation in only
instrumentality." (Emphasis supplied)
one transaction. This scheme will effectively nullify the constitutional ban in
Section 3, Article XII of the 1987 Constitution which was intended to diffuse
equitably the ownership of alienable lands of the public domain among Thus, private property purchased by the National Government for expansion
Filipinos, now numbering over 80 million strong. of a public wharf may be titled in the name of a government corporation
regulating port operations in the country. Private property purchased by the
National Government for expansion of an airport may also be titled in the
This scheme, if allowed, can even be applied to alienable agricultural lands of
name of the government agency tasked to administer the airport. Private
the public domain since PEA can "acquire x x x any and all kinds of lands."
property donated to a municipality for use as a town plaza or public school
This will open the floodgates to corporations and even individuals acquiring
site may likewise be titled in the name of the municipality. 106 All these
hundreds of hectares of alienable lands of the public domain under the guise
properties become properties of the public domain, and if already registered
that in the hands of PEA these lands are private lands. This will result in
under Act No. 496 or PD No. 1529, remain registered land. There is no
corporations amassing huge landholdings never before seen in this country -
requirement or provision in any existing law for the de-registration of land
creating the very evil that the constitutional ban was designed to prevent. This
from the Torrens System.
will completely reverse the clear direction of constitutional development in
this country. The 1935 Constitution allowed private corporations to acquire
not more than 1,024 hectares of public lands. 105 The 1973 Constitution Private lands taken by the Government for public use under its power of
prohibited private corporations from acquiring any kind of public land, and eminent domain become unquestionably part of the public domain.
the 1987 Constitution has unequivocally reiterated this prohibition. Nevertheless, Section 85 of PD No. 1529 authorizes the Register of Deeds to
issue in the name of the National Government new certificates of title
covering such expropriated lands. Section 85 of PD No. 1529 states –
The contention of PEA and AMARI that public lands, once registered under
Act No. 496 or PD No. 1529, automatically become private lands is contrary
to existing laws. Several laws authorize lands of the public domain to be "Sec. 85. Land taken by eminent domain. Whenever any registered
registered under the Torrens System or Act No. 496, now PD No. 1529, land, or interest therein, is expropriated or taken by eminent
without losing their character as public lands. Section 122 of Act No. 496, and domain, the National Government, province, city or municipality,
Section 103 of PD No. 1529, respectively, provide as follows: or any other agency or instrumentality exercising such right shall
file for registration in the proper Registry a certified copy of the
judgment which shall state definitely by an adequate description,
Act No. 496
the particular property or interest expropriated, the number of the
certificate of title, and the nature of the public use. A memorandum
"Sec. 122. Whenever public lands in the Philippine Islands of the right or interest taken shall be made on each certificate of
belonging to the x x x Government of the Philippine Islands are title by the Register of Deeds, and where the fee simple is taken, a
alienated, granted, or conveyed to persons or the public or private new certificate shall be issued in favor of the National
corporations, the same shall be brought forthwith under the Government, province, city, municipality, or any other agency or
operation of this Act and shall become registered lands." instrumentality exercising such right for the land so taken. The
legal expenses incident to the memorandum of registration or
issuance of a new certificate of title shall be for the account of the
PD No. 1529
authority taking the land or interest therein." (Emphasis supplied)

"Sec. 103. Certificate of Title to Patents. Whenever public land is


Consequently, lands registered under Act No. 496 or PD No. 1529 are not
by the Government alienated, granted or conveyed to any person,
exclusively private or patrimonial lands. Lands of the public domain may also
the same shall be brought forthwith under the operation of this
be registered pursuant to existing laws.
Decree." (Emphasis supplied)

AMARI makes a parting shot that the Amended JVA is not a sale to AMARI
Based on its legislative history, the phrase "conveyed to any person" in
of the Freedom Islands or of the lands to be reclaimed from submerged areas
Section 103 of PD No. 1529 includes conveyances of public lands to public
of Manila Bay. In the words of AMARI, the Amended JVA "is not a sale but a
corporations.
joint venture with a stipulation for reimbursement of the original cost incurred
by PEA for the earlier reclamation and construction works performed by the
Alienable lands of the public domain "granted, donated, or transferred to a CDCP under its 1973 contract with the Republic." Whether the Amended JVA
province, municipality, or branch or subdivision of the Government," as is a sale or a joint venture, the fact remains that the Amended JVA requires
provided in Section 60 of CA No. 141, may be registered under the Torrens PEA to "cause the issuance and delivery of the certificates of title conveying
System pursuant to Section 103 of PD No. 1529. Such registration, however, AMARI's Land Share in the name of AMARI."107
is expressly subject to the condition in Section 60 of CA No. 141 that the land
"shall not be alienated, encumbered or otherwise disposed of in a manner
This stipulation still contravenes Section 3, Article XII of the 1987
affecting its title, except when authorized by Congress." This provision refers
Constitution which provides that private corporations "shall not hold such
to government reclaimed, foreshore and marshy lands of the public domain
alienable lands of the public domain except by lease." The transfer of title and
that have been titled but still cannot be alienated or encumbered unless
ownership to AMARI clearly means that AMARI will "hold" the reclaimed
expressly authorized by Congress. The need for legislative authority prevents
lands other than by lease. The transfer of title and ownership is a "disposition"
the registered land of the public domain from becoming private land that can
of the reclaimed lands, a transaction considered a sale or alienation under CA
be disposed of to qualified private parties.
No. 141,108 the Government Auditing Code,109 and Section 3, Article XII of
the 1987 Constitution.
The Revised Administrative Code of 1987 also recognizes that lands of the
public domain may be registered under the Torrens System. Section 48,
The Regalian doctrine is deeply implanted in our legal system. Foreshore and
Chapter 12, Book I of the Code states –
submerged areas form part of the public domain and are inalienable. Lands
132
reclaimed from foreshore and submerged areas also form part of the public SO ORDERED.
domain and are also inalienable, unless converted pursuant to law into
alienable or disposable lands of the public domain. Historically, lands G.R. No. 173819               November 23, 2007
reclaimed by the government are sui generis, not available for sale to private REPUBLIC OF THE PHILIPPINES, Petitioner,
parties unlike other alienable public lands. Reclaimed lands retain their vs.
inherent potential as areas for public use or public service. Alienable lands of MA. ISABEL LAUREL BARANDIARAN, Respondent.
the public domain, increasingly becoming scarce natural resources, are to be
distributed equitably among our ever-growing population. To insure such
DECISION
equitable distribution, the 1973 and 1987 Constitutions have barred private
corporations from acquiring any kind of alienable land of the public domain.
Those who attempt to dispose of inalienable natural resources of the State, or CARPIO MORALES, J.:
seek to circumvent the constitutional ban on alienation of lands of the public
domain to private corporations, do so at their own risk.
Ma. Isabel Laurel Barandiaran (respondent) filed before the Municipal Trial
Court in Cities of Tanauan City, Batangas an Application for
We can now summarize our conclusions as follows: Registration1 over a parcel of land which she specifically described as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom A parcel of land (Lot No. 12753-C=Lot 13115 of the subdivision plan, Csd-
Islands, now covered by certificates of title in the name of PEA, 04-020537-D, being a portion of Lot 12753, Cad-168, Tanauan Cadastre,
are alienable lands of the public domain. PEA may lease these L.R.C. Rec. No. ____) [sic], situated in the Barrio of Boot, Municipality of
lands to private corporations but may not sell or transfer ownership Tanauan, Province of Batangas. Bounded on the NE., along line 1-2 by Lot
of these lands to private corporations. PEA may only sell these 12753-B of this subdivision plan; on the SE., along line 2-3 by Lot 12753-E,
lands to Philippine citizens, subject to the ownership limitations in both of the subdivision plan; on the SW., along line 3-4-5 by Lot 12269; along
the 1987 Constitution and existing laws. line 5-6 by Lot 12268; along line 6-7 by Lot 12266, all of Cad-168; Tanauan
Cadastre; and on the NW., along line 7-1 by Lot 12753-A, of the subdivision
plan x x x containing an area of TWENTY THREE THOUSAND NINE
2. The 592.15 hectares of submerged areas of Manila Bay remain
HUNDRED SIXTY TWO (23,962) SQUARE METERS, more or
inalienable natural resources of the public domain until classified
less.2 (Emphasis in the original)
as alienable or disposable lands open to disposition and declared
no longer needed for public service. The government can make
such classification and declaration only after PEA has reclaimed The Republic of the Philippines (the Republic, herein petitioner), represented
these submerged areas. Only then can these lands qualify as by the Director of Lands, through the Solicitor General, opposed the
agricultural lands of the public domain, which are the only natural application on the ground that Lot No. 12753-C (the questioned lot) is a
resources the government can alienate. In their present state, the portion of the public domain belonging to the Republic and that neither
592.15 hectares of submerged areas are inalienable and outside respondent nor her predecessors-in-interest had been in open, continuous,
the commerce of man. exclusive, and notorious possession or occupation thereof since June 12, 1945
or prior thereto.3
3. Since the Amended JVA seeks to transfer to AMARI, a private
corporation, ownership of 77.34 hectares110 of the Freedom Islands, After respondent proved compliance with jurisdictional requirements, the trial
such transfer is void for being contrary to Section 3, Article XII of court issued on August 5, 2004 an Order of General Default, 4 no one, other
the 1987 Constitution which prohibits private corporations from than the Republic, having appeared or filed an answer within the time allowed
acquiring any kind of alienable land of the public domain. for the purpose.

4. Since the Amended JVA also seeks to transfer to AMARI During the hearing, respondent testified 5 as follows: A certain Isadora
ownership of 290.156 hectares111 of still submerged areas of Gonzales (Gonzales) was the owner of Lot No. 12753 (the lot) of which the
Manila Bay, such transfer is void for being contrary to Section 2, questioned lot forms part. When respondent and her siblings became
Article XII of the 1987 Constitution which prohibits the alienation interested in buying the lot, they inquired from people in the vicinity and from
of natural resources other than agricultural lands of the public the Assessor’s Office in Tanauan and came to learn that the lot was registered
domain. PEA may reclaim these submerged areas. Thereafter, the in Gonzales’ name in 1930. After negotiating with the heirs of Gonzales, the
government can classify the reclaimed lands as alienable or latter executed on October 3, 2002 a Deed of Sale 6 in favor of respondent and
disposable, and further declare them no longer needed for public her siblings for a consideration of ₱100,000.
service. Still, the transfer of such reclaimed alienable lands of the
public domain to AMARI will be void in view of Section 3, Article
Respondent went on to declare: On June 9, 2003, she and her siblings
XII of the 1987 Constitution which prohibits private corporations
partitioned the lot and the questioned lot was allotted to her. 7 She thereupon
from acquiring any kind of alienable land of the public domain.
took possession of the questioned lot for which she hired an overseer, and had
it surveyed under her name. She also had the questioned lot declared under her
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of name for taxation purposes, and paid taxes thereon.1âwphi1
the 1987 Constitution. Under Article 1409112 of the Civil Code, contracts
whose "object or purpose is contrary to law," or whose "object is outside the
Carmen Garcia Azuelo (Azuelo), one of the heirs of Gonzales, corroborated
commerce of men," are "inexistent and void from the beginning." The Court
respondent’s testimony that she and her siblings bought the lot from her
must perform its duty to defend and uphold the Constitution, and therefore
(Azuelo) and her co-heirs.8 She added that Gonzales was, since time
declares the Amended JVA null and void ab initio.
immemorial, in possession of the lot which was registered in Gonzales’
name.9
Seventh issue: whether the Court is the proper forum to raise the issue of
whether the Amended JVA is grossly disadvantageous to the government.
By Decision of August 18, 2004, the trial court, finding respondent to have a
clear registrable title over the questioned lot, disposed as follows:
Considering that the Amended JVA is null and void ab initio, there is no
necessity to rule on this last issue. Besides, the Court is not a trier of facts, and
WHEREFORE, and upon confirmation of the Order of General Default, the
this last issue involves a determination of factual matters.
Court hereby adjudicates and decrees Lot No. 127[5]3-C, Cad-168 of the
subdivision plan Csd-04-020537-D with a total area of Twenty three thousand
WHEREFORE, the petition is GRANTED. The Public Estates Authority and nine hundred sixty two (23,962) square meters, situated at Barangay Maria
Amari Coastal Bay Development Corporation are PERMANENTLY Paz (formerly Boot), Tanauan, Batangas, on the name of Ma. Isabel Laurel
ENJOINED from implementing the Amended Joint Venture Agreement Barandiaran with postal address at 2nd Floor, Rufina Tower, Ayala Avenue,
which is hereby declared NULL and VOID ab initio. Makati City.
133
Once this decision shall have become final, let the corresponding decree of his predecessors-in-interest for a long number of years without the
registration be issued.10 government taking any action to dislodge the occupants from their holdings,
and when the land has passed from one hand to another by inheritance or by
purchase, the government is duty bound to prove that the land which it avers
The Republic appealed,11 contending that respondent had not proven that the
to be of public domain is really of such nature." 24
questioned lot is within the alienable and disposable land of the public
domain.12 By Decision13 dated July 21, 2006, the Court of Appeals affirmed
the trial court’s decision, observing as follows: Respondent argues thus:

x x x [O]ther than the bare assertion of the Office of the Solicitor General In the case at bar, it was proven through documentary and testimonial
(OSG) that applicant-appellee Barandiaran possesses no registrable right over evidences that the applicant and her predecessors-in-interest has been in open,
the subject property, it failed to adduce concrete and convincing evidence to peaceful, continuous and adverse possession of the subject land, in the
support its stand. Neither were there private oppositors who came to register concept of an owner as early as 1945, as shown by the Declaration of Real
their opposition in the instant application for registration, which inclined us Property No. 030-00252 in the name of Isadora Gonzales. 25 (Citations
more to grant the instant application.14 omitted)

Hence, the present Petition15 faulting the appellate court: Respondent has not, however, established by well-nigh incontrovertible
evidence that she and her predecessors-in-interest have been in open, peaceful,
continuous and adverse possession of the questioned lot in the concept of an
. . . IN RULING THAT [THE QUESTIONED LOT] IS WITHIN THE
owner since 1945. While she claims having confirmed with the Assessor’s
ALIENABLE AND DISPOSABLE LAND OF THE PUBLIC DOMAIN
Office in Tanauan that the lot was "registered" in Gonzales’ name in 1930, for
AND, HENCE, AVAILABLE FOR PUBLIC APPROPRIATION.16
what purpose was the registration made she did not elaborate, as she did not
even present any document to substantiate the same.
The petition is meritorious.
Respecting the Declaration of Real Property in Gonzales’ name, the same
The burden of proof to overcome the presumption of state ownership of lands does not prove ownership of the questioned lot. It is settled that tax receipts
of the public domain lies on the person applying for registration. The evidence and declarations of ownership for tax purposes are "not incontrovertible
to overcome the presumption must be "well-nigh incontrovertible."17 evidence of ownership; they only become evidence of ownership acquired by
prescription when accompanied by proof of actual possession of the
property."26 No such proof of actual possession of the property was presented.
To discharge the burden, respondent presented a Certification issued by the Besides, the Declaration of Real Property shows that it was effective in 1997,
Community Environment and Natural Resources Office of the Department of indicating that the declaration is of recent vintage.27 It cannot thus prove open,
Environment and Natural Resources. Such certificate does not state, however, continuous, exclusive, and notorious possession in the concept of an owner
that the lot of which the questioned lot forms part is alienable and disposable. since time immemorial or since 1945.
The certification merely states that the lot "is not covered by any kind of
public land application or patent."18
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision
of July 21, 2006 is REVERSED and SET ASIDE, and respondent’s
As for the notation on the subdivision plan of the lot stating that "the survey is Application for Registration of Lot No. 12753-C is DISMISSED.
inside alienable and disposable area,"19 the same does not constitute proof that
the lot is alienable and disposable. So Republic v. Tri-Plus
Corporation20 instructs: SO ORDERED.

In the present case, the only evidence to prove the character of the subject G.R. No. 179987               April 29, 2009
lands as required by law is the notation appearing in the Advance Plan stating HEIRS OF MARIO MALABANAN, Petitioner,
in effect that the said properties are alienable and disposable. However, this is vs.
hardly the kind of proof required by law. To prove that the land subject of an REPUBLIC OF THE PHILIPPINES, Respondent.
application for registration is alienable, an applicant must establish the
existence of a positive act of the government such as a presidential
DECISION
proclamation or an executive order, an administrative action, investigation
reports of Bureau of Lands investigators, and a legislative act or statute. The
applicant may also secure a certification from the Government that the lands TINGA, J.:
applied for are alienable and disposable. In the case at bar, while the Advance
Plan bearing the notation was certified by the Lands Management Services of
One main reason why the informal sector has not become formal is that from
the DENR, the certification refers only to the technical correctness of the
Indonesia to Brazil, 90 percent of the informal lands are not titled and
survey plotted in the said plan and has nothing to do whatsoever with the
registered. This is a generalized phenomenon in the so-called Third World.
nature and character of the property surveyed. 21 (Emphasis and underscoring
And it has many consequences.
supplied)

xxx
Respondent cites22 the rulings of the Court of Appeals in Guido Sinsuat v.
Director of Lands, et al. and Raymundo v. Bureau of Forestry and Diaz which
she quoted in her petition, albeit inaccurately. The rulings in said cases are The question is: How is it that so many governments, from Suharto's in
correctly quoted below: Indonesia to Fujimori's in Peru, have wanted to title these people and have not
been able to do so effectively? One reason is that none of the state systems in
Asia or Latin America can gather proof of informal titles. In Peru, the
xxxx
informals have means of proving property ownership to each other which are
not the same means developed by the Spanish legal system. The informals
"[W]here it appears that the evidence of ownership and possession are so have their own papers, their own forms of agreements, and their own systems
significant and convincing, the government is not necessarily relieved of its of registration, all of which are very clearly stated in the maps which they use
duty from presenting proofs to show that the parcel of land sought to be for their own informal business transactions.
registered is part of the public domain to enable [the courts] to evaluate the
evidence of both sides."23
If you take a walk through the countryside, from Indonesia to Peru, and you
walk by field after field--in each field a different dog is going to bark at you.
x x x [W]hen the records shows that a certain property, the registration of title Even dogs know what private property is all about. The only one who does
to which is applied for has been possessed and cultivated by the applicant and not know it is the government. The issue is that there exists a "common law"
134
and an "informal law" which the Latin American formal legal system does not who is of legal age, Filipino, widower, and with residence at Munting Ilog,
know how to recognize. Silang, Cavite.

- Hernando De Soto1 Once this Decision becomes final and executory, the corresponding decree of
registration shall forthwith issue.
This decision inevitably affects all untitled lands currently in possession of
persons and entities other than the Philippine government. The petition, while SO ORDERED.
unremarkable as to the facts, was accepted by the Court en banc in order to
provide definitive clarity to the applicability and scope of original registration
The Republic interposed an appeal to the Court of Appeals, arguing that
proceedings under Sections 14(1) and 14(2) of the Property Registration
Malabanan had failed to prove that the property belonged to the alienable and
Decree. In doing so, the Court confronts not only the relevant provisions of
disposable land of the public domain, and that the RTC had erred in finding
the Public Land Act and the Civil Code, but also the reality on the ground.
that he had been in possession of the property in the manner and for the length
The countrywide phenomenon of untitled lands, as well as the problem of
of time required by law for confirmation of imperfect title.
informal settlement it has spawned, has unfortunately been treated with
benign neglect. Yet our current laws are hemmed in by their own
circumscriptions in addressing the phenomenon. Still, the duty on our part is On 23 February 2007, the Court of Appeals rendered a Decision 8 reversing the
primarily to decide cases before us in accord with the Constitution and the RTC and dismissing the application of Malabanan. The appellate court held
legal principles that have developed our public land law, though our social that under Section 14(1) of the Property Registration Decree any period of
obligations dissuade us from casting a blind eye on the endemic problems. possession prior to the classification of the lots as alienable and disposable
was inconsequential and should be excluded from the computation of the
period of possession. Thus, the appellate court noted that since the CENRO-
I.
DENR certification had verified that the property was declared alienable and
disposable only on 15 March 1982, the Velazcos’ possession prior to that date
On 20 February 1998, Mario Malabanan filed an application for land could not be factored in the computation of the period of possession. This
registration covering a parcel of land identified as Lot 9864-A, Cad-452-D, interpretation of the Court of Appeals of Section 14(1) of the Property
Silang Cadastre,2 situated in Barangay Tibig, Silang Cavite, and consisting of Registration Decree was based on the Court’s ruling in Republic v. Herbieto.9
71,324 square meters. Malabanan claimed that he had purchased the property
from Eduardo Velazco,3 and that he and his predecessors-in-interest had been
Malabanan died while the case was pending with the Court of
in open, notorious, and continuous adverse and peaceful possession of the
Appeals;10 hence, it was his heirs who appealed the decision of the appellate
land for more than thirty (30) years.
court. Petitioners, before this Court, rely on our ruling in Republic v.
Naguit,11 which was handed down just four months prior to Herbieto.
The application was raffled to the Regional Trial Court of (RTC) Cavite- Petitioners suggest that the discussion in Herbieto cited by the Court of
Tagaytay City, Branch 18. The Office of the Solicitor General (OSG) duly Appeals is actually obiter dictum since the Metropolitan Trial Court therein
designated the Assistant Provincial Prosecutor of Cavite, Jose Velazco, Jr., to which had directed the registration of the property had no jurisdiction in the
appear on behalf of the State. 4 Apart from presenting documentary evidence, first place since the requisite notice of hearing was published only after the
Malabanan himself and his witness, Aristedes Velazco, testified at the hearing had already begun. Naguit, petitioners argue, remains the controlling
hearing. Velazco testified that the property was originally belonged to a doctrine, especially when the property in question is agricultural land.
twenty-two hectare property owned by his great-grandfather, Lino Velazco. Therefore, with respect to agricultural lands, any possession prior to the
Lino had four sons– Benedicto, Gregorio, Eduardo and Esteban–the fourth declaration of the alienable property as disposable may be counted in
being Aristedes’s grandfather. Upon Lino’s death, his four sons inherited the reckoning the period of possession to perfect title under the Public Land Act
property and divided it among themselves. But by 1966, Esteban’s wife, and the Property Registration Decree.
Magdalena, had become the administrator of all the properties inherited by the
Velazco sons from their father, Lino. After the death of Esteban and
The petition was referred to the Court en banc, 12 and on 11 November 2008,
Magdalena, their son Virgilio succeeded them in administering the properties,
the case was heard on oral arguments. The Court formulated the principal
including Lot 9864-A, which originally belonged to his uncle, Eduardo
issues for the oral arguments, to wit:
Velazco. It was this property that was sold by Eduardo Velazco to
Malabanan.5
1. In order that an alienable and disposable land of the public
domain may be registered under Section 14(1) of Presidential
Assistant Provincial Prosecutor Jose Velazco, Jr. did not cross-examine
Decree No. 1529, otherwise known as the Property Registration
Aristedes Velazco. He further manifested that he "also [knew] the property
Decree, should the land be classified as alienable and disposable as
and I affirm the truth of the testimony given by Mr. Velazco." 6 The Republic
of June 12, 1945 or is it sufficient that such classification occur at
of the Philippines likewise did not present any evidence to controvert the
any time prior to the filing of the applicant for registration
application.
provided that it is established that the applicant has been in open,
continuous, exclusive and notorious possession of the land under a
Among the evidence presented by Malabanan during trial was a Certification bona fide claim of ownership since June 12, 1945 or earlier?
dated 11 June 2001, issued by the Community Environment & Natural
Resources Office, Department of Environment and Natural Resources
2. For purposes of Section 14(2) of the Property Registration
(CENRO-DENR), which stated that the subject property was "verified to be
Decree may a parcel of land classified as alienable and disposable
within the Alienable or Disposable land per Land Classification Map No.
be deemed private land and therefore susceptible to acquisition by
3013 established under Project No. 20-A and approved as such under FAO 4-
prescription in accordance with the Civil Code?
1656 on March 15, 1982."7

3. May a parcel of land established as agricultural in character


On 3 December 2002, the RTC rendered judgment in favor of Malabanan, the
either because of its use or because its slope is below that of forest
dispositive portion of which reads:
lands be registrable under Section 14(2) of the Property
Registration Decree in relation to the provisions of the Civil Code
WHEREFORE, this Court hereby approves this application for registration on acquisitive prescription?
and thus places under the operation of Act 141, Act 496 and/or P.D. 1529,
otherwise known as Property Registration Law, the lands described in Plan
4. Are petitioners entitled to the registration of the subject land in
Csd-04-0173123-D, Lot 9864-A and containing an area of Seventy One
their names under Section 14(1) or Section 14(2) of the Property
Thousand Three Hundred Twenty Four (71,324) Square Meters, as supported
Registration Decree or both?13
by its technical description now forming part of the record of this case, in
addition to other proofs adduced in the name of MARIO MALABANAN,
Based on these issues, the parties formulated their respective positions.
135
With respect to Section 14(1), petitioners reiterate that the analysis of the their claims and the issuance of a certificate of title therefor, under the Land
Court in Naguit is the correct interpretation of the provision. The seemingly Registration Act, to wit:
contradictory pronouncement in Herbieto, it is submitted, should be
considered obiter dictum, since the land registration proceedings therein was
xxx
void ab initio due to lack of publication of the notice of initial hearing.
Petitioners further point out that in Republic v. Bibonia, 14 promulgated in June
of 2007, the Court applied Naguit and adopted the same observation that the (b) Those who by themselves or through their predecessors in interest have
preferred interpretation by the OSG of Section 14(1) was patently absurd. For been in open, continuous, exclusive, and notorious possession and occupation
its part, the OSG remains insistent that for Section 14(1) to apply, the land of alienable and disposable lands of the public domain, under a bona fide
should have been classified as alienable and disposable as of 12 June 1945. claim of acquisition of ownership, since June 12, 1945, or earlier, immediately
Apart from Herbieto, the OSG also cites the subsequent rulings in preceding the filing of the application for confirmation of title except when
Buenaventura v. Republic,15 Fieldman Agricultural Trading v. Republic 16 and prevented by war or force majeure. These shall be conclusively presumed to
Republic v. Imperial Credit Corporation,17 as well as the earlier case of have performed all the conditions essential to a Government grant and shall be
Director of Lands v. Court of Appeals.18 entitled to a certificate of title under the provisions of this chapter.

With respect to Section 14(2), petitioners submit that open, continuous, Section 48(b) of Com. Act No. 141 received its present wording in 1977 when
exclusive and notorious possession of an alienable land of the public domain the law was amended by P.D. No. 1073. Two significant amendments were
for more than 30 years ipso jure converts the land into private property, thus introduced by P.D. No. 1073. First, the term "agricultural lands" was changed
placing it under the coverage of Section 14(2). According to them, it would to "alienable and disposable lands of the public domain." The OSG submits
not matter whether the land sought to be registered was previously classified that this amendment restricted the scope of the lands that may be
as agricultural land of the public domain so long as, at the time of the registered.23 This is not actually the case. Under Section 9 of the Public Land
application, the property had already been "converted" into private property Act, "agricultural lands" are a mere subset of "lands of the public domain
through prescription. To bolster their argument, petitioners cite extensively alienable or open to disposition." Evidently, alienable and disposable lands of
from our 2008 ruling in Republic v. T.A.N. Properties.19 the public domain are a larger class than only "agricultural lands."

The arguments submitted by the OSG with respect to Section 14(2) are more Second, the length of the requisite possession was changed from possession
extensive. The OSG notes that under Article 1113 of the Civil Code, the for "thirty (30) years immediately preceding the filing of the application" to
acquisitive prescription of properties of the State refers to "patrimonial possession "since June 12, 1945 or earlier." The Court in Naguit explained:
property," while Section 14(2) speaks of "private lands." It observes that the
Court has yet to decide a case that presented Section 14(2) as a ground for
When the Public Land Act was first promulgated in 1936, the period of
application for registration, and that the 30-year possession period refers to the
possession deemed necessary to vest the right to register their title to
period of possession under Section 48(b) of the Public Land Act, and not the
agricultural lands of the public domain commenced from July 26, 1894.
concept of prescription under the Civil Code. The OSG further submits that,
However, this period was amended by R.A. No. 1942, which provided that
assuming that the 30-year prescriptive period can run against public lands,
the bona fide claim of ownership must have been for at least thirty (30) years.
said period should be reckoned from the time the public land was declared
Then in 1977, Section 48(b) of the Public Land Act was again amended, this
alienable and disposable.
time by P.D. No. 1073, which pegged the reckoning date at June 12, 1945.
xxx
Both sides likewise offer special arguments with respect to the particular
factual circumstances surrounding the subject property and the ownership
It bears further observation that Section 48(b) of Com. Act No, 141 is
thereof.
virtually the same as Section 14(1) of the Property Registration Decree. Said
Decree codified the various laws relative to the registration of property,
II. including lands of the public domain. It is Section 14(1) that operationalizes
the registration of such lands of the public domain. The provision reads:
First, we discuss Section 14(1) of the Property Registration Decree. For a full
understanding of the provision, reference has to be made to the Public Land SECTION 14. Who may apply.— The following persons may file in the
Act. proper Court of First Instance an application for registration of title to land,
whether personally or through their duly authorized representatives:
A.
(1) those who by themselves or through their predecessors-in-interest have
been in open, continuous, exclusive and notorious possession and occupation
Commonwealth Act No. 141, also known as the Public Land Act, has, since
of alienable and disposable lands of the public domain under a bona fide claim
its enactment, governed the classification and disposition of lands of the
of ownership since June 12, 1945, or earlier.
public domain. The President is authorized, from time to time, to classify the
lands of the public domain into alienable and disposable, timber, or mineral
lands.20 Alienable and disposable lands of the public domain are further Notwithstanding the passage of the Property Registration Decree and the
classified according to their uses into (a) agricultural; (b) residential, inclusion of Section 14(1) therein, the Public Land Act has remained in effect.
commercial, industrial, or for similar productive purposes; (c) educational, Both laws commonly refer to persons or their predecessors-in-interest who
charitable, or other similar purposes; or (d) reservations for town sites and for "have been in open, continuous, exclusive and notorious possession and
public and quasi-public uses.21 occupation of alienable and disposable lands of the public domain under a
bona fide claim of ownership since June 12, 1945, or earlier." That
circumstance may have led to the impression that one or the other is a
May a private person validly seek the registration in his/her name of alienable
redundancy, or that Section 48(b) of the Public Land Act has somehow been
and disposable lands of the public domain? Section 11 of the Public Land Act
repealed or mooted. That is not the case.
acknowledges that public lands suitable for agricultural purposes may be
disposed of "by confirmation of imperfect or incomplete titles" through
"judicial legalization."22 Section 48(b) of the Public Land Act, as amended by The opening clauses of Section 48 of the Public Land Act and Section 14 of
P.D. No. 1073, supplies the details and unmistakably grants that right, subject the Property Registration Decree warrant comparison:
to the requisites stated therein:
Sec. 48 [of the Public Land Act]. The following described citizens of the
Sec. 48. The following described citizens of the Philippines, occupying lands Philippines, occupying lands of the public domain or claiming to own any
of the public domain or claiming to own any such land or an interest therein, such land or an interest therein, but whose titles have not been perfected or
but whose titles have not been perfected or completed, may apply to the Court completed, may apply to the Court of First Instance of the province where the
of First Instance of the province where the land is located for confirmation of land is located for confirmation of their claims and the issuance of a certificate
of title therefor, under the Land Registration Act, to wit:
136
xxx associated, and not those distantly or remotely located. 25 Ad proximum
antecedents fiat relation nisi impediatur sentencia.
Sec. 14 [of the Property Registration Decree]. Who may apply.— The
following persons may file in the proper Court of First Instance an application Besides, we are mindful of the absurdity that would result if we adopt
for registration of title to land, whether personally or through their duly petitioner’s position. Absent a legislative amendment, the rule would be,
authorized representatives: adopting the OSG’s view, that all lands of the public domain which were not
declared alienable or disposable before June 12, 1945 would not be
susceptible to original registration, no matter the length of unchallenged
xxx
possession by the occupant. Such interpretation renders paragraph (1) of
Section 14 virtually inoperative and even precludes the government from
It is clear that Section 48 of the Public Land Act is more descriptive of the giving it effect even as it decides to reclassify public agricultural lands as
nature of the right enjoyed by the possessor than Section 14 of the Property alienable and disposable. The unreasonableness of the situation would even be
Registration Decree, which seems to presume the pre-existence of the right, aggravated considering that before June 12, 1945, the Philippines was not yet
rather than establishing the right itself for the first time. It is proper to assert even considered an independent state.
that it is the Public Land Act, as amended by P.D. No. 1073 effective 25
January 1977, that has primarily established the right of a Filipino citizen who
Accordingly, the Court in Naguit explained:
has been "in open, continuous, exclusive, and notorious possession and
occupation of alienable and disposable lands of the public domain, under a
bona fide claim of acquisition of ownership, since June 12, 1945" to perfect or [T]he more reasonable interpretation of Section 14(1) is that it merely requires
complete his title by applying with the proper court for the confirmation of his the property sought to be registered as already alienable and disposable at the
ownership claim and the issuance of the corresponding certificate of title. time the application for registration of title is filed. If the State, at the time the
application is made, has not yet deemed it proper to release the property for
alienation or disposition, the presumption is that the government is still
Section 48 can be viewed in conjunction with the afore-quoted Section 11 of
reserving the right to utilize the property; hence, the need to preserve its
the Public Land Act, which provides that public lands suitable for agricultural
ownership in the State irrespective of the length of adverse possession even if
purposes may be disposed of by confirmation of imperfect or incomplete
in good faith. However, if the property has already been classified as alienable
titles, and given the notion that both provisions declare that it is indeed the
and disposable, as it is in this case, then there is already an intention on the
Public Land Act that primarily establishes the substantive ownership of the
part of the State to abdicate its exclusive prerogative over the property.
possessor who has been in possession of the property since 12 June 1945. In
turn, Section 14(a) of the Property Registration Decree recognizes the
substantive right granted under Section 48(b) of the Public Land Act, as well The Court declares that the correct interpretation of Section 14(1) is that
provides the corresponding original registration procedure for the judicial which was adopted in Naguit. The contrary pronouncement in Herbieto, as
confirmation of an imperfect or incomplete title. pointed out in Naguit, absurdly limits the application of the provision to the
point of virtual inutility since it would only cover lands actually declared
alienable and disposable prior to 12 June 1945, even if the current possessor is
There is another limitation to the right granted under Section 48(b). Section 47
able to establish open, continuous, exclusive and notorious possession under a
of the Public Land Act limits the period within which one may exercise the
bona fide claim of ownership long before that date.
right to seek registration under Section 48. The provision has been amended
several times, most recently by Rep. Act No. 9176 in 2002. It currently reads
thus: Moreover, the Naguit interpretation allows more possessors under a bona fide
claim of ownership to avail of judicial confirmation of their imperfect titles
than what would be feasible under Herbieto. This balancing fact is significant,
Section 47. The persons specified in the next following section are hereby
especially considering our forthcoming discussion on the scope and reach of
granted time, not to extend beyond December 31, 2020 within which to avail
Section 14(2) of the Property Registration Decree.
of the benefits of this Chapter: Provided, That this period shall apply only
where the area applied for does not exceed twelve (12) hectares: Provided,
further, That the several periods of time designated by the President in Petitioners make the salient observation that the contradictory passages from
accordance with Section Forty-Five of this Act shall apply also to the lands Herbieto are obiter dicta since the land registration proceedings therein is void
comprised in the provisions of this Chapter, but this Section shall not be ab initio in the first place due to lack of the requisite publication of the notice
construed as prohibiting any said persons from acting under this Chapter at of initial hearing. There is no need to explicitly overturn Herbieto, as it
any time prior to the period fixed by the President.24 suffices that the Court’s acknowledgment that the particular line of argument
used therein concerning Section 14(1) is indeed obiter.
Accordingly under the current state of the law, the substantive right granted
under Section 48(b) may be availed of only until 31 December 2020. It may be noted that in the subsequent case of Buenaventura, 26 the Court,
citing Herbieto, again stated that "[a]ny period of possession prior to the date
when the [s]ubject [property was] classified as alienable and disposable is
B.
inconsequential and should be excluded from the computation of the period of
possession…" That statement, in the context of Section 14(1), is certainly
Despite the clear text of Section 48(b) of the Public Land Act, as amended and erroneous. Nonetheless, the passage as cited in Buenaventura should again be
Section 14(a) of the Property Registration Decree, the OSG has adopted the considered as obiter. The application therein was ultimately granted, citing
position that for one to acquire the right to seek registration of an alienable Section 14(2). The evidence submitted by petitioners therein did not establish
and disposable land of the public domain, it is not enough that the applicant any mode of possession on their part prior to 1948, thereby precluding the
and his/her predecessors-in-interest be in possession under a bona fide claim application of Section 14(1). It is not even apparent from the decision whether
of ownership since 12 June 1945; the alienable and disposable character of the petitioners therein had claimed entitlement to original registration following
property must have been declared also as of 12 June 1945. Following the Section 14(1), their position being that they had been in exclusive possession
OSG’s approach, all lands certified as alienable and disposable after 12 June under a bona fide claim of ownership for over fifty (50) years, but not before
1945 cannot be registered either under Section 14(1) of the Property 12 June 1945.
Registration Decree or Section 48(b) of the Public Land Act as amended. The
absurdity of such an implication was discussed in Naguit.
Thus, neither Herbieto nor its principal discipular ruling Buenaventura has
any precedental value with respect to Section 14(1). On the other hand, the
Petitioner suggests an interpretation that the alienable and disposable ratio of Naguit is embedded in Section 14(1), since it precisely involved
character of the land should have already been established since June 12, 1945 situation wherein the applicant had been in exclusive possession under a bona
or earlier. This is not borne out by the plain meaning of Section 14(1). "Since fide claim of ownership prior to 12 June 1945. The Court’s interpretation of
June 12, 1945," as used in the provision, qualifies its antecedent phrase "under Section 14(1) therein was decisive to the resolution of the case. Any doubt as
a bonafide claim of ownership." Generally speaking, qualifying words restrict to which between Naguit or Herbieto provides the final word of the Court on
or modify only the words or phrases to which they are immediately Section 14(1) is now settled in favor of Naguit.

137
We noted in Naguit that it should be distinguished from Bracewell v. Court of The Court in Naguit offered the following discussion concerning Section
Appeals27 since in the latter, the application for registration had been filed 14(2), which we did even then recognize, and still do, to be an obiter dictum,
before the land was declared alienable or disposable. The dissent though but we nonetheless refer to it as material for further discussion, thus:
pronounces Bracewell as the better rule between the two. Yet two years after
Bracewell, its ponente, the esteemed Justice Consuelo Ynares-Santiago,
Did the enactment of the Property Registration Decree and the amendatory
penned the ruling in Republic v. Ceniza, 28 which involved a claim of
P.D. No. 1073 preclude the application for registration of alienable lands of
possession that extended back to 1927 over a public domain land that was
the public domain, possession over which commenced only after June 12,
declared alienable and disposable only in 1980. Ceniza cited Bracewell,
1945? It did not, considering Section 14(2) of the Property Registration
quoted extensively from it, and following the mindset of the dissent, the
Decree, which governs and authorizes the application of "those who have
attempt at registration in Ceniza should have failed. Not so.
acquired ownership of private lands by prescription under the provisions of
existing laws."
To prove that the land subject of an application for registration is alienable, an
applicant must establish the existence of a positive act of the government such
Prescription is one of the modes of acquiring ownership under the Civil Code.
as a presidential proclamation or an executive order; an administrative action;
[30 ] There is a consistent jurisprudential rule that properties classified as
investigation reports of Bureau of Lands investigators; and a legislative act or
alienable public land may be converted into private property by reason of
a statute.
open, continuous and exclusive possession of at least thirty (30) years.[ 31 ]
With such conversion, such property may now fall within the contemplation
In this case, private respondents presented a certification dated November 25, of "private lands" under Section 14(2), and thus susceptible to registration by
1994, issued by Eduardo M. Inting, the Community Environment and Natural those who have acquired ownership through prescription. Thus, even if
Resources Officer in the Department of Environment and Natural Resources possession of the alienable public land commenced on a date later than June
Office in Cebu City, stating that the lots involved were "found to be within the 12, 1945, and such possession being been open, continuous and exclusive,
alienable and disposable (sic) Block-I, Land Classification Project No. 32-A, then the possessor may have the right to register the land by virtue of Section
per map 2962 4-I555 dated December 9, 1980." This is sufficient evidence to 14(2) of the Property Registration Decree.
show the real character of the land subject of private respondents’ application.
Further, the certification enjoys a presumption of regularity in the absence of
Naguit did not involve the application of Section 14(2), unlike in this case
contradictory evidence, which is true in this case. Worth noting also was the
where petitioners have based their registration bid primarily on that provision,
observation of the Court of Appeals stating that:
and where the evidence definitively establishes their claim of possession only
as far back as 1948. It is in this case that we can properly appreciate the
[n]o opposition was filed by the Bureaus of Lands and Forestry to contest the nuances of the provision.
application of appellees on the ground that the property still forms part of the
public domain. Nor is there any showing that the lots in question are forestal
A.
land....

The obiter in Naguit cited the Civil Code provisions on prescription as the
Thus, while the Court of Appeals erred in ruling that mere possession of
possible basis for application for original registration under Section 14(2).
public land for the period required by law would entitle its occupant to a
Specifically, it is Article 1113 which provides legal foundation for the
confirmation of imperfect title, it did not err in ruling in favor of private
application. It reads:
respondents as far as the first requirement in Section 48(b) of the Public Land
Act is concerned, for they were able to overcome the burden of proving the
alienability of the land subject of their application. All things which are within the commerce of men are susceptible of
prescription, unless otherwise provided. Property of the State or any of its
subdivisions not patrimonial in character shall not be the object of
As correctly found by the Court of Appeals, private respondents were able to
prescription.
prove their open, continuous, exclusive and notorious possession of the
subject land even before the year 1927. As a rule, we are bound by the factual
findings of the Court of Appeals. Although there are exceptions, petitioner did It is clear under the Civil Code that where lands of the public domain are
not show that this is one of them.29 patrimonial in character, they are susceptible to acquisitive prescription. On
the other hand, among the public domain lands that are not susceptible to
acquisitive prescription are timber lands and mineral lands. The Constitution
Why did the Court in Ceniza, through the same eminent member who
itself proscribes private ownership of timber or mineral lands.
authored Bracewell, sanction the registration under Section 48(b) of public
domain lands declared alienable or disposable thirty-five (35) years and 180
days after 12 June 1945? The telling difference is that in Ceniza, the There are in fact several provisions in the Civil Code concerning the
application for registration was filed nearly six (6) years after the land had acquisition of real property through prescription. Ownership of real property
been declared alienable or disposable, while in Bracewell, the application was may be acquired by ordinary prescription of ten (10) years,32 or through
filed nine (9) years before the land was declared alienable or disposable. That extraordinary prescription of thirty (30) years. 33 Ordinary acquisitive
crucial difference was also stressed in Naguit to contradistinguish it from prescription requires possession in good faith,34 as well as just title.35
Bracewell, a difference which the dissent seeks to belittle.
When Section 14(2) of the Property Registration Decree explicitly provides
III. that persons "who have acquired ownership over private lands by prescription
under the provisions of existing laws," it unmistakably refers to the Civil Code
as a valid basis for the registration of lands. The Civil Code is the only
We next ascertain the correct framework of analysis with respect to Section
existing law that specifically allows the acquisition by prescription of private
14(2). The provision reads:
lands, including patrimonial property belonging to the State. Thus, the critical
question that needs affirmation is whether Section 14(2) does encompass
SECTION 14. Who may apply. — The following persons may file in the original registration proceedings over patrimonial property of the State, which
proper Court of First Instance an application for registration of title to land, a private person has acquired through prescription.
whether personally or through their duly authorized representatives:
The Naguit obiter had adverted to a frequently reiterated jurisprudence
xxx holding that properties classified as alienable public land may be converted
into private property by reason of open, continuous and exclusive possession
of at least thirty (30) years. 36 Yet if we ascertain the source of the "thirty-year"
(2) Those who have acquired ownership over private lands by prescription
period, additional complexities relating to Section 14(2) and to how exactly it
under the provisions of existing laws.
operates would emerge. For there are in fact two distinct origins of the thirty
(30)-year rule.

138
The first source is Rep. Act No. 1942, enacted in 1957, which amended interpretation of Section 14(2). There is no similar demand on our part in the
Section 48(b) of the Public Land Act by granting the right to seek original case of Section 14(1).
registration of alienable public lands through possession in the concept of an
owner for at least thirty years.
The critical qualification under Article 1113 of the Civil Code is thus:
"[p]roperty of the State or any of its subdivisions not patrimonial in character
The following-described citizens of the Philippines, occupying lands of the shall not be the object of prescription." The identification what consists of
public domain or claiming to own any such lands or an interest therein, but patrimonial property is provided by Articles 420 and 421, which we quote in
whose titles have not been perfected or completed, may apply to the Court of full:
First Instance of the province where the land is located for confirmation of
their claims and the issuance of a certificate of title therefor, under the Land
Art. 420. The following things are property of public dominion:
Registration Act, to wit:

(1) Those intended for public use, such as roads, canals, rivers,
xxxxxxxxx
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character;
(b) Those who by themselves or through their predecessors in interest have
been in open, continuous, exclusive and notorious possession and occupation
(2) Those which belong to the State, without being for public use,
of agricultural lands of the public domain, under a bona fide claim of
and are intended for some public service or for the development of
acquisition of ownership, for at least thirty years immediately preceding the
the national wealth.
filing of the application for confirmation of title, except when prevented by
war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be Art. 421. All other property of the State, which is not of the character stated in
entitled to a certificate of title under the provisions of this Chapter. (emphasis the preceding article, is patrimonial property
supplied)37
It is clear that property of public dominion, which generally includes property
This provision was repealed in 1977 with the enactment of P.D. 1073, which belonging to the State, cannot be the object of prescription or, indeed, be
made the date 12 June 1945 the reckoning point for the first time. subject of the commerce of man. 39 Lands of the public domain, whether
Nonetheless, applications for registration filed prior to 1977 could have declared alienable and disposable or not, are property of public dominion and
invoked the 30-year rule introduced by Rep. Act No. 1942. thus insusceptible to acquisition by prescription.

The second source is Section 14(2) of P.D. 1529 itself, at least by implication, Let us now explore the effects under the Civil Code of a declaration by the
as it applies the rules on prescription under the Civil Code, particularly Article President or any duly authorized government officer of alienability and
1113 in relation to Article 1137. Note that there are two kinds of prescription disposability of lands of the public domain. Would such lands so declared
under the Civil Code–ordinary acquisitive prescription and extraordinary alienable and disposable be converted, under the Civil Code, from property of
acquisitive prescription, which, under Article 1137, is completed "through the public dominion into patrimonial property? After all, by connotative
uninterrupted adverse possession… for thirty years, without need of title or of definition, alienable and disposable lands may be the object of the commerce
good faith." of man; Article 1113 provides that all things within the commerce of man are
susceptible to prescription; and the same provision further provides that
patrimonial property of the State may be acquired by prescription.
Obviously, the first source of the thirty (30)-year period rule, Rep. Act No.
1942, became unavailable after 1977. At present, the only legal basis for the
thirty (30)-year period is the law on prescription under the Civil Code, as Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public
mandated under Section 14(2). However, there is a material difference dominion, when no longer intended for public use or for public service, shall
between how the thirty (30)-year rule operated under Rep. Act No. 1942 and form part of the patrimonial property of the State." It is this provision that
how it did under the Civil Code. controls how public dominion property may be converted into patrimonial
property susceptible to acquisition by prescription. After all, Article 420 (2)
makes clear that those property "which belong to the State, without being for
Section 48(b) of the Public Land Act, as amended by Rep. Act No. 1942, did
public use, and are intended for some public service or for the development of
not refer to or call into application the Civil Code provisions on prescription.
the national wealth" are public dominion property. For as long as the property
It merely set forth a requisite thirty-year possession period immediately
belongs to the State, although already classified as alienable or disposable, it
preceding the application for confirmation of title, without any qualification as
remains property of the public dominion if when it is "intended for some
to whether the property should be declared alienable at the beginning of, and
public service or for the development of the national wealth".
continue as such, throughout the entire thirty-(30) years. There is neither
statutory nor jurisprudential basis to assert Rep. Act No. 1942 had mandated
such a requirement,38 similar to our earlier finding with respect to the present Accordingly, there must be an express declaration by the State that the public
language of Section 48(b), which now sets 12 June 1945 as the point of dominion property is no longer intended for public service or the development
reference. of the national wealth or that the property has been converted into patrimonial.
Without such express declaration, the property, even if classified as alienable
or disposable, remains property of the public dominion, pursuant to Article
Then, with the repeal of Rep. Act No. 1942, the thirty-year possession period
420(2), and thus incapable of acquisition by prescription. It is only when such
as basis for original registration became Section 14(2) of the Property
alienable and disposable lands are expressly declared by the State to be no
Registration Decree, which entitled those "who have acquired ownership over
longer intended for public service or for the development of the national
private lands by prescription under the provisions of existing laws" to apply
wealth that the period of acquisitive prescription can begin to run. Such
for original registration. Again, the thirty-year period is derived from the rule
declaration shall be in the form of a law duly enacted by Congress or a
on extraordinary prescription under Article 1137 of the Civil Code. At the
Presidential Proclamation in cases where the President is duly authorized by
same time, Section 14(2) puts into operation the entire regime of prescription
law.
under the Civil Code, a fact which does not hold true with respect to Section
14(1).
It is comprehensible with ease that this reading of Section 14(2) of the
Property Registration Decree limits its scope and reach and thus affects the
B.
registrability even of lands already declared alienable and disposable to the
detriment of the bona fide possessors or occupants claiming title to the lands.
Unlike Section 14(1), Section 14(2) explicitly refers to the principles on Yet this interpretation is in accord with the Regalian doctrine and its
prescription under existing laws. Accordingly, we are impelled to apply the concomitant assumption that all lands owned by the State, although declared
civil law concept of prescription, as set forth in the Civil Code, in our alienable or disposable, remain as such and ought to be used only by the
Government.

139
Recourse does not lie with this Court in the matter. The duty of the Court is to It may be asked why the principles of prescription under the Civil Code
apply the Constitution and the laws in accordance with their language and should not apply as well to Section 14(1). Notwithstanding the vaunted status
intent. The remedy is to change the law, which is the province of the of the Civil Code, it ultimately is just one of numerous statutes, neither
legislative branch. Congress can very well be entreated to amend Section superior nor inferior to other statutes such as the Property Registration Decree.
14(2) of the Property Registration Decree and pertinent provisions of the Civil The legislative branch is not bound to adhere to the framework set forth by the
Code to liberalize the requirements for judicial confirmation of imperfect or Civil Code when it enacts subsequent legislation. Section 14(2) manifests a
incomplete titles. clear intent to interrelate the registration allowed under that provision with the
Civil Code, but no such intent exists with respect to Section 14(1).
The operation of the foregoing interpretation can be illustrated by an actual
example. Republic Act No. 7227, entitled "An Act Accelerating The IV.
Conversion Of Military Reservations Into Other Productive Uses, etc.," is
more commonly known as the BCDA law. Section 2 of the law authorizes the
One of the keys to understanding the framework we set forth today is seeing
sale of certain military reservations and portions of military camps in Metro
how our land registration procedures correlate with our law on prescription,
Manila, including Fort Bonifacio and Villamor Air Base. For purposes of
which, under the Civil Code, is one of the modes for acquiring ownership over
effecting the sale of the military camps, the law mandates the President to
property.
transfer such military lands to the Bases Conversion Development Authority
(BCDA)40 which in turn is authorized to own, hold and/or administer
them.41 The President is authorized to sell portions of the military camps, in The Civil Code makes it clear that patrimonial property of the State may be
whole or in part.42 Accordingly, the BCDA law itself declares that the military acquired by private persons through prescription. This is brought about by
lands subject thereof are "alienable and disposable pursuant to the provisions Article 1113, which states that "[a]ll things which are within the commerce of
of existing laws and regulations governing sales of government properties."43 man are susceptible to prescription," and that [p]roperty of the State or any of
its subdivisions not patrimonial in character shall not be the object of
prescription."
From the moment the BCDA law was enacted the subject military lands have
become alienable and disposable. However, said lands did not become
patrimonial, as the BCDA law itself expressly makes the reservation that these There are two modes of prescription through which immovables may be
lands are to be sold in order to raise funds for the conversion of the former acquired under the Civil Code. The first is ordinary acquisitive prescription,
American bases at Clark and Subic. 44 Such purpose can be tied to either which, under Article 1117, requires possession in good faith and with just
"public service" or "the development of national wealth" under Article 420(2). title; and, under Article 1134, is completed through possession of ten (10)
Thus, at that time, the lands remained property of the public dominion under years. There is nothing in the Civil Code that bars a person from acquiring
Article 420(2), notwithstanding their status as alienable and disposable. It is patrimonial property of the State through ordinary acquisitive prescription, nor
upon their sale as authorized under the BCDA law to a private person or entity is there any apparent reason to impose such a rule. At the same time, there are
that such lands become private property and cease to be property of the public indispensable requisites–good faith and just title. The ascertainment of good
dominion. faith involves the application of Articles 526, 527, and 528, as well as Article
1127 of the Civil Code,45 provisions that more or less speak for themselves.
C.
On the other hand, the concept of just title requires some clarification. Under
Article 1129, there is just title for the purposes of prescription "when the
Should public domain lands become patrimonial because they are declared as
adverse claimant came into possession of the property through one of the
such in a duly enacted law or duly promulgated proclamation that they are no
modes recognized by law for the acquisition of ownership or other real rights,
longer intended for public service or for the development of the national
but the grantor was not the owner or could not transmit any right." Dr.
wealth, would the period of possession prior to the conversion of such public
Tolentino explains:
dominion into patrimonial be reckoned in counting the prescriptive period in
favor of the possessors? We rule in the negative.
Just title is an act which has for its purpose the transmission of ownership, and
which would have actually transferred ownership if the grantor had been the
The limitation imposed by Article 1113 dissuades us from ruling that the
owner. This vice or defect is the one cured by prescription. Examples: sale
period of possession before the public domain land becomes patrimonial may
with delivery, exchange, donation, succession, and dacion in payment.46
be counted for the purpose of completing the prescriptive period. Possession
of public dominion property before it becomes patrimonial cannot be the
object of prescription according to the Civil Code. As the application for The OSG submits that the requirement of just title necessarily precludes the
registration under Section 14(2) falls wholly within the framework of applicability of ordinary acquisitive prescription to patrimonial property. The
prescription under the Civil Code, there is no way that possession during the major premise for the argument is that "the State, as the owner and grantor,
time that the land was still classified as public dominion property can be could not transmit ownership to the possessor before the completion of the
counted to meet the requisites of acquisitive prescription and justify required period of possession."47 It is evident that the OSG erred when it
registration. assumed that the grantor referred to in Article 1129 is the State. The grantor is
the one from whom the person invoking ordinary acquisitive prescription
derived the title, whether by sale, exchange, donation, succession or any other
Are we being inconsistent in applying divergent rules for Section 14(1) and
mode of the acquisition of ownership or other real rights.
Section 14(2)? There is no inconsistency. Section 14(1) mandates registration
on the basis of possession, while Section 14(2) entitles registration on the
basis of prescription. Registration under Section 14(1) is extended under the Earlier, we made it clear that, whether under ordinary prescription or
aegis of the Property Registration Decree and the Public Land Act while extraordinary prescription, the period of possession preceding the
registration under Section 14(2) is made available both by the Property classification of public dominion lands as patrimonial cannot be counted for
Registration Decree and the Civil Code. the purpose of computing prescription. But after the property has been become
patrimonial, the period of prescription begins to run in favor of the possessor.
Once the requisite period has been completed, two legal events ensue: (1) the
In the same manner, we can distinguish between the thirty-year period under
patrimonial property is ipso jure converted into private land; and (2) the
Section 48(b) of the Public Land Act, as amended by Rep. Act No. 1472, and
person in possession for the periods prescribed under the Civil Code acquires
the thirty-year period available through Section 14(2) of the Property
ownership of the property by operation of the Civil Code.
Registration Decree in relation to Article 1137 of the Civil Code. The period
under the former speaks of a thirty-year period of possession, while the period
under the latter concerns a thirty-year period of extraordinary prescription. It is evident that once the possessor automatically becomes the owner of the
Registration under Section 48(b) of the Public Land Act as amended by Rep. converted patrimonial property, the ideal next step is the registration of the
Act No. 1472 is based on thirty years of possession alone without regard to property under the Torrens system. It should be remembered that registration
the Civil Code, while the registration under Section 14(2) of the Property of property is not a mode of acquisition of ownership, but merely a mode of
Registration Decree is founded on extraordinary prescription under the Civil confirmation of ownership.48
Code.
140
Looking back at the registration regime prior to the adoption of the Property property for at least thirty (30) years, regardless of good
Registration Decree in 1977, it is apparent that the registration system then did faith or just title, ripens into ownership.
not fully accommodate the acquisition of ownership of patrimonial property
under the Civil Code. What the system accommodated was the confirmation
B.
of imperfect title brought about by the completion of a period of possession
ordained under the Public Land Act (either 30 years following Rep. Act No.
1942, or since 12 June 1945 following P.D. No. 1073). We now apply the above-stated doctrines to the case at bar.

The Land Registration Act49 was noticeably silent on the requisites for It is clear that the evidence of petitioners is insufficient to establish that
alienable public lands acquired through ordinary prescription under the Civil Malabanan has acquired ownership over the subject property under Section
Code, though it arguably did not preclude such registration. 50 Still, the gap 48(b) of the Public Land Act. There is no substantive evidence to establish
was lamentable, considering that the Civil Code, by itself, establishes that Malabanan or petitioners as his predecessors-in-interest have been in
ownership over the patrimonial property of persons who have completed the possession of the property since 12 June 1945 or earlier. The earliest that
prescriptive periods ordained therein. The gap was finally closed with the petitioners can date back their possession, according to their own evidence—
adoption of the Property Registration Decree in 1977, with Section 14(2) the Tax Declarations they presented in particular—is to the year 1948. Thus,
thereof expressly authorizing original registration in favor of persons who they cannot avail themselves of registration under Section 14(1) of the
have acquired ownership over private lands by prescription under the Property Registration Decree.
provisions of existing laws, that is, the Civil Code as of now.
Neither can petitioners properly invoke Section 14(2) as basis for registration.
V. While the subject property was declared as alienable or disposable in 1982,
there is no competent evidence that is no longer intended for public use
service or for the development of the national evidence, conformably with
We synthesize the doctrines laid down in this case, as follows:
Article 422 of the Civil Code. The classification of the subject property as
alienable and disposable land of the public domain does not change its status
(1) In connection with Section 14(1) of the Property Registration as property of the public dominion under Article 420(2) of the Civil Code.
Decree, Section 48(b) of the Public Land Act recognizes and Thus, it is insusceptible to acquisition by prescription.
confirms that "those who by themselves or through their
predecessors in interest have been in open, continuous, exclusive,
VI.
and notorious possession and occupation of alienable and
disposable lands of the public domain, under a bona fide claim of
acquisition of ownership, since June 12, 1945" have acquired A final word. The Court is comfortable with the correctness of the legal
ownership of, and registrable title to, such lands based on the doctrines established in this decision. Nonetheless, discomfiture over the
length and quality of their possession. implications of today’s ruling cannot be discounted. For, every untitled
property that is occupied in the country will be affected by this ruling. The
social implications cannot be dismissed lightly, and the Court would be
(a) Since Section 48(b) merely requires possession
abdicating its social responsibility to the Filipino people if we simply levied
since 12 June 1945 and does not require that the lands
the law without comment.
should have been alienable and disposable during the
entire period of possession, the possessor is entitled to
secure judicial confirmation of his title thereto as soon The informal settlement of public lands, whether declared alienable or not, is a
as it is declared alienable and disposable, subject to the phenomenon tied to long-standing habit and cultural acquiescence, and is
timeframe imposed by Section 47 of the Public Land common among the so-called "Third World" countries. This paradigm
Act.51 powerfully evokes the disconnect between a legal system and the reality on
the ground. The law so far has been unable to bridge that gap. Alternative
means of acquisition of these public domain lands, such as through homestead
(b) The right to register granted under Section 48(b) of
or free patent, have
the Public Land Act is further confirmed by Section
14(1) of the Property Registration Decree.
proven unattractive due to limitations imposed on the grantee in the
encumbrance or alienation of said properties.52 Judicial confirmation of
(2) In complying with Section 14(2) of the Property Registration
imperfect title has emerged as the most viable, if not the most attractive means
Decree, consider that under the Civil Code, prescription is
to regularize the informal settlement of alienable or disposable lands of the
recognized as a mode of acquiring ownership of patrimonial
public domain, yet even that system, as revealed in this decision, has
property. However, public domain lands become only patrimonial
considerable limits.
property not only with a declaration that these are alienable or
disposable. There must also be an express government
manifestation that the property is already patrimonial or no longer There are millions upon millions of Filipinos who have individually or
retained for public service or the development of national wealth, exclusively held residential lands on which they have lived and raised their
under Article 422 of the Civil Code. And only when the property families. Many more have tilled and made productive idle lands of the State
has become patrimonial can the prescriptive period for the with their hands. They have been regarded for generation by their families and
acquisition of property of the public dominion begin to run. their communities as common law owners. There is much to be said about the
virtues of according them legitimate states. Yet such virtues are not for the
Court to translate into positive law, as the law itself considered such lands as
(a) Patrimonial property is private property of the
property of the public dominion. It could only be up to Congress to set forth a
government. The person acquires ownership of
new phase of land reform to sensibly regularize and formalize the settlement
patrimonial property by prescription under the Civil
of such lands which in legal theory are lands of the public domain before the
Code is entitled to secure registration thereof under
problem becomes insoluble. This could be accomplished, to cite two
Section 14(2) of the Property Registration Decree.
examples, by liberalizing the standards for judicial confirmation of imperfect
title, or amending the Civil Code itself to ease the requisites for the conversion
(b) There are two kinds of prescription by which of public dominion property into patrimonial.
patrimonial property may be acquired, one ordinary and
other extraordinary. Under ordinary acquisitive
One’s sense of security over land rights infuses into every aspect of well-
prescription, a person acquires ownership of a
being not only of that individual, but also to the person’s family. Once that
patrimonial property through possession for at least ten
sense of security is deprived, life and livelihood are put on stasis. It is for the
(10) years, in good faith and with just title. Under
political branches to bring welcome closure to the long pestering problem.
extraordinary acquisitive prescription, a person’s
uninterrupted adverse possession of patrimonial
141
WHEREFORE, the Petition is DENIED. The Decision of the Court of
Appeals dated 23 February 2007 and Resolution dated 2 October 2007 are
AFFIRMED. No pronouncement as to costs.

SO ORDERED.

142

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