Republic of the Philippines Article 1473 of the Civil Code is as follows:
SUPREME COURT
Manila
EN BANC
G.R. No. L-11658 February 15, 1918
LEUNG YEE, plaintiff-appellant,
vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery company from the
defendant machinery company, and executed a chattel mortgage thereon to secure payment of the purchase
price. It included in the mortgage deed the building of strong materials in which the machinery was installed,
without any reference to the land on which it stood. The indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the
mortgage instrument, and was bought in by the machinery company. The mortgage was registered in the chattel
mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was
annotated in the same registry on December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the "Compaia Agricola Filipina" executed a
deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although
executed in a public document, was not registered. This deed makes no reference to the building erected on the
land and would appear to have been executed for the purpose of curing any defects which might be found to
exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery
company went into possession of the building at or about the time when this sale took place, that is to say, the
month of December, 1913, and it has continued in possession ever since.
At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor,
the "Compaia Agricola Filipina" executed another mortgage to the plaintiff upon the building, separate and apart
from the land on which it stood, to secure payment of the balance of its indebtedness to the plaintiff under a
contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the
indebtedness secured by the mortgage, the plaintiff secured judgment for that amount, levied execution upon the
building, bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's certificate
of the sale duly registered in the land registry of the Province of Cavite.
At the time when the execution was levied upon the building, the defendant machinery company, which was in
possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the
property from the levy. Thereafter, upon demand of the sheriff, the plaintiff 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.
This action was instituted by the plaintiff to recover possession of the building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery
company, on the ground that the company had its title to the building registered prior to the date of registry of the
plaintiff's certificate.
PROPERTY 1ST BATCH
If the same thing should have been sold to different vendees, the ownership shall be transfer to the
person who may have the first taken possession thereof in good faith, if it should be personal
property.
Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.
Should there be no entry, the property shall belong to the person who first took possession of it in
good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is
good faith.
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 inscription in the registry of real property. By its express terms, the Chattel Mortgage Law contemplates and
makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage
registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property
executed in the manner and form prescribed in the statute. The building of strong materials in which the rice-
cleaning machinery was installed by the "Compaia Agricola Filipina" was real property, and the mere fact that
the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its
character as real property. It follows that neither the original registry in the chattel mortgage of the building and
the machinery installed therein, not the annotation in that registry of the sale of the mortgaged property, had any
effect whatever so far as the building was concerned.
We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by
the trial judge. We are of opinion, however, that the judgment must be sustained on the ground that the agreed
statement of facts in the court below discloses that neither the purchase of the building by the plaintiff nor his
inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the machinery company
must be held to be the owner of the property under the third paragraph of the above cited article of the code, it
appearing that the company first took possession of the property; and further, that the building and the land were
sold to the machinery company long prior to the date of the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express
terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to
the "inscription" of the property on the registry, it must be presumed that good faith is not an essential requisite
of registration in order that it may have the effect contemplated in this article. We cannot agree with this
contention. It could not have been the intention of the legislator to base the preferential right secured under this
article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this
section would open 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 public record presupposes the good faith of him who enters such inscription;
and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot
accrue under an inscription "in bad faith," to the benefit of the person who thus makes the inscription.
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 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
knowledge of the previous sale, the question is to be decided in accordance with the following
paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title of conveyance of ownership of
the real property that is first recorded in the registry shall have preference, this provision must always
be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not
have wished to strike it out and to sanction bad faith, just to comply with a mere formality 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.)

Republic of the Philippines

The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale SUPREME COURT
and inscribed his title in the land registry, was duly notified that the machinery company had bought the building Manila
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 FIRST DIVISION
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 G.R. No. L-55729 March 28, 1983
certificate of title must be held to have been tainted with the same defect.
ANTONIO PUNSALAN, JR., petitioner,
Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff vs.
was not made in good faith, we should not be understood as questioning, in any way, the good faith and REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO A. ORTIZ, respondents.
genuineness of the plaintiff's claim against the "Compaia 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
Benjamin S. Benito & Associates for petitioner.
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 the sheriff's sale, he Expedito Yummul for private respondent.
considered that he was doing no more than he had a right to do under all the circumstances, and it is highly
possible and even probable that he thought at that time that he would be able to maintain his position in a
contest with the machinery company. There was no collusion on his part with the common debtor, and no
thought of the perpetration of a fraud upon the rights of another, in the ordinary sense of the word. He may have
hoped, and 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 confirmed his unfounded hopes, no one could question the MELENCIO-HERRERA, J.:
legality of the propriety of the course he adopted.
The sole issue presented by petitioner for resolution is whether or not respondent Court erred in denying the
But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed Motion to Set Case for Pre-trial with respect to respondent Remedios Vda. de Lacsamana as the case had been
the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery dismissed on the ground of improper venue upon motion of co-respondent Philippine National Bank (PNB).
company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for
value. He took the risk and must stand by the consequences; and it is in this sense that we find that he was not a It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a parcel of land consisting of
purchaser in good faith. 340 square meters situated in Bamban, Tarlac. In 1963, petitioner mortgaged said land to respondent PNB
(Tarlac Branch) in the amount of P10,000.00, but for failure to pay said amount, the property was foreclosed on
One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has December 16, 1970. Respondent PNB (Tarlac Branch) was the highest bidder in said foreclosure proceedings.
acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same However, the bank secured title thereto only on December 14, 1977.
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 him with the defects in the title of his vendor. A purchaser In the meantime, in 1974, while the properly was still in the alleged possession of petitioner and with the alleged
cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted acquiescence of respondent PNB (Tarlac Branch), and upon securing a permit from the Municipal Mayor,
in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that petitioner constructed a warehouse on said property. Petitioner declared said warehouse for tax purposes for
such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's which he was issued Tax Declaration No. 5619. Petitioner then leased the warehouse to one Hermogenes Sibal
title, will not make him an innocent purchaser for value, if afterwards develops that the title was in fact defective, for a period of 10 years starting January 1975.
and it appears that he had such notice of the defects as would have led to its discovery had he acted with that
measure of precaution which may reasonably be acquired of a prudent man in a like situation. Good faith, or lack
of it, is in its analysis a question of intention; but in ascertaining the intention by which one is actuated on a given On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac Branch) and respondent
occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the Lacsamana over the property. This contract was amended on July 31, 1978, particularly to include in the sale,
inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," the building and improvement thereon. By virtue of said instruments, respondent - Lacsamana secured title over
which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person the property in her name (TCT No. 173744) as well as separate tax declarations for the land and building. 1
on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the
courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible,
tangible fact that can be seen or touched, but rather a state or condition of mind which can only be judged of by On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with Damages" against
actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 herein respondents PNB and Lacsamana before respondent Court of First Instance of Rizal, Branch XXXI,
La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.) Quezon City, essentially impugning the validity of the sale of the building as embodied in the Amended Deed of
Sale. In this connection, petitioner alleged:

We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in
the court below should be affirmed with costs of this instance against the appellant. So ordered. xxx xxx xxx

Arellano, C.J., Johnson, Araullo, Street and Malcolm, JJ., concur. 22. That defendant, Philippine National Bank, through its Branch Manager ... by virtue of
Torres, Avancea and Fisher, JJ., took no part. the request of defendant ... executed a document dated July 31, 1978, entitled

PROPERTY 1ST BATCH

 Amendment to Deed of Absolute Sale ... wherein said defendant bank as Vendor sold to
defendant Lacsamana the building owned by the plaintiff under Tax Declaration No.
5619, notwithstanding the fact that said building is not owned by the bank either by virtue
of the public auction sale conducted by the Sheriff and sold to the Philippine National
Bank or by virtue of the Deed of Sale executed by the bank itself in its favor on
September 21, 1977 ...;
23. That said defendant bank fraudulently mentioned ... that the sale in its favor should
likewise have included the building, notwithstanding no legal basis for the same and
despite full knowledge that the Certificate of Sale executed by the sheriff in its favor ...
only limited the sale to the land, hence, by selling the building which never became the
property of defendant, they have violated the principle against 'pactum commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana be declared null and
void and that damages in the total sum of P230,000.00, more or less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative defense of lack of cause of
action in that she was a purchaser for value and invoked the principle in Civil Law that the "accessory follows the
principal". 3
In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for Pre-trial as the case
was already dismissed in the previous Orders of April 25, 1980 and September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due course.
We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable or real property as provided in article 415(l)
of the Civil Code. 6 Buildings are always immovable under the Code. 7 A building treated separately from the
land on which it stood is immovable property and the mere fact that the parties to a contract seem to have dealt
with it separate and apart from the land on which it stood in no wise changed its character as immovable
property. 8
While it is true that petitioner does not directly seek the recovery of title or possession of the property in question,
his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of
the building which, under the law, is considered immovable property, the recovery of which is petitioner's primary
objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does
not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real
property. It is a real action. 9

On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue was improperly laid
considering that the building was real property under article 415 (1) of the New Civil Code and therefore section Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue (Section 2,
2(a) of Rule 4 should apply. 4 Rule 4) 10, which was timely raised (Section 1, Rule 16) 11.

Opposing said Motion to Dismiss, petitioner contended that the action for annulment of deed of sale with
damages is in the nature of a personal action, which seeks to recover not the title nor possession of the property
but to compel payment of damages, which is not an action affecting title to real property.
On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as follows:
Petitioner's other contention that the case should proceed in so far as respondent Lacsamana is concerned as
she had already filed an Answer, which did not allege improper venue and, therefore, issues had already been
joined, is likewise untenable. Respondent PNB is an indispensable party as the validity of the Amended Contract
of Sale between the former and respondent Lacsamana is in issue. It would, indeed, be futile to proceed with the
case against respondent Lacsamana alone.

WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case by petitioner Antonio
Acting upon the 'Motion to Dismiss' of the defendant Philippine National Bank dated Punsalan, Jr. in the proper forum.
March 13, 1980, considered against the plaintiff's opposition thereto dated April 1, 1980,
including the reply therewith of said defendant, this Court resolves to DISMISS the
plaintiff's complaint for improper venue considering that the plaintiff's complaint which Costs against petitioner.
seeks for the declaration as null and void, the amendment to Deed of Absolute Sale
executed by the defendant Philippine National Bank in favor of the defendant Remedios
SO ORDERED.
T. Vda. de Lacsamana, on July 31, 1978, involves a warehouse allegedly owned and
constructed by the plaintiff on the land of the defendant Philippine National Bank situated
in the Municipality of Bamban, Province of Tarlac, which warehouse is an immovable Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., JJ., concur.
property pursuant to Article 415, No. 1 of the New Civil Code; and, as such the action of
the plaintiff is a real action affecting title to real property which, under Section 2, Rule 4 of
the New Rules of Court, must be tried in the province where the property or any part
thereof lies. 5
Footnotes
In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the argument that the action to
annul does not involve ownership or title to property but is limited to the validity of the deed of sale and
emphasized that the case should proceed with or without respondent PNB as respondent Lacsamana had 1 Exhibits "R" and "U", Original Records.
already filed her Answer to the Complaint and no issue on venue had been raised by the latter.
2 pp. 17-21, Rollo.
On September 1, 1980,.respondent Court denied reconsideration for lack of merit.
3 pp, 22-25, Ibid.
Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent Lacsamana was concerned, as the
issues had already been joined with the filing of respondent Lacsamana's Answer. 4 pp. 26 -28, Ibid.

5 p. 35, Ibid.

PROPERTY 1ST BATCH

 6 ART. 415. The following are immovable property. (1) Land, buildings, roads and date she executed a document in the form of a chattel mortgage, purporting to convey to the petitioner by way of
constructions of all kinds adhered to the soil; mortgage both the leasehold interest in said lot and the building which stands thereon.

xxx The clauses in said document describing the property intended to be thus mortgage are expressed in the
following words:
7 3 Manresa 20.
Now, therefore, the mortgagor hereby conveys and transfer to the mortgage, by way of mortgage,
the following described personal property, situated in the City of Manila, and now in possession of
8 Leung Yee vs. Strong Machinery Co., 37 Phil. 644 (1918). the mortgagor, to wit:

9 Gavieres vs. Sanchez, et a]. 94 Phil. 760, (1954); Torres vs. J.M. Tuason & Co., 12 (1) All of the right, title, and interest of the mortgagor in and to the contract of lease hereinabove
SCRA 174 (1964); De Jesus vs. Coloso, 1 SCRA 272 (1961) referred to, and in and to the premises the subject of the said lease;

10 Section 2. Venue in Courts of First Instance.Actions affecting title, to or for recovery (2) The building, property of the mortgagor, situated on the aforesaid leased premises.
of possession or for partition or condemnation of, or foreclosure of mortgage on, real
property, shall be commenced and tried in the province where the property or any part
thereof Lies (Rule 4, Rules of Court). After said document had been duly acknowledge and delivered, the petitioner caused the same to be presented
to the respondent, Joaquin Jaramillo, as register of deeds of the City of Manila, for the purpose of having the
same recorded in the book of record of chattel mortgages. Upon examination of the instrument, the respondent
11 Section 1. Grounds. Within the time for pleading a motion to dismiss the action may was of the opinion that it was not a chattel mortgage, for the reason that the interest therein mortgaged did not
be made on any of the following grounds: appear to be personal property, within the meaning of the Chattel Mortgage Law, and registration was refused
on this ground only.
xxx
We are of the opinion that the position taken by the respondent is untenable; and it is his duty to accept the
proper fee and place the instrument on record. The duties of a register of deeds in respect to the registration of
c) That venue is improperly laid; (Rule 16)
chattel mortgage are of a purely ministerial character; and no provision of law can be cited which confers upon
him any judicial or quasi-judicial power to determine the nature of any document of which registration is sought
as a chattel mortgage.
Republic of the Philippines
SUPREME COURT The original provisions touching this matter are contained in section 15 of the Chattel Mortgage Law (Act No.
Manila 1508), as amended by Act No. 2496; but these have been transferred to section 198 of the Administrative Code,
where they are now found. There is nothing in any of these provisions conferring upon the register of deeds any
EN BANC authority whatever in respect to the "qualification," as the term is used in Spanish law, of chattel mortgage. His
duties in respect to such instruments are ministerial only. The efficacy of the act of recording a chattel mortgage
consists in the fact that it operates as constructive notice of the existence of the contract, and the legal effects of
G.R. No. L-20329 March 16, 1923 the contract must be discovered in the instrument itself in relation with the fact of notice. Registration adds
nothing to the instrument, considered as a source of title, and affects nobody's rights except as a specifies of
notice.
THE STANDARD OIL COMPANY OF NEW YORK, petitioner,
vs.
JOAQUIN JARAMILLO, as register of deeds of the City of Manila, respondent. Articles 334 and 335 of the Civil Code supply no absolute criterion for discriminating between real property and
personal property for purpose of the application of the Chattel Mortgage Law. Those articles state rules which,
considered as a general doctrine, are law in this jurisdiction; but it must not be forgotten that under given
Ross, Lawrence and Selph for petitioner. conditions property may have character different from that imputed to it in said articles. It is undeniable that the
City Fiscal Revilla and Assistant City Fiscal Rodas for respondent. parties to a contract may by agreement treat as personal property that which by nature would be real property;
and it is a familiar phenomenon to see things classed as real property for purposes of taxation which on general
principle might be considered personal property. Other situations are constantly arising, and from time to time
STREET, J.: are presented to this court, in which the proper classification of one thing or another as real or personal property
may be said to be doubtful.
This cause is before us upon demurrer interposed by the respondent, Joaquin Jaramillo, register of deeds of the
City of Manila, to an original petition of the Standard Oil Company of New York, seeking a The point submitted to us in this case was determined on September 8, 1914, in an administrative ruling
peremptory mandamus to compel the respondent to record in the proper register a document purporting to be a promulgated by the Honorable James A. Ostrand, now a Justice of this Court, but acting at that time in the
chattel mortgage executed in the City of Manila by Gervasia de la Rosa, Vda. de Vera, in favor of the Standard capacity of Judge of the fourth branch of the Court of First Instance of the Ninth Judicial District, in the City of
Oil Company of New York. Manila; and little of value can be here added to the observations contained in said ruling. We accordingly quote
therefrom as follows:
It appears from the petition that on November 27, 1922, Gervasia de la Rosa, Vda. de Vera, was the lessee of a
parcel of land situated in the City of Manila and owner of the house of strong materials built thereon, upon which It is unnecessary here to determine whether or not the property described in the document in
question is real or personal; the discussion may be confined to the point as to whether a register of

PROPERTY 1ST BATCH

 deeds has authority to deny the registration of a document purporting to be a chattel mortgage and
executed in the manner and form prescribed by the Chattel Mortgage Law.
Then, after quoting section 5 of the Chattel Mortgage Law (Act No. 1508), his Honor continued:
Based principally upon the provisions of section quoted the Attorney-General of the Philippine
Islands, in an opinion dated August 11, 1909, held that a register of deeds has no authority to pass
upon the capacity of the parties to a chattel mortgage which is presented to him for record. A
fortiori a register of deeds can have no authority to pass upon the character of the property sought to
be encumbered by a chattel mortgage. Of course, if the mortgaged property is real instead of
personal the chattel mortgage would no doubt be held ineffective as against third parties, but this is a
question to be determined by the courts of justice and not by the register of deeds.
In Leung Yee vs. Frank L. Strong Machinery Co. and Williamson (37 Phil., 644), this court held that where the
interest conveyed is of the nature of real, property, the placing of the document on record in the chattel mortgage
register is a futile act; but that decision is not decisive of the question now before us, which has reference to the
function of the register of deeds in placing the document on record.
In the light of what has been said it becomes unnecessary for us to pass upon the point whether the interests
conveyed in the instrument now in question are real or personal; and we declare it to be the duty of the register
of deeds to accept the estimate placed upon the document by the petitioner and to register it, upon payment of
the proper fee.
The demurrer is overruled; and unless within the period of five days from the date of the notification hereof, the
respondent shall interpose a sufficient answer to the petition, the writ of mandamus will be issued, as prayed, but
without costs. So ordered.
Araullo, C.J., Malcolm, Avancea, Ostrand, Johns, and Romualdez, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-40411 August 7, 1935
DAVAO SAW MILL CO., INC., plaintiff-appellant,
vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in 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 consequence absolved
the defendants from the complaint, with costs against the plaintiff.
PROPERTY 1ST BATCH
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, the land upon which the business was conducted belonged to another person. On the land the sawmill
company erected a building which housed the machinery used by it. Some of the implements thus used were
clearly personal property, the conflict concerning machines which were placed and mounted on foundations of
cement. In the contract of lease between the sawmill company and the owner of the land there appeared the
following provision:
That on the expiration of the period agreed upon, all the improvements and buildings introduced and
erected by the party of the second part shall pass to the exclusive ownership of the party of the first
part without any obligation on its part to pay any amount for said improvements and buildings; also,
in the event the party of the second part should leave or abandon the land leased before the time
herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of
the first part as though the time agreed upon had expired: Provided, however, That the machineries
and accessories are not included in the improvements which will pass to the party of the first part on
the expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co.,
Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in
that action; a writ of execution issued thereon, and the properties now in 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 the record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and
the defendant herein having consummated the sale, proceeded to take possession of the machinery and other
properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao 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. One of such persons is the appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx xxx xxx
5. Machinery, liquid containers, instruments or implements intended by the owner of any building or
land for use in connection with any industry or trade being carried on therein and which are expressly
adapted to meet the requirements of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt
that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have 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 upon the property the
character determined by the parties. In this connection the decision of this court in the case of Standard Oil Co.
of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a
situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is
machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in
connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be
returned to the lessee on the expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the 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 agent of the owner. In the opinion written by Chief Justice
White, whose knowledge of the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and character of the property from the point of
view of the rights of Valdes and 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 machinery placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and buildings, but
also attributes 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 be immovable either by their own nature or by their destination or the object to which they are
applicable." Numerous illustrations are given in the fifth subdivision of section 335, which is as
follows: "Machinery, vessels, instruments or implements intended by the 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 to meet the needs of the said industry or works." (See also Code 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 are dealing machinery placed in
the plant it is plain, both under the provisions of the Porto Rican Law and of the Code Napoleon,
that machinery which is movable in its nature only becomes immobilized when placed in a plant by
the owner of the property or plant. Such result would not be accomplished, therefore, by the placing
of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and
decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction
rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the
possession or enjoyment of property is not presumed by the law to have applied movable property
belonging to him so as to deprive him of it by causing it by an act of immobilization to become the
property of another. It follows that abstractly speaking the machinery put by the Altagracia Company
in the plant belonging to Sanchez did not lose its character of movable property and become
immovable by destination. But in the concrete immobilization took place because of the express
provisions of the lease under which the Altagracia held, since the lease in substance required the
putting in of improved machinery, deprived the tenant of any right to charge against the lessor the
cost such machinery, and it was expressly stipulated that the machinery so put in should become a
part of the plant belonging to the owner without compensation to the lessee. Under such conditions
the tenant in putting in the machinery was acting but as the agent of the owner in compliance with
the obligations resting upon him, and the immobilization of the machinery which resulted arose in
legal effect from the act of the owner in giving by contract a permanent destination to the machinery.
xxx xxx xxx
The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the
Altagracia Company, being, 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 legal sense conflict with the claim of Valdes, since as to him the property was a
part of the realty which, as the result of his obligations under the lease, he could not, for the purpose
of collecting his debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance
to be paid by the appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
PROPERTY 1ST BATCH
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-15334 January 31, 1964
BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF QUEZON
CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for petitioners.
Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
From the stipulation of facts and evidence adduced during the hearing, the following appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of
Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light, heat
and power system in the City of Manila and its suburbs to the person or persons making the most favorable bid.
Charles M. Swift was awarded the said franchise on March 1903, the terms and conditions of which were
embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila Electric Co. (Meralco for
short), became the transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is
transmitted to the City of Manila by means of electric transmission wires, running from the province of Laguna to
the said City. These electric transmission wires which carry high voltage current, are fastened to insulators
attached on steel towers constructed by respondent at intervals, from its hydro-electric plant in the province of
Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel towers within Quezon
City, on land belonging to it. A photograph of one of these steel towers is attached to the petition for review,
marked Annex A. Three steel towers were inspected by the lower court and parties and the following were the
descriptions given there of by said court:
The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. The findings were
as follows: the ground around one of the four posts was excavated to a depth of about eight (8) feet,
with an opening of about one (1) meter in diameter, decreased to about a quarter of a meter as it we
deeper until it reached the bottom of the post; at the bottom of the post were two parallel steel bars
attached to the leg means of bolts; the tower proper was attached to the leg three bolts; with two
cross metals to prevent mobility; there was no concrete foundation but there was adobe stone
underneath; as the bottom of the excavation was covered with water about three inches high, it could
not be determined with certainty to whether said adobe stone was placed purposely or not, as the
place abounds with this kind of stone; and the tower carried five high voltage wires without cover or
any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by
the petitioner approximate more than one kilometer from the first tower. As in the first tower, the
ground around one of the four legs was excavate from seven to eight (8) feet deep and one and a
half (1-) meters wide. There being very little water at the bottom, it was seen that there was no
concrete foundation, but there soft adobe beneath. The leg was likewise provided with two parallel
steel bars bolted to a square metal frame also bolted to each corner. Like the first one, the second
tower is made up of metal rods joined together by means of bolts, so that by unscrewing the bolts,
the tower could be dismantled and reassembled.
 The third tower examined is located along Kamias Road, Quezon City. As in the first two towers
given above, the ground around the two legs of the third tower was excavated to a depth about two
or three inches beyond the outside level of the steel bar foundation. It was found that there was no
concrete foundation. Like the two previous ones, the bottom arrangement of the legs thereof were
found to be resting on soft adobe, which, probably due to high humidity, looks like mud or clay. It was
also found that the square metal frame supporting the legs were not attached to any material or
foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real
property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these
declarations, an appeal was taken by respondent to the Board of Assessment Appeals of Quezon City, which
required respondent to pay the amount of P11,651.86 as real property tax on the said steel towers for the years
1952 to 1956. Respondent paid the amount under protest, and filed a petition for review in the Court of Tax
Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the cancellation of the said
tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of
P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant petition for review
was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles"
which are declared exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel towers
are personal properties and are not subject to real property tax; and (3) the City Treasurer of Quezon City is held
responsible for the refund of the amount paid. These are assigned as errors by the petitioner in the brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators), machinery and personal property as other
persons are or may be hereafter required by law to pay ... Said percentage shall be due and payable
at the time stated in paragraph nineteen of Part One hereof, ... and shall be in lieu of all taxes and
assessments of whatsoever nature and by whatsoever authority upon the privileges, earnings,
income, franchise, and poles, wires, transformers, and insulators of the grantee from which taxes
and assessments the grantee is hereby expressly exempted. (Par. 9, Part Two, Act No. 484
Respondent's Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as typically the
stem of a small tree stripped of its branches; also by extension, a similar typically cylindrical piece or object of
metal or the like". The term also refers to "an upright standard to the top of which something is affixed or by
which something is supported; as a dovecote set on a pole; telegraph poles; a tent pole; sometimes, specifically
a vessel's master (Webster's New International Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of
Manila, may be seen cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co. which are made
of two steel bars joined together by an interlacing metal rod. They are called "poles" notwithstanding the fact that
they are no made of wood. It must be noted from paragraph 9, above quoted, that the concept of the "poles" for
which exemption is granted, is not determined by their place or location, nor by the character of the electric
current it carries, nor the material or form of which it is made, but the use to which they are dedicated. In
accordance with the definitions, pole is not restricted to a long cylindrical piece of wood or metal, but includes
"upright standards to the top of which something is affixed or by which something is supported. As heretofore
described, respondent's steel supports consists of a framework of four steel bars or strips which are bound by
steel cross-arms atop of which are cross-arms supporting five high voltage transmission wires (See Annex A)
and their sole function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a novelty.
Several courts of last resort in the United States have called these steel supports "steel towers", and they
denominated these supports or towers, as electric poles. In their decisions the words "towers" and "poles" were
used interchangeably, and it is well understood in that jurisdiction that a transmission tower or pole means the
same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law provided that wires shall be
constructed upon suitable poles, this term was construed to mean either wood or metal poles and in view of the
PROPERTY 1ST BATCH
land being subject to overflow, and the necessary carrying of numerous wires and the distance between poles,
the statute was interpreted to include towers or poles. (Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224;
32-A Words and Phrases, p. 365.)
The term "poles" was also used to denominate the steel supports or towers used by an association used to
convey its electric power furnished to subscribers and members, constructed for the purpose of fastening high
voltage and dangerous electric wires alongside public highways. The steel supports or towers were made of iron
or other metals consisting of two pieces running from the ground up some thirty feet high, being wider at the
bottom than at the top, the said two metal pieces being connected with criss-cross iron running from the bottom
to the top, constructed like ladders and loaded with high voltage electricity. In form and structure, they are like
the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company engaged in the generation of
hydro-electric power generated from its plant to the Tower of Oxford and City of Waterbury. These steel towers
are about 15 feet square at the base and extended to a height of about 35 feet to a point, and are embedded in
the cement foundations sunk in the earth, the top of which extends above the surface of the soil in the tower of
Oxford, and to the towers are attached insulators, arms, and other equipment capable of carrying wires for the
transmission of electric power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met his death was built for the
purpose of supporting a transmission wire used for carrying high-tension electric power, but claimed that the
steel towers on which it is carried were so large that their wire took their structure out of the definition of a pole
line. It was held that in defining the word pole, one should not be governed by the wire or material of the support
used, but was considering the danger from any elevated wire carrying electric current, and that regardless of the
size or material wire of its individual members, any continuous series of structures intended and used solely or
primarily for the purpose of supporting wires carrying electric currents is a pole line (Inspiration Consolidation
Cooper Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's
franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the
franchise was granted. The poles as contemplated thereon, should be understood and taken as a part of the
electric power system of the respondent Meralco, for the conveyance of electric current from the source thereof
to its consumers. If the respondent would be required to employ "wooden poles", or "rounded poles" as it used to
do fifty years back, then one should admit that the Philippines is one century behind the age of space. It should
also be conceded by now that steel towers, like the ones in question, for obvious reasons, can better effectuate
the purpose for which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question are not embraced within the
term poles, the logical question posited is whether they constitute real properties, so that they can be subject to
a real property tax. The tax law does not provide for a definition of real property; but Article 415 of the Civil Code
does, by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object;
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried in a building or on a piece of land, and which tends directly to
meet the needs of the said industry or works;
 xxx xxx xxx
The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because
they do not constitute buildings or constructions adhered to the soil. They are not construction analogous to
buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely
attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and
moved from place to place. They can not be included under paragraph 3, as they are not attached to an
immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration
upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal
strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled
by screwing the same. These steel towers or supports do not also fall under paragraph 5, for they are not
machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or
works on the land. Petitioner is not engaged in an industry or works in the land in which the steel supports or
towers are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the sum of
P11,651.86, despite the fact that Quezon City is not a party to the case. It is argued that as the City Treasurer is
not the real party in interest, but Quezon City, which was not a party to the suit, notwithstanding its capacity to
sue and be sued, he should not be ordered to effect the refund. This question has not been raised in the court
below, and, therefore, it cannot be properly raised for the first time on appeal. The herein petitioner is indulging
in legal technicalities and niceties which do not help him any; for factually, it was he (City Treasurer) whom had
insisted that respondent herein pay the real estate taxes, which respondent paid under protest. Having acted in
his official capacity as City Treasurer of Quezon City, he would surely know what to do, under the
circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Regala, JJ., concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.
PROPERTY 1ST BATCH
DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court)
promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of
Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI, issued in Civil
Case No. 36040, as wen as the resolution dated September 22, 1981 of the said appellate court, denying
petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance
Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables
with the former under a Receivable Purchase Agreement. To secure the collection of the receivables assigned,
private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a machinery
described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into
private respondent's premises and was not able to effect the seizure of the aforedescribed machinery. Petitioner
thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal, Branch VI, docketed
as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which
was however subsequently restrained upon private respondent's filing of a motion for reconsideration. After
several incidents, the lower court finally issued on February 11, 1981, an order lifting the restraining order for the
enforcement of the writ of seizure and an order to break open the premises of private respondent to enforce said
writ. The lower court reaffirmed its stand upon private respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and
removed the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent,
set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to
said Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel
mortgage, because it is a real property pursuant to Article 415 of the new Civil Code, the same being attached to
the ground by means of bolts and the only way to remove it from respondent's plant would be to drill out or
destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ was to take the main
drive motor of said machinery. The appellate court rejected petitioner's argument that private respondent is
estopped from claiming that the machine is real property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought
the case to this Court for review by writ of certiorari. It is contended by private respondent, however, that the
instant petition was rendered moot and academic by petitioner's act of returning the subject motor drive of
respondent's machinery after the Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made
itself unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of
Appeals decision, as shown by the receipt duly signed by respondent's representative. 1 Considering that
petitioner has reserved its right to question the propriety of the Court of Appeals' decision, the contention of
private respondent that this petition has been mooted by such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or
personal property from the point of view of the parties, with petitioner arguing that it is a personality, while the
respondent claiming the contrary, and was sustained by the appellate court, which accordingly held that the
chattel mortgage constituted thereon is null and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking
through Justice J.B.L. Reyes, ruled:
 Although there is no specific statement referring to the subject house as personal SO ORDERED.
property, yet by ceding, selling or transferring a property by way 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 Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin JJ., concur.
inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented
lot to which defendants-appellants merely had a temporary right as lessee, and although
Abad Santos, J., concurs in the result.
this can not in itself alone determine the status of the property, it does so when combined
with other factors to sustain the interpretation that the parties, particularly the mortgagors,
intended to treat the house as personality. Finally, unlike in the Iya cases, Lopez vs.
Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery &
Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the
defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity Republic of the Philippines
of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the SUPREME COURT
herein defendants-appellants, having treated the subject house as personality. Manila

Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate EN BANC
court did, the present case from the application of the abovequoted pronouncement. If a house of strong
materials, like what was involved in the above Tumalad case, may be considered as personal property for
purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no G.R. No. L-17870 September 29, 1962
innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable
in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This MINDANAO BUS COMPANY, petitioner,
is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.
vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on City, respondents.
the fact that the house involved therein was built on a land that did not belong to the owner of such house. But
the law makes no distinction with respect to the ownership of the land on which the house is built and We should
Binamira, Barria and Irabagon for petitioner.
not lay down distinctions not contemplated by law.
Vicente E. Sabellina for respondents.

It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is
indicative of intention and impresses upon the property the character determined by the parties. As stated
in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by LABRADOR, J.:
agreement treat as personal property that which by nature would be real property, as long as no interest of third
parties would be prejudiced thereby.
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that
the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair
Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed
equipment hereunder referred to.
that the machinery in suit be considered as personal property but was merely required and dictated on by herein
petitioner to sign a printed form of chattel mortgage which was in a blank form at the time of signing. This
contention lacks persuasiveness. As aptly pointed out by petitioner and not denied by the respondent, the status Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned
of the subject machinery as movable or immovable was never placed in issue before the lower court and the equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the
Court of Appeals except in a supplemental memorandum in support of the petition filed in the appellate court. same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed
Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can with the Court of Tax Appeals a petition for the review of the assessment.
only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil
Code, by a proper action in court. There is nothing on record to show that the mortgage has been annulled.
Neither is it disclosed that steps were taken to nullify the same. On the other hand, as pointed out by petitioner In the Court of Tax Appeals the parties submitted the following stipulation of facts:
and again not refuted by respondent, the latter has indubitably benefited from said contract. Equity dictates that
one should not benefit at the expense of another. Private respondent could not now therefore, be allowed to
impugn the efficacy of the chattel mortgage after it has benefited therefrom, Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:

From what has been said above, the error of the appellate court in ruling that the questioned machinery is real,
not personal property, becomes very apparent. Moreover, the case of Machinery and Engineering Supplies, Inc.
v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable to the case at bar, the nature of the
machinery and equipment involved therein as real properties never having been disputed nor in issue, and they
were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more nearly perfect parity
with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set
aside, and the Orders of the lower court are hereby reinstated, with costs against the private respondent.
1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor
trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public
Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices
and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe,
Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties are the
following:

PROPERTY 1ST BATCH

 (a) Hobart Electric Welder Machine, appearing in the attached photograph, marked
Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in the attached photograph,
marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex
"G".
4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached
photographs which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor
trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed
therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be
serviceable in the TPU land transportation business it operates;
6. That these machineries have never been or were never used as industrial equipments to produce
finished products for sale, nor to repair machineries, parts and the like offered to the general public
indiscriminately for business or commercial purposes for which petitioner has never engaged in, to
date.1awphl.nt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having denied a motion
for reconsideration, petitioner brought the case to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that the
questioned assessments are valid; and that said tools, equipments or machineries are immovable
taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and
holding that pursuant thereto the movable equipments are taxable realties, by reason of their being
intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent City
Assessor's power to assess and levy real estate taxes on machineries is further restricted by section
31, paragraph (c) of Republic Act No. 521; and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with
paragraph 5 of Article 415 of the New Civil Code which provides:
Art. 415. The following are immovable properties:
PROPERTY 1ST BATCH
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They
can be moved around and about in petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61
Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to
"machinery, liquid containers, instruments or implements intended by the owner of any building or
land for use in connection with any industry or trade being carried on therein and which are expressly
adapted to meet the requirements of such trade or industry."
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 therein, for its sugar and industry, converted
them into real property by reason of their purpose, it cannot be said that their incorporation therewith
was not permanent in character because, as essential and principle elements of a sugar central,
without them the sugar central would be unable to function or carry on the industrial purpose for
which it was established. Inasmuch as the central is permanent in character, the necessary
machinery and equipment installed for carrying on the sugar industry for which it has been
established must necessarily be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal
elements" of an industry or works without which such industry or works would be "unable to function or carry on
the industrial purpose for which it was established." We may here distinguish, therefore, those movable which
become immobilized by destination because they are essential and principal elements in the industry for those
which may not be so considered immobilized because they are merely incidental, not essential and principal.
Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely
incidentals and are not and should not be considered immobilized by destination, for these businesses can
continue or carry on their functions without these equity comments. Airline companies use forklifts, jeep-wagons,
pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature.
On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable
in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding
machines which they usually own and use and are found within their industrial compounds are merely incidental
and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and
principle municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks.
They are merely incidentals acquired as movables and used only for expediency to facilitate and/or improve
its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on,
without such equipments, before the war. The transportation business could be carried on without the repair or
service shop if its rolling equipment is repaired or serviced in another shop belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an
industry or works which may be carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works; (Civil Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the industry or works be
carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the
"machinery, liquid containers, and instruments or implements" are found in a building constructed on the land. A
sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in
the land or building.
But in the case at bar the equipments in question are destined only to repair or service the transportation
business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said
equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to
the petitioner's transportation business, and petitioner's business is not carried on in a building, tenement or on a
specified land, so said equipment may not be considered real estate within the meaning of Article 415 (c) of the
Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question
declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs.
So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-50466 May 31, 1982
CALTEX (PHILIPPINES) INC., petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents.
AQUINO, J.:
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 machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks,
gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and
tireflators. The city assessor described the said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is erected, a water
tank if there is any is placed in one corner of the lot, car hoists are placed in an adjacent
shed, an air compressor is attached in the wall of the shed or at the concrete wall fence.
PROPERTY 1ST BATCH
The controversial underground tank, depository of gasoline or crude oil, is dug deep
about six feet more or less, a few meters away from the shed. This is done to prevent
conflagration because gasoline and other combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline pump and the
gasoline pump is commonly placed or constructed under the shed. The footing of the
pump is a cement pad and this cement pad is imbedded in the pavement under the shed,
and evidence that the gasoline underground tank is attached and connected to the shed
or building through the pipe to the pump and the pump is attached and affixed to the
cement pad and pavement covered by the roof of the building or shed.
The building or shed, the elevated water tank, the car hoist under a separate shed, the air
compressor, the underground gasoline tank, neon lights signboard, concrete fence and
pavement and the lot where they are all placed or erected, all of them used in the
pursuance of the gasoline service station business formed the entire gasoline service-
station.
As to whether the subject properties are attached and affixed to the tenement, it is clear
they are, for the tenement we consider in this particular case are (is) the pavement
covering the entire lot which was constructed by the owner of the gasoline station and the
improvement which holds all the properties under question, they are attached and affixed
to the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as well as all the
improvements, machines, equipments and apparatus are allowed by Caltex (Philippines)
Inc. ...
The underground gasoline tank is attached to the shed by the steel pipe to the pump, so
with the water tank it is connected also by a steel pipe to the pavement, then to the
electric motor which electric motor is placed under the shed. So to say that the gasoline
pumps, water pumps and underground tanks are outside of the service station, and to
consider only the building as the service station is grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station 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 machines and equipment in good condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of the machines and
equipment installed therein. Caltex retains the ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station 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 Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata as chairman, Acting Secretary of Justice
Catalino Macaraig, Jr. and Secretary of Local Government and Community Development Jose Roo, held in its
decision of June 3, 1977 that the said machines and equipment are real 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 415 and 416 of the Civil Code are
not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's place) in its resolution
of January 12, 1978, denying Caltex's motion for reconsideration, a copy of which was received by its lawyer on
April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision
and for a declaration that t he said machines and equipment are personal property not subject to realty tax (p.
16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate jurisdiction over this
case is not correct. When Republic act No. 1125 created the Tax Court in 1954, there was as yet no Central
Board of Assessment Appeals. Section 7(3) of that law in providing that the Tax Court had jurisdiction to review
by appeal decisions of provincial or city boards of assessment appeals had in mind the local boards of
assessment appeals but not the Central Board of Assessment Appeals which under the Real Property Tax Code
has appellate jurisdiction over decisions of the said local boards of assessment appeals and is, therefore, in the
same category as the Tax Court.
Section 36 of the Real Property Tax Code provides that the decision of the Central Board of Assessment
Appeals shall become final and executory after the lapse of fifteen days from the receipt of its decision by the
appellant. Within that fifteen-day period, a petition for reconsideration may be filed. The Code does not provide
for the review of the Board's decision by this Court.
Consequently, the only remedy available for seeking a review by this Court of the decision of the Central Board
of Assessment Appeals is the special civil action of certiorari, the recourse resorted to herein by Caltex
(Philippines), Inc.
The issue is whether the pieces of gas station equipment and machinery already enumerated are subject to
realty tax. This issue has to be resolved primarily under the provisions of the Assessment Law and the Real
Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings,
machinery, and other improvements" not specifically exempted in section 3 thereof. This provision is reproduced
with some modification in the Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax. There shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on real
property, such as land, buildings, machinery and other improvements affixed or attached
to real property not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements is a valuable addition made to property or an amelioration in its
condition, amounting to more than mere repairs or replacement of waste, costing labor or
capital and intended to enhance its value, beauty or utility or to adapt it for new or further
purposes.
m) Machinery shall embrace machines, mechanical contrivances, instruments,
appliances and apparatus attached to the real estate. It includes the physical facilities
available for production, as well as the installations and appurtenant service facilities,
together with all other equipment designed for or essential to its manufacturing, industrial
or agricultural purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by
Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station,
for without them the gas station would be useless, and which have been attached or affixed permanently to the
gas station site or embedded therein, are taxable improvements and machinery within the meaning of the
Assessment Law and the Real Property Tax Code.
Caltex invokes the rule 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
PROPERTY 1ST BATCH
having only a temporary right, unless such person acted as the agent of the owner (Davao Saw Mill Co. vs.
Castillo, 61 Phil 709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding machinery that becomes
real property by destination. In the Davao Saw Mills case the question was whether the machinery mounted on
foundations of cement and installed by the lessee on leased land should be regarded as real property
for purposes of execution of a judgment against the lessee. The sheriff treated the machinery as personal
property. This Court sustained the sheriff's action. (Compare with Machinery & Engineering Supplies, Inc. vs.
Court of Appeals, 96 Phil. 70, where in a replevin case machinery was treated as realty).
Here, the question is whether the gas station equipment and machinery permanently affixed by Caltex to its gas
station and pavement (which are indubitably taxable realty) should be subject to the realty tax. This question is
different from the issue raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes they might be considered
personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar phenomenon to see things classed as real
property for purposes of taxation which on general principle might be considered personal property" (Standard
Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila Electric Co., 119 Phil.
328, where Meralco's steel towers were considered poles within the meaning of paragraph 9 of its franchise
which exempts its poles from taxation. The steel towers were considered personalty because they were attached
to square metal frames by means of bolts and could be moved from place to place when unscrewed and
dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and 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 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretion in upholding the city
assessor's is imposition of the realty tax on Caltex's gas station and equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of Assessment Appeals are
affirmed. The petition for certiorari is dismissed for lack of merit. No costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.
Concepcion, Jr. and Abad Santos, JJ., took no part.
THIRD DIVISION
[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND
FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
 After agreeing to a contract stipulating that a real or immovable property be considered as
personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such
property is a proper subject of a writ of replevin obtained by the other contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision[1] of
the Court of Appeals (CA)[2] in CA-GR SP No. 47332 and its February 26, 1999
Resolution[3] denying reconsideration. The decretal portion of the CA Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated March
31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The writ of preliminary injunction issued on June
15, 1998 is hereby LIFTED.[4]
In its February 18, 1998 Order,[5] the Regional Trial Court (RTC) of Quezon City (Branch
218) issued a Writ of Seizure.[7] The March 18, 1998 Resolution[8] denied petitioners Motion for
[6]
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject machines were
personal property, and that they had only been leased, not 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.Observing that Petitioner Goquiolay was an experienced businessman who 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:
Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case below,
since the merits of the whole matter are 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 a full-blown trial, necessitating presentation of
evidence by both parties. The contract is being enforced by one, and [its] validity is attacked by the other a
matter x x x which respondent court is in the best position to determine.
Hence, this Petition.[11]

Special Protective Order, praying that the deputy sheriff be enjoined from seizing immobilized or
other real properties in (petitioners) factory in Cainta, Rizal and to return to their original place
whatever immobilized machineries or equipments he may have removed.[9] The Issues

In their Memorandum, petitioners submit the following issues for our consideration:

The Facts A. Whether or not the machineries purchased and imported by SERGS became real property by virtue of
immobilization.
[10]
The undisputed facts are summarized by the Court of Appeals as follows:

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 Leasing for short) filed with the RTC-QC
a complaint for [a] sum of money (Annex E), with an application for a writ of replevin docketed as Civil Case No. In the main, the Court will resolve whether the said machines are personal, not immovable,
Q-98-33500. property which may be a proper subject of a writ of replevin. As a preliminary matter, the Court will
also address briefly the procedural points raised by respondent.
On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent 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 Courts Ruling

On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized one The Petition is not meritorious.
machinery with [the] word that he [would] return for the other machineries.

On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the power of the
court to control the conduct of its officers and amend and control its processes, praying for a directive for the
sheriff to defer enforcement of the writ of replevin.
This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still personal and
therefore still subject to seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article
415 of the Civil Code, the parties agreement to the contrary notwithstanding. They argued that to give effect to
the agreement would be prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped
from treating these machineries as personal because the contracts in which the alleged agreement [were]
embodied [were] totally sham and farcical.
Preliminary Matter:Procedural Questions
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 alleges that the Petition erroneously
impleadedJudge Hilario Laqui as respondent.
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 Review on Certiorari.[13]
While Judge Laqui should not have been impleaded as a respondent,[14] substantial justice
requires that such lapse by itself should not warrant the dismissal of the present Petition. In this
light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui from the caption
of the present case.

On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining
properties. He was able to take two more, but was prevented by the workers from taking the rest.
Main Issue: Nature of the Subject Machinery

On April 7, 1998, they went to [the CA] via an original action for certiorari.

PROPERTY 1ST BATCH

 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 property. Serious policy
considerations, they argue, militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of
personal property only.[15] Section 3 thereof reads:
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 the personal property alleged to be wrongfully detained and requiring
the sheriff forthwith to take such property into his custody.
On the other hand, Article 415 of the Civil Code enumerates immovable or real property as
follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or
works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of
the said industry or works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the subjects of the Writ of Seizure were placed
by petitioners in the factory built on their own land. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence, although each of them was movable or
personal property on its own, all of them have become immobilized by destination because they
are essential and principal elements in the industry.[16] In that sense, petitioners are correct in
arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the
Civil Code.[17]
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.
The Court has held that contracting parties may validly stipulate that a real property be
consideredas personal.[18] After agreeing to such stipulation, they are consequently estopped from
claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily precluded
from denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the parties to treat
a house as a personal property because it had been made the subject of a chattel mortgage. The
Court ruled:
x x x. Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way 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 otherwise.
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills[20] also held that the machinery used in a factory and 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 portions of the Courts ruling are reproduced hereunder:
x x x. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as
personal property for purposes of 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 absolutely no reason why a machinery,
which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped from denying the existence of the
chattel mortgage.
PROPERTY 1ST BATCH
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 of the Agreement reads as
follows:[21]
12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the
PROPERTY or any part thereof may now be, or hereafter become, in any manner affixed or attached to or
embedded in, or permanently resting upon, real property or any building thereon, or attached in any manner to
what is permanent.
Clearly then, petitioners are estopped from denying the characterization of the subject
machines as personal property. Under the circumstances, they are proper subjects of the Writ of
Seizure.
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 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, there is no showing that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.[24]Submitting documents supposedly showing that they own the subject machines,
petitioners also argue in their Petition that the Agreement suffers from intrinsic ambiguity which
places in serious doubt the intention of the parties and the validity of the lease agreement
itself.[25] In their Reply to respondents Comment, they further allege that the Agreement is
invalid.[26]
These arguments are unconvincing. The validity and the nature of the contract are the lis
mota of the civil action pending before the RTC. A resolution of these questions, therefore, is
effectively a resolution of the merits of the case. Hence, they should be threshed out in the trial,
not in the proceedings involving the issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the policy under Rule 60
was that questions involving title to the subject property questions which petitioners are now
raising -- should be determined in the trial. In that case, the Court noted that the remedy of
defendants under Rule 60 was either to post a counter-bond or to question the sufficiency of the
plaintiffs bond. They were not allowed, however, to invoke the title to the subject property. The
Court ruled:
In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of seizure
(or delivery) on ground of 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 replevied, the policy apparently being that said matter should be ventilated and
determined only at the trial on the merits.[28]
Besides, these questions require a determination of facts and a presentation of 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]
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease 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 ironically been instituted by respondent. Accordingly, it
must be presumed valid and binding as the law between the parties.
 Makati Leasing and Finance Corporation[30] is also instructive on this point. In that case, the
Deed of Chattel Mortgage, which characterized the subject machinery as personal property, was
also assailed because respondent had allegedly been required to sign a printed form of chattel
mortgage which was in a blank form at the time of signing. The Court rejected the argument and
relied on the Deed, ruling as follows:
x x x. Moreover, even granting that the charge is true, such fact alone does 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 Code, by a proper action in court. There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify the same. x x x
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows these machineries to be seized, then its workers
would be out of work and thrown into the streets.[31] They also allege that the seizure would nullify
all efforts to rehabilitate the corporation.
Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed,
law and jurisprudence support its propriety. Verily, the above-mentioned consequences, if they
come true, should not be blamed on this Court, but on the petitioners for failing to avail themselves
of the remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision
states:
SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicants bond, or of the
surety or sureties thereon, he cannot immediately require the return of the property, but if he does not so object,
he may, at any time before the delivery of the property to the applicant, require 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 applicants affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the
payment of such sum to him as may be recovered against the adverse party, and by serving a copy bond on the
applicant.
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-30173 September 30, 1971
GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,
vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.
Castillo & Suck for plaintiffs-appellees.
PROPERTY 1ST BATCH
Jose Q. Calingo for defendants-appellants.
REYES, J.B.L., J.:
Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of
law are involved.
This case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case No.
43073, for ejectment. Having lost therein, defendants-appellants appealed to the court a quo (Civil Case No.
30993) which also rendered a decision against them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against
the defendants, ordering the latter to pay jointly and severally the former a monthly rent of
P200.00 on the house, subject-matter of this action, from March 27, 1956, to January 14,
1967, with interest at the legal rate from April 18, 1956, the filing of the complaint, until
fully paid, plus attorney's fees in the sum of P300.00 and to pay the costs.
It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage in favor
of plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo,
Manila, over Lot Nos. 6-B and 7-B, Block No. 2554, which were being rented from Madrigal & Company, Inc. The
mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The herein mortgage was
executed to guarantee a loan of P4,800.00 received from plaintiffs-appellees, payable within one year at 12%
per annum. The mode of payment was P150.00 monthly, starting September, 1955, up to July 1956, and the
lump sum of P3,150 was payable on or before August, 1956. It was also agreed that default in the payment of
any of the amortizations, would cause the remaining unpaid balance to becomeimmediately due and Payable
and
the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act
No. 3135, and for this purpose, the Sheriff of the City of Manila or any of his deputies is
hereby empowered and authorized to sell all the Mortgagor's property after the necessary
publication in order to settle the financial debts of P4,800.00, plus 12% yearly interest,
and attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March
1956, the house was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-appellees
were issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced
Civil Case No. 43073 in the municipal court of Manila, praying, among other things, that the house be vacated
and its possession surrendered to them, and for defendants-appellants to pay rent of P200.00 monthly from 27
March 1956 up to the time the possession is surrendered. 4 On 21 September 1956, the municipal court
rendered its decision
... ordering the defendants to vacate the premises described in the complaint; ordering
further to pay monthly the amount of P200.00 from March 27, 1956, until such (time that)
the premises is (sic) completely vacated; plus attorney's fees of P100.00 and the costs of
the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of the
chattel mortgage, claiming that they are still the owners of the house; but they waived the right to introduce
evidence, oral or documentary. Instead, they relied on their memoranda in support of their motion to dismiss,
predicated mainly on the grounds that: (a) the municipal court did not have jurisdiction to try and decide the case
because (1) the issue involved, is ownership, and (2) there was no allegation of prior possession; and (b) failure
to prove prior demand pursuant to Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the rent
for November, 1956 within the first 10 days of December, 1956 as ordered in the decision of the municipal court.
As a result, the court granted plaintiffs-appellees' motion for execution, and it was actually issued on 24 January
1957. However, the judgment regarding the surrender of possession to plaintiffs-appellees could not be
executed because the subject house had been already demolished on 14 January 1957 pursuant to the order of
the court in a separate civil case (No. 25816) for ejectment against the present defendants for non-payment of
rentals on the land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of
deposited rentals was denied for the reason that the liability therefor was disclaimed and was still being litigated,
and under Section 8, Rule 72, rentals deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which is
quoted earlier. The said decision was appealed by defendants to the Court of Appeals which, in turn, certified the
appeal to this Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which can be condensed into two questions,
namely: .
(a) Whether the municipal court from which the case originated had jurisdiction to
adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay rentals to the
plaintiffs during the period of one (1) year provided by law for the redemption of the
extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case
originated, and consequently, the appellate jurisdiction of the Court of First Instance a quo, on the theory that the
chattel mortgage is void ab initio; whence it would follow that the extrajudicial foreclosure, and necessarily the
consequent auction sale, are also void. Thus, the ownership of the house still remained with defendants-
appellants who are entitled to possession and not plaintiffs-appellees. Therefore, it is argued by defendants-
appellants, the issue of ownership will have to be adjudicated first in order to determine possession. lt is
contended further that ownership being in issue, it is the Court of First Instance which has jurisdiction and not the
municipal court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a)
that, their signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the
subject matter of the mortgage is a house of strong materials, and, being an immovable, it can only be the
subject of a real estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants' contentions as
not supported by evidence and accordingly dismissed the charge, 8 confirming the earlier finding of the municipal
court that "the defense of ownership as well as the allegations of fraud and deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a mere statement of the facts
which the party filing it expects to prove, but it is not evidence; 11 and further, that when the question to be
determined is one of title, the Court is given the authority to proceed with the hearing of the cause until this fact
is clearly established. In the case of Sy vs. Dalman, 12 wherein the defendant was also a successful bidder in an
auction sale, it was likewise held by this Court that in detainer cases the aim of ownership "is a matter of defense
and raises an issue of fact which should be determined from the evidence at the trial." What determines
jurisdiction are the allegations or averments in the complaint and the relief asked for. 13
PROPERTY 1ST BATCH
Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and can
only be a ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil
Code, by a proper action in court. 14 There is nothing on record to show that the mortgage has been annulled.
Neither is it disclosed that steps were taken to nullify the same. Hence, defendants-appellants' claim of
ownership on the basis of a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the
chattel mortgage was still null and void ab initio because only personal properties can be subject of a chattel
mortgage. The rule about the status of buildings as immovable property is stated in Lopez vs. Orosa, Jr. and
Plaza Theatre Inc., 15cited in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that
... it is obvious that the inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties (art. 415, New Civil Code) could only
mean one thing that a building is by itself an immovable property irrespective of
whether or not said structure and the land on which it is adhered to belong to the same
owner.
Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang vs.
Ofilada, 17 this Court stated that "it is undeniable that the parties to a contract may by agreement treat as
personal property that which by nature would be real property", citing Standard Oil Company of New York vs.
Jaramillo. 18 In the latter case, the mortgagor conveyed and transferred to the mortgagee by way of mortgage
"the following described personal property." 19 The "personal property" consisted of leasehold rights and a
building. Again, in the case of Luna vs. Encarnacion, 20 the subject of the contract designated as Chattel
Mortgage was a house of mixed materials, and this Court hold therein that it was a valid Chattel mortgage
because it was so expressly designated and specifically that the property given as security "is a house of mixed
materials, which by its very nature is considered personal property." In the later case of Navarro vs.
Pineda,21 this Court stated that
The view that parties to a deed of chattel mortgage may agree to consider a house as
personal property for the purposes of said contract, "is good only insofar as the
contracting parties are concerned. It is based, partly, upon the principle of estoppel"
(Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a mortgaged house
built on a rented land was held to be a personal property, not only because the deed of
mortgage considered it as such, but also because it did not form part of the land
(Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now settled that an object placed on
land by one who had only a temporary right to the same, such as the lessee or
usufructuary, does not become immobilized by attachment (Valdez vs. Central Altagracia,
222 U.S. 58, cited in Davao Sawmill Co., Inc. vs. 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 as so stipulated in the document of mortgage.
(Evangelista vs. Abad, Supra.) It should be noted, however that the principle is
predicated on statements by the owner declaring his house to be a chattel, a conduct that
may conceivably estop him from subsequently claiming otherwise. (Ladera vs. C.N.
Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it
specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage 23 the property together with its leasehold rights over the lot on which it is constructed and participation
..." 24Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way 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 otherwise. Moreover, the subject house stood on a rented lot
to which defendats-appellants merely had a temporary right as lessee, and although this can not in itself alone
determine the status of the property, it does so when combined with other factors to sustain the interpretation
that the parties, particularly the mortgagors, intended to treat the house as personalty. Finally unlike in the Iya
cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong Machinery and
Williamson, 26 wherein third persons assailed the validity of the chattel mortgage, 27 it is the defendants-
appellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this
case. The doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject
house as personalty.
(b) Turning to the question of possession and rentals of the premises in question. The Court of First Instance
noted in its decision that nearly a year after the foreclosure sale the mortgaged house had been demolished on
14 and 15 January 1957 by virtue of a decision obtained by the lessor of the land on which the house stood. For
this reason, the said court limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of
P200.00 from 27 March 1956 (when the chattel mortgage was foreclosed and the house sold) until 14 January
1957 (when it was torn down by the Sheriff), plus P300.00 attorney's fees.
It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure
sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered,
dismissing the complaint. With costs against plaintiffs-appellees.

Appellants mortgagors question this award, claiming that they were entitled to remain in possession without any Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar,
obligation to pay rent during the one year redemption period after the foreclosure sale, i.e., until 27 March 1957. JJ., concur.
On this issue, We must rule for the appellants.

Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. 28 Section 14 of this
Act allows the mortgagee to have the property mortgaged sold at public auction through a public officer in almost
EN BANC
the same manner as that allowed by Act No. 3135, as amended by Act No. 4118, provided that the requirements
of the law relative to notice and registration are complied with. 29 In the instant case, the parties specifically
stipulated that "the chattel mortgage will be enforceable in accordance with the provisions of Special Act No. G.R. No. L-17898 October 31, 1962
3135 ... ." 30 (Emphasis supplied).

PASTOR D. AGO, Petitioner, vs. THE HON. COURT OF APPEALS, HON. MONTANO A. ORTIZ,
Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) may, at any
Judge of the Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO
time within one year from and after the date of the auction sale, redeem the property sold at the extra judicial
and GRACE PARK ENGINEERING, INC., Respondents.
foreclosure sale. Section 7 of the same Act 32 allows the purchaser of the property to obtain from the court the
possession during the period of redemption: but the same provision expressly requires the filing of a petition with
the proper Court of First Instance and the furnishing of a bond. It is only upon filing of the proper motion and the Jose M. Luison for petitioner.
approval of the corresponding bond that the order for a writ of possession issues as a matter of course. No Norberto J. Quisumbing for respondent Grace Park Engineering, Inc.
discretion is left to the court. 33 In the absence of such a compliance, as in the instant case, the purchaser can The Provincial Fiscal of Surigao for respondent Sheriff of Surigao.
not claim possession during the period of redemption as a matter of right. In such a case, the governing
provision is Section 34, Rule 39, of the Revised Rules of Court 34 which also applies to properties purchased in
extrajudicial foreclosure proceedings. 35 Construing the said section, this Court stated in the aforestated case LABRABOR, J.:
of Reyes vs. Hamada.

In other words, before the expiration of the 1-year period within which the judgment-
debtor or mortgagor may redeem the property, the purchaser thereof is not entitled, as a
matter of right, to possession of the same. Thus, while it is true that the Rules of Court
allow the purchaser to receive the rentals if the purchased property is occupied by
tenants, he is, nevertheless, accountable to the judgment-debtor or mortgagor as the
case may be, for the amount so received and the same will be duly credited against the
redemption price when the said debtor or mortgagor effects the redemption. Differently
stated, the rentals receivable from tenants, although they may be collected by the
purchaser during the redemption period, do not belong to the latter but still pertain to the
debtor of mortgagor. The rationale for the Rule, it seems, is to secure for the benefit of
the debtor or mortgagor, the payment of the redemption amount and the consequent
return to him of his properties sold at public auction. (Emphasis supplied)
Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R. No. 26723-R
entitled "Pastor D. Ago vs. The Provincial Sheriff of Surigao, et al." which in part reads:
In this case for certiorari and prohibition with preliminary injunction, it appears from the records
that the respondent Judge of the Court of First Instance of Agusan rendered judgment (Annex
"A") in open court on January 28, 1959, basing said judgment on a compromise agreement
between the parties.chanroblesvirtualawlibrarychanrobles virtual law library
On August 15, 1959, upon petition, the Court of First Instance issued a writ of
execution.chanroblesvirtualawlibrarychanrobles virtual law library

The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to
remain in possession during the period of redemption or within one year from and after 27 March 1956, the date
of the auction sale, and to collect the rents or profits during the said period.
It will be noted further that in the case at bar the period of redemption had not yet expired when action was
instituted in the court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7,
Act No. 3135, as amended, which is the law selected by the parties to govern the extrajudicial foreclosure of the
chattel mortgage. Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess was
not yet born at the filing of the complaint, there could be no violation or breach thereof. Wherefore, the original
complaint stated no cause of action and was prematurely filed. For this reason, the same should be ordered
dismissed, even if there was no assignment of error to that effect. The Supreme Court is clothed with ample
authority to review palpable errors not assigned as such if it finds that their consideration is necessary in arriving
at a just decision of the cases. 37
Petitioner's motion for reconsideration dated October 12, 1959 alleges that he, or his counsel, did
not receive a formal and valid notice of said decision, which motion for reconsideration was denied
by the court below in the order of November 14, 1959.chanroblesvirtualawlibrarychanrobles
virtual law library
Petitioner now contends that the respondent Judge exceeded in his jurisdiction in rendering the
execution without valid and formal notice of the decision.chanroblesvirtualawlibrarychanrobles
virtual law library
A compromise agreement is binding between the parties and becomes the law between them.
(Gonzales vs. Gonzales G.R. No. L-1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L-
12439, May 22, 1959) .chanroblesvirtualawlibrarychanrobles virtual law library
It is a general rule in this jurisdiction that a judgment based on a compromise agreement is not
appealable and is immediately executory, unless a motion is filed on the ground fraud, mistake or

PROPERTY 1ST BATCH

duress. (De los Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R. No. L-10089, July 31,
1957)chanrobles virtual law library
Petitioner's claim that he was not notified or served notice of the decision is untenable. The
judgment on the compromise agreement rendered by the court below dated January 28, 1959,
was given in open court. This alone is a substantial compliance as to notice. (De los Reyes vs.
Ugarte, supra)chanrobles virtual law library
IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its jurisdiction in
ordering the execution of the judgment. The petition for certiorari is hereby dismissed and the writ
of preliminary injunction heretofore dissolved, with costs against the
petitioner.chanroblesvirtualawlibrarychanrobles virtual law library
IT IS
The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D. Ago bought
sawmill machineries and equipments from respondent Grace Park Engineer domineering, Inc.,
executing a chattel mortgage over said machineries and equipments to secure the payment of
balance of the price remaining unpaid of P32,000.00, which petitioner agreed to pay on
installment basis.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner Ago defaulted in his payment and so, in 1958 respondent Grace Park Engineering, Inc.
instituted extra-judicial foreclosure proceedings of the mortgage. To enjoin said foreclosure,
petitioner herein instituted Special Civil Case No. 53 in the Court of First Instance of Agusan. The
parties to the case arrived at a compromise agreement and submitted the same in court in
writing, signed by Pastor D. Ago and the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz,
Judge of the Court of First Instance of Agusan, then presiding, dictated a decision in open court on
January 28, 1959.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner continued to default in his payments as provided in the judgment by compromise, so
Grace Park Engineering, Inc. filed with the lower court a motion for execution, which was granted
by the court on August 15, 1959. A writ of execution, dated September 23, 1959, later
followed.chanroblesvirtualawlibrarychanrobles virtual law library
The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of execution issued by
the lower court, levied upon and ordered the sale of the sawmill machineries and equipments in
question. These machineries and equipments had been taken to and installed in a sawmill building
located in Lianga, Surigao del Sur, and owned by the Golden Pacific Sawmill, Inc., to whom,
petitioner alleges, he had sold them on February 16, 1959 (a date after the decision of the lower
court but before levy by the Sheriff).chanroblesvirtualawlibrarychanrobles virtual law library
Having been advised by the sheriff that the public auction sale was set for December 4, 1959,
petitioner, on December 1, 1959, filed the petition for certiorari and prohibition with preliminary
injunction with respondent Court of Appeals, alleging that a copy of the aforementioned judgment
given in open court on January 28, 1959 was served upon counsel for petitioner only on
September 25, 1959 (writ of execution is dated September 23, 1959); that the order and writ of
execution having been issued by the lower court before counsel for petitioner received a copy of
the judgment, its resultant last order that the "sheriff may now proceed with the sale of the
properties levied constituted a grave abuse of discretion and was in excess of its jurisdiction; and
that the respondent Provincial Sheriff of Surigao was acting illegally upon the allegedly void writ of
execution by levying the same upon the sawmill machineries and equipments which have become
real properties of the Golden Pacific sawmill, Inc., and is about to proceed in selling the same
without prior publication of the notice of sale thereof in some newspaper of general circulation as
required by the Rules of Court.chanroblesvirtualawlibrarychanrobles virtual law library
PROPERTY 1ST BATCH
The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction against the
sheriff but it turned out that the latter had already sold at public auction the machineries in
question, on December 4, 1959, as scheduled. The respondent Grace Park Engineering, Inc. was
the only bidder for P15,000.00, although the certificate sale was not yet executed. The Court of
Appeals constructed the sheriff to suspend the issuance of a certificate of sale of the said sawmill
machineries and equipment sold by him on December 4, 1959 until the final decision of the case.
On November 9, 1960 the Court of Appeals rendered the aforequoted
decision.chanroblesvirtualawlibrarychanrobles virtual law library
Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding that the
rendition of judgment on compromise in open court on January 1959 was a sufficient notice; and
(2) in not resolving the other issues raised before it, namely, (a) the legality of the public auction
sale made by the sheriff, and (b) the nature of the machineries in question, whether they are
movables or immovables.chanroblesvirtualawlibrarychanrobles virtual law library
The Court of Appeals held that as a judgment was entered by the court below in open court upon
the submission of the compromise agreement, the parties may be considered as having been
notified of said judgment and this fact constitutes due notice of said judgment. This raises the
following legal question: Is the order dictated in open court of the judgment of the court, and is
the fact the petitioner herein was present in open court was the judgment was dictated, sufficient
notice thereof? The provisions of the Rules of Court decree otherwise. Section 1 of Rule 35
describes the manner in which judgment shall be rendered, thus:
SECTION 1. How judgment rendered. - All judgments determining the merits of cases shall be in
writing personally and directly prepared by the judge, and signed by him, stating clearly and
distinctly the facts and the law on which it is based, filed with the clerk of the court.
The court of first instance being a court of record, in order that a judgment may be considered as
rendered, must not only be in writing, signed by the judge, but it must also be filed with the clerk
of court. The mere pronouncement of the judgment in open court with the stenographer taking
note thereof does not, therefore, constitute a rendition of the judgment. It is the filing of the
signed decision with the clerk of court that constitutes rendition. While it is to be presumed that
the judgment that was dictated in open court will be the judgment of the court, the court may still
modify said order as the same is being put into writing. And even if the order or judgment has
already been put into writing and signed, while it has not yet been delivered to the clerk for filing
it is still subject to amendment or change by the judge. It is only when the judgment signed by
the judge is actually filed with the clerk of court that it becomes a valid and binding judgment.
Prior thereto, it could still be subject to amendment and change and may not, therefore,
constitute the real judgment of the court.chanroblesvirtualawlibrarychanrobles virtual law library
Regarding the notice of judgment, the mere fact that a party heard the judge dictating the
judgment in open court, is not a valid notice of said judgment. If rendition thereof is constituted
by the filing with the clerk of court of a signed copy (of the judgment), it is evident that the fact
that a party or an attorney heard the order or judgment being dictated in court cannot be
considered as notice of the real judgment. No judgment can be notified to the parties unless it has
previously been rendered. The notice, therefore, that a party has of a judgment that was being
dictated is of no effect because at the time no judgment has as yet been signed by the judge and
filed with the clerk.chanroblesvirtualawlibrarychanrobles virtual law library
Besides, the Rules expressly require that final orders or judgments be served personally or by
registered mail. Section 7 of Rule 27 provides as follows:
SEC. 7. Service of final orders or judgments. - Final orders or judgments shall be served either
personally or by registered mail.
In accordance with this provision, a party is not considered as having been served with the
judgment merely because he heard the judgment dictating the said judgment in open court; it is
necessary that he be served with a copy of the signed judgment that has been filed with the clerk
in order that he may legally be considered as having been served with the
judgment.chanroblesvirtualawlibrarychanrobles virtual law library
For all the foregoing, the fact that the petitioner herein heard the trial judge dictating the
judgment in open court, is not sufficient to constitute the service of judgement as required by the
above-quoted section 7 of Rule 2 the signed judgment not having been served upon the
petitioner, said judgment could not be effective upon him (petitioner) who had not received it. It
follows as a consequence that the issuance of the writ of execution null and void, having been
issued before petitioner her was served, personally or by registered mail, a copy of the
decision.chanroblesvirtualawlibrarychanrobles virtual law library
The second question raised in this appeal, which has been passed upon by the Court of Appeals,
concerns the validity of the proceedings of the sheriff in selling the sawmill machineries and
equipments at public auction with a notice of the sale having been previously
published.chanroblesvirtualawlibrarychanrobles virtual law library
The record shows that after petitioner herein Pastor D. Ago had purchased the sawmill
machineries and equipments he assigned the same to the Golden Pacific Sawmill, Inc. in payment
of his subscription to the shares of stock of said corporation. Thereafter the sawmill machinery
and equipments were installed in a building and permanently attached to the ground. By reason of
such installment in a building, the said sawmill machineries and equipment became real estate
properties in accordance with the provision of Art. 415 (5) of the Civil Code, thus:
ART. 415. The following are immovable property:
xxx xxx xxxchanrobles virtual law library
(5) Machinery, receptacles, instruments or implements tended by the owner of the tenement for
an industry or works which may be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
This Court in interpreting a similar question raised before it in the case of Berkenkotter vs. Cu
Unjieng e Hijos, 61 Phil. 683, held that the installation of the machine and equipment in the
central of the Mabalacat Sugar Co., Inc. for use in connection with the industry carried by the
company, converted the said machinery and equipment into real estate by reason of their
purpose. Paraphrasing language of said decision we hold that by the installment of the sawmill
machineries in the building of the Gold Pacific Sawmill, Inc., for use in the sawing of logs carried
on in said building, the same became a necessary and permanent part of the building or real
estate on which the same was constructed, converting the said machineries and equipments into
real estate within the meaning of Article 415(5) above-quoted of the Civil Code of the
Philippines.chanroblesvirtualawlibrarychanrobles virtual law library
Considering that the machineries and equipments in question valued at more than P15,000.00
appear to have been sold without the necessary advertisement of sale by publication in a
newspaper, as required in Sec. 16 of Rule 39 of the Rules of Court, which is as follows:
SEC. 16. Notice of sale of property on execution. - Before the sale of property on execution, notice
thereof must be given as follows:
xxx xxx xxxchanrobles virtual law library
PROPERTY 1ST BATCH
(c) In case of real property, by posting a similar notice particularly describing the property for
twenty days in three public places in the municipality or city where the property is situated, and
also where the property is to be sold, and, if the assessed value of the property exceeds four
hundred pesos, by publishing a copy of the notice once a week, for the same period, in some
newspaper published or having general circulation in the province, if there be one. If there are
newspapers published in the province in both the English and Spanish languages, then a like
publication for a like period shall be made in one newspaper published in the English language,
and in one published in the Spanish language.
the sale made by the sheriff must be declared null and void.chanroblesvirtualawlibrarychanrobles
virtual law library
WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set aside and
We declare that the issuance of the writ of execution in this case against the sawmill machineries
and equipments purchased by petitioner Pastor D. Ago from the Grace Park Engineering, Inc., as
well as the sale of the same by the Sheriff of Surigao, are null and void. Costs shall be against the
respondent Grace Park Engineering, Inc.chanroblesvirtualawlibrarychanrobles virtual law library
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and
Makalintal, JJ., concur.
Padilla, J., took no part.
[G.R. No. 6295. September 1, 1911.]
THE UNITED STATES, Plaintiff-Appellee, v. IGNACIO CARLOS, Defendant-
Appellant.
A. D. Gibbs, for Appellant.
Acting Attorney-General Harvey, for Appellee.
SYLLABUS
1. ELECTRICITY; UNLAWFUL USE: OF ELECTRIC CURRENT; LARCENY. A
person to whom an electric light company furnishes electric current for lighting
purposes, and who, by means of a "jumper," uses electricity which does not pass
through the meter installed for the purpose of measuring the current used, thus
depriving the company of such electric current, is guilty of larceny.
DECISION
PER CURIAM:
The information filed in this case is as follows: jgc:chan robles. com.ph
"The undersigned accuses Ignacio Carlos of the crime of theft, committed as
follows: jgc:c hanrobles. com.ph
"That on, during, and between the 13th day of February, 1909, and the 3d day
of March, 1910, in the city of Manila, Philippine Islands, the said Ignacio Carlos,
with intent of gain and without violence or intimidation against the person or
force against the thing, did then and there, willfully, unlawfully, and feloniously,
take, steal, and carry away two thousand two hundred and seventy-three
(2,2~3) kilowatts of electric current, of the value of nine hundred and nine (909)
pesos and twenty (20) cents Philippine currency, the property of the Manila
Electric Railroad and Light Company, a corporation doing business in the
Philippine Islands, without the consent of the owner thereof; to the damage and
prejudice of the said Manila Electric Railroad and Light Company in the said sum
of nine hundred and nine (909) pesos and twenty (20) cents Philippine currency,
equal to and the equivalent of 4,546 pesetas Philip pine currency. All contrary to
law.
(Sgd. )L.M. SOUTHWORTH,
Prosecuting Attorney
"Subscribed and sworn to before me this 4th day of March, 1910, in the city of
Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city
of Manila.
(Sgd.) "CHARLES S. LOBINGIER,
"Judge, First Instance.
"A preliminary investigation has heretofore been con ducted in this case, under
my direction, having examined the witnesses under oath, in accordance with the
provisions of section 39 of Act No. 183 of the Philippine Commission, as
amended by section 2 of Act No. 6-12 of the Philippine Commission.
(Sgd.) "L. M. SOUTHWORTH,
"Prosecuting Attorney.
"Subscribed and sworn to before me this 4th day of March, 1910, in the city of
Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city
of Manila.
(Sgd.) "CHARLES S. LOBINGIER,
"Judge, First Instance." cralaw virtua 1aw lib rary
A warrant for the arrest of the defendant was issued by the Honorable J. C.
Jenkins on the 4th of March and placed in the hands of the sheriff. The sheriffs
return shows that the defendant gave bond for his appearance. On the 14th of
the same month counsel for the defendant demurred to the complaint on the
following grounds: jg c:chan roble s.com. ph
PROPERTY 1ST BATCH
"1. That the court has no jurisdiction over the person of the accused nor of the
offense charged because the accused has not been accorded a preliminary
investigation or examination as required by law and no court, magistrate, or
other competent authority has determined from a sworn complaint or evidence
adduced that there is probable cause to believe that a crime has been
committed, or that this defendant has committed any crime.
"2. That the facts charged do not constitute a public offense." cralaw virtu a1aw lib rary
The demurrer was overruled on the same day and the defendant having refused
to plead, a plea of not guilty was entered by direction of the court for him and
the trial proceeded.
After due consideration of all the proofs presented and the arguments of counsel
the trial court found the defendant guilty of the crime charged and sentenced
him to one year eight months and twenty-one days presidio correccional, to
indemnify the offended party, The Manila Electric Rail road and Light Company,
in the sum of P865.26, to the corresponding subsidiary imprisonment in case of
insolvency and to the payment of the costs. From this judgment the defendant
appealed and makes the following assignments of error: cha nrob1e s virtual 1aw lib rary
"I
"The court erred in overruling the objection of the accused to the jurisdiction of
the court, because he was not given a preliminary investigation as required by
law, and in overruling his demurrer for the same reason.
"II.
"The court erred in declaring the accused to be guilty, in view of the evidence
submitted.
"III.
"The court erred in declaring that electrical energy may be stolen.
"IV.
"The court erred in not declaring that the plaintiff consented to the taking of the
current.
"V

"The court erred in finding the accused guilty of more than one offense.
"VI.
"The court erred in condemning the accused to pay P15.26 to the electric
company as damages." cralaw virtua 1aw lib rary
Exactly the same question as that raised in the first assignment of error was,
after a thorough examination and due consideration, decided adversely to
appellants contention in the case of U. S. v. Grant and Kennedy (18 Phil. Rep.,
122). No sufficient reason is presented why we should not follow the doctrine
enunciated in that case. The question raised in the second assignment of error is
purely one of fact. Upon this point the trial court said: jgc:chan rob les.com. ph
"For considerably more than a year previous to the filing of this complaint the
accused had been a consumer of electricity furnished by the Manila Electric
Railroad and Light Company for a building containing the residence of the
accused and three other residences, and which was equipped, according to the
defendants testimony, with thirty electric lights. On March 15, 1909, the
representatives of the company, believing that more light was being used than
their meter showed, installed an additional meter (Exhibit A) on a pole outside of
defendants house, and both it and the meter (Exhibit B) which had been
previously installed in the house were read on said date. Exhibit A read 218
kilowatt hours; Exhibit B, 746 kilowatt hours. On March 3, 1910, each was read
again, Exhibit A showing 2,718 kilo watt hours and Exhibit B, 968. It is
undisputed that the current which supplied the house passed through both
meters and the city electrician testifies that each meter was tested on the date
of the last reading and was "in good condition." The result of this registration
therefore is that while the outside meter (Exhibit A) showed a consumption in
defendants building of 2,500 kilowatt hours of electricity, the inside meter
(Exhibit B) showed but 223 kilowatt hours. In other words the actual
consumption, according to the outside meter, was more than ten times as great
as that registered by the one inside. (obviously this difference could not be due
to normal causes, for while the electrician called by the defense (Lanusa)
testifies to the possibility of a difference between two such meters, he places the
extreme limit of such difference between them at 5 per cent. Here, as we have
seen. the difference is more than 900 per cent. Besides, according to the
defendants electrician, the outside meter should normally run faster, while
according to the test made in this case the inside meter (Exhibit B) ran the
faster. The city electrician also testifies that the electric current could have been
deflected from the inside meter by placing thereon a device known as a jumper
connecting the two outside wires, and there is other testimony that there were
marks on the insulation of the meter Exhibit B which showed the use of such a
device. There is further evidence that the consumption of 223 kilowatt hours,
registered by the inside meter would not be a reasonable amount for the number
of lights installed in defendants building during the period in question, and the
PROPERTY 1ST BATCH
accused fails to explain why he should have had thirty lights installed if he
needed but four or five.
"On the strength of this showing a search warrant was issued for the
examination of defendants premises and was duly served by a police officer
(Hartpence). He was accompanied at the time by three employees of the Manila
Electric Railroad and Light Company, and he found there the accused, his wife
and son, and perhaps one or two others. There is a sharp conflict between the
several spectators on some points but on one there is no dispute. All agree that
the jumper (Exhibit C) was found in a drawer of a small cabinet in the room of
defendants house where the meter was installed and not more than 20 feet
therefrom. In the absence of a satisfactory explanation this constituted
possession on defendants part, and such possession, under the Code of Civil
Procedure, section 334 (10), raises the presumption that the accused was the
owner of a device whose only use was to deflect the current from the meter.
"Is there any other satisfactory explanation of the jumpers presence? The only
one sought to be offered is the statement by the son of the accused, a boy of
twelve years, that he saw the jumper placed there by the witness Porter, an
employee of the Light Company. The boy is the only witness who so testifies and
Porter himself squarely denies it. We can Dot agree with counsel for the defense
that the boys interest in the outcome of this case is less than that of the
witnesses for the prosecution. It seems to us that his natural desire to shield his
father would far outweigh any interest such an employee like Porter would have
and which, at most, would be merely pecuniary.
"There is, however, one witness whom so far as appears, has no interest in the
matter whatsoever. This is officer Hartpence, who executed the search warrant.
He testifies that after inspecting other articles and places in the building as he
and the other spectators, including the accused, approached the cabinet in which
the jumper was found, the officers attention was called to the defendants
appearance and the former noticed that the latter was becoming nervous. Where
the only two witnesses who are supposed to know anything of the matter thus
contradict each other this item of testimony by the officer is of more than
ordinary significance; for if, as the accused claims, the jumper was placed in
the cabinet for the first time by Porter there would be no occasion for any
change of demeanor on the part of the accused. We do not think that the
officers declination to wait until defendant should secure a notary public shows
bias. The presence of such an official was neither required nor authorized by law
and the very efficacy of a search often depends upon its swiftness.
"We must also agree with the prosecuting attorney that the attending
circumstances do not strengthen the story told by the boy; that the latter would
have been likely to call out at the time he saw the jumper being placed in the
drawer, or at least directed his fathers attention to it immediately instead of
waiting, as he says, until the latter was called by the officer. Finally, to accept
the boys story we must believe that this company or its representatives
deliberately conspired not merely to lure the defendant into the commission of a
crime but to fasten upon him a crime which he did not commit and thus convict
an innocent man by perjured evidence. This is a much more serious charge than
that contained in the complaint and should be supported by very strong
corroborating circumstances which we do not find here. We are, accordingly,
unable to consider as satisfactory defendants explanation of the jumpers
presence.
"The only alternative is the conclusion that the jumper was placed there by the
accused or by some one acting for him and that it was the instrument by which
the current was deflected from the meter Exhibit B and the Light Company
deprived of its lawful compensation." After a careful examination of the entire
record we are satisfied beyond peradventure of a doubt that the proofs
presented fully support the facts as set forth in the fore- going finding.
Counsel for the appellant insists that only corporeal property can be the subject
of the crime of larceny, and in support of this proposition cites several
authorities for the purpose of showing that the only subjects of larceny are
tangible, movable, chattels, something which could be taken in possession and
carried away, and which had some, although trifling, intrinsic value, and also to
show that electricity is an unknown force and can not be a subject of larceny.
In the case of U. S. v. Genato (15 Phil. Rep., 170) the defendant, the owner of
the store situated at No. 154 Escolta, Manila, was using a contrivance known as
a "jumper" on the electric meter installed by the Manila Electric Rail road and
Light Company. As a result of the use of this "jumper" the meter, instead of
making one revolution in every four seconds, registered one in seventy-seven
seconds, thereby reducing the current approximately 95 per cent. Genato was
charged in the municipal court with a violation of a certain ordinance of the city
of Manila, and was sentenced to pay a fine of P200. He appealed to the Court of
First Instance, was again tried and sentenced to pay the same fine. An appeal
was taken from the judgment of the Court of First Instance to the Supreme
Court on the ground that the ordinance in question was null and void. It is true
that the only question directly presented was that of the validity of the city
ordinance. The court, after holding that said ordinance was valid, said:
"Even without them (ordinances), the right of ownership of electric current is
secured by articles 517 and 518 of the Penal Code; the application of these
articles in cases of substraction of gas, a fluid used for lighting, and in some
respects resembling electricity, is confirmed by the rule laid down in the
decisions of the supreme court of Spain January 20, 1887, and April 1, 1897,
construing and enforcing the provisions of articles 530 and 531 of the penal code
of that country, articles identical with articles 517 and 518 of the code in force in
these Islands."cralaw virtua1aw l ibra ry
Article 517 of the Penal Code above referred to reads as follows: jgc:c hanro bles. com.ph
"The following are guilty of larceny: jgc:chanro bles. com.ph
"(1) Those who with intent of gain and without violence or intimidation against
the person, or force against things, shall take anothers personal property
PROPERTY 1ST BATCH
without the owners consent." cralaw virt ua1aw lib ra ry
And article 518 fixes the penalty for larceny in proportion to the value of the
personal property stolen.
It is true that electricity is no longer, as formerly, regarded by electricians as a
fluid, but its manifestations and effects, like those of gas, may be seen and felt.
The true test of what is a proper subject of larceny seems to be not whether the
subject is corporeal or incorporeal, but whether it is capable of appropriation by
another than the owner.
It is well-settled that illuminating gas may be the subject of larceny, even in the
absence of a statute so providing. (Decisions of supreme court of Spain, January
20, 1887. and April 1, 1897, supra; also (England) Queen v. Firth, L. R. 1 C. C.,
172, 11 Cox C. C., 234; Queen v. White, 3 C. & K., 363, 6 Cox C. C., 213;
Woods v. People, 222 Ill., 293, 7 L. R. A., 520; Commonwealth v. Shaw, 4 Allen
(Mass.) , 308; State v. Wellman, 34 Minn., 221, N. W. Rep., 385, and 25 Cyc.,
p. 12, note 10.)
In the case of Commonwealth v. Shaw, supra, the court, speaking through Chief
Justice Bigelow, said:jgc:c han robles. com.ph
"There is nothing in the nature of gas used for illuminating purposes which
renders it incapable of being feloniously taken and carried away. It is a valuable
article of merchandise, bought and sold like other personal property, susceptible
of being severed from a mass or larger quantity, and of being transported from
place to place. In the present case it appears that it was the property of the
Boston Gas Light Company; that it was in their possession by being confined in
conduits and tubes which belonged to them, and that the defendant severed a
portion of that which was in the pipes of the company by taking it into her house
and there consuming it. All this being proved to have been done by her secretly
and with intent to deprive the company of their property and to appropriate it to
jgc:chanro bles. com.ph her own use, clearly constitutes the crime of larceny." cralaw virt ua1aw libra ry
Electricity, the same as gas, is a valuable article of merchandise, bought and
sold like other personal property and is capable of appropriation by another. So
no error was committed by the trial court in holding that electricity is a subject
of larceny.
It is urged in support of the fourth assignment of error that if it be true that the
appellant did appropriate to his own use the electricity as charged he can not be
held guilty of larceny for any part of the electricity thus appropriated, after the
first month, for the reason that the complaining party, the Manila Electric
Railroad and Light Company, knew of this misappropriation and consented
thereto.
The outside meter was installed on March 15, 1909, and read 218 kilowatt
hours. On the same day the inside meter was read and showed 745 kilowatt
hours. Both meters were again read on March 3, 1910, and the outside one
showed 2,718 kilowatt hours while the one on the inside only showed 968, the
difference in consumption during this time being 2,277 kilowatt hours. The
taking of this cur rent continued over a period of one year, less twelve days.
Assuming that the company read both meters at the end of each month; that it
knew the defendant was misappropriating the current to that extent; and that it
continued to furnish the current, thereby giving the defendant an opportunity to
continue the misappropriation still, we think, that the defendant is criminally
responsible for the taking of the whole amount, 2,277 kilowatt hours. The
company had a contract with the defendant to furnish him with current for
lighting purposes. It could not stop the misappropriation without cutting off the
current entirely. It could not reduce the current so as to just furnish sufficient for
the lighting of two, three, or five lights, as claimed by the defendant that he
used during the most of this times but the current must always be sufficiently
strong to furnish current for the thirty lights, at any time the defendant desired
to use them.
There is no pretense that the accused was solicited by the company or any one
else to commit the acts charged At most there was a mere passive submission
on the part of the company that the current should be taken and no indication
that it wished it to be taken, and no knowledge by the defendant that the
company wished him to take the current, and no mutual understanding between
the company and the defendant, and no measures of induce ment of any kind
were employed by the company for the purpose of leading the defendant into
temptation, and no preconcert whatever between him and the company: The
original design to misappropriate this current was formed by the defendant
absolutely independent of any acts on the part of the company or its agents. It is
true, no doubt, as a general proposition, that larceny is not committed when the
property is taken with the consent of its owner. It may be difficult in some
instances to determine whether certain acts constitute, in law, such "consent."
But under the facts in the case at bar it is not difficult to reach a conclusion that
the acts performed by the plaintiff company did not constitute a consent on its
part that the defendant take its property. We have been unable to find a well
considered case holding a contrary opinion under similar facts, but, there are
numerous cases holding that such acts do not constitute such consent as would
relieve the taker of criminal responsibility. The fourth assignment of error is,
therefore, not well founded.
It is also contended that since the "jumper" was not used continuously, the
defendant committed not a single offense but a series of offenses. It is, no
doubt, true that the defendant did not allow the "jumper" to remain in place
continuously for any number of days as the company inspected monthly the
inside meter. So the "jumper" was put on and taken off at least monthly, if not
daily, in order to avoid detection, and while the "jumper" was off the defendant
was not misappropriating the current. The complaint alleged that the defendant
did on, during, and between the 13th day of February, 1909, and the 3d of
March, 1910, willfully, unlawfully, and feloniously take, steal, and carry away
2,277 kilowatts of electric current of the value of P909. No demurrer was
presented against this complaint on the ground that more than one crime was
PROPERTY 1ST BATCH
charged. The Government had no opportunity to amend or correct this error, if
error at all. In the case of U. S. v. Macaspac (12 Phil. Rep., 26), the defendant
received from one Joaquina Punu the sum of P31.50, with the request to deliver
it to Marcelina Dy-Oco. The defendant called upon Marcelina, but instead of
delivering the said amount she asked Marcelina for P30 in the name of Joaquina
who had in no way authorized her to do so. Marcelina gave her P30, believing
that Joaquina had sent for it. Counsel for the defendant insisted that the
complaint charged his client with two different crimes of estafa in violation of
section 11 of General Orders, No. 58. In disposing of this question this court
said:jgc:chan roble s.com.p h
"The said defect constitutes one of the dilatory pleas indicated by section 21, and
the accused ought to have raised the point before the trial began. Had this been
done, the complaint might have been amended in time, because it is merely a
defect of form easily remedies. . . . Inasmuch as in the first instance the accused
did not make the corresponding dilatory plea to the irregularity of the complaint,
it must be understood that she has waived such objection, and is not now
entitled to raise for the first time any question in reference thereto when
submitting to this court her assignment of errors. Apart from the fact that the
defense does not pretend that any of the essential rights of the accused have
been injured, the allegation of the defect above alluded to, which in any case
would only affect the form of the complaint, can not justify a reversal of the
judgment appealed from, according to the provisions of section 10 of General
Orders, No. 58." cralaw virtua 1aw lib rary
In the case at bar it is not pointed out wherein any of the essential rights of the
defendant have been prejudiced by reason of the fact that the complaint covered
the entire period. If twelve distinct and separate complaints had been filed
against the defendant, one for each month, the sum total of the penalties
imposed might have been very much greater than that imposed by the court in
this case. The covering of the entire period by one charge has been beneficial, if
anything, and not prejudicial to the rights of the defendant. The prosecuting
attorney elected to cover the entire period with one charge and the accused
having been convicted for this offense, he can not again be prosecuted for the
stealing of the current at any time within that period. Then, again, we are of the
opinion that the charge was properly laid. The electricity was stolen from the
same person, in the same manner, and in the same place. It was substantially
one continuous act, although the "jumper" might have been removed and
replaced daily or monthly. The defendant was moved by one impulse to
appropriate to his own use the current, and the means adopted by him for the
taking of the current were in the execution of a general fraudulent plan.
"A person stole gas for the use of a manufactory by means of a pipe, which drew
off the gas from the main without allowing it to pass through the meter. The gas
from this pipe was burnt everyday, and turned off at night. The pipe was never
closed at its junction with the main, and consequently always remained full of
gas. It was held, that if the pipe always remained full, there was, in fact, a
continuous taking of the gas and not a series of separate takings. It was held
also that even if the pipe had not been kept full, the taking would have been
continuous, as it was substantially all one transaction." (Regina v. Firth, L. R., 1
C. C., 172; 11 Cox C. C., 234. Cited on p. 758 of Whartons Criminal-Law, vol. 1,
10th ed.)
The value of the electricity taken by the defendant was found by the trial court
to be P865.26. This finding is fully in accordance with the evidence presented. So
no error was committed in sentencing the defendant to indemnify the company
in this amount, or to suffer the corresponding subsidiary imprisonment in case of
insolvency.
The judgment being strictly in accordance with the law and the merits of the
case, same is hereby affirmed, with costs against the Appellant.
Arellano, C.J., Torres, Mapa, and Carson, JJ.,
Separate Opinions
G.R. No. 155076 February 27, 2006
LUIS MARCOS P. LAUREL, Petitioner,
vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial
Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES&
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the Decision1 of the Court
of Appeals (CA) in CA-G.R. SP No. 68841 affirming the Order issued by
Judge Zeus C. Abrogar, Regional Trial Court (RTC), Makati City, Branch
150, which denied the "Motion to Quash (With Motion to Defer
Arraignment)" in Criminal Case No. 99-2425 for theft.
Philippine Long Distance Telephone Company (PLDT) is the holder of a
legislative franchise to render local and international telecommunication
services under Republic Act No. 7082.2 Under said law, PLDT is
authorized to establish, operate, manage, lease, maintain and purchase
telecommunication systems, including transmitting, receiving and switching
stations, for both domestic and international calls. For this purpose, it has
installed an estimated 1.7 million telephone lines nationwide. PLDT also
offers other services as authorized by Certificates of Public Convenience
PROPERTY 1ST BATCH
and Necessity (CPCN) duly issued by the National Telecommunications
Commission (NTC), and operates and maintains an International Gateway
Facility (IGF). The PLDT network is thus principally composed of the Public
Switch Telephone Network (PSTN), telephone handsets and/or
telecommunications equipment used by its subscribers, the wires and
cables linking said telephone handsets and/or telecommunications
equipment, antenna, the IGF, and other telecommunications equipment
which provide interconnections.3 1avv phil.net
PLDT alleges that one of the alternative calling patterns that constitute
network fraud and violate its network integrity is that which is known as
International Simple Resale (ISR). ISR is a method of routing and
completing international long distance calls using International Private
Leased Lines (IPL), cables, antenna or air wave or frequency, which
connect directly to the local or domestic exchange facilities of the
terminating country (the country where the call is destined). The IPL is
linked to switching equipment which is connected to a PLDT telephone
line/number. In the process, the calls bypass the IGF found at the
terminating country, or in some instances, even those from the originating
country.4
One such alternative calling service is that offered by Baynet Co., Ltd.
(Baynet) which sells "Bay Super Orient Card" phone cards to people who
call their friends and relatives in the Philippines. With said card, one is
entitled to a 27-minute call to the Philippines for about 37.03 per minute.
After dialing the ISR access number indicated in the phone card, the ISR
operator requests the subscriber to give the PIN number also indicated in
the phone card. Once the callers identity (as purchaser of the phone card)
is confirmed, the ISR operator will then provide a Philippine local line to the
requesting caller via the IPL. According to PLDT, calls made through the
IPL never pass the toll center of IGF operators in the Philippines. Using the
local line, the Baynet card user is able to place a call to any point in the
Philippines, provided the local line is National Direct Dial (NDD) capable.5
PLDT asserts that Baynet conducts its ISR activities by utilizing an IPL to
course its incoming international long distance calls from Japan. The IPL is
linked to switching equipment, which is then connected to PLDT telephone
lines/numbers and equipment, with Baynet as subscriber. Through the use
of the telephone lines and other auxiliary equipment, Baynet is able to
connect an international long distance call from Japan to any part of the
Philippines, and make it appear as a call originating from Metro Manila.
Consequently, the operator of an ISR is able to evade payment of access,
termination or bypass charges and accounting rates, as well as compliance
with the regulatory requirements of the NTC. Thus, the ISR operator offers
international telecommunication services at a lower rate, to the damage
and prejudice of legitimate operators like PLDT.6
PLDT pointed out that Baynet utilized the following equipment for its ISR
activities: lines, cables, and antennas or equipment or device capable of
transmitting air waves or frequency, such as an IPL and telephone lines
and equipment; computers or any equipment or device capable of
accepting information applying the prescribed process of the information
and supplying the result of this process; modems or any equipment or
device that enables a data terminal equipment such as computers to
communicate with other data terminal equipment via a telephone line;
multiplexers or any equipment or device that enables two or more signals
from different sources to pass through a common cable or transmission
line; switching equipment, or equipment or device capable of connecting
telephone lines; and software, diskettes, tapes or equipment or device
used for recording and storing information.7
PLDT also discovered that Baynet subscribed to a total of 123 PLDT
telephone lines/numbers.8 Based on the Traffic Study conducted on the
volume of calls passing through Baynets ISR network which bypass the
IGF toll center, PLDT incurred an estimated monthly loss of
P10,185,325.96.9 Records at the Securities and Exchange Commission
(SEC) also revealed that Baynet was not authorized to provide
international or domestic long distance telephone service in the country.
The following are its officers: Yuji Hijioka, a Japanese national (chairman of
the board of directors); Gina C. Mukaida, a Filipina (board member and
president); Luis Marcos P. Laurel, a Filipino (board member and corporate
secretary); Ricky Chan Pe, a Filipino (board member and treasurer); and
Yasushi Ueshima, also a Japanese national (board member).
Upon complaint of PLDT against Baynet for network fraud, and on the
strength of two search warrants10 issued by the RTC of Makati, Branch
147, National Bureau of Investigation (NBI) agents searched its office at
the 7th Floor, SJG Building, Kalayaan Avenue, Makati City on November 8,
1999. Atsushi Matsuura, Nobuyoshi Miyake, Edourd D. Lacson and
Rolando J. Villegas were arrested by NBI agents while in the act of
manning the operations of Baynet. Seized in the premises during the
search were numerous equipment and devices used in its ISR activities,
such as multiplexers, modems, computer monitors, CPUs, antenna,
assorted computer peripheral cords and microprocessors, cables/wires,
PROPERTY 1ST BATCH
assorted PLDT statement of accounts, parabolic antennae and voltage
regulators.
State Prosecutor Ofelia L. Calo conducted an inquest investigation and
issued a Resolution11 on January 28, 2000, finding probable cause for theft
under Article 308 of the Revised Penal Code and Presidential Decree No.
40112against the respondents therein, including Laurel.
On February 8, 2000, State Prosecutor Calo filed an Information with the
RTC of Makati City charging Matsuura, Miyake, Lacson and Villegas with
theft under Article 308 of the Revised Penal Code. After conducting the
requisite preliminary investigation, the State Prosecutor filed an Amended
Information impleading Laurel (a partner in the law firm of Ingles, Laurel,
Salinas, and, until November 19, 1999, a member of the board of directors
and corporate secretary of Baynet), and the other members of the board of
directors of said corporation, namely, Yuji Hijioka, Yasushi Ueshima,
Mukaida, Lacson and Villegas, as accused for theft under Article 308 of the
Revised Penal Code. The inculpatory portion of the Amended Information
reads:
On or about September 10-19, 1999, or prior thereto, in Makati City, and
within the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one
another, with intent to gain and without the knowledge and consent of the
Philippine Long Distance Telephone (PLDT), did then and there willfully,
unlawfully and feloniously take, steal and use the international long
distance calls belonging to PLDT by conducting International Simple
Resale (ISR), which is a method of routing and completing international
long distance calls using lines, cables, antennae, and/or air wave
frequency which connect directly 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 prejudice of PLDT, in the said amount.
CONTRARY TO LAW.13
Accused Laurel filed a "Motion to Quash (with Motion to Defer
Arraignment)" on the ground that the factual allegations in the Amended
Information do not constitute the felony of theft under Article 308 of the
Revised Penal Code. He averred that the Revised Penal Code, or any
other special penal law for that matter, does not prohibit ISR operations.
He claimed that telephone calls with the use of PLDT telephone lines,
whether domestic or international, belong to the persons making the call,
not to PLDT. He argued that the caller merely uses the facilities of PLDT,
and what the latter owns are the telecommunication infrastructures or
facilities through which the call is made. He also asserted that PLDT is
compensated for the callers use of its facilities by way of rental; for an
outgoing overseas call, PLDT charges the caller per minute, based on the
duration of the call. Thus, no personal property was stolen from PLDT.
According to Laurel, the P20,370,651.92 stated in the Information, if
anything, represents the rental for the use of PLDT facilities, and not the
value of anything owned by it. Finally, he averred that the allegations in the
Amended Information are already subsumed under the Information for
violation of Presidential Decree (P.D.) No. 401 filed and pending in the
Metropolitan Trial Court of Makati City, docketed as Criminal Case No.
276766.
The prosecution, through private complainant PLDT, opposed the
motion,14 contending that the movant unlawfully took personal property
belonging to it, as follows: 1) intangible telephone services that are being
offered by PLDT and other telecommunication companies, i.e., the
connection and interconnection to their telephone lines/facilities; 2) the use
of those facilities over a period of time; and 3) the revenues derived in
connection with the rendition of such services and the use of such
facilities.15
The prosecution asserted that the use of PLDTs intangible telephone
services/facilities allows electronic voice signals to pass through the same,
and ultimately to the called partys number. It averred that such
service/facility is akin to electricity which, although an intangible property,
may, nevertheless, be appropriated and be the subject of theft. Such
service over a period of time for a consideration is the business that PLDT
provides to its customers, which enables the latter to send various
messages to installed recipients. The service rendered by PLDT is akin to
merchandise which has specific value, and therefore, capable of
appropriation by another, as in this case, through the ISR operations
conducted by the movant and his co-accused.
The prosecution further alleged that "international business calls and
revenues constitute personal property envisaged in Article 308 of the
Revised Penal Code." Moreover, the intangible telephone services/facilities
belong to PLDT and not to the movant and the other accused, because
they have no telephone services and facilities of their own duly authorized
PROPERTY 1ST BATCH
by the NTC; thus, the taking by the movant and his co-accused of PLDT
services was with intent to gain and without the latters consent.
The prosecution pointed out that the accused, as well as the movant, were
paid in exchange for their illegal appropriation and use of PLDTs
telephone services and facilities; on the other hand, the accused did not
pay a single centavo for their illegal ISR operations. Thus, the acts of the
accused were akin to the use of a "jumper" by a consumer to deflect the
current from the house electric meter, thereby enabling one to steal
electricity. The prosecution emphasized that its position is fortified by the
Resolutions of the Department of Justice in PLDT v. Tiongson, et al. (I.S.
No. 97-0925) and in PAOCTF-PLDT v. Elton John Tuason, et al. (I.S. No.
2000-370) which were issued on August 14, 2000 finding probable cause
for theft against the respondents therein.
On September 14, 2001, the RTC issued an Order16 denying the Motion to
Quash the Amended Information. The court declared that, although there is
no law that expressly prohibits the use of ISR, the facts alleged in the
Amended Information "will show how the alleged crime was committed by
conducting ISR," to the damage and prejudice of PLDT.
Laurel filed a Motion for Reconsideration17 of the Order, alleging that
international long distance calls are not personal property, and are not
capable of appropriation. He maintained that business or revenue is not
considered personal property, and that the prosecution failed to adduce
proof of its existence and the subsequent loss of personal property
belonging to another. Citing the ruling of the Court in United States v. De
Guzman,18 Laurel averred that the case is not one with telephone calls
which originate with a particular caller and terminates with the called party.
He insisted that telephone calls are considered privileged communications
under the Constitution and cannot be considered as "the property of
PLDT." He further argued that there is no kinship between telephone calls
and electricity or gas, as the latter are forms of energy which are generated
and consumable, and may be considered as personal property because of
such characteristic. On the other hand, the movant argued, the telephone
business is not a form of energy but is an activity.
In its Order19 dated December 11, 2001, the RTC denied the movants
Motion for Reconsideration. This time, it ruled that what was stolen from
PLDT was its "business" because, as alleged in the Amended Information,
the international long distance calls made through the facilities of PLDT
formed part of its business. The RTC noted that the movant was charged
with stealing the business of PLDT. To support its ruling, it cited
Strochecker v. Ramirez,20where the Court ruled that interest in business is
personal property capable of appropriation. It further declared that, through
their ISR operations, the movant and his co-accused deprived PLDT of
fees for international long distance calls, and that the ISR used by the
movant and his co-accused was no different from the "jumper" used for
stealing electricity.
Laurel then filed a Petition for Certiorari with the CA, assailing the Order of
the RTC. He alleged that the respondent judge gravely abused his
discretion in denying his Motion to Quash the Amended Information.21 As
gleaned from the material averments of the amended information, he was
charged with stealing the international long distance calls belonging to
PLDT, not its business. Moreover, the RTC failed to distinguish between
the business of PLDT (providing services for international long distance
calls) and the revenues derived therefrom. He opined that a "business" or
its revenues cannot be considered as personal property under Article 308
of the Revised Penal Code, since a "business" is "(1) a commercial or
mercantile activity customarily engaged in as a means of livelihood and
typically involving some independence of judgment and power of decision;
(2) a commercial or industrial enterprise; and (3) refers to transactions,
dealings or intercourse of any nature." On the other hand, the term
"revenue" is defined as "the income that comes back from an investment
(as in real or personal property); the annual or periodical rents, profits,
interests, or issues of any species of real or personal property."22
Laurel further posited that an electric companys business is the production
and distribution of electricity; a gas companys business is the production
and/or distribution of gas (as fuel); while a water companys business is the
production and distribution of potable water. He argued that the "business"
in all these cases is the commercial activity, while the goods and
merchandise are the products of such activity. Thus, in prosecutions for
theft of certain forms of energy, it is the electricity or gas which is alleged to
be stolen and not the "business" of providing electricity or gas. However,
since a telephone company does not produce any energy, goods or
merchandise and merely renders a service or, in the words of PLDT, "the
connection and interconnection to their telephone lines/facilities," such
service cannot be the subject of theft as defined in Article 308 of the
Revised Penal Code.23
PROPERTY 1ST BATCH
He further declared that to categorize "business" as personal property
under Article 308 of the Revised Penal Code would lead to absurd
consequences; in prosecutions for theft of gas, electricity or water, it would
then be permissible to allege in the Information that it is the gas business,
the electric business or the water business which has been stolen, and no
longer the merchandise produced by such enterprise.24
Laurel further cited the Resolution of the Secretary of Justice in Piltel v.
Mendoza,25 where it was ruled that the Revised Penal Code, legislated as
it was before present technological advances were even conceived, is not
adequate to address the novel means of "stealing" airwaves or airtime. In
said resolution, it was noted that the inadequacy prompted the filing of
Senate Bill 2379 (sic) entitled "The Anti-Telecommunications Fraud of
1997" to deter cloning of cellular phones and other forms of
communications fraud. The said bill "aims to protect in number (ESN) (sic)
or Capcode, mobile identification number (MIN), electronic-international
mobile equipment identity (EMEI/IMEI), or subscriber identity module" and
"any attempt to duplicate the data on another cellular phone without the
consent of a public telecommunications entity would be punishable by
law."26 Thus, Laurel concluded, "there is no crime if there is no law
punishing the crime."
On August 30, 2002, the CA rendered judgment dismissing the
petition.27 The appellate court ruled that a petition for certiorari under Rule
65 of the Rules of Court was not the proper remedy of the petitioner. On
the merits of the petition, it held that while business is generally an activity
which is abstract and intangible in form, it is nevertheless considered
"property" under Article 308 of the Revised Penal Code. The CA opined
that PLDTs business of providing international calls is personal property
which may be the object of theft, and cited United States v. Carlos28 to
support such conclusion. The tribunal also cited Strochecker v.
Ramirez,29 where this Court ruled that one-half interest in a days business
is personal property under Section 2 of Act No. 3952, otherwise known as
the Bulk Sales Law. The appellate court held that the operations of the ISR
are not subsumed in the charge for violation of P.D. No. 401.
Laurel, now the petitioner, assails the decision of the CA, contending that -
THE COURT OF APPEALS ERRED IN RULING THAT THE
PERSONAL PROPERTY ALLEGEDLY STOLEN PER THE
 INFORMATION IS NOT THE "INTERNATIONAL LONG
DISTANCE CALLS" BUT THE "BUSINESS OF PLDT."
THE COURT OF APPEALS ERRED IN RULING THAT THE TERM
"BUSINESS" IS PERSONAL PROPERTY WITHIN THE MEANING
OF ART. 308 OF THE REVISED PENAL CODE.30
Petitioner avers that the petition for a writ of certiorari may be filed to nullify
an interlocutory order of the trial court which was issued with grave abuse
of discretion amounting to excess or lack of jurisdiction. In support of his
petition before the Court, he reiterates the arguments in his pleadings filed
before the CA. He further claims that while the right to carry on a business
or an interest or participation in business is considered property under the
New Civil Code, the term "business," however, is not. He asserts that the
Philippine Legislature, which approved the Revised Penal Code way back
in January 1, 1932, could not have contemplated to include international
long distance calls and "business" as personal property under Article 308
thereof.
In its comment on the petition, the Office of the Solicitor General (OSG)
maintains that the amended information clearly states all the essential
elements of the crime of theft. Petitioners interpretation as to whether an
"international long distance call" is personal property under the law is
inconsequential, as a reading of the amended information readily reveals
that specific acts and circumstances were alleged charging Baynet,
through its officers, including petitioner, of feloniously taking, stealing and
illegally using international long distance calls belonging to respondent
PLDT by conducting ISR operations, thus, "routing and completing
international long distance calls using lines, cables, antenna and/or
airwave frequency which connect directly to the local or domestic
exchange facilities of the country where the call is destined." The OSG
maintains that the international long distance calls alleged in the amended
information should be construed to mean "business" of PLDT, which, while
abstract and intangible in form, is personal property susceptible of
appropriation.31 The OSG avers that what was stolen by petitioner and his
co-accused is the business of PLDT providing international long distance
calls which, though intangible, is personal property of the PLDT.32
For its part, respondent PLDT asserts that personal property under Article
308 of the Revised Penal Code comprehends intangible property such as
electricity and gas which are valuable articles for merchandise, brought
PROPERTY 1ST BATCH
and sold like other personal property, and are capable of appropriation. It
insists that the business of international calls and revenues constitute
personal property because the same are valuable articles of merchandise.
The respondent reiterates that international calls involve (a) the intangible
telephone services that are being offered by it, that is, the connection and
interconnection to the telephone network, lines or facilities; (b) the use of
its telephone network, lines or facilities over a period of time; and (c) the
income derived in connection therewith.33
PLDT further posits that business revenues or the income derived in
connection with the rendition of such services and the use of its telephone
network, lines or facilities are personal properties under Article 308 of the
Revised Penal Code; so is the use of said telephone services/telephone
network, lines or facilities which allow electronic voice signals to pass
through the same and ultimately to the called partys number. It is akin to
electricity which, though intangible property, may nevertheless be
appropriated and can be the object of theft. The use of respondent PLDTs
telephone network, lines, or facilities over a period of time for consideration
is the business that it provides to its customers, which enables the latter to
send various messages to intended recipients. Such use over a period of
time is akin to merchandise which has value and, therefore, can be
appropriated by another. According to respondent PLDT, this is what
actually happened when petitioner Laurel and the other accused below
conducted illegal ISR operations.34
The petition is meritorious.
The issues for resolution are as follows: (a) whether or not the petition for
certiorari is the proper remedy of the petitioner in the Court of Appeals; (b)
whether or not international telephone calls using Bay Super Orient Cards
through the telecommunication services provided by PLDT for such calls,
or, in short, PLDTs business of providing said telecommunication services,
are proper subjects of theft under Article 308 of the Revised Penal Code;
and (c) whether or not the trial court committed grave abuse of discretion
amounting to excess or lack of jurisdiction in denying the motion of the
petitioner to quash the amended information.
On the issue of whether or not the petition for certiorari instituted by the
petitioner in the CA is proper, the general rule is that a petition for certiorari
under Rule 65 of the Rules of Court, as amended, to nullify an order
denying a motion to quash the Information is inappropriate because the
aggrieved party has a remedy of appeal in the ordinary course of law.
Appeal and certiorari are mutually exclusive of each other. The remedy of
the aggrieved party is to continue with the case in due course and, when
an unfavorable judgment is rendered, assail the order and the decision on
appeal. However, if the trial court issues the order denying the motion to
quash the Amended Information with grave abuse of discretion amounting
to excess or lack of jurisdiction, or if such order is patently erroneous, or
null and void for being contrary to the Constitution, and the remedy of
appeal would not afford adequate and expeditious relief, the accused may
resort to the extraordinary remedy of certiorari.35 A special civil action for
certiorari is also available where there are special circumstances clearly
demonstrating the inadequacy of an appeal. As this Court held in Bristol
Myers Squibb (Phils.), Inc. v. Viloria:36
Nonetheless, the settled rule is that a writ of certiorari may be granted in
cases where, despite availability of appeal after trial, there is at least a
prima facie showing on the face of the petition and its annexes that: (a) the
trial court issued the order with grave abuse of discretion amounting to lack
of or in excess of jurisdiction; (b) appeal would not prove to be a speedy
and adequate remedy; (c) where the order is a patent nullity; (d) the
decision in the present case will arrest future litigations; and (e) for certain
considerations such as public welfare and public policy.37
In his petition for certiorari in the CA, petitioner averred that the trial court
committed grave abuse of its discretion amounting to excess or lack of
jurisdiction when it denied his motion to quash the Amended Information
despite his claim that the material allegations in the Amended Information
do not charge theft under Article 308 of the Revised Penal Code, or any
offense for that matter. By so doing, the trial court deprived him of his
constitutional right to be informed of the nature of the charge against him.
He further averred that the order of the trial court is contrary to the
constitution and is, thus, null and void. He insists that he should not be
compelled to undergo the rigors and tribulations of a protracted trial and
incur expenses to defend himself against a non-existent charge.
Petitioner is correct.
An information or complaint must state explicitly and directly every act or
omission constituting an offense38 and must allege facts establishing
conduct that a penal statute makes criminal;39 and describes the property
which is the subject of theft to advise the accused with reasonable
PROPERTY 1ST BATCH
certainty of the accusation he is called upon to meet at the trial and to
enable him to rely on the judgment thereunder of a subsequent
prosecution for the same offense.40 It must show, on its face, that if the
alleged facts are true, an offense has been committed. The rule is rooted
on the constitutional right of the accused to be informed of the nature of the
crime or cause of the accusation against him. He cannot be convicted of
an offense even if proven unless it is alleged or necessarily included in the
Information filed against him.
As a general prerequisite, a motion to quash on the ground that the
Information does not constitute the offense charged, or any offense for that
matter, should be resolved on the basis of said allegations whose truth and
veracity are hypothetically committed;41 and on additional facts admitted or
not denied by the prosecution.42 If the facts alleged in the Information do
not constitute an offense, the complaint or information should be quashed
by the court.43
We have reviewed the Amended Information and find that, as mentioned
by the petitioner, it does not contain material allegations charging the
petitioner of theft of personal property under Article 308 of the Revised
Penal Code. It, thus, behooved the trial court to quash the Amended
Information. The Order of the trial court denying the motion of the petitioner
to quash the Amended Information is a patent nullity.
On the second issue, we find and so hold that the international telephone
calls placed by Bay Super Orient Card holders, the telecommunication
services provided by PLDT and its business of providing said services are
not personal properties under Article 308 of the Revised Penal Code. The
construction by the respondents of Article 308 of the said Code to include,
within its coverage, the aforesaid international telephone calls,
telecommunication services and business is contrary to the letter and
intent of the law.
The rule is that, penal laws are to be construed strictly. Such rule is
founded on the tenderness of the law for the rights of individuals and on
the plain principle that the power of punishment is vested in Congress, not
in the judicial department. It is Congress, not the Court, which is to define a
crime, and ordain its punishment.44 Due respect for the prerogative of
Congress in defining crimes/felonies constrains the Court to refrain from a
broad interpretation of penal laws where a "narrow interpretation" is
appropriate. The Court must take heed to language, legislative history and
purpose, in order to strictly determine the wrath and breath of the conduct
the law forbids.45 However, when the congressional purpose is unclear, the
court must apply the rule of lenity, that is, ambiguity concerning the ambit
of criminal statutes should be resolved in favor of lenity.46
Penal statutes may not be enlarged by implication or intent beyond the fair
meaning of the language used; and may not be held to include offenses
other than those which are clearly described, notwithstanding that the
Court may think that Congress should have made them more
comprehensive.47 Words and phrases in a statute are to be construed
according to their common meaning and accepted usage.
As Chief Justice John Marshall declared, "it would be dangerous, indeed,
to carry the principle that a case which is within the reason or
mischief of a statute is within its provision, so far as to punish a crime not
enumerated in the statute because it is of equal atrocity, or of kindred
character with those which are enumerated.48 When interpreting a criminal
statute that does not explicitly reach the conduct in question, the Court
should not base an expansive reading on inferences from subjective and
variable understanding.49
Article 308 of the Revised Penal Code defines theft as follows:
Art. 308. Who are liable for theft. Theft is committed by any person who,
with intent to gain but without violence, against or intimidation of persons
nor force upon things, shall take personal property of another without the
latters consent.
The provision was taken from Article 530 of the Spanish Penal Code which
reads:
1. Los que con nimo de lucrarse, y sin violencia o intimidacin en las
personas ni fuerza en las cosas, toman las cosas muebles ajenas sin la
voluntad de su dueo.50
For one to be guilty of theft, the accused must have an intent to steal
(animus furandi) personal property, meaning the intent to deprive another
of his ownership/lawful possession of personal property which intent is
apart from and concurrently with the general criminal intent which is an
essential element of a felony of dolo (dolus malus).
PROPERTY 1ST BATCH
An information or complaint for simple theft must allege the following
elements: (a) the taking of personal property; (b) the said property belongs
to another; (c) the taking be done with intent to gain; and (d) the taking be
accomplished without the use of violence or intimidation of person/s or
force upon things.51
One is apt to conclude that "personal property" standing alone, covers both
tangible and intangible properties and are subject of theft under the
Revised Penal Code. But the words "Personal property" under the Revised
Penal Code must be considered in tandem with the word "take" in the law.
The statutory definition of "taking" and movable property indicates that,
clearly, not all personal properties may be the proper subjects of theft. The
general rule is that, only movable properties which have physical or
material existence and susceptible of occupation by another are proper
objects of theft.52 As explained by Cuelo Callon: "Cosa juridicamente es
toda sustancia corporal, material, susceptible de ser aprehendida que
tenga un valor cualquiera."53
According to Cuello Callon, in the context of the Penal Code, only those
movable properties which can be taken and carried from the place they are
found are proper subjects of theft. Intangible properties such as rights and
ideas are not subject of theft because the same cannot be "taken" from the
place it is found and is occupied or appropriated.
Solamente las cosas muebles y corporales pueden ser objeto de hurto. La
sustraccin de cosas inmuebles y la cosas incorporales (v. gr., los
derechos, las ideas) no puede integrar este delito, pues no es posible
asirlas, tomarlas, para conseguir su apropiacin. El Codigo emplea la
expresin "cosas mueble" en el sentido de cosa que es susceptible de ser
llevada del lugar donde se encuentra, como dinero, joyas, ropas, etctera,
asi que su concepto no coincide por completo con el formulado por el
Codigo civil (arts. 335 y 336).54
Thus, movable properties under Article 308 of the Revised Penal Code
should be distinguished from the rights or interests to which they relate. A
naked right existing merely in contemplation of law, although it may be very
valuable to the person who is entitled to exercise it, is not the subject of
theft or larceny.55 Such rights or interests are intangible and cannot be
"taken" by another. Thus, right to produce oil, good will or an interest in
business, or the right to engage in business, credit or franchise are
properties. So is the credit line represented by a credit card. However, they
are not proper subjects of theft or larceny because they are without form or
substance, the mere "breath" of the Congress. On the other hand, goods,
wares and merchandise of businessmen and credit cards issued to them
are movable properties with physical and material existence and may be
taken by another; hence, proper subjects of theft.
There is "taking" of personal property, and theft is consummated when the
offender unlawfully acquires possession of personal property even if for a
short time; or if such property is under the dominion and control of the thief.
The taker, at some particular amount, must have obtained complete and
absolute possession and control of the property adverse to the rights of the
owner or the lawful possessor thereof.56 It is not necessary that the
property be actually carried away out of the physical possession of the
lawful possessor or that he should have made his escape with it.57 Neither
asportation nor actual manual possession of property is required.
Constructive possession of the thief of the property is enough.58
The essence of the element is the taking of a thing out of the possession of
the owner without his privity and consent and without animus revertendi.59
Taking may be by the offenders own hands, by his use of innocent
persons without any felonious intent, as well as any mechanical device,
such as an access device or card, or any agency, animate or inanimate,
with intent to gain. Intent to gain includes the unlawful taking of personal
property for the purpose of deriving utility, satisfaction, enjoyment and
pleasure.60
We agree with the contention of the respondents that intangible properties
such as electrical energy and gas are proper subjects of theft. The reason
for this is that, as explained by this Court in United States v. Carlos61 and
United States v. Tambunting,62 based on decisions of the Supreme Court
of Spain and of the courts in England and the United States of America,
gas or electricity are capable of appropriation by another other than the
owner. Gas and electrical energy may be taken, carried away and
appropriated. In People v. Menagas,63 the Illinois State Supreme Court
declared that electricity, like gas, may be seen and felt. Electricity, the
same as gas, is a valuable article of merchandise, bought and sold like
other personal property and is capable of appropriation by another. It is a
valuable article of merchandise, bought and sold like other personal
property, susceptible of being severed from a mass or larger quantity and
of being transported from place to place. Electrical energy may, likewise,
PROPERTY 1ST BATCH
be taken and carried away. It is a valuable commodity, bought and sold like
other personal property. It may be transported from place to place. There is
nothing in the nature of gas used for illuminating purposes which renders it
incapable of being feloniously taken and carried away.
In People ex rel Brush Electric Illuminating Co. v. Wemple,64 the Court of
Appeals of New York held that electric energy is manufactured and sold in
determinate quantities at a fixed price, precisely as are coal, kerosene oil,
and gas. It may be conveyed to the premises of the consumer, stored in
cells of different capacity known as an accumulator; or it may be sent
through a wire, just as gas or oil may be transported either in a close tank
or forced through a pipe. Having reached the premises of the consumer, it
may be used in any way he may desire, being, like illuminating gas,
capable of being transformed either into heat, light, or power, at the option
of the purchaser. In Woods v. People,65 the Supreme Court of Illinois
declared that there is nothing in the nature of gas used for illuminating
purposes which renders it incapable of being feloniously taken and carried
away. It is a valuable article of merchandise, bought and sold like other
personal property, susceptible of being severed from a mass or larger
quantity and of being transported from place to place.
Gas and electrical energy should not be equated with business or services
provided by business entrepreneurs to the public. Business does not have
an exact definition. Business is referred as that which occupies the time,
attention and labor of men for the purpose of livelihood or profit. It
embraces everything that which a person can be employed.66 Business
may also mean employment, occupation or profession. Business is also
defined as a commercial activity for gain benefit or advantage.67 Business,
like services in business, although are properties, are not proper subjects
of theft under the Revised Penal Code because the same cannot be
"taken" or "occupied." If it were otherwise, as claimed by the respondents,
there would be no juridical difference between the taking of the business of
a person or the services provided by him for gain, vis--vis, the taking of
goods, wares or merchandise, or equipment comprising his business.68 If it
was its intention to include "business" as personal property under Article
308 of the Revised Penal Code, the Philippine Legislature should have
spoken in language that is clear and definite: that business is personal
property under Article 308 of the Revised Penal Code.69
We agree with the contention of the petitioner that, as gleaned from the
material averments of the Amended Information, he is charged of "stealing
the international long distance calls belonging to PLDT" and the use
thereof, through the ISR. Contrary to the claims of the OSG and
respondent PLDT, the petitioner is not charged of stealing P20,370,651.95
from said respondent. Said amount of P20,370,651.95 alleged in the
Amended Information is the aggregate amount of access, transmission or
termination charges which the PLDT expected from the international long
distance calls of the callers with the use of Baynet Super Orient Cards sold
by Baynet Co. Ltd.
In defining theft, under Article 308 of the Revised Penal Code, as the
taking of personal property without the consent of the owner thereof, the
Philippine legislature could not have contemplated the human voice which
is converted into electronic impulses or electrical current which are
transmitted to the party called through the PSTN of respondent PLDT and
the ISR of Baynet Card Ltd. within its coverage. When the Revised Penal
Code was approved, on December 8, 1930, international telephone calls
and the transmission and routing of electronic voice signals or impulses
emanating from said calls, through the PSTN, IPL and ISR, were still non-
existent. Case law is that, where a legislative history fails to evidence
congressional awareness of the scope of the statute claimed by the
respondents, a narrow interpretation of the law is more consistent with the
usual approach to the construction of the statute. Penal responsibility
cannot be extended beyond the fair scope of the statutory mandate.70
Respondent PLDT does not acquire possession, much less, ownership of
the voices of the telephone callers or of the electronic voice signals or
current emanating from said calls. The human voice and the electronic
voice signals or current caused thereby are intangible and not susceptible
of possession, occupation or appropriation by the respondent PLDT or
even the petitioner, for that matter. PLDT merely transmits the electronic
voice signals through its facilities and equipment. Baynet Card Ltd.,
through its operator, merely intercepts, reroutes the calls and passes them
to its toll center. Indeed, the parties called receive the telephone calls from
Japan.
In this modern age of technology, telecommunications systems have
become so tightly merged with computer systems that it is difficult to know
where one starts and the other finishes. The telephone set is highly
computerized and allows computers to communicate across long
distances.71 The instrumentality at issue in this case is not merely a
telephone but a telephone inexplicably linked to a computerized
communications system with the use of Baynet Cards sold by the Baynet
PROPERTY 1ST BATCH
Card Ltd. The corporation uses computers, modems and software, among
others, for its ISR.72
The conduct complained of by respondent PLDT is reminiscent of
"phreaking" (a slang term for the action of making a telephone system to
do something that it normally should not allow by "making the phone
company bend over and grab its ankles"). A "phreaker" is one who
engages in the act of manipulating phones and illegally markets telephone
services.73 Unless the phone company replaces all its hardware, phreaking
would be impossible to stop. The phone companies in North America were
impelled to replace all their hardware and adopted full digital switching
system known as the Common Channel Inter Office Signaling. Phreaking
occurred only during the 1960s and 1970s, decades after the Revised
Penal Code took effect.
The petitioner is not charged, under the Amended Information, for theft of
telecommunication or telephone services offered by PLDT. Even if he is,
the term "personal property" under Article 308 of the Revised Penal Code
cannot be interpreted beyond its seams so as to include
"telecommunication or telephone services" or computer services for that
matter. The word "service" has a variety of meanings dependent upon the
context, or the sense in which it is used; and, in some instances, it may
include a sale. For instance, the sale of food by restaurants is usually
referred to as "service," although an actual sale is involved.74 It may also
mean the duty or labor to be rendered by one person to another;
performance of labor for the benefit of another.75 In the case of PLDT, it is
to render local and international telecommunications services and such
other services as authorized by the CPCA issued by the NTC. Even at
common law, neither time nor services may be taken and occupied or
appropriated.76 A service is generally not considered property and a theft of
service would not, therefore, constitute theft since there can be no caption
or asportation.77 Neither is the unauthorized use of the equipment and
facilities of PLDT by the petitioner theft under the aforequoted provision of
the Revised Penal Code.78
If it was the intent of the Philippine Legislature, in 1930, to include services
to be the subject of theft, it should have incorporated the same in Article
308 of the Revised Penal Code. The Legislature did not. In fact, the
Revised Penal Code does not even contain a definition of services.
If taking of telecommunication services or the business of a person, is to
be proscribed, it must be by special statute79 or an amendment of the
Revised Penal Code. Several states in the United States, such as New
York, New Jersey, California and Virginia, realized that their criminal
statutes did not contain any provisions penalizing the theft of services and
passed laws defining and penalizing theft of telephone and computer
services. The Pennsylvania Criminal Statute now penalizes theft of
services, thus:
(a) Acquisition of services. --
(1) A person is guilty of theft if he intentionally obtains services for himself
or for another which he knows are available only for compensation, by
deception or threat, by altering or tampering with the public utility meter or
measuring device by which such services are delivered or by causing or
permitting such altering or tampering, by making or maintaining any
unauthorized connection, whether physically, electrically or inductively, to a
distribution or transmission line, by attaching or maintaining the attachment
of any unauthorized device to any cable, wire or other component of an
electric, telephone or cable television system or to a television receiving
set connected to a cable television system, by making or maintaining any
unauthorized modification or alteration to any device installed by a cable
television system, or by false token or other trick or artifice to avoid
payment for the service.
In the State of Illinois in the United States of America, theft of labor or
services or use of property is penalized:
(a) A person commits theft when he obtains the temporary use of property,
labor or services of another which are available only for hire, by means of
threat or deception or knowing that such use is without the consent of the
person providing the property, labor or services.
In 1980, the drafters of the Model Penal Code in the United States of
America arrived at the conclusion that labor and services, including
professional services, have not been included within the traditional scope
of the term "property" in ordinary theft statutes. Hence, they decided to
incorporate in the Code Section 223.7, which defines and penalizes theft of
services, thus:
PROPERTY 1ST BATCH
(1) A person is guilty of theft if he purposely obtains services which he
knows are available only for compensation, by deception or threat, or by
false token or other means to avoid payment for the service. "Services"
include labor, professional service, transportation, telephone or other
public service, accommodation in hotels, restaurants or elsewhere,
admission to exhibitions, use of vehicles or other movable property. Where
compensation for service is ordinarily paid immediately upon the rendering
of such service, as in the case of hotels and restaurants, refusal to pay or
absconding without payment or offer to pay gives rise to a presumption
that the service was obtained by deception as to intention to pay; (2) A
person commits theft if, having control over the disposition of services of
others, to which he is not entitled, he knowingly diverts such services to his
own benefit or to the benefit of another not entitled thereto.
Interestingly, after the State Supreme Court of Virginia promulgated its
decision in Lund v. Commonwealth,80declaring that neither time nor
services may be taken and carried away and are not proper subjects of
larceny, the General Assembly of Virginia enacted Code No. 18-2-98 which
reads:
Computer time or services or data processing services or information or
data stored in connection therewith is hereby defined to be property which
may be the subject of larceny under 18.2-95 or 18.2-96, or
embezzlement under 18.2-111, or false pretenses under 18.2-178.
In the State of Alabama, Section 13A-8-10(a)(1) of the Penal Code of
Alabama of 1975 penalizes theft of services:
"A person commits the crime of theft of services if: (a) He intentionally
obtains services known by him to be available only for compensation by
deception, threat, false token or other means to avoid payment for the
services "
In the Philippines, Congress has not amended the Revised Penal Code to
include theft of services or theft of business as felonies. Instead, it
approved a law, Republic Act No. 8484, otherwise known as the Access
Devices Regulation Act of 1998, on February 11, 1998. Under the law, an
access device means any card, plate, code, account number, electronic
serial number, personal identification number and other telecommunication
services, equipment or instrumentalities-identifier or other means of
account access that can be used to obtain money, goods, services or any
other thing of value or to initiate a transfer of funds other than a transfer IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
originated solely by paper instrument. Among the prohibited acts assailed Orders of the Regional Trial Court and the Decision of the Court
enumerated in Section 9 of the law are the acts of obtaining money or of Appeals are REVERSED and SET ASIDE. The Regional Trial Court is
anything of value through the use of an access device, with intent to directed to issue an order granting the motion of the petitioner to quash the
defraud or intent to gain and fleeing thereafter; and of effecting Amended Information.
transactions with one or more access devices issued to another person or
persons to receive payment or any other thing of value. Under Section 11 SO ORDERED.
of the law, conspiracy to commit access devices fraud is a crime. However,
the petitioner is not charged of violation of R.A. 8484. G.R. No. L-9069 March 31, 1915

Significantly, a prosecution under the law shall be without prejudice to any THE MUNICIPALITY OF CAVITE, plaintiff-appellant,
liability for violation of any provisions of the Revised Penal Code inclusive vs.
of theft under Rule 308 of the Revised Penal Code and estafa under Article HILARIA ROJAS and her husband TIUNG SIUKO, alias
315 of the Revised Penal Code. Thus, if an individual steals a credit card SIWA, defendants-appellees.
and uses the same to obtain services, he is liable of the following: theft of
the credit card under Article 308 of the Revised Penal Code; violation of
Attorney-General Villamor for appellant.
Republic Act No. 8484; and estafa under Article 315(2)(a) of the Revised
J. Y. Pinzon for appellees.
Penal Code with the service provider as the private complainant. The
petitioner is not charged of estafa before the RTC in the Amended
Information. TORRES, J.:

Section 33 of Republic Act No. 8792, Electronic Commerce Act of 2000 Appeal filed through bill of exceptions by the Attorney-General,
provides: representing the plaintiff municipality of Cavite, from the judgment of March
27, 1913, whereby the Honorable Herbert D. Gale, judge, dismissed the
complaint with costs against the plaintiff party, declaring that the said
Sec. 33. Penalties. The following Acts shall be penalized by fine and/or
municipality had no right to require that the defendants vacate the land in
imprisonment, as follows:
question.
a) Hacking or cracking which refers to unauthorized access into or
By an instrument dated December 5, 1911, afterwards amended on March
interference in a computer system/server or information and
14, 1912, the provincial fiscal of Cavite, representing the municipality of
communication system; or any access in order to corrupt, alter, steal, or
that name, filed a complaint in the Court of First Instance of said province
destroy using a computer or other similar information and communication
alleging that the plaintiff municipal corporation, duly organized and
devices, without the knowledge and consent of the owner of the computer
constituted in accordance with Act No. 82, and as the successor to the
or information and communications system, including the introduction of
rights s aid entity had under the late Spanish government, and by virtue of
computer viruses and the like, resulting on the corruption, destruction,
Act No. 1039, had exclusive right, control and administration over the
alteration, theft or loss of electronic data messages or electronic
streets, lanes, plazas, and public places of the municipality of Cavite; that
documents shall be punished by a minimum fine of One hundred thousand
the defendants, by virtue of a lease secured from the plaintiff municipality,
pesos (P100,000.00) and a maximum commensurate to the damage
occupy a parcel of land 93 square meters in area that forms part o the
incurred and a mandatory imprisonment of six (6) months to three (3)
public plaza known under the name of Soledad, belonging to the
years.
municipality of Cavite, the defendants having constructed thereon a house,
through payment to the plaintiff for occupation thereof of a rental of P5,58 a
quarter in advance, said defendants being furthermore obligated to vacate

PROPERTY 1ST BATCH

the leased land within sixty days subsequent to plaintiff's demand to that
effect; that the defendants have been required by the municipality to
vacate and deliver possession of the said land, but more than the sixty
days within which they having done so to date; that the lease secured from
the municipality of Cavite, by virtue whereof the defendants occupy the
land that is the subject matter of the complaint, is ultra vires and
therefore ipso facto null and void and of no force or effect, for the said land
is an integral portion of a public plaza of public domain and use, and the
municipal council of Cavite has never at any time had any power or
authority to withdraw it from public use, and to lease it to a private party for
his own use, and so the defendants have never had any right or occupy or
to retain the said land under leasehold, or in any other way, their
occupation of the parcel being furthermore illegal; and therefore prayed
that judgment be rendered declaring that possession of the sad land lies
with the plaintiff and ordering the defendants to vacate the land and deliver
possession thereof to said plaintiff, with the costs against the defendants.
The demurrer filed to the foregoing complaint having been overruled, with
exception on the part of the defendants, in their answer of April 10, 1912,
they admitted some of the allegations contained in the complaint but
denied that the parcel of land which they occupy and to which the
complaint refers forms and integral part of Plaza Soledad, or that the lease
secured by them from the municipality of Cavite was null and void and ultra
vires, stating if they refused to vacate said land it was because they had
acquired the right of possession thereof. As a special defense they alleged
that, according to the lease, they could only be ordered to vacate the land
leased when the plaintiff municipality might need it for decoration or other
public use, which does not apply in the present case; and in a cross-
complaint they alleged that on the land which is the subject matter of the
complaint the defendants have erected a house of strong materials,
assessed at P3,000, which was constructed under a license secured from
the plaintiff municipality; that if they should be ordered to vacate the said
land they would suffer damages to the extent of P3,000, wherefore they
prayed that they be absolved from the complaint, or in the contrary case
that the plaintiff be sentenced to indemnify them in the sum of P3,000 as
damages, and to pay the costs.
After hearing of the case, wherein both parties submitted parol and
documentary evidence, the court rendered the judgment that he been
mentioned, whereto counsel for the municipality excepted and in writing
asked for a reopening of the case and the holding of a new trial. This
PROPERTY 1ST BATCH
motion was denied, with exception on the part of the appellant, and the
forwarded to the clerk of this court.
It is duly proven in the record that, upon presentation of an application by
Hilaria Rojas, he municipal council of Cavite by resolution No. 10, dated
July 3, 107, Exhibit C, leased to the said Rojas some 70 or 80 square
meters of Plaza Soledad, on condition that she pay rent quarterly in
advance according to the schedule fixed in Ordinance No. 43, land within
sixty days subsequent to notification to that effect. The record shows
(receipts, Exhibit 1) that she has paid the land tax on the house erected on
the lot.
The boundary line between the properties of the municipality of Cavite and
the naval reservation, as fixed in Act No. 1039 of the Philippine
Commission, appears in the plan prepared by a naval engineer and
submitted as evidence by the plaintiff, Exhibit C of civil case No. 274 of the
Cavite court and registered in this court as No. 9071. According to said
plan, defendant's house is erected on a plat of ground that forms part of
the promenade called Plaza Soledad, and this was also so proven by the
testimony of the plaintiff's witnesses.
By section 3 of the said Act No. 1039, passed January 12, 1904, the
Philippine Commission granted to the municipality of Cavite all the land
included in the tract called Plaza Soledad. In the case of Nicolas vs. Jose
(6 Phil. Rep., 589), wherein the municipality of Cavite, represented by its
president Catalino Nicolas, sought inscription in its name of the land
comprised in the said Palza Soledad, with objection on the part of Maria
Jose et al. who is sought that inscription be decreed in their name of the
parcels of land in this plaza occupied by them, this court decided that
neither the municipality nor the objectors were entitled to inscription, for
with respect to the objectors said plaza belonged to the municipality of
Cavite and with respect to the latter the said Plaza Soledad was not
transferable property of that municipality to be inscribed in its name,
because he intention of Act No. 1039 was that the said plaza and other
places therein enumerated should be kept open for public transit; herefore
there can be no doubt that the defendant has no right to continue to
occupy the land of the municipality leased by her, for it is an integral
portion of Plaza Soledad, which if for public use and is reserved for the
common benefit.
According to article 344 of the Civil Code: "Property for public use in
provinces and in towns comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and public
works of general service supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal
council of Cavite could not in 1907 withdraw or exclude from public use a
portion thereof in order to lease it for the sole benefit of the defendant
Hilaria Rojas. In leasing a portion of said plaza or public place to the
defendant for private use the plaintiff municipality exceeded its authority in
the exercise of its powers by executing a contract over a thing of which it
could not dispose, nor is it empowered so to do.
The Civil Code, articles 1271, prescribes that everything which is not
outside he commerce of man may be the object of a contract, and plazas
and streets are outside of this commerce, as was decided by the supreme
court of Spain in its decision of February 12, 195, which says: "Communal
things that cannot be soud because they are by their very nature outside of
commerce are those for public use, such as the plazas, streets, common
lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby he
municipality of Cavite leased to Hilaria Rojas a portion of the Plaza
Soledad is null and void and of no force or effect, because it is contrary to
the law and the thing leased cannot be the object of a contract. On the
hyphotesis that the said lease is null and void in accordance with the
provisions of article 1303 of the Civil Code, the defendant must restore and
deliver possession of the land described in the complaint to the
municipality of Cavite, which in its turn must restore to the said defendant
all the sums it may have received from her in the nature of rentals just as
soon as she restores the land improperly leased. For the same reasons as
have been set forth, and as said contract is null and void in its origin, it can
produce no effect and consequently the defendant is not entitled to claim
that the plaintiff municipality indemnity her for the damages she may suffer
by the removal of her house from the said land.
For all the foregoing reasons we must reverse the judgment appealed from
and declare, as we do declare, that the land occupied by Hilaria Rojas
forms part of the public plaza called Soledad, and as the lease of said
parcel of land is null and void, we order the defendant to vacate it and
release the land in question within thirty days, leaving it cleared as it was
PROPERTY 1ST BATCH
before hr occupation. There is no ground for the indemnity sought in the
nature of damages, but the municipality must in its turn to the defendant
the rentals collected; without finding as to the costs. So ordered.
G.R. No. L-66575 September 30, 1986
ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA,
LOURDES, TEODORO and MYRNA, all surnamed
MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA,
CORLETO CASTRO, SALOME RODRIGUEZ, EDUCARDO CUISON,
FERNANDO ZARCILLA, MARIANO GABRIEL, NICOMEDES
CORDERO, CLETO PEDROZO, FELIX SALARY and JOSE
PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.
FERNAN, J.:
Petitioners Adriano Maneclang, et. al. filed before the then Court of First
Instance of Pangasinan, Branch XI a complaint for quieting of title over a
certain fishpond located within the four [41 parcels of land belonging to
them situated in Barrio Salomague, Bugallon, Pangasinan, and the
annulment of Resolutions Nos. 38 and 95 of the Municipal Council of
Bugallon Pangasinan. The trial court dismissed the complaint in a decision
dated August 15, 1975 upon a finding that the body of water traversing the
titled properties of petitioners is a creek constituting a tributary of the Agno
River; therefore public in nature and not subject to private appropriation.
The lower court likewise held that Resolution No. 38, ordering an ocular
inspection of the Cayangan Creek situated between Barrios Salomague
Sur and Salomague Norte, and Resolution No. 95 authorizing public
bidding for the lease of all municipal ferries and fisheries, including the
fishpond under consideration, were passed by respondents herein as
members of the Municipal Council of Bugallon, Pangasinan in the exercise
of their legislative powers.
Petitioners appealed said decision to the Intermediate Appellate Court, waters, and it cannot be said that petitioners were deprived of their right to
which affirmed the same on April 29, 1983. Hence, this petition for review due process as mere publication of the notice of the public bidding suffices
on certiorari. as a constructive notice to the whole world.

Acting on the petition, the Court required the respondents to comment IN VIEW OF THE FOREGOING, the Court Resolved to set aside the
thereon. However, before respondents could do so, petitioners manifested Compromise Agreement and declare the same null and void for being
that for lack of interest on the part of respondent Alfredo Maza, the contrary to law and public policy. The Court further resolved to DISMISS
awardee in the public bidding of the fishpond, the parties desire to the instant petition for lack of merit.
amicably settle the case by submitting to the Court a Compromise
Agreement praying that judgment be rendered recognizing the ownership SO ORDERED.
of petitioners over the land the body of water found within their titled
properties, stating therein, among other things, that "to pursue the case, G.R. No. 153726 March 28, 2007
the same will not amount to any benefit of the parties, on the other hand it
is to the advantage and benefit of the municipality if the ownership of the
REPUBLIC OF THE PHILIPPINES, Petitioner,
land and the water found therein belonging to petitioners be recognized in
vs.
their favor as it is now clear that after the National Irrigation Administration
DEMOCRITO T. MENDOZA, SR., GWENDOLYN MENDOZA, VILMA
[NIA] had built the dike around the land, no water gets in or out of the
MENDOZA, DEMOCRITO MENDOZA, JR., MENCA DEVELOPMENT
land. 1
CORP., CARMEN VELEZ TING and JACINTO VELEZ,
JR., Respondents.
The stipulations contained in the Compromise Agreement partake of the
nature of an adjudication of ownership in favor of herein petitioners of the
x-----------------------x
fishpond in dispute, which, as clearly found by the lower and appellate
courts, was originally a creek forming a tributary of the Agno River.
Considering that as held in the case of Mercado vs. Municipal President of G.R. No. 154014 March 28, 2007
Macabebe, 59 Phil. 592 [1934], a creek, defined as a recess or arm
extending from a river and participating in the ebb and flow of the sea, is a SILOT BAY FISHERMANS ASSOCIATION, INC., Petitioner,
property belonging to the public domain which is not susceptible to private vs.
appropriation and acquisitive prescription, and as a public water, it cannot REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF
be registered under the Torrens System in the name of any individual LANDS MANAGEMENT BUREAU, Respondent.
[Diego v. Court of Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil.
4551; and considering further that neither the mere construction of DECISION
irrigation dikes by the National Irrigation Administration which prevented
the water from flowing in and out of the subject fishpond, nor its conversion CHICO-NAZARIO, J.:
into a fishpond, alter or change the nature of the creek as a property of the
public domain, the Court finds the Compromise Agreement null and Before Us are consolidated Petitions for Review on Certiorari under Rule
void and of no legal effect, the same being contrary to law and public 45 of the Rules of Civil Procedure, assailing the Decision1 of the Court of
policy. Appeals in CA-G.R. CV No. 57069, dated 30 March 2001, which reversed
and set aside the Decision2 of the Regional Trial Court (RTC) of Cebu,
The finding that the subject body of water is a creek belonging to the public Branch 14, and dismissed for lack of merit Civil Case No. CEB-9563.
domain is a factual determination binding upon this Court. The Municipality
of Bugallon, acting thru its duly-constituted municipal council is clothed with
authority to pass, as it did the two resolutions dealing with its municipal

PROPERTY 1ST BATCH

The present controversy involves a considerable spread of Silot Bay
situated in Liloan, Cebu, and originally classified as part of Block B-
Timberland, Project No. 29 of LC Map 1391-Liloan of the Land
Classification Project of the Province of Cebu, with an area of 87.134
hectares, more or less.
On 13 January 1954, Democrito T. Mendoza, Sr. was accorded Ordinary
Fishpond Permit No. F-2166-J for an area of 6.25 hectares within Silot
Bay, which was previously leased by his father who waived the leasehold
rights in his favor. On 26 July of the same year, Democrito Mendoza, Sr.
was also issued Ordinary Nipa-Bacauan Permit No. NB 642 for an area of
2.635 hectares, also in Silot Bay. Several years later, on 7 May 1969,
Democrito Mendoza, Sr. was issued Ordinary Fishpond Permit No. F-
6029-Y encompassing an estimated area of 70.07 hectares within Silot
Bay. This new permit covers the combined areas under Ordinary Nipa-
Bacauan Permit No. NB 642 and Ordinary Fishpond Permit No. F-2166-J,
as well as other areas previously managed by other fishpond permit
grantees which Democrito Mendoza, Sr. acquired for valuable
consideration.
Meanwhile, on 16 January 1967, then President Ferdinand E. Marcos
issued a Memorandum addressed to the Secretary of Agriculture and
Natural Resources, the Chairman of the Board of Governors of the
Development Bank of the Philippines, the Undersecretary of Natural
Resources, and the Directors of the Bureaus of Fishery, Forestry, and
Lands, respectively, thereby constituting a continuing committee to
accomplish the following:
1. Identify the exact locations and area of these 700,000 hectares
of fishpond areas on or before February 28, 1967. x x x.
2. Within the month of March 1967, all these fishpond areas shall
be released by the Bureau of Forestry to the Bureau of Lands as
alienable and disposable, but subject to the disposal of the Bureau
of Fisheries for fishpond purposes.3
Thereafter, on 24 September 1969, Democrito Mendoza, Sr. filed an
application for sales patent4 to purchase the area covered by Ordinary
Fishpond Permit No. F-6029-Y.5 The fishpond permit indicated that the
area covered by said permit was only 70.07 hectares; however, upon
resurvey by the Bureau of Lands, the area was reported to be measuring
PROPERTY 1ST BATCH
92.3881 hectares. Later, still another survey by the same bureau disclosed
that the area applied for was only a little over 89 hectares.
On 17 August 1970, then Acting Director of Forestry Jose Viado issued a
Letter Certification addressed to the Director of Lands regarding the
classification of the property covered by Ordinary Fishpond Permit No. F-
6029-Y subject of the sales patent application applied for by Democrito
Mendoza, Sr., to wit:
Please be informed that the tract of land situated in Silot-Poblacion, Liloan,
Cebu, containing an area of 70.07 hectares xxx, is within the Timberland
Block-B of LC Project No. 29 of Liloan, Cebu, per BF Map LC-1391.
However, since the said area has already been certified as available for
fishpond development and is thus no longer needed for forest purposes,
the same (the 70.07 hectares shown on Cebu PMD No. 1379) is, therefore,
hereby certified as such and released as Alienable or Disposable for
fishpond purposes only pursuant to the directive of the President dated
January 16, 1967 and for disposition under the Public Land Act, as
amended, subject nevertheless, to the following conditions:
xxxx
2. That the area herein certified as Alienable or Disposable be solely
developed and used for fishpond purposes in consonance with the
approved scientific practices and assistance of the personnel of the
Philippine Fisheries Commission (Presidential Directive of January 16,
1967).6 [Emphasis ours]
In compliance with the process for sales patent application, Democrito
Mendoza, Sr. secured and submitted separate certifications from
concerned government agencies such as the Provincial Engineer of Cebu,
the District Engineer of Cebu, the Municipal Council of Liloan, Cebu, the
Commissioner of Customs, the Secretary of Public Works and Highways,
among other offices, to determine if there were objections to his
application. Based on these certifications issued upon Democrito
Mendoza, Sr.s request, it was ascertained that there was no objection to
said application and that the same did not interfere with any function or
proposed project of the government.
Subsequently, notices of sale were published in the Nueva Era and the
Mindanao Mail, in addition to the publication in the Official Gazette. The
same were posted in conspicuous places within the vicinity of the property
subject of the sale and on the bulletin boards of the Municipal Hall of
Liloan, Cebu, and of the Bureau of Lands, District VII-I, both in Cebu City.
In the interim, Presidential Decree No. 43, Providing for the Accelerated
Development of the Fishery Industry of the Philippines,7 was issued on 9
November 1972. Whereupon all public lands, such as tidal swamps,
mangrove and other swamps, marshes, ponds and streams within public
lands, including public lands left dry during the lowest low tide and covered
by water during the highest tide; and which are not needed for forestry
purposes were declared available for fishpond purposes and automatically
transferred to the Bureau of Fisheries for its administration and
disposition.8
On 18 January 1973, a day before the scheduled auction sale of the
disputed property, then Liloan Mayor Cesar Bugtai filed a letter-protest with
the Director of Lands objecting to the proposed sale of the property.
According to Mayor Bugtai, the area was intended for development by the
local government as a tourist attraction. Despite said opposition by the
municipal mayor, the District Land Office of Cebu City proceeded with the
scheduled auction sale on 19 January 1973, wherein Democrito Mendoza,
Sr. was declared winner, being the sole bidder thereat. The opposition of
Mayor Bugtai was subsequently recommended for dismissal by the Bureau
of Lands for lack of merit.
Thereafter, then Acting Director of the Bureau of Lands Ramon N.
Casanova recommended the approval of Democrito Mendoza, Sr.s
request for the issuance of a patent to the land covered by Sales
(Fishpond) Application No. (VI-I) 41-A on grounds of justice and equity.
In the First Indorsement of then Secretary of Agriculture and Natural
Resources Arturo Tanco, Jr., dated 5 March 1974 to the Office of the
President, the recommendation of Acting Director of the Bureau of Lands
Ramon N. Casanova was favorably endorsed.
On 21 May 1974, then Presidential Executive Assistant Jacobo C. Clave
issued a Memorandum informing the Secretary of the Department of
Natural Resources that President Marcos had approved the
recommendation advising approval of the request of Democrito Mendoza,
Sr. for the issuance of a patent over the disputed property.
PROPERTY 1ST BATCH
Prior to the formal award of the subject property, Democrito Mendoza, Sr.,
however, had caused the property to be subdivided into Lots 1 and 2. Lot 1
was further subdivided into four, namely Lots 1-A, 1-B, 1-C, and 1-D.
Thereafter, Democrito Mendoza, Sr. made an assignment of his rights and
interests over Lots 1-B, 1-C, and 1-D in favor of his three children
Gwendolyn,9 Vilma,10 and Democrito, Jr.,11 all surnamed Mendoza. For
himself, Democrito Mendoza, Sr. retained Lot 1-A12 with an area of
215,838 square meters and Lot 2 with an area of 241.61 square meters.
Subsequently, Gwendolyn, Vilma, and Democrito, Jr. filed their respective
sales patent applications for the property assigned to them by their father.
On 26 June 1974, Acting Director of the Bureau of Lands Ramon N.
Casanova issued an Order awarding the sales patents over the disputed
property to Democrito Mendoza, Sr. and his three children Gwendolyn,
Vilma, and Democrito, Jr., respectively, to wit:
It appearing that the proceedings had in connection with the above-noted
applications were in accordance with law and existing regulations, the
portions of the land applied for which correspond to Lot No. 1-A & Lot No.
2, Si(F) (VI-I) 42-D are hereby awarded to Democrito T. Mendoza
at P200.00 per hectare or P4,800.00 for the whole tract of 24.0000
hectares; Lot No. 1-B, Si(F) (VI-I) 42-D, to Gwendolyn C. Mendoza
at P200.00 per hectare or P4,600.00 for the whole tract of 23.0000
hectares; Lot No. 1-C Si(F) (VI-I) 42-D, to Vilma C. Mendoza at P200.00
per hectare or P4,600.00 for the whole tract of 23.0000 hectares and Lot
No. 1-D Si(F) (VI-I) 42-D, to Democrito C. Mendoza, Jr. at P200.00 per
hectare or P4,477.62 for the whole tract of 23.3881 hectares.13
Following the registration of the sales patents with the Register of Deeds of
Cebu, Original Certificates of Title were each issued to Democrito,
Sr.,14 Gwendolyn,15 Vilma,16 and Democrito, Jr.17
On 8 January 1982, in consideration of shares of stock in MENCA
Development Corporation (MENCA) worth P77,283.00, Democrito
Mendoza, Sr. executed a "Contract of Exchange of Real Properties for
Shares of Stock" on 8 January 1982, whereby he ceded to MENCA Lot No.
2 and a portion of Lot No. 1-A. The portion tendered to MENCA was later
on known as Lot No. 1-A-1, while the lot retained by Democrito Mendoza,
Sr. was denominated as Lot No. 1-A-2.
On 9 July 1982, Democrito Mendoza, Sr., for himself and on behalf of his
daughters Gwendolyn and Vilma, executed a "Deed of Exchange" wherein
Lot No. 1-A-2 and a portion of each lot belonging to Gwendolyn and Vilma,
respectively, were relinquished to Jacinto Velez, Jr. and Carmen Velez-
Ting in exchange for properties enumerated in said instrument. The portion
of the lots originally belonging to Gwendolyn and Vilma that were given to
Jacinto Velez, Jr. and Carmen Velez-Ting were thereafter denominated as
Lots No. 1-B-1 and 1-C-1, while the lots retained were labeled Lots No. 1-
B-2 and 1-C-2.
Finally, on 9 May 1988, Democrito Mendoza, Sr., on behalf of his three
children Gwendolyn, Vilma, and Democrito, Jr., executed another
"Contract of Exchange of Real Properties for Shares of Stock" with
MENCA, trading Lots No. 1-B-2, 1-C-2, and 1-D in exchange for 8,468
shares of stock in said corporation.
Sometime in 1988, a protest was filed by the fisherman-residents of Liloan
against the issuance of the sales patents to the Mendozas. Acting thereon,
the Department of Environment and Natural Resources (DENR) Regional
Office No. 7, Cebu City, conducted an investigation. On 23 October 1990,
based on the information gathered by the DENR, showing that there were
alleged irregularities in the issuance of the sales patents awarded to the
Mendozas, the Republic of the Philippines, represented by the Director of
the Land Management Bureau, filed with the RTC of Cebu, a complaint for
Cancellation of Sales Patents and Titles against Democrito Mendoza, Sr.
and his three children Gwendolyn, Vilma, and Democrito, Jr., together with
the Register of Deeds of Cebu City.
According to the complaint, there was irregularity in the issuance of the
sales patents covering the subject properties since the area in question
forms part of Silot Bay and used as communal fishing grounds by the
residents of Liloan, Cebu, and hence, is not alienable and disposable. It is
further maintained that the sales patents were issued in violation of Section
23 of Presidential Decree No. 704, Fisheries Decree of 1975,18 which
prohibits the disposal by sale of public land suitable for fishpond
purposes.19 Complainant also contends that the issuance of the sales
patents was attended by fraud and misrepresentation in that it was made
to appear in the applications for sales patents that the areas sought to be
patented were alienable and disposable tracts of land, when in fact the
same form part of Silot Bay being used as communal fishing grounds by
the residents of Liloan, Cebu.
PROPERTY 1ST BATCH
On 8 July 1991, herein petitioner Republic of the Philippines filed an
Amended Complaint impleading as additional party-defendants MENCA
Development Corporation, Jacinto Velez, Jr., and Carmen Velez-Ting.
Subsequently, the Silot Bay Fishermans Association, Inc. filed a Complaint
in Intervention on 24 October 1991, claiming that its members have a legal
interest in the cancellation of the sales patents as they are residing around
Silot Bay and deriving their income from fishing in the said disputed area.
After trial on the merits, the trial court, on 3 June 1996, rendered a
Decision declaring the sales patents, as well as the original certificates of
title issued to the Mendozas as null and void ab initio. Thus:
WHEREFORE, premises considered, judgment is hereby rendered:
(1) Declaring Sales Patents Nos. 187, 188, 189 and 190 together
with its corresponding Original Certificates of Titles Nos. 0-9983, 0-
9980, 0-9981 and 0-9982 issued to defendants Democrito T.
Mendoza, Sr., Democrito Mendoza, Jr., Gwendolyn Mendoza and
Vilma Mendoza, absolutely null and void ab initio;
(2) Ordering the said defendants to surrender to the defendant
Register of Deeds for the Province of Cebu their respective
owners duplicate copies of Original Certificates of Titles Nos. 0-
9983, 0-9980, 0-9981 and 0-9982, and directing the said defendant
Register of Deeds for the Province of Cebu to cancel the same and
all the patent titles emanating or springing therefrom; and,
(3) Declaring Lot 1-A, Lot 1-B, Lot 1-C and Lot 1-D Psd. 07-01-
00026 as inalienable and non-disposable being parts of Silot Bay.20
Aggrieved by the aforequoted Decision, the Mendozas and MENCA
Corporation lodged an appeal with the Court of Appeals. On 30 March
2001, the appellate court rendered the herein assailed Decision, the
pertinent portions of which state:
The separate appeals interposed by the defendants are impressed with
merit.
As We see it, the primordial issue is whether or not appellants are qualified
to own the property subject matter of this controversy. Implied in this issue
is a more basic one, that is whether or not said property is alienable and
disposable and, therefore, subject to private appropriation through modes
recognized under the Public Land Act.
The lower court resolved the issue in the negative on the main reasoning
that Silot Bay is a "communal fishing ground", and that the area in question
is actually part of the seabed, hence, non-alienable. It added that,
assuming the availability for disposition of the area applied for, appellant
Democrito, Sr. is barred from asserting ownership thereof in view of
Section 11, Article XIV of the 1973 Constitution, xxx.
The Court cannot bring itself to agree to the rationale for the trial courts
posture. Our reasons are, as follows:
One, the property involved in this case is not a communal fishing ground,
as erroneously concluded by the court a quo. While Silot Bay is a potential
fishpond area, there must be, for it to come within the term "communal
fishing ground", a declaration to that effect by the appropriate agency.
We have carefully perused the records before Us and found nothing
therein evidencing such a declaration by the DANR respecting Silot Bay.
What the records yield is the fact that Silot Bay, as shown by a Land
Classification (LC) map, was once categorized as timberland. It cannot be
overemphasized that the prerogative of classifying public lands pertains to
administrative agencies which have been specially tasked by statutes to do
so, namely: the DANR, now the DENR, and two (2) of its bureaus, the
Bureau of Lands and the Bureau of Forestry. Hence, consistent with the
oft-repeated pronouncements that courts will not interfere on matters which
are addressed to the sound discretion of government and/or quasi-judicial
agencies entrusted with the regulation of activities coming under the
special technical knowledge and training (International Container Terminal
Service, Inc. vs. NLRC, 256 SCRA 124; Alba vs. Nitorreda, 254 SCRA
753, citing other cases), and that issues involving basically technical
matters deserve to be disentangled from undue interference by the courts
(Sta. Ines Melale Forest Products Corp. vs. Macaraig, Jr., 299 SCRA 491,
citing Ynson vs. CA, 257 SCRA 411; Casa Filipinas Realty Corporation vs.
Office of the President, 241 SCRA 165; Rubenecia vs, CSC, 244 SCRA
770), it behooves this Court to refrain from looking into the underlying
reasons or grounds which impelled the classification and declaration of
Silot Bay as timberland or from questioning the wisdom such classification
or declaration.
PROPERTY 1ST BATCH
xxxx
This Court, for argument, may allow that Silot Bay had once upon a time
been duly reserved or declared as a communal fishing ground. It has to be
pointed out, however, that an interplay of events had supervened to alter
this reserved nature of the bay. We refer to the issuance on January 16,
1967 of the Presidential Memorandum, supra, and subsequently
Presidential Decree (PD) No. 43, whereunder then President Marcos, with
the end view of attaining self-sufficiency in fish production, directed the
identification of potential fishpond areas, the same to be declared alienable
and disposable to be titled in the name of the actual occupants thereof.
There can hardly be any quibbling regarding the power of the then
President to promulgate the twin issuances, or to undo, by way of
reclassification, what a subordinate has done.
Second, the Mendozas, or Democrito, Sr. in his behalf and in behalf of his
children appear to have complied with all the documentary, developmental,
publication, bidding and other legal requirements necessary for securing
sales patents. Otherwise, the Director of Lands, during the evaluation
process, would have simply denied due course to his application. The
actuality of the Director of Lands recommending and the Secretary of
Agriculture and Natural Resources favorably endorsing the request of
Democrito, Sr. for the issuance of what turned out to be the underlying
sales (fishpond) patent is indicative of Democritos compliance. Last but
not least, the Presidents act of approving the issuance of the requested
sales (fishpond) patent cannot but be viewed as final confirmation that
Democrito, Sr. has indeed met all the requirements to justify a public land
award through sales.
It may be worth mentioning that the Director of Lands had dismissed the
protests filed by then Liloan Municipal Mayor Bugtai, et al., against the
Sales (Fishpond) Patent application of Democrito, Sr. on the consistent
ground that the applicant had complied with all the requirements of the law
for a sales patent grant. In this regard, jurisprudence reminds that
decisions of the Director of Lands on disputes involving patents to public
lands, if supported by substantial evidence and approved by the DENR
Secretary of Agriculture, are generally conclusive. xxx.
Third, as a necessary consequence of Democrito, Sr.s compliance with
the legal requirements referred to above, the sales patents and the original
certificates of titles issued in favor of the Mendozas are presumptively legal
and valid.
Much was made by the trial court of the splitting up of the sales patent
issued to Democrito, Sr., into four (4) parts, with each part containing an
area not exceeding twenty-four (24) hectares in the names of Democrito,
Sr., Democrito, Jr., Gwendolyn Mendoza and Vilma Mendoza. It may well
be noted, however, that the split obviously effected in view of Section 11,
Article XIV of the 1973 Constitution, supra, limiting the acquisition of
alienable land by individuals to twenty-four (24) hectares came with the
approval of the Director of Lands and the Secretary of Agriculture and
Natural Resources. In a very real sense, therefore, the flaw, if any there
be, in the manner the Mendoza children acquired their sales patents was
remedied by the positive actions of the very officials charged by law with
the administration and disposition of alienable public lands.
The unyielding posture of the appellee, as adopted by the trial court, that
the area in question cannot be legally titled because it is underwater may
be accorded some cogency but for the hard fact that it is being titled "for
fishpond purposes only", as what precisely appears in the sales patents.
Fish do not thrive on dry land. Fish are born and grow in water.
xxxx
Fourth, the sales patents and certificates of titles issued in the name of the
Mendozas cannot, after the lapse of one (1) year from their issuance, be
successfully challenged on the ground of fraud or misrepresentation. The
reason is simple. After the due registration of a patent and the issuance of
the corresponding title, the covered area is deemed to have been brought
under the aegis of the Torrens system entitled to all guarantees implied in
such system of registration. xxx
As may be noted, the one-year prescriptive period in the underscored
portion of Section 32, P.D. No. 1529 applies even to the government.
Accordingly, the government if deprived of property through fraud, as the
trial court seems to imply, and as intervenor-appellee have at every turn
postulated, must institute the proper petition in court for the reopening and
review of the decree of registration including of course the patent issued
within one (1) year from and after the date of entry of such decree of
registration. Failing in this, the decree becomes inconvertible even as
against the government itself. Hence, since the sales patents in question
PROPERTY 1ST BATCH
were registered a little less than a month after they were issued on
September 25, 1974, the filing of the instant action for cancellation on
October 23, 1990, which in net legal effect partakes of a petition for a
reopening or review of the validity of the issuance of the sales patents,
has, with the view We take of the case, definitely prescribed.
Fifth, the government is estopped to ask for the cancellation of the sales
patents and titles issued in the names of the Mendozas. To say the least,
there is something disconcerting, if not absurd, in the instant case. For, the
very same agency the Bureau of Land Management, formerly called
Bureau of Lands, which presumptively evaluated with thoroughness and
recommended the grant of Sales (Fishpond) Application No. (VI-I) 41-A of
Democrito Sr., he having complied with all the requirements of the law for
the grant, would now trifle with its own processes, execute a 180 degree
turn to argue and say that the same is not valid and illegal. Suffice it to
state that to go back on ones word and to change a stand volte face, as
what the Bureau of Land Management has done in this case, goes against
well-settled principles of justice and fair play. While concededly, there is
the legal stricture that the government is not estopped by the mistakes
committed by its agents, the Supreme Court in Commissioner of Internal
Revenue v. Court of Appeals, 303 SCRA 508, 516, pointedly stated that:
"This Court is mindful of the well entrenched principle that the government
is never estopped from the collecting of taxes because of the mistakes or
errors on the part of its agents, but this rule admits of exceptions in the
interest of justice and fair play x x x.
xxxx
Then, too, it has been the long standing policy and practice of this Court to
respect the conclusions arrived at by quasi-judicial agencies x x x which by
the nature of its functions, is dedicated exclusively to the study and
consideration of x x x problems, and which has thus developed an
expertise on the subject, unless an abuse or improvident exercise of its
authority is shown. x x x"
The Bureau of Land Management and the intervenor-appellee, at this late
hour, can no longer assail the issuance of the patents and titles to the
Mendozas on the ground of fraud or irregularity. This is as it should be,
because the sales patents in question, and the certificates of title issued by
virtue thereof, have become incontrovertible and are binding against all
persons, including the government and its branches, given that those who
may be minded to question their validity have not done so within the period
of one (1) year from the date of their registration.
Moreover, by reason of the lapse of more that sixteen (16) years from the
issuance of the patents and the titles in question up to the filing on October
23, 1990 of the complaint contesting their validity on the ground of fraud,
the government agency concerned and the intervenor are guilty of laches
and are now precluded from questioning the validity of such grants. x x x.
It is indeed illogical and a cruel breach of the sporting idea of fair play, if
the very same government agency which vigorously recommended,
through indubitable public documents and authentic writings, the issuance
of Sales Patents to Democrito Sr., would now be permitted to deny and
successfully impugn in this action its official acts. What compounds matters
is that the same agency led Democrito Sr. to believe that he has truly
complied with the law and who, acting on such belief, participated in the
bidding held on January 19, 1973 and paid the price for the area sold.
xxxx
Finally, We note that the primary basis of the lower court in declaring the
nullity of the sales patent and titles of the appellants is its finding that the
area covered thereby is "beyond the commerce of man", and, therefore,
could not have been declared as alienable and disposable. x x x.
It bears stressing herein that LC map 1391-Liloan of the Land
Classification Project of the Province of Cebu classified Silot Bay as
"timberland". Evidently, the lower court makes light of LC Map 1391
prepared in 1940. To Our mind, the evidentiary value of antique map like
Map 1391 ought to be accorded weighty consideration. Precisely, under
the Revised Rules on Evidence, the antiquity of documents impart then
with greater probative value. x x x.
The trial court deduced that the 1940 map wherein Silot Bay is classified
as timberland is incorrect due to misleading information wittingly or
unwittingly supplied by the government agencies concerned.
The conclusion reached by the lower court is assumed, not demonstrated;
it is absolutely wanting in factual support, what with the reality that no
evidence whatsoever was adduced by the Republic to sustain such a
PROPERTY 1ST BATCH
finding. It cannot be taken to overturn the legal presumption that official
duties have been regularly performed.
xxxx
As between the aforesaid official findings of experts and the bare
unsupported conclusions of the lower court, the choice is not hard to make.
As it were, only the executive and possibly the legislative departments
have the power to transfer, any time, lands of the public domain from one
class to another, and, in like manner, to classify, for purposes of
administration and disposition, such land as disposable and alienable by
sale or other modes of ownership transfer. x x x.
Unquestionably, then, the lower court committed a serious error in ruling
that Silot Bay cannot be declared as alienable and disposable.
Foregoing premises considered, We rule and so hold that (1) Sales
Patents Nos. 187, 188, 189 and 190 issued in favor of the Mendozas; (2)
the corresponding Original Certificates of Titles Nos. 0-9980, 0-9981, 0-
9982 and 0-9983 issued in favor of the Mendozas; and (3) all the derivative
titles emanating therefrom in the names of MENCA Development
Corporation and Carmen Velez-Teng and Jacinto Velez, Jr., are all valid,
legal and binding as against the whole world.21
The trial courts Decision having been reversed and the Sales Patents, as
well as the Original Certificates of Title issued to the Mendozas having
been declared valid, petitioners Republic of the Philippines and Silot Bay
Fishermans Association, Inc. filed their separate appeals before this Court.
Petitioners maintain that the Court of Appeals erred in declaring that the
area covered by the sales patents are not communal fishing grounds due
to the absence of any declaration to that effect by the appropriate
government agency. According to petitioners, the appellate court failed to
consider that Silot Bay is a navigable body of water and by its very nature
and inherent character is of public dominion, thus there is no need for a
declaration by any appropriate government agency that it is a communal
fishing ground before Silot Bay may be recognized as such. Furthermore,
petitioners assert that the Court of Appeals failed to give weight to the
testimony of Edgardo Lipang, a former Geodetic Engineer of the
Community and Environment Resources Office in Cebu City, who was
authorized by the trial court to conduct a resurvey of the disputed area. His
testimony established that the disputed area were found to be at the center
of Silot Bay, the waters of which flow from Camotes Sea where marine
organisms like sea urchins thrive, and not on marshy lands, rivers or lakes.
Additionally, Edgardo Lipang explained in his testimony that the subject
property is deep even during low tide and navigable by boats which further
indicate that the area is part of the seabed rather than the foreshore.
Petitioner Republic of the Philippines added that it was erroneous for the
appellate court to conclude that the Mendozas complied with all the
requirements for the issuance of sales patents. According to petitioner, the
Court of Appeals did not consider the findings of the investigation team
from the DENR which discovered irregularities in the issuance of the sales
patents, to wit:
(a) The areas covered by the sales patents are part of Silot Bay
and used as communal fishing grounds by Liloan residents and,
therefore, is not alienable and disposable;
(b) The sales patents were issued in violation of Section 23 0f
Presidential Decree No. 704, which provides that no public land
suitable for fishpond purposes shall be disposed by sale except
sales patent already processed and approved on or before
November 9, 1972 subject to the condition that such application
covers a fully developed fishpond not exceeding twenty-four (24)
hectares. (The questioned sales patents do not fall within the
exception as they were issued on September 25, 1974);
(c) The issuance of the sales patents was attended by fraud and
misrepresentation committed by the applicants in that it was made
to appear that the areas applied for are alienable and disposable
tracts of land, when in truth and in fact, they form part of Silot Bay
being used as communal fishing grounds by the residents of
Liloan, Cebu.
Moreover, the government stresses the fact that the sales patent
application of Democrito Mendoza, Sr. was for an area of 92.3881
hectares, clearly in violation of the constitutional limitation of 24 hectares;
and that his act of circumventing the constitutional prohibition by
distributing the area applied for to his three children cannot be legally
authorized since his children were not qualified to apply for sales patents
because not one of them had an existing lease over the property, which is
PROPERTY 1ST BATCH
a condition that must first be complied with before the grant of a sales
patent.
On the Court of Appeals ruling that the government is now precluded from
bringing an action for annulment of title after the lapse of one year from the
issuance of the certificate of title, petitioners contend that said ruling is
diametrically opposed to the pronouncement of this Court that the Republic
of the Philippines is not precluded from bringing an action for annulment of
title and reversion of land to the public domain even after the lapse of the
one-year period.
Lastly, petitioners call attention to the previous rulings of this Court that
estoppel does not operate against the government. In the case at bar,
petitioner explains that the court a quo found that the sales patents were
issued on the basis of false and misleading information supplied by the
Mendozas to the government agencies which processed and granted their
application; hence, it is erroneous for the appellate court to say that the
government is already estopped from seeking the cancellation of these
sales patents since the Republic of the Philippines is never estopped by
the mistakes or error committed by its officials or agent.
In resolving the instant controversy, we shall foremost settle the issue of
whether or not the government is now precluded from bringing an action
for the annulment of title and reversion of the disputed property to the
public domain after the lapse of the one-year period from registration
thereof. We answer in the negative. It is true that, as the Court of Appeals
upheld, the sales patents and certificates of title issued in the name of the
Mendozas cannot, after the lapse of one year from their issuance, be
successfully challenged on the ground of fraud or misrepresentation for the
reason that after the due registration of a patent and the issuance of the
corresponding title, the covered area is deemed to have been brought
under the aegis of the Torrens system entitled to all guarantees implied in
such system of registration. It is equally true however, that this Court, on
the other hand, has declared too in numerous cases that the lapse of the
one-year period within which a decree of title may be reopened for fraud
would not prevent the cancellation thereof by the government, for to hold
that a title may become indefeasible by registration, even if such title had
been secured through fraud or in violation of the law would be the height of
absurdity.22 As held in the case of Republic v. Court of Appeals23:
[T]he indefeasibility of a title over land previously public is not bar to an
investigation by the Director of Lands as to how such title has been
acquired, if the purpose of such investigation is to determine whether or
not fraud has been committed in securing such title in order that the
appropriate action for reversion may be filed by the Government.24
Nevertheless, whilst we agree with petitioners that the government is not
precluded from conducting an investigation as to how titles to property
formerly belonging to the public domain has been acquired notwithstanding
the lapse of the one-year period for bringing an action for the annulment of
title and reversion of property to the public domain, in the absence of any
showing that there was fraud or a violation of any law, we are constrained
to uphold the ruling of the Court of Appeals regarding the authority of
administrative agencies to classify Silot Bay as timberland and its
subsequent release as alienable and disposable, and the findings of the
appellate court that the Mendozas have complied with all the necessary
requirements under the law for the issuance of the sales patents.
Despite petitioners assertion that Silot Bay is a navigable body of water
and by its very nature and inherent character is of public dominion, thus,
there is no need for a declaration by any appropriate government agency
that it is a communal fishing ground before Silot Bay may be recognized as
such, it cannot be gainsaid that the prerogative of classifying public lands
pertains to administrative agencies which have been specially tasked by
statutes to do so and that the courts will not interfere on matters which are
addressed to the sound discretion of government and/or quasi-judicial
agencies entrusted with the regulation of activities coming under their
special technical knowledge and training.25 It should be stressed that the
function of administering and disposing of lands of the public domain in the
manner prescribed by law is not entrusted to the courts but to executive
officials.26 And as such, courts should refrain from looking into the
underlying reasons or grounds which impelled the classification and
declaration of Silot Bay as timberland and its subsequent release as
alienable and disposable land. From the facts of the case, it is evident that
the Bureau of Forestry released Silot Bay as alienable and disposable by
virtue of the Memorandum issued by then President Marcos on 16 January
1967 which clearly empowered said bureau to identify and locate the
700,000 hectares of fishpond areas and to release said areas as alienable
and disposable. Hence, the courts, in view of the clear legal directive by
which said area was released as alienable and disposable, will refrain from
questioning the wisdom of such classification or declaration.
PROPERTY 1ST BATCH
After a careful perusal of the records of the case, We rule that the sales
patents handed out to Democrito T. Mendoza, Sr., Gwendolyn Mendoza,
Vilma Mendoza and Democrito Mendoza, Jr., were properly issued.
Although it may seem that upon the advent of the 1973 Constitution, a
conflict had arisen with respect to the then pending sales patent application
of Democrito Mendoza, Sr., yet from the letter of then Acting Director of the
Bureau of Lands Ramon N. Casanova, the approval of the sales patent
application of Democrito T. Mendoza, Sr. was still favorably recommended
on grounds of equity and justice, to wit:
Under Opinion No. 64, series of 1973 which was promulgated in the
meantime by the Secretary of Justice and given clearance for
implementation by the President per Memorandum dated February 6, 1974
of Presidential Executive Assistant Jacobo C. Clave, it has been held that
"even sales application already awarded are not to be exempted from
constitutional injunction regarding the acquisition of public lands for the
reason that other requirements have still to be satisfied before a patent
may be issued". In the case of the abovementioned application, while the
land covered thereby was sold at public auction in which the applicant is
the successful bidder and has been considerably improved and developed,
no formal award has up to now been issued by this Office. In other words,
the applicant may be considered not having acquired vested rights over the
land applied for prior to the advent of the New Constitution which will entitle
him to exemption from the constitutional limitation, following the above-
noted ruling of the Secretary of Justice.
It may also be mentioned that this case does not fall under any of the
categories of sales applications which may be given due course and
issued patent pursuant to the policy guidelines prescribed by the
Honorable Secretary in his memorandum dated February 18, 1974.
As the applicant, however, has in good faith made considerable investment
in the development and improvement of the fishpond area and could have
already obtained a title thereto were it not for circumstances beyond his
control, it is believed that he is entitled, on considerations of equity and
justice, to exemption from constitutional injunction.27(Emphasis ours.)
From the abovequoted letter, it can be deduced that had it not been for
circumstance beyond the applicants control, i.e., the adoption of the 1973
Constitution during the pendency of the sales patent application of
Democrito T. Mendoza, Sr., there would not have been any obstacle for its
approval by the Office of the President. Hence, taking into account the fact
that Democrito T. Mendoza, Sr. had complied with all the necessary
requirements for the issuance of sales patent covering the disputed area,
then Acting Director of the Bureau of Lands Ramon N. Casanova
recommended the approval of said application in the spirit of justice and
equity. As stated by the Court of Appeals, Democrito Mendoza, Sr.,
appears to have complied with all the legal requirements for securing the
sales patents; otherwise, the Acting Director of Lands would not have
recommended the approval of said application despite the seeming
constitutional impediment.
Moreover, it is worth noting that in order to conform to the prohibitions
imposed by the 1973 Constitution which limits the purchase of lands of the
public dominion to 24 hectares per individual, Democrito Mendoza, Sr.,
subdivided the property in question into four, each comprising an area not
more than 24 hectares, and assigned his rights over three parts to his
three children. Accordingly, Democrito Mendoza, Sr. amended his sales
patent application while his three children filed their own applications for
their respective parts. The area applied for in each of the Mendozas sales
patent applications were, by then, well-within the constitutional limitation.
Such subdivision of the area originally applied for by Democrito Mendoza,
Sr. was made with the full knowledge and the subsequent approval of all
the appropriate government authorities. There is nothing to suggest that it
was done illicitly or fraudulently. That the subdivision was executed overtly
actually establish the good faith of the Mendozas to comply with the
Constitutional and statutory provisions on sales patent applications.
Petitioner Republic has failed to prove fraud on the part of the Mendozas
with respect to the issuance of the sales patents. The burden of proving
that actual fraud exists rests on the party alleging it. In this jurisdiction,
fraud is never presumed FRAUS EST IDIOSA ET NON
PRAESUMENDA.28 It must be stressed that mere allegations of fraud are
not enough. Intentional acts to deceive and deprive another of his right, or
in some manner injure him, must be specifically alleged and
proved.29 There is very little evidence in this case to convince Us that the
Mendozas were able to secure their sales patent by fraud or
misrepresentation. The assertion of petitioner Republic that the issuance of
the sales patents was attended by fraud and misrepresentation is based
solely on the claim made by the Mendozas in their sales patent
applications that the areas sought to be patented were alienable and
disposable tracts of land, when, in fact, the same form part of Silot Bay
PROPERTY 1ST BATCH
which were being used as communal fishing grounds by the residents of
Liloan, Cebu. Such an assertion, however, has been squarely debunked in
light of the unmistakable legal basis by which the appropriate
administrative agency classified the areas applied for as alienable and
disposable.
In the absence of any evidence of fraud or violation of law, the title of the
Mendozas over the disputed property has now become indefeasible, even
as against the petitioner Republic.
While the general rule is that the State cannot be put in estoppel by the
mistakes or errors of its officials or agents, like all general rules, this is also
subject to exceptions. We recognized such exceptions in Republic v. Court
of Appeals,30 to wit
The general rule is that the State cannot be put in estoppel by the mistakes
or errors of its officials or agents. However, like all general rules, this is
also subject to exceptions, viz:
"Estoppels against the public are little favored. They should not be invoked
except in rare and unusual circumstances, and may not be invoked where
they would operate to defeat the effective operation of a policy adopted to
protect the public. They must be applied with circumspection and should
be applied only in those special cases where the interests of justice clearly
require it. Nevertheless, the government must not be allowed to deal
dishonorably or capriciously with its citizens, and must not play an ignoble
part or do a shabby thing; and subject to limitations x x x the doctrine of
equitable estoppel may be invoked against public authorities as well as
against private individuals."
In Republic v. Sandiganbayan, the government, in its effort to recover ill-
goten wealth, tried to skirt the application of estoppel against it by invoking
a specific constitutional provision. The Court countered:
"We agree with the statement that the State is immune from estoppel, but
this concept is understood to refer to acts and mistakes of its officials
especially those which are irregular (Sharp International Marketing vs.
Court of Appeals, 201 SCRA 299; 306 [1991]; Republic v. Aquino, 120
SCRA 186 [1983]), which peculiar circumstances are absent in the case at
bar. Although the State's right of action to recover ill-gotten wealth is not
vulnerable to estoppel[;] it is non sequitur to suggest that a contract, freely
and in good faith executed between the parties thereto is susceptible to
disturbance ad infinitum. A different interpretation will lead to the absurd
scenario of permitting a party to unilaterally jettison a compromise
agreement which is supposed to have the authority of res judicata (Article
2037, New Civil Code), and like any other contract, has the force of law
between parties thereto (Article 1159, New Civil Code; Hernaez vs. Kao,
17 SCRA 296 [1966]; 6 Padilla, Civil Code Annotated, 7th ed., 198, p. 711;
3 Aquino, Civil Code, 1990 ed., p. 46.
Based on the foregoing, the State can only be immune from estoppel as
regards mistakes, errors or irregularities committed by its officials or
agents. In the absence of mistake, error or irregularity in the performance
by the concerned government officials of their duties, then the State cannot
invoke its immunity from estoppel.
In the Petition at bar, the Mendozas were given clearances and
certifications on the lack of objections to their sales patent applications by
the Director of Forestry, Provincial Engineer of Cebu, the District Engineer
of Cebu, the Municipal Council of Liloan, Cebu, and the Commissioner of
Customs, and the Secretary of Public Works and Highways. Subsequently,
their sales patent applications were approved by the Director of the Bureau
of Lands, the Secretary of the Department of Natural Resources, and the
President of the Republic. Based on their patents, the Mendozas were able
to acquire original certificates of tile from the Registry of Deeds. Without
any allegation and evidence that these government officials committed any
mistake, error or irregularity in the approval of the sales patent applications
and issuance of the certificates of title in the name of the Mendozas, then
their acts in relation thereto estop the Republic from questioning the
validity of the said sales patents and the certificates of title.
Finally, it should be borne in mind that that the contested areas and titles
thereto had already passed on to third parties who acquired the same from
the Mendozas in good faith and for value. When the Mendozas sales
patents were registered, they were brought under the operation of
Presidential Decree No. 11529, otherwise know as the Land Registration
Decree.
According to Section 103 of the Land Registration Decree, whenever
public lands is by the Government alienated, granted, or conveyed to any
person, the same shall be brought under the operation of the said Decree
and shall be deemed to registered lands to all intents and purposes under
PROPERTY 1ST BATCH
the Decree. And a well-settled doctrine in Our jurisdiction provides that one
who deals with property registered under the Torrens system need not go
beyond the same, but only has to rely on the title. He is charged with notice
only of such burdens and claims as are annotated on the title.31 The
Mendozas certificates of title were clean and, thus, MENCA Corporation,
Jacinto Velez, Jr. and Carmen Velez-Ting were induced to acquire the
same from the Mendozas. That they did so in good faith and for value was
not even questioned herein. Their titles, rights, and interests to the
fishpond area must be respected and protected.
In Republic v. Agunoy, Sr., et al.,32 We refused to revert the land in
question to the public domain despite the fact that the free patent thereto
was secured by fraud since the same land already passed on to
purchasers in good faith and for value
There can be no debate at all on petitioners submission that no amount of
legal technicality may serve as a solid foundation for the enjoyment of the
fruits of fraud. It is thus understandable why petitioner chants the dogma
of fraus et jus nunquam cohabitant.
Significantly, however, in the cases cited by petitioner Republic, as well as
in those other cases where the doctrine of fraus et jus nunquam
cohabitant was applied against a patent and title procured thru fraud or
misrepresentation, we note that the land covered thereby is either a part of
the forest zone which is definitely non-disposable, as in Animas, or that
said patent and title are still in the name of the person who committed the
fraud or misrepresentation, as in Acot, Animas, Republic vs. CA and Del
Mundo and Director of Lands vs. Abanilla, et al. and, in either instance,
there were yet no innocent third parties standing in the way.
If the titles of innocent buyers were recognized and protected in the afore-
mentioned circumstances, even when the original title to the property was
obtained through fraud, then the titles of the purchasers in good faith and
for value of the fishpond areas in the present case better deserve our
recognition and protection considering that the sales patents and original
certificates of title of their predecessors-in-interest were found to be legally
and validly issued.
WHEREFORE, premises considered, the instant petition is hereby
DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 57069
is hereby AFFIRMED.
SO ORDERED.
G.R. No. L-12958 May 30, 1960
FAUSTINO IGNACIO, applicant-appellant,
vs.
THE DIRECTOR OF LANDS and LAUREANO VALERIANO, oppositors-
appellees.
Acting Assistant Solicitor General Pacifico P. de Castro and Solicitor
Crispin V. Bautista for appellee Director of Lands.
Benjamin H. Aquino for appellee Laureano Veleriano.
MONTEMAYOR, J.:
Faustino Ignacio is appealing the decision of the Court of First Instance of
Rizal, dismissing his application for the registration of a parcel of land.
On January 25, 1950, Ignacio filed an application for the registration of a
parcel of land (mangrove), situated in barrio Gasac, Navotas, Rizal, with an
area of 37,877 square meters. Later, he amended his application by
alleging among others that he owned the parcel applied for by right of
accretion. To the application, the Director of Lands, Laureano Valeriano
and Domingo Gutierrez filed oppositions. Gutierrez later withdrew his
opposition. The Director of Lands claimed the parcel applied for as a
portion of the public domain, for the reason that neither the applicant nor
his predecessor-in-interest possessed sufficient title thereto, not having
acquired it either by composition title from the Spanish government or by
possessory information title under the Royal Decree of February 13, 1894,
and that he had not possessed the same openly, continuously and
adversely under a bona fide claim of ownership since July 26, 1894. In his
turn, Valeriano alleged he was holding the land by virtue of a permit
granted him by the Bureau of Fisheries, issued on January 13, 1947, and
approved by the President.
It is not disputed that the land applied for adjoins a parcel owned by the
applicant which he had acquired from the Government by virtue of a free
patent title in 1936. It has also been established that the parcel in question
was formed by accretion and alluvial deposits caused by the action of the
Manila Bay which boarders it on the southwest. Applicant Ignacio claims
that he had occupied the land since 1935, planting it with api-api trees, and
PROPERTY 1ST BATCH
that his possession thereof had been continuous, adverse and public for a
period of twenty years until said possession was distributed by oppositor
Valeriano.
On the other hand, the Director of Lands sought to prove that the parcel is
foreshore land, covered by the ebb and flow of the tide and, therefore,
formed part of the public domain.
After hearing, the trial court dismissed the application, holding that the
parcel formed part of the public domain. In his appeal, Ignacio assigns the
following errors:
I. The lower court erred in holding that the land in question, altho
an accretion to the land of the applicant-appellant, does not belong
to him but forms part of the public domain.
II. Granting that the land in question forms part of the public
domain, the lower court nevertheless erred in not declaring the
same to be the necessary for any public use or purpose and in not
ordering in the present registration proceedings.
III. The lower court erred in not holding that the land in question
now belongs to the applicant-appellant by virtue of acquisitive
prescription, the said land having ceased to be of the public
domain and became the private or patrimonial property of the
State.
IV. The lower court erred in not holding that the oppositor Director
of Lands is now in estoppel from claiming the land in question as a
land of the public domain.
Appellant contends that the parcel belongs to him by the law of accretion,
having been formed by gradual deposit by action of the Manila Bay, and he
cites Article 457 of the New Civil Code (Article 366, Old Civil Code), which
provides that:
To 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.
The article cited is clearly inapplicable because it refers to accretion or
deposits on the banks of rivers, while the accretion in the present case was
caused by action of the Manila Bay.
Appellant next contends that Articles 1, 4 and 5 of the Law of Waters are
not applicable because they refer to accretions formed by the sea, and that
Manila Bay cannot be considered as a sea. We find said contention
untenable. A bay is a part of the sea, being a mere indentation of the
same:
Bay. An opening into the land where the water is shut in on all
sides except at the entrance; an inlet of the sea; an arm of the sea,
distinct from a river, a bending or curbing of the shore of the sea or
of a lake. 7 C.J. 1013-1014 (Cited in Francisco, Philippine Law of
Waters and Water Rights p. 6)
Moreover, this Tribunal has some cases applied the Law of Waters on
Lands bordering Manila Bay. (See the cases of Ker & Co. vs. Cauden, 6
Phil., 732, involving a parcel of land bounded on the sides by Manila Bay,
where it was held that such land formed by the action of the sea is property
of the State; Francisco vs. Government of the P.I., 28 Phil., 505, involving
a land claimed by a private person and subject to the ebb and flow of the
tides of the Manila Bay).
Then the applicant argues that granting that the land in question formed
part of the public domain, having been gained from the sea, the trial court
should have declared the same no longer necessary for any public use or
purpose, and therefore, became disposable and available for private
ownership. Article 4 of the Law of Waters of 1866 reads thus:
ART. 4. Lands added to the shores by accretions and alluvial
deposits caused by the action of the sea, form part of the public
domain. When they are no longer washed by the waters of the sea
and are not necessary for purposes of public utility, or for the
establishment of special industries, or for the coastguard service,
the Government shall declare them to be the property of the
owners of the estates adjacent thereto and as increment thereof.
Interpreting Article 4 of the Law of Waters of 1866, in the case of Natividad
vs. Director of Lands, (CA) 37 Off. Gaz., 2905, it was there held that:
PROPERTY 1ST BATCH
Article 4 of the Law of Waters of 1866 provides that when a portion
of the shore is no longer washed by the waters of the sea and is
not necessary for purposes of public utility, or for the establishment
of special industries, or for coastguard service, the government
shall declare it to be the property of the owners of the estates
adjacent thereto and as an increment thereof. We believe that only
the executive and possibly the legislative departments have the
authority and the power to make the declaration that any land so
gained by the sea, is not necessary for purposes of public utility, or
for the establishment of special industries, on for coast-guard
service. If no such declaration has been made by said
departments, the lot in question forms part of the public domain.
(Natividad vs. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the case
of Vicente Joven y Monteverde vs. Director of Lands, 93 Phil., 134, (cited
in Velayo's Digest, VI. I, p. 52).
. . . is undoubtedly that the courts are neither primarily called upon,
nor indeed in a position to determine whether any public land are to
be used for the purposes specified in Article 4 of the Law of
Waters.
Consequently, until a formal declaration on the part of the Government,
through the executive department or the Legislature, to the effect that the
land in question is no longer needed for coast guard service, for public use
or for special industries, they continue to be part of the public domain, not
available for private appropriation or ownership.
Appellant next contends that he had acquired the parcel in question
through acquisitive prescription, having possessed the same for over ten
years. In answer, suffice it to say that land of the public domain is not
subject to ordinary prescription. In the case of Insular Government vs.
Aldecoa & Co., 19 Phil., 505 this Court said:
The occupation or material possession of any land formed upon
the shore by accretion, without previous permission from the
proper authorities, although the occupant may have held the same
as owner for seventeen years and constructed a wharf on the land,
is illegal and is a mere detainer, inasmuch as such land is outside
of the sphere of commerce; it pertains to the national domain; it is
 intended for public uses and for the benefit of those who live
nearby.
We deem it unnecessary to discuss the other points raised in the appeal.
In view of the foregoing, the appealed decision is hereby affirmed, with
costs.
G.R. No. 97764 August 10, 1992
LEVY D. MACASIANO, Brigadier General/PNP Superintendent,
Metropolitan Traffic Command, petitioner,
vs.
HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62,
Regional Trial Court of Makati, Metro Manila, MUNICIPALITY OF
PARAAQUE, METRO MANILA, PALANYAG KILUSANG BAYAN FOR
SERVICE, respondents.
Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.
Manuel de Guia for Municipality of Paraaque.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking
the annulment of the decision of the Regional Trial Court of Makati, Branch
62, which granted the writ of preliminary injunction applied for by
respondents Municipality of Paraaque and Palanyag Kilusang Bayan for
Service (Palanyag for brevity) against petitioner herein.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86,
Series of 1990 which authorized the closure of J. Gabriel, G.G. Cruz,
Bayanihan, Lt. Garcia Extension and Opena Streets located at Baclaran,
Paraaque, Metro Manila and the establishment of a flea market thereon.
The said ordinance was approved by the municipal council pursuant to
MMC Ordinance No. 2, Series of 1979, authorizing and regulating the use
PROPERTY 1ST BATCH
of certain city and/or municipal streets, roads and open spaces within
Metropolitan Manila as sites for flea market and/or vending areas, under
certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance
No. 86, s. 1990 of the municipal council of respondent municipality subject
to the following conditions:
1. That the aforenamed streets are not used for vehicular
traffic, and that the majority of the residents do not oppose
the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea
market/vending area shall be marked distinctly, and that
the 2 meters on both sides of the road shall be used by
pedestrians;
3. That the time during which the vending area is to be
used shall be clearly designated;
4. That the use of the vending areas shall be temporary
and shall be closed once the reclaimed areas are
developed and donated by the Public Estate Authority.
On June 20, 1990, the municipal council of Paraaque issued a resolution
authorizing Paraaque Mayor Walfrido N. Ferrer to enter into contract with
any service cooperative for the establishment, operation, maintenance and
management of flea markets and/or vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a
service cooperative, entered into an agreement whereby the latter shall
operate, maintain and manage the flea market in the aforementioned
streets with the obligation to remit dues to the treasury of the municipal
government of Paraaque. Consequently, market stalls were put up by
respondent Palanyag on the said streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP
Superintendent of the Metropolitan Traffic Command, ordered the
destruction and confiscation of stalls along G.G. Cruz and J. Gabriel St. in
Baclaran. These stalls were later returned to respondent Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to
respondent Palanyag giving the latter ten (10) days to discontinue the flea
market; otherwise, the market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed
with the trial court a joint petition for prohibition and mandamus with
damages and prayer for preliminary injunction, to which the petitioner filed
his memorandum/opposition to the issuance of the writ of preliminary
injunction.
On October 24, 1990, the trial court issued a temporary restraining order to
enjoin petitioner from enforcing his letter-order of October 16, 1990
pending the hearing on the motion for writ of preliminary injunction.
On December 17, 1990, the trial court issued an order upholding the
validity of Ordinance No. 86 s. 1990 of the Municipality' of Paraaque and
enjoining petitioner Brig. Gen. Macasiano from enforcing his letter-order
against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor
General alleging grave abuse of discretion tantamount to lack or excess of
jurisdiction on the part of the trial judge in issuing the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or
resolution issued by the municipal council of Paraaque authorizing the
lease and use of public streets or thoroughfares as sites for flea markets is
valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads
are used for public service and are therefore public properties; that as
such, they cannot be subject to private appropriation or private contract by
any person, even by the respondent Municipality of Paraaque. Petitioner
submits that a property already dedicated to public use cannot be used for
another public purpose and that absent a clear showing that the
Municipality of Paraaque has been granted by the legislature specific
authority to convert a property already in public use to another public use,
respondent municipality is, therefore, bereft of any authority to close
municipal roads for the establishment of a flea market. Petitioner also
submits that assuming that the respondent municipality is authorized to
close streets, it failed to comply with the conditions set forth by the
Metropolitan Manila Authority for the approval of the ordinance providing
PROPERTY 1ST BATCH
for the establishment of flea markets on public streets. Lastly, petitioner
contends that by allowing the municipal streets to be used by market
vendors the municipal council of respondent municipality violated its duty
under the Local Government Code to promote the general welfare of the
residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government
Code is a statutory grant of power given to local
government units, the Municipality of Paraaque as such,
is empowered under that law to close its roads, streets or
alley subject to limitations stated therein (i.e., that it is in
accordance with existing laws and the provisions of this
code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi
Macasiano, though apparently within its power is in fact an
encroachment of power legally vested to the municipality,
precisely because when the municipality enacted the
ordinance in question the authority of the respondent as
Police Superintendent ceases to be operative on the
ground that the streets covered by the ordinance ceases to
be a public thoroughfare. (pp. 33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the
disputed municipal ordinance authorizing the flea market on the public
streets is valid, it is necessary to examine the laws in force during the time
the said ordinance was enacted, namely, Batas Pambansa Blg. 337,
otherwise known as Local Government Code, in connection with
established principles embodied in the Civil Code an property and settled
jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property
for public use and patrimonial property (Art. 423, Civil Code). As to what
consists of property for public use, Article 424 of Civil Code states:
Art. 424. Property for public use, in the provinces, cities
and municipalities, consists of the provincial roads, city
 streets, the squares, fountains, public waters, promenades,
and public works for public service paid for by said
provinces, cities or municipalities.
All other property possessed by any of them is patrimonial
and shall be governed by this Code, without prejudice to
the provisions of special laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia
Extension and Opena streets are local roads used for public service and
are therefore considered public properties of respondent municipality.
Properties of the local government which are devoted to public service are
deemed public and are under the absolute control of Congress (Province
of Zamboanga del Norte v. City of Zamboanga, L-24440, March 28, 1968,
22 SCRA 1334). Hence, local governments have no authority whatsoever
to control or regulate the use of public properties unless specific authority
is vested upon them by Congress. One such example of this authority
given by Congress to the local governments is the power to close roads as
provided in Section 10, Chapter II of the Local Government Code, which
states:
Sec. 10. Closure of roads. A local government unit may
likewise, through its head acting pursuant to a resolution of
its sangguniang and in accordance with existing law and
the provisions of this Code, close any barangay, municipal,
city or provincial road, street, alley, park or square. No such
way or place or any part of thereof shall be close without
indemnifying any person prejudiced thereby. A property
thus withdrawn from public use may be used or conveyed
for any purpose for which other real property belonging to
the local unit concerned might be lawfully used or
conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local
government units to close roads and other similar public places should be
read and interpreted in accordance with basic principles already
established by law. These basic principles have the effect of limiting such
authority of the province, city or municipality to close a public street or
thoroughfare. Article 424 of the Civil Code lays down the basic principle
that properties of public dominion devoted to public use and made
available to the public in general are outside the commerce of man and
PROPERTY 1ST BATCH
cannot be disposed of or leased by the local government unit to private
persons. Aside from the requirement of due process which should be
complied with before closing a road, street or park, the closure should be
for the sole purpose of withdrawing the road or other public property from
public use when circumstances show that such property is no longer
intended or necessary for public use or public service. When it is already
withdrawn from public use, the property then becomes patrimonial property
of the local government unit concerned (Article 422, Civil Code; Cebu
Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474, August 29, 1975,
66 SCRA 481). It is only then that the respondent municipality can "use or
convey them for any purpose for which other real property belonging to the
local unit concerned might be lawfully used or conveyed" in accordance
with the last sentence of Section 10, Chapter II of Blg. 337, known as Local
Government Code. In one case, the City Council of Cebu, through a
resolution, declared the terminal road of M. Borces Street, Mabolo, Cebu
City as an abandoned road, the same not being included in the City
Development Plan. Thereafter, the City Council passes another resolution
authorizing the sale of the said abandoned road through public bidding. We
held therein that the City of Cebu is empowered to close a city street and
to vacate or withdraw the same from public use. Such withdrawn portion
becomes patrimonial property which can be the object of an ordinary
contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and
streets which are available to the public in general and ordinarily used for
vehicular traffic are still considered public property devoted to public use.
In such case, the local government has no power to use it for another
purpose or to dispose of or lease it to private persons. This limitation on
the authority of the local government over public properties has been
discussed and settled by this Court en banc in "Francisco V. Dacanay,
petitioner v. Mayor Macaria Asistio, Jr., et al., respondents, G.R. No.
93654, May 6, 1992." This Court ruled:
There is no doubt that the disputed areas from which the
private respondents' market stalls are sought to be evicted
are public streets, as found by the trial court in Civil Case
No. C-12921. A public street is property for public use
hence outside the commerce of man (Arts. 420, 424, Civil
Code). Being outside the commerce of man, it may not be
the subject of lease or others contract (Villanueva, et al. v.
Castaeda and Macalino, 15 SCRA 142 citing the
Municipality of Cavite v. Rojas, 30 SCRA 602; Espiritu v.
 Municipal Council of Pozorrubio, 102 Phil. 869; And Muyot
v. De la Fuente, 48 O.G. 4860).
As the stallholders pay fees to the City Government for the
right to occupy portions of the public street, the City
Government, contrary to law, has been leasing portions of
the streets to them. Such leases or licenses are null and
void for being contrary to law. The right of the public to use
the city streets may not be bargained away through
contract. The interests of a few should not prevail over the
good of the greater number in the community whose
health, peace, safety, good order and general welfare, the
respondent city officials are under legal obligation to
protect.
The Executive Order issued by acting Mayor Robles
authorizing the use of Heroes del '96 Street as a vending
area for stallholders who were granted licenses by the city
government contravenes the general law that reserves city
streets and roads for public use. Mayor Robles' Executive
Order may not infringe upon the vested right of the public to
use city streets for the purpose they were intended to
serve: i.e., as arteries of travel for vehicles and
pedestrians.
Even assuming, in gratia argumenti, that respondent municipality has the
authority to pass the disputed ordinance, the same cannot be validly
implemented because it cannot be considered approved by the
Metropolitan Manila Authority due to non-compliance by respondent
municipality of the conditions imposed by the former for the approval of the
ordinance, to wit:
1. That the aforenamed streets are not used for vehicular
traffic, and that the majority of the residents do(es) not
oppose the establishment of the flea market/vending areas
thereon;
2. That the 2-meter middle road to be used as flea
market/vending area shall be marked distinctly, and that
the 2 meters on both sides of the road shall be used by
pedestrians;
PROPERTY 1ST BATCH
3. That the time during which the vending area is to be
used shall be clearly designated;
4. That the use of the vending areas shall be temporary
and shall be closed once the reclaimed areas are
developed and donated by the Public Estate Authority. (p.
38, Rollo)
Respondent municipality has not shown any iota of proof that it has
complied with the foregoing conditions precedent to the approval of the
ordinance. The allegations of respondent municipality that the closed
streets were not used for vehicular traffic and that the majority of the
residents do not oppose the establishment of a flea market on said streets
are unsupported by any evidence that will show that this first condition has
been met. Likewise, the designation by respondents of a time schedule
during which the flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are
congested with people, houses and traffic brought about by the
proliferation of vendors occupying the streets. To license and allow the
establishment of a flea market along J. Gabriel, G.G. Cruz, Bayanihan, Lt.
Garcia Extension and Opena streets in Baclaran would not help in solving
the problem of congestion. We take note of the other observations of the
Solicitor General when he said:
. . . There have been many instances of emergencies and
fires where ambulances and fire engines, instead of using
the roads for a more direct access to the fire area, have to
maneuver and look for other streets which are not occupied
by stalls and vendors thereby losing valuable time which
could, otherwise, have been spent in saving properties and
lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital.
However, its ambulances and the people rushing their
patients to the hospital cannot pass through G.G. Cruz
because of the stalls and the vendors. One can only
imagine the tragedy of losing a life just because of a few
seconds delay brought about by the inaccessibility of the
streets leading to the hospital.
 The children, too, suffer. In view of the occupancy of the
roads by stalls and vendors, normal transportation flow is
disrupted and school children have to get off at a distance
still far from their schools and walk, rain or shine.
Indeed one can only imagine the garbage and litter left by
vendors on the streets at the end of the day. Needless to
say, these cause further pollution, sickness and
deterioration of health of the residents therein. (pp. 21-
22, Rollo)
Respondents do not refute the truth of the foregoing findings and
observations of petitioners. Instead, respondents want this Court to focus
its attention solely on the argument that the use of public spaces for the
establishment of a flea market is well within the powers granted by law to a
local government which should not be interfered with by the courts.
Verily, the powers of a local government unit are not absolute. They are
subject to limitations laid down by toe Constitution and the laws such as
our Civil Code. Moreover, the exercise of such powers should be
subservient to paramount considerations of health and well-being of the
members of the community. Every local government unit has the sworn
obligation to enact measures that will enhance the public health, safety and
convenience, maintain peace and order, and promote the general
prosperity of the inhabitants of the local units. Based on this objective, the
local government should refrain from acting towards that which might
prejudice or adversely affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal
right to demand the demolition of the illegally constructed stalls in public
roads and streets and the officials of respondent municipality have the
corresponding duty arising from public office to clear the city streets and
restore them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance
which is void and illegal for lack of basis and authority in laws applicable
during its time. However, at this point, We find it worthy to note that Batas
Pambansa Blg. 337, known as Local Government Lode, has already been
repealed by Republic Act No. 7160 known as Local Government Code of
1991 which took effect on January 1, 1992. Section 5(d) of the new Code
provides that rights and obligations existing on the date of effectivity of the
PROPERTY 1ST BATCH
new Code and arising out of contracts or any other source of prestation
involving a local government unit shall be governed by the original terms
and conditions of the said contracts or the law in force at the time such
rights were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the
respondent Regional Trial Court dated December 17, 1990 which granted
the writ of preliminary injunction enjoining petitioner as PNP
Superintendent, Metropolitan Traffic Command from enforcing the
demolition of market stalls along J. Gabriel, G.G. Cruz, Bayanihan, Lt.
Garcia Extension and Opena streets is hereby RESERVED and SET
ASIDE.
SO ORDERED.
G.R. No. L40474 August 29, 1975
CEBU OXYGEN & ACETYLENE CO., INC., petitioner,
vs.
HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th
Judicial District, and JOSE L. ESPELETA, Assistant Provincial Fiscal,
Province of Cebu, representing the Solicitor General's Office and the
Bureau of Lands, respondents.
Jose Antonio R Conde for petitioner.
Office of the Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant
Solicitor General Octavio R. Ramirez and Trial Attorney David R. Hilario for
respondents. .
CONCEPCION, Jr., J.:
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
of land situated in the City of Cebu.
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 terminal portion of M. Borces Street, Mabolo, Cebu City, as
an abandoned road, the same not being included in the City Development
Plan. 1 Subsequently, on December 19, 1968, the City Council of Cebu passed
Resolution No. 2755, authorizing the Acting City Mayor to sell the land through
a public bidding. 2 Pursuant thereto, the lot was awarded to the herein
petitioner being the highest bidder and on March 3, 1969, the City of Cebu,
through the Acting City Mayor, executed a deed of absolute sale to the herein
petitioner for a total consideration of P10,800.00. 3 By virtue of the aforesaid
deed of absolute sale, the petitioner filed an application with the Court of First
instance of Cebu to have its title to the land registered. 4
On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to
dismiss the application on the ground that the property sought to be
registered 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
After hearing the parties, on October 11, 1974 the trial court issued an
order dismissing the petitioner's application for registration of title. 6 Hence,
the instant petition for review.
For the resolution of this case, the petitioner poses the following questions:
(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? and
(2) Does the declaration of the road, as abandoned, make
it the patrimonial property of the City of Cebu which may be
the object of a common contract?
(1) The pertinent portions of the Revised Charter of Cebu City provides:
Section 31. Legislative Powers. Any provision of law and
executive order to the contrary notwithstanding, the City
Council shall have the following legislative powers:
xxx xxx xxx
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(34) ...; to close any city road, street or alley, boulevard,
avenue, park or square. Property thus withdrawn from
public servitude may be used or conveyed for any purpose
for which other real property belonging to the City may be
lawfully used or conveyed.
From the foregoing, it is undoubtedly clear that the City of Cebu is
empowered to close a city road or street. In the case of Favis vs. City of
Baguio, 7 where the power of the city Council of Baguio City to close city
streets and to vacate or withdraw the same from public use was similarly
assailed, this court said:
5. So it is, that appellant may not challenge the city
council's act of withdrawing a strip of Lapu-Lapu Street at
its dead end from public use and converting the remainder
thereof into an alley. These are acts well within the ambit of
the power to close a city street. The city council, it would
seem to us, is the authority competent to determine
whether or not a certain property is still necessary for public
use.
Such power to vacate a street or alley is discretionary. And
the discretion will not ordinarily be controlled or interfered
with by the courts, absent a plain case of abuse or fraud or
collusion. Faithfulness to the public trust will be presumed.
So the fact that some private interests may be served
incidentally will not invalidate the vacation ordinance.
(2) Since that portion of the city street subject of petitioner's application for
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.
Article 422 of the Civil Code expressly provides that "Property of public
dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State."
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 property belonging to the City may be lawfully used or conveyed."
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.
WHEREFORE, the order dated October 11, 1974, rendered by the
respondent court in Land Reg. Case No. N-948, LRC Rec. No. N-44531 is
hereby set aside, and the respondent court is hereby ordered to proceed
with the hearing of the petitioner's application for registration of title.
SO ORDERED.
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL
MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO
MACARAIG, as Executive Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION
TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL
ROSARIO, et al., as members of the PRINCIPAL AND BIDDING
COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF
PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN, respondents.
Arturo M. Tolentino for petitioner in 92013.
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin respondents,
their representatives and agents from proceeding with the bidding for
the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome
Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted
the prayer for a temporary restraining order effective February 20,
PROPERTY 1ST BATCH
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 basis of their decision to push through with the sale of the
Roppongi property inspire of strong public opposition and to explain
the proceedings which effectively prevent the participation of Filipino
citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were
heard 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 comment by the Court's resolution dated February 22, 1990. The
two petitions were consolidated on March 27, 1990 when the
memoranda of the parties in the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the
respondents filed a motion for an extension of thirty (30) days to file
comment in G.R. No. 92047, followed by a second motion for an
extension of another thirty (30) days which we granted on May 8,
1990, a third motion for extension of time granted on May 24, 1990
and a fourth motion for extension of time which we granted on June
5, 1990 but calling the attention of the respondents to the length of
time the petitions have been pending. After the comment was filed,
the petitioner in G.R. No. 92047 asked for thirty (30) days to file a
reply. We noted his motion and resolved to decide the two (2) cases.
I
The subject property in this case is one of the four (4) properties in
Japan acquired by the Philippine government under the Reparations
Agreement entered into with Japan on May 9, 1956, the other lots
being:
(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 at present the site of the Philippine Embassy Chancery;
(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; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho,
Shinohara, Nada-ku, Kobe, a residential lot which is now vacant.
The properties and the capital goods and services procured from the
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.
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 governments (Article 2, Reparations Agreement). Rep. Act
No. 1789, the Reparations Law, prescribes the national policy on
procurement and utilization of reparations and development loans.
The procurements are divided into those for use by the government
sector and those for private parties in projects as the then National
Economic Council shall 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.
The Roppongi property was acquired from the Japanese government
under the Second Year Schedule and listed under the heading
"Government Sector", through Reparations Contract No. 300 dated
June 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 Embassy until the latter was transferred to Nampeidai
on July 22, 1976 when the Roppongi building needed major repairs.
Due to the failure of our government to provide necessary funds, the
Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former
Philippine Ambassador to Japan, Carlos J. Valdez, to make the
property the subject of a lease agreement with a Japanese firm -
Kajima Corporation which shall construct two (2) buildings in
Roppongi and one (1) building in Nampeidai and renovate the present
Philippine Chancery in Nampeidai. The consideration of the
construction would be the lease to the foreign corporation of one (1)
of the buildings to be constructed in Roppongi and the two (2)
buildings in Nampeidai. The other building in Roppongi shall then be
PROPERTY 1ST BATCH
used as the Philippine Embassy Chancery. At the end of the lease
period, all the three leased buildings shall be occupied and used by
the Philippine government. No change of ownership or title shall
occur. (See Annex "B" to Reply to Comment) The Philippine
government retains the title all throughout the lease period and
thereafter. However, the government has not acted favorably on this
proposal which is pending approval and ratification between the
parties. Instead, on August 11, 1986, President Aquino created a
committee to study the disposition/utilization of Philippine
government properties in Tokyo and Kobe, Japan through
Administrative Order No. 3, followed by Administrative Orders
Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296
entitling non-Filipino citizens or entities to avail of separations'
capital goods and services in the event of sale, lease or disposition.
The four properties in Japan including the Roppongi were specifically
mentioned in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the
government has been pushing, with great vigor, its decision to sell
the reparations properties starting with the Roppongi lot. The
property has twice been set for bidding at a minimum floor price of
$225 million. The first bidding was a failure since only one bidder
qualified. The second one, after postponements, has not yet
materialized. The last scheduled bidding on February 21, 1990 was
restrained by his Court. Later, the rules on bidding were changed
such that the $225 million floor price became merely a suggested
floor price.
The Court finds that each of the herein petitions raises distinct
issues. The petitioner in G.R. No. 92013 objects to the alienation of
the Roppongi property to anyone while the petitioner in G.R. No.
92047 adds as a principal objection the alleged unjustified bias of the
Philippine government in favor of selling the property to non-Filipino
citizens and entities. These petitions have been consolidated and are
resolved at the same time for the objective is the same - to stop the
sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by
the Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have the
authority and jurisdiction, to sell the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning
the 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 the bidding procedures of the Committee on the
Utilization or Disposition of Philippine Government Properties in
Japan for being discriminatory against Filipino citizens and Filipino-
owned entities by denying them the right to be informed about the
bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi
property and the related lots were acquired as part of the reparations
from the Japanese government for diplomatic and consular use by
the Philippine government. Vice-President Laurel states that the
Roppongi property is classified as one of public dominion, and not of
private ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under
"property intended for public service" in paragraph 2 of the above
provision. He states that being one of public dominion, no ownership
by any one can attach to it, not even by the State. The Roppongi and
related properties were acquired for "sites for chancery, diplomatic,
and consular quarters, buildings and other improvements" (Second
Year Reparations Schedule). The petitioner states that they continue
to be intended for a necessary service. They are held by the State in
anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it
cannot be appropriated, is outside the commerce of man, or to put it
in more simple terms, it cannot be alienated nor be the subject matter
of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]).
Noting the non-use of the Roppongi property at the moment, the
petitioner avers that the same remains property of public dominion
so long as the government has not used it for other purposes nor
PROPERTY 1ST BATCH
adopted any measure constituting a removal of its original purpose
or use.
The respondents, for their part, refute the petitioner's contention by
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 of lex situs which is used in determining the applicable law
regarding the acquisition, transfer and devolution of the title to a
property. They also invoke Opinion No. 21, Series of 1988, dated
January 27, 1988 of the Secretary of Justice which used the lex
situs in explaining the inapplicability of Philippine law regarding a
property situated in Japan.
The respondents add that even assuming for the sake of argument
that the Civil Code is applicable, the Roppongi property has ceased
to become property of public dominion. It has become patrimonial
property because it has not been used for public service or for
diplomatic purposes for over thirteen (13) years now (Citing Article
422, Civil Code) and because the intention by the Executive
Department and the Congress to convert it to private use has been
manifested by overt acts, such as, among others: (1) the transfer of
the Philippine Embassy to Nampeidai (2) the issuance 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
Comprehensive Agrarian Reform Law] on June 10, 1988 which
contains a provision stating that funds may be taken from the sale of
Philippine properties in foreign countries; (5) the holding of the
public bidding of the Roppongi property but which failed; (6) the
deferment by the Senate in Resolution No. 55 of the bidding to a
future date; thus an acknowledgment by the Senate of the
government's intention to remove the Roppongi property from the
public service purpose; and (7) the resolution of this Court
dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No.
87478 which sought to enjoin the second bidding of the Roppongi
property scheduled on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule
on the constitutionality of Executive Order No. 296. He had earlier
filed a 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 Preamble of the 1987 Constitution. It also
allegedly violates:
(1) The reservation of the ownership and acquisition of alienable
lands of the public domain to Filipino citizens. (Sections 2 and 3,
Article XII, Constitution; Sections 22 and 23 of Commonwealth Act
141).itc-asl
(2) The preference for Filipino citizens in the grant of rights,
privileges and concessions covering the national economy and
patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair
competition andTRADE PRACTICES ;
(4) The guarantee of the right of the people to information on all
matters of public concern (Section 7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities
not wholly owned by Filipino citizens of capital goods received by the
Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act
No. 1789); and
(6) The declaration of the state policy of full public disclosure of all
transactions involving public interest (Section 28, Article III,
Constitution).
Petitioner Ojeda warns that the use of public funds in the execution
of an unconstitutional executive order is a misapplication of public
funds He states that since the details of the bidding for the Roppongi
property were never publicly disclosed until February 15, 1990 (or a
few days before the scheduled bidding), the bidding guidelines are
available only in Tokyo, and the accomplishment of requirements and
the selection of qualified bidders should be done in Tokyo, interested
Filipino citizens or entities owned by them did not have the chance to
comply with Purchase Offer Requirements on the Roppongi. Worse,
the Roppongi shall be sold for a minimum price of $225 million from
PROPERTY 1ST BATCH
which price capital gains tax under Japanese law of about 50 to 70%
of the floor price would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact
that the Roppongi site and the three related properties were through
reparations agreements, that these were assigned to the government
sector and that the Roppongi property itself was specifically
designated under the Reparations Agreement to house the Philippine
Embassy.
The nature of the Roppongi lot as property for public service is
expressly spelled out. It is dictated by the terms of the Reparations
Agreement and the corresponding contract of procurement which
bind both the Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is
convincingly shown that the property has become patrimonial. This,
the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the
commerce of man. It cannot be alienated. Its ownership is a special
collective ownership for general use and enjoyment, an application to
the satisfaction of collective needs, and resides in the social group.
The purpose is not to serve the State as a juridical person, but the
citizens; it is intended for the common and public welfare and cannot
be the object of appropration. (Taken from 3 Manresa, 66-69; cited in
Tolentino, Commentaries on the Civil Code of the Philippines, 1963
Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of
private ownership.
ART. 420. The following things are property of public
dominion
(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;
(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.
ART. 421. All other property of the State, which is not
of the character stated in the preceding article, is
patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of
Article 420 of the Civil Code as property belonging to the State and
intended for some public service.
Has the intention of the government regarding the use of the property
been changed because the lot has been Idle for some years? Has it
become patrimonial?
The fact that the Roppongi site has not been used for a long time for
actual Embassy service does not automatically convert it to
patrimonial property. Any such conversion happens only if the
property is withdrawn from public use (Cebu Oxygen and Acetylene
Co. v. Bercilles, 66 SCRA 481 [1975]). A property 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 being such (Ignacio v. Director of
Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned
public officials insinuating a change of intention. We emphasize,
however, that an abandonment of the intention to use the Roppongi
property for public service and to make it patrimonial property under
Article 422 of 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 financial support to repair and improve the
property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368
[1988]). Abandonment must be a certain and positive act based on
correct legal premises.
PROPERTY 1ST BATCH
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is
not relinquishment of the Roppongi property's original purpose. Even
the failure by the government to repair the building in Roppongi is
not abandonment since as earlier stated, there simply was a shortage
of government funds. The recent Administrative Orders authorizing a
study of the status and conditions of government properties in Japan
were merely directives for investigation but did not in any way signify
a clear intention to dispose of the properties.
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 four properties procured from Japan for the government
sector. The executive order does not declare that the properties lost
their public character. It merely intends to make the
properties available to foreigners and not to Filipinos alone in case of
a sale, lease or other disposition. It merely eliminates the restriction
under Rep. Act No. 1789 that reparations goods may be sold only to
Filipino citizens and one hundred (100%) percent Filipino-owned
entities. The text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as
amended, and of other laws to the contrary
notwithstanding, the above-mentioned properties can
be made available for sale, lease or any other manner
of disposition to non-Filipino citizens or to entities
owned by non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise or
assumption that the Roppongi and the three other properties were
earlier converted into alienable real properties. As earlier stated, Rep.
Act No. 1789 differentiates the procurements for the government
sector and the private sector (Sections 2 and 12, Rep. Act No. 1789).
Only the private sector properties can be sold to end-users who must
be Filipinos or entities owned by Filipinos. It is this nationality
provision which was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as
one of the sources of funds for its implementation, the proceeds of
the 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 63 (c) refers to properties which are
alienable and not to those reserved for public use or service. Rep Act
No. 6657, therefore, does not authorize the Executive Department to
sell the Roppongi property. It merely enumerates possible sources of
future funding to augment (as and when needed) the Agrarian Reform
Fund created under Executive Order No. 299. Obviously any property
outside of the commerce of man cannot be tapped as a source of
funds.
The respondents try to get around the public dominion character of
the Roppongi property by insisting that Japanese law and not our
Civil Code should apply.
It is exceedingly strange why our top government officials, of all
people, should be the ones to insist that in the sale of extremely
valuable 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 asserted that the lex loci rei sitae or Japanese law
should apply without stating what that law provides. It is a ed on faith
that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no
conflict of law situation exists. A conflict of law situation arises only
when: (1) There is a dispute over the title or ownership of an
immovable, such that the capacity to take and transfer immovables,
the formalities of conveyance, the essential validity and effect of the
transfer, or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981 ed., pp. 377-
383); and (2) A foreign law on land ownership and its conveyance is
asserted to conflict with a domestic law on the same matters. Hence,
the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There
is no question that the property belongs to the Philippines. The issue
is the authority of the respondent officials to validly dispose of
property belonging to the State. And the validity of the procedures
adopted to effect its sale. This is governed by Philippine Law. The
rule of lex situs does not apply.
PROPERTY 1ST BATCH
The assertion that the opinion of the Secretary of Justice sheds light
on the relevance of the lex situs rule is misplaced. The opinion does
not tackle the alienability of the real properties procured through
reparations nor the existence in what body of the authority to sell
them. In discussing who are capable of acquiring the lots, the
Secretary merely explains that it is the foreign law which should
determine who can acquire the properties so that the constitutional
limitation on acquisition of lands of the public domain to Filipino
citizens and entities wholly owned by Filipinos is inapplicable. We
see no point in belaboring whether or not 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 subsequent approval on October 4, 1988 by President Aquino of
the recommendation by the investigating committee to sell the
Roppongi property was premature or, at the very least, conditioned
on a valid change in the public character of the Roppongi property.
Moreover, the approval does not have the force and effect of law
since the President already lost her legislative powers. The Congress
had already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi
property is no longer of public dominion, there is another obstacle to
its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the
Government is a party. In cases in which the
Government of the Republic of the Philippines is a
party to any deed or other instrument conveying the
title to real estate or to any other property the value of
which is in excess of one hundred thousand pesos, the
respective Department Secretary shall prepare the
necessary papers which, together with the proper
recommendations, shall be submitted to the Congress
of the Philippines for approval by the same. Such deed,
instrument, or contract shall be executed and signed
by the President of the Philippines on behalf of the
 Government of the Philippines unless the Government
of the Philippines unless the authority therefor be
expressly vested by law in another officer. (Emphasis
supplied)
The requirement has been retained in Section 48, Book I of the
Administrative Code of 1987 (Executive Order No. 292).
SEC. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government
is authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the name of
the Republic of the Philippines, by the President,
unless the authority therefor is expressly vested by law
in another officer.
(2) For property belonging to the Republic of the
Philippines but titled in the name of any political
subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)
It is not for the President to convey valuable real property of the
government on his or her own sole will. Any such conveyance must
be authorized and approved by a law enacted by the Congress. It
requires executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the
deferment of the sale of the Roppongi property does not withdraw the
property from public domain much less authorize its sale. It is a mere
resolution; it is not a formal declaration abandoning the public
character of the Roppongi property. In fact, the Senate Committee on
Foreign Relations is conducting hearings on Senate Resolution No.
734 which raises serious policy considerations and calls for a fact-
finding investigation of the circumstances behind the decision to sell
the Philippine government properties in Japan.
PROPERTY 1ST BATCH
The resolution of this Court in Ojeda v. Bidding Committee, et al.,
supra, did not pass upon the constitutionality of Executive Order No.
296. Contrary to respondents' assertion, we did not uphold the
authority of the President to sell the Roppongi property. The Court
stated that the constitutionality of the executive order was not the
real issue and that resolving the constitutional question was "neither
necessary nor finally determinative of the case." The Court noted that
"[W]hat petitioner ultimately questions is the use of the proceeds of
the disposition of the Roppongi property." In emphasizing that "the
decision of the Executive to dispose of the Roppongi property to
finance the CARP ... cannot be questioned" in view of Section 63 (c)
of Rep. Act No. 6657, the Court did not acknowledge the fact that the
property became alienable nor did it 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 authority of law, the
proceeds of a sale may be used for national economic development
projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us
question the proposed 1990 sale of the Roppongi property. We are
resolving the issues raised in these petitions, not the issues raised in
1989.
Having declared a need for a law or formal declaration to withdraw
the Roppongi property from public domain to make it alienable and a
need for legislative authority to allow the sale of the property, we see
no compelling reason to tackle the constitutional issues raised by
petitioner Ojeda.
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, 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 (Siler v. Louisville and
Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v.
Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property
should not be sold:
The Roppongi property is not just like any piece of
property. It was given to the Filipino people in
reparation for the lives and blood of Filipinos who died
and suffered during the Japanese military occupation,
for the suffering of widows and orphans who lost their
loved ones and kindred, for the homes and other
properties lost by countless Filipinos during the war.
The Tokyo properties are a monument to the bravery
and sacrifice of the 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 benefits from them. But who would think of
selling these monuments? Filipino honor and national
dignity dictate that we keep our properties in Japan as
memorials to the countless Filipinos who died and
suffered. Even if we should become paupers we 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)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by
the Japanese government in atonement for its past
belligerence for the valiant sacrifice of life and limb and
for deaths, physical dislocation and economic
devastation the whole Filipino people endured in World
War II.
It is for what it stands for, and for what it could never
bring back to life, that its significance today remains
undimmed, inspire of the lapse of 45 years since the
war ended, inspire of the passage of 32 years since the
property passed on to the Philippine government.
Roppongi is a reminder that cannot should not be
dissipated ... (Rollo-92047, p. 9)
PROPERTY 1ST BATCH
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 alike. Whether or not the Roppongi and related properties
will eventually be sold is a policy determination where both the
President and Congress must concur. Considering the properties'
importance and value, the laws on conversion and disposition of
property of public dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are
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
PERMANENT.
SO ORDERED.
Melencio-Herrera, Paras, Bidin, Grio-Aquino and Regalado, JJ.,
concur.
Separate Opinions
CRUZ, J., concurring:
I concur completely with the excellent ponencia of Mr. Justice
Gutierrez and will add the following observations only for emphasis.
It is clear that the respondents have failed to show the President's
legal authority to sell the Roppongi property. When asked to do so at
the hearing on these petitions, the Solicitor General was at best
ambiguous, although I must add in fairness that this was not his fault.
The fact is that there is -no such authority. Legal expertise alone
cannot conjure that statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative, double
talk, does not contain such authority. Neither does Rep. Act No. 6657,
which simply allows the proceeds of the sale of our properties abroad
to be used for the comprehensive agrarian reform program. Senate
Res. No. 55 was a mere request for the deferment of the scheduled
sale of tile Roppongi property, possibly to stop the transaction
altogether; and ill any case it is not a law. The sale of the said
property may be authorized only by Congress through a duly enacted
statute, and there is no such law.
Once again, we have affirmed the principle that ours is a government
of laws and not of men, where every public official, from the lowest to
the highest, can act only by virtue of a valid authorization. I am happy
to note that in the several cases where this Court has ruled against
her, the President of the Philippines has submitted to this principle
with becoming grace.
PADILLA, J., concurring:
I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only
wish to make a few observations which could help in further
clarifying the issues.
Under our tripartite system of government ordained by the
Constitution, it is Congress that lays down or determines policies.
The President executes such policies. The policies determined by
Congress are embodied in legislative enactments that have to be
approved by the President to become law. The President, of course,
recommends to Congress the approval of policies but, in the final
analysis, it is Congress that is the policy - determining branch of
government.
The judiciary interprets the laws and, in appropriate cases,
determines whether the laws enacted by Congress and approved by
the President, and presidential acts implementing such laws, are in
accordance with the Constitution.
The Roppongi property was acquired by the Philippine government
pursuant to the reparations agreement between the Philippine and
PROPERTY 1ST BATCH
Japanese governments. Under such agreement, this property was
acquired by the Philippine government for a specific purpose,
namely, to serve as the site of the Philippine Embassy in Tokyo,
Japan. Consequently, Roppongi is a property of public dominion and
intended for public service, squarely falling within that class of
property under Art. 420 of the Civil Code, which provides:
Art. 420. The following things are property of public
dominion :
(1) ...
(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. (339a)
Public dominion property intended for public service cannot be
alienated unless the property is first transformed into private
property of the state otherwise known as patrimonial property of the
state. 1 The transformation of public dominion property to state
patrimonial property involves, to my mind, a policy decision. It is a policy
decision because the treatment of the property varies according to its
classification. Consequently, it is Congress which can decide and
declare the conversion of Roppongi from a public dominion property to a
state patrimonial property. Congress has made no such decision or
declaration.
Moreover, the sale of public property (once converted from public
dominion to state patrimonial property) must be approved by
Congress, for this again is a matter of policy (i.e. to keep or dispose
of the property). Sec. 48, Book 1 of the Administrative Code of 1987
provides:
SEC. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government is
authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled
in the name of the Republic of the
 Philippines, by the President, unless the
authority therefor is expressly vested by
law in another officer.
(2) For property belonging to the
Republic of the Philippines but titled in
the name of any political subdivision or
of any corporate agency or
instrumentality, by the executive head of
the agency or instrumentality.
(Emphasis supplied)
But the record is bare of any congressional decision or approval to
sell Roppongi. The record is likewise bare of any congressional
authority extended to the President to sell Roppongi thru public
bidding or otherwise.
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA) Complex in Paraaque City under
Executive Order No. 903, otherwise known as the Revised Charter of the
Manila International Airport Authority ("MIAA Charter"). Executive Order
No. 903 was issued on 21 July 1983 by then President Ferdinand E.
Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the
MIAA Charter.
As operator of the international airport, MIAA administers the land,
improvements and equipment within the NAIA Complex. The MIAA Charter
transferred to MIAA approximately 600 hectares of land,3 including the
runways and buildings ("Airport Lands and Buildings") then under the
Bureau of Air Transportation.4 The MIAA Charter further provides that no
portion of the land transferred to MIAA shall be disposed of through sale or
any other mode unless specifically approved by the President of the
Philippines.5

It is therefore, clear that the President cannot sell or order the sale of
Roppongi thru public bidding or otherwise without a prior
congressional approval, first, converting Roppongi from a public
dominion property to a state patrimonial property, and, second,
authorizing the President to sell the same.
ACCORDINGLY, my vote is to GRANT the petition and to make
PERMANENT the temporary restraining order earlier issued by this
Court.
G.R. No. 155650 July 20, 2006
On 21 March 1997, the Office of the Government Corporate Counsel
(OGCC) issued Opinion No. 061. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate tax
granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA
negotiated with respondent City of Paraaque to pay the real estate tax
imposed by the City. MIAA then paid some of the real estate tax already
due.
On 28 June 2001, MIAA received Final Notices of Real Estate Tax
Delinquency from the City of Paraaque for the taxable years 1992 to
2001. MIAA's real estate tax delinquency is broken down as follows:

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, TAX TAXABLE

TAX DUE PENALTY TOTAL
vs. DECLARATION YEAR
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF E-016-01370 1992- 19,558,160.00 11,201,083.20 30,789,2
PARAAQUE, SANGGUNIANG PANGLUNGSOD NG PARAAQUE, 2001
CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF E-016-01374 1992- 111,689,424.90 68,149,479.59 179,838,9
PARAAQUE, respondents. 2001
E-016-01375 1992- 20,276,058.00 12,371,832.00 32,647,8
DECISION 2001
E-016-01376 1992- 58,144,028.00 35,477,712.00 93,621,7
CARPIO, J.:
2001
The Antecedents E-016-01377 1992- 18,134,614.65 11,065,188.59 29,199,8

PROPERTY 1ST BATCH

 2001 auctioning for public sale the Airport Lands and Buildings. The petition was
E-016-01378 1992- 111,107,950.40 67,794,681.59 docketed as CA-G.R. SP No. 66878.
178,902,631.99
2001
On 5 October 2001, the Court of Appeals dismissed the petition because
E-016-01379 1992- 4,322,340.00 2,637,360.00 6,959,700.00
MIAA filed it beyond the 60-day reglementary period. The Court of Appeals
2001
also denied on 27 September 2002 MIAA's motion for reconsideration and
E-016-01380 1992- 7,776,436.00 4,744,944.00 12,521,380.00
supplemental motion for reconsideration. Hence, MIAA filed on 5
2001 December 2002 the present petition for review.7
*E-016-013-85 1998- 6,444,810.00 2,900,164.50 9,344,974.50
2001 Meanwhile, in January 2003, the City of Paraaque posted notices of
*E-016-01387 1998- 34,876,800.00 5,694,560.00 auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and
50,571,360.00
2001 Tambo, Paraaque City; in the public market of Barangay La Huerta; and
*E-016-01396 1998- 75,240.00 33,858.00 in the main lobby of the Paraaque City Hall. The City of Paraaque
109,098.00
2001 published the notices in the 3 and 10 January 2003 issues of the Philippine
Daily Inquirer, a newspaper of general circulation in the Philippines. The
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42
notices announced the public auction sale of the Airport Lands and
Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 Legislative Session Hall Building of Paraaque City.
for P4,207,028.75
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA
#9476101 for P28,676,480.00 filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the
Issuance of a Temporary Restraining Order. The motion sought to restrain
#9476103 for P49,115.006 respondents the City of Paraaque, City Mayor of
Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of
On 17 July 2001, the City of Paraaque, through its City Treasurer, issued Paraaque, and the City Assessor of Paraaque ("respondents") from
notices of levy and warrants of levy on the Airport Lands and Buildings. auctioning the Airport Lands and Buildings.
The Mayor of the City of Paraaque threatened to sell at public auction the
Airport Lands and Buildings should MIAA fail to pay the real estate tax On 7 February 2003, this Court issued a temporary restraining order (TRO)
delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. effective immediately. The Court ordered respondents to cease and desist
from selling at public auction the Airport Lands and Buildings. Respondents
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC received the TRO on the same day that the Court issued it. However,
Opinion No. 061. The OGCC pointed out that Section 206 of the Local respondents received the TRO only at 1:25 p.m. or three hours after the
Government Code requires persons exempt from real estate tax to show conclusion of the public auction.
proof of exemption. The OGCC opined that Section 21 of the MIAA Charter
is the proof that MIAA is exempt from real estate tax. On 10 February 2003, this Court issued a Resolution confirming nunc pro
tunc the TRO.
On 1 October 2001, MIAA filed with the Court of Appeals an original
petition for prohibition and injunction, with prayer for preliminary injunction On 29 March 2005, the Court heard the parties in oral arguments. In
or temporary restraining order. The petition sought to restrain the City of compliance with the directive issued during the hearing, MIAA, respondent
Paraaque from imposing real estate tax on, levying against, and City of Paraaque, and the Solicitor General subsequently submitted their
respective Memoranda.

PROPERTY 1ST BATCH

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
Airport Lands and Buildings is the Republic of the Philippines. The MIAA
Charter mandates MIAA to devote the Airport Lands and Buildings for the
benefit of the general public. Since the Airport Lands and Buildings are
devoted to public use and public service, the ownership of these properties
remains with the State. The Airport Lands and Buildings are thus
inalienable and are not subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically
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 justify the exemption, MIAA invokes the principle that the
government cannot tax itself. MIAA points out that the reason for tax
exemption of public property is that its taxation would not inure to any
public advantage, since in such a case the tax debtor is also the tax
creditor.
Respondents invoke Section 193 of the Local Government Code,
which expressly withdrew the tax exemption privileges of "government-
owned and-controlled corporations" upon the effectivity of the Local
Government Code. Respondents also argue that a basic rule of statutory
construction is that the express mention of one person, thing, or act
excludes all others. An international airport is not among the exceptions
mentioned in Section 193 of the Local Government Code. Thus,
respondents assert that MIAA cannot claim that the Airport Lands and
Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International
Airport v. Marcos8 where we held that the Local Government Code has
withdrawn the exemption from real estate tax granted to international
airports. Respondents further argue that since MIAA has already paid
some of the real estate tax assessments, it is now estopped from claiming
that the Airport Lands and Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and
Buildings of MIAA are exempt from real estate tax under existing laws. If so
PROPERTY 1ST BATCH
exempt, then the real estate tax assessments issued by the City of
Paraaque, and all proceedings taken pursuant to such assessments, are
void. In such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real
estate tax imposed by local governments.
First, MIAA is not a government-owned or controlled corporation but
an instrumentality of the National Government and thus exempt from
local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled
corporation, is not exempt from real estate tax. Respondents claim that the
deletion of the phrase "any government-owned or controlled so exempt by
its charter" in Section 234(e) of the Local Government Code withdrew the
real 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.
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 controlled corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a government-
owned or controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any
agency organized as a stock or non-stock corporation, vested
with functions relating 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 fifty-one
(51) percent of its capital stock: x x x. (Emphasis supplied)
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 divided into shares. MIAA has no stockholders or voting
shares. Section 10 of the MIAA Charter9 provides:
SECTION 10. Capital. The capital of the Authority to be
contributed by the National Government shall be increased from
Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion
(P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways
and equipment and such other properties, movable and
immovable[,] which may be contributed by the National
Government or transferred by it from any of its agencies, the
valuation of which shall be determined jointly with the Department
of Budget and Management and the Commission on Audit on the
date of such contribution or transfer after making due allowances
for depreciation and other deductions taking into account the loans
and other liabilities of the Authority at the time of the takeover of
the assets and other properties;
(b) That the amount of P605 million as of December 31, 1986
representing about seventy percentum (70%) of the unremitted
share of the National Government from 1983 to 1986 to be remitted
to the National Treasury as provided for in Section 11 of E. O. No.
903 as amended, shall be converted into the equity of the National
Government in the Authority. Thereafter, the Government
contribution to the capital of the Authority shall be provided in the
General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided
into shares.
Section 3 of the Corporation Code10 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 divided into shares of stock. MIAA has no stockholders
or voting shares. Hence, MIAA is not a stock corporation.
PROPERTY 1ST BATCH
MIAA is also not a non-stock corporation because it has no members.
Section 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 officers." A non-stock corporation must have
members. Even if we assume that the Government is considered as the
sole member of MIAA, this will not make MIAA a non-stock corporation.
Non-stock corporations cannot distribute any part of their income to their
members. Section 11 of the MIAA 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.
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
purposes, like trade, industry, agriculture and like chambers." MIAA is not
organized for any of these purposes. MIAA, a public utility, is organized to
operate an international and domestic airport for public use.
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?
MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with
corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any 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,
and enjoying operational autonomy, usually through a charter. x x x
(Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains
a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain,12 police authority13 and the levying of fees and
charges.14 At the same time, MIAA exercises "all the powers of a
corporation under the Corporation Law, insofar as these powers are not
inconsistent with the provisions of this Executive Order."15
Likewise, when the law makes a government instrumentality operationally
autonomous, the instrumentality remains part of the National Government
machinery although not integrated with the department framework. The
MIAA Charter expressly states that transforming MIAA into a "separate and
autonomous body"16 will make its operation more "financially viable."17
Many government instrumentalities are vested with corporate powers but
they do not become stock or non-stock corporations, which is a necessary
condition before an agency or instrumentality is deemed a government-
owned or controlled corporation. Examples are the Mactan International
Airport Authority, the Philippine Ports Authority, the University of the
Philippines and Bangko Sentral ng Pilipinas. All these government
instrumentalities 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 Administrative Code. These government
instrumentalities are sometimes 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 relationship and status
of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the
Local Government Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:
xxxx
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and local
government units.(Emphasis and underscoring supplied)
PROPERTY 1ST BATCH
Section 133(o) recognizes the basic principle that local governments
cannot tax the national government, which historically merely delegated to
local governments the power to tax. While the 1987 Constitution now
includes 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
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 the law imposing the tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation. This rule applies
with greater force when local governments seek to tax national government
instrumentalities.
Another rule is that a tax exemption is strictly construed against the
taxpayer claiming the exemption. However, when Congress grants an
exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government
instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
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 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 liberally, in
favor of non tax-liability of such agencies.19
There is, moreover, no point in national and local governments taxing each
other, unless a sound and compelling policy requires such transfer of
public funds from one government pocket to another.
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of
local governments. The only exception is when the legislature clearly
intended to tax government instrumentalities for the delivery of
essential public services for sound and compelling policy
considerations. There must be express language in the law empowering
local governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax national
government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to
retard, impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to
carry into execution the powers vested in the federal
government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L
Ed. 579)
This doctrine emanates from the "supremacy" of the National
Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made
reference to the entire absence of power on the part of the
States to touch, in that way (taxation) at least, the
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 instrumentality in
such a way as to prevent it from consummating its federal
responsibilities, or even to seriously burden it in the
accomplishment of them." (Antieau, Modern Constitutional
Law, Vol. 2, p. 140, emphasis supplied)
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
for regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the
"power to destroy" (Mc Culloch v. Maryland, supra) cannot be
allowed to defeat an instrumentality or creation of the very entity
which has the inherent power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
PROPERTY 1ST BATCH
The Airport Lands and Buildings of MIAA are property of public dominion
and therefore owned by the State or the Republic of the Philippines.
The Civil Code provides:
ARTICLE 419. Property is either of public dominion or of private
ownership.
ARTICLE 420. The following things are property of public
dominion:
(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;
(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. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer
intended for public use or for public service, shall form part of the
patrimonial property of the State.
No one can dispute that properties of public dominion mentioned in Article
420 of the Civil Code, like "roads, canals, rivers, torrents, ports and
bridges constructed by the State," are owned by the State. The term
"ports" includes seaports and airports. The MIAA Airport Lands and
Buildings constitute a "port" constructed by the State. Under Article 420 of
the Civil Code, the MIAA Airport Lands and Buildings are properties of
public dominion and thus owned by the State or the Republic of the
Philippines.
The Airport Lands and Buildings are devoted to public use because they
are used by the public for international and domestic travel and
transportation. The fact that the MIAA collects terminal fees and other
charges from the public does not remove the character of the Airport Lands
and Buildings as properties for public use. The operation by the
government 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 who actually use the road through the toll fees they
pay upon using the road. The tollway system is even a more efficient and
equitable manner of taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the character of the
property whether it is of public dominion or not. Article 420 of the Civil
Code defines property of public dominion as one "intended for public use."
Even if the government collects toll fees, the road is still "intended for
public use" if anyone can use the road under the same terms and
conditions as the rest of the 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.
The terminal fees MIAA charges to passengers, as well as the landing fees
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
user's tax. This means taxing those among the public who actually use a
public facility instead of taxing all the public including those who never use
the particular public facility. A user's tax is more equitable a principle of
taxation mandated in the 1987 Constitution.21
The Airport Lands and Buildings of MIAA, which its Charter calls the
"principal airport of the Philippines for both international and domestic air
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.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and
thus are properties of public dominion. As properties of public dominion,
the Airport Lands and Buildings are outside the commerce of man.
The Court has ruled repeatedly that properties of public dominion are
outside the commerce of man. As early as 1915, this Court already ruled
in Municipality of Cavite v. Rojas that properties devoted to public use
are outside the commerce of man, thus:
PROPERTY 1ST BATCH
According to article 344 of the Civil Code: "Property for public use
in provinces and in towns comprises the provincial and town roads,
the squares, streets, fountains, and public waters, the promenades,
and public works of general service supported by said towns or
provinces."
The said Plaza Soledad being a promenade for public use, the
municipal council of Cavite could not in 1907 withdraw or exclude
from public use a portion thereof in order to lease it for the sole
benefit of the defendant Hilaria Rojas. In leasing a portion of said
plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by
executing a contract over a thing of which it could not dispose, nor
is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not
outside the commerce of man may be the object of a contract, 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 because
they are by their very nature outside of commerce are those
for public use, such as the plazas, streets, common lands,
rivers, fountains, etc." (Emphasis supplied) 23
Again in Espiritu v. Municipal Council, the Court declared that properties
of public dominion are outside the commerce of man:
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
disposed of or even leased by the municipality to private parties.
While in case of war or during an emergency, town plazas may be
occupied temporarily by private individuals, as was done and as
was tolerated by the Municipality of Pozorrubio, when the
emergency has ceased, said temporary occupation or use must
also 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)
The Court has also ruled that property of public dominion, being outside
the commerce of man, cannot be the subject of an auction sale.25
Properties of public dominion, being for public use, are not subject to levy,
encumbrance or disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of any property of public
dominion is void 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 Paraaque can foreclose and compel the auction sale of the 600-
hectare runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the
President must first withdraw from public use the Airport Lands and
Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth
Act No. 141, which "remains to this day the existing general law governing
the classification and disposition of lands of the public domain other than
timber and mineral lands,"27 provide:
SECTION 83. Upon the recommendation of the Secretary of
Agriculture and Natural Resources, the President may designate
by proclamation any tract or tracts of land of the public domain as
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
purposes when the public interest requires it, including reservations
for highways, rights of way for railroads, hydraulic power sites,
irrigation systems, communal pastures or lequas communales,
public parks, public quarries, public fishponds, working men's
village and other improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved under the
provisions of Section eighty-three shall be non-alienable and
shall not be subject to occupation, entry, sale, lease, or other
disposition until again declared alienable under the provisions
of this Act or by proclamation of the President. (Emphasis and
underscoring supplied)
Thus, unless the President issues a proclamation withdrawing the Airport
Lands and Buildings from public use, these properties remain properties of
public dominion and are inalienable. Since the Airport Lands and
PROPERTY 1ST BATCH
Buildings are inalienable in their present status as properties of public
dominion, they are not subject to levy on execution or foreclosure sale. As
long as the Airport Lands and Buildings are reserved for public use, their
ownership remains with the State or the Republic of the Philippines.
The authority of the President to reserve lands of the public domain for
public use, and to withdraw such public use, is reiterated in Section 14,
Chapter 4, Title I, Book III of the Administrative Code of 1987, which
states:
SEC. 14. Power to Reserve Lands of the Public and Private
Domain of the Government. (1) The President shall have the
power to reserve for settlement or public use, and for specific
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 indicated until otherwise provided by law or
proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings
are withdrawn by law or presidential proclamation from public use, they are
properties of public dominion, owned by the Republic and outside the
commerce of man.
c. MIAA is a Mere Trustee of the Republic
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 by the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government is authorized by law to
be conveyed, the deed of conveyance shall be executed in behalf
of the government by the following:
(1) For property belonging to and titled in the name of the Republic
of the Philippines, by the President, unless the authority therefor is
expressly vested by law in another officer.
 (2) For property belonging to the Republic of the Philippines
but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head of
the agency or instrumentality. (Emphasis supplied)
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 on behalf of the Republic. Only the President of the
Republic can sign such deed of conveyance.28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the
Airport Lands and Buildings from the Bureau of Air Transportation of the
Department of Transportation and Communications. The MIAA Charter
provides:
SECTION 3. Creation of the Manila International Airport Authority.
xxxx
The land where the Airport is presently located as well as the
surrounding land area of approximately six hundred hectares,
are hereby transferred, conveyed and assigned to the
ownership and administration of the Authority, subject to
existing rights, if any. The Bureau of Lands and other appropriate
government agencies shall undertake an actual survey of the area
transferred within one year from the promulgation of this Executive
Order and the corresponding title to be issued in the name of the
Authority. Any portion thereof shall not be disposed through
sale or through any other mode unless specifically approved
by the President of the Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible 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
privileges belonging to the Bureau of Air Transportation relating
to airport works or air operations, including all equipment which are
necessary for the operation of crash fire and rescue facilities, are
hereby transferred to the Authority. (Emphasis supplied)
PROPERTY 1ST BATCH
SECTION 25. Abolition of the Manila International Airport as a
Division in the Bureau of Air Transportation and Transitory
Provisions. The Manila International Airport including the Manila
Domestic Airport as a division under the Bureau of Air
Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA
without the Republic receiving cash, promissory notes or even stock since
MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the
transfer of the Airport Lands and Buildings to MIAA, thus:
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 and
service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and
other facilities, have to be upgraded to meet the current and future
air traffic and other demands of aviation in Metro Manila;
WHEREAS, a management and organization study has indicated
that the objectives of providing high standards of
accommodation and service within the context of a financially
viable operation, will best be achieved by a separate and
autonomous body; and
WHEREAS, under Presidential Decree No. 1416, as amended by
Presidential Decree No. 1772, the President of the Philippines is
given continuing authority to reorganize the National
Government, which authority includes the creation of new
entities, agencies and instrumentalities of the Government[.]
(Emphasis supplied)
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
to reorganize a division in the Bureau of Air Transportation into a
separate and autonomous body. The Republic remains the beneficial
owner of the Airport Lands and Buildings. MIAA itself is owned solely by
the Republic. No party claims any ownership rights over MIAA's assets
adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings
"shall not be disposed through sale or through any other mode
unless specifically approved by the President of the Philippines." This
only means that the Republic retained the beneficial ownership of the
Airport Lands and Buildings because under Article 428 of the Civil Code,
only the "owner has the right to x x x dispose of a thing." Since MIAA
cannot dispose of the Airport Lands and Buildings, MIAA does not own the
Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the
Airport Lands and Buildings without the Republic paying MIAA any
consideration. Under Section 3 of the MIAA Charter, the President is the
only one who can authorize the sale or disposition of the Airport Lands and
Buildings. This only confirms that the Airport Lands and Buildings belong to
the Republic.
e. Real Property Owned by the Republic is Not Taxable
Section 234(a) of the Local Government Code exempts from real estate
tax any "[r]eal property owned by the Republic of the Philippines." Section
234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following
are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or
any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a
taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same
Code, which prohibits local governments from imposing "[t]axes, fees or
charges of any kind on the National Government, its agencies
and instrumentalities x x x." The real properties owned by the Republic
PROPERTY 1ST BATCH
are titled either in the name of the Republic itself or in the name of
agencies or instrumentalities of the National Government. The
Administrative Code 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.
The Republic may grant the beneficial use of its real property to an agency
or 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 the loss of the tax exemption. Section 234(a) of the Local
Government Code states that real property owned by the Republic loses its
tax exemption only if the "beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person." MIAA, as a government
instrumentality, is not a 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 of the Airport Lands and Buildings, such fact
does not make these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases to
private entities are not exempt from real estate tax. For example, the 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 and
therefore such land area is subject to real estate tax. In Lung Center of
the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private
entities 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 paying or non-paying, are
exempt from real property taxes.29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax
because 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:
 SEC. 193. Withdrawal of Tax Exemption Privileges Unless
otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural
or juridical, including government-owned or controlled
corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals
and educational institutions are hereby withdrawn upon effectivity
of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The
minority argues that since the Local Government Code withdrew the tax
exemption of all juridical persons, then MIAA is not exempt from real
estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local
Government Code that the withdrawn exemptions from realty
tax cover not just GOCCs, but all persons. To repeat, the
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 explicit
provision.
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
determinative test is not just whether MIAA is a GOCC, but
whether MIAA is a juridical person at all. (Emphasis and
underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt
from local taxation is its status whether MIAA is a juridical person or not.
The minority also insists that "Sections 193 and 234 may be examined in
isolation from Section 133(o) to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local
Government Code expressly withdrew the tax exemption of all juridical
persons "[u]nless otherwise provided in this Code." Now, Section
133(o) of the Local Government Code expressly provides otherwise,
specifically prohibiting local governments from imposing any kind of tax
on national government instrumentalities. Section 133(o) states:
PROPERTY 1ST BATCH
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National
Government, its agencies and instrumentalities, and local
government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments
cannot impose any kind of tax on national government instrumentalities like
the MIAA. Local governments are devoid of power to tax the national
government, its agencies and instrumentalities. The taxing powers of local
governments do not extend to the national government, its agencies and
instrumentalities, "[u]nless otherwise provided in this Code" as stated in the
saving clause of Section 133. The saving clause refers to Section 234(a)
on the exception to the exemption from real estate tax of real property
owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193
itself, 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. Thus, the minority states:
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
institutions. It would be belaboring the obvious why the MIAA does
not fall within any of the exempt entities under Section 193.
(Emphasis supplied)
The minority's theory directly contradicts and completely negates Section
133(o) of the Local Government Code. This theory will result in gross
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 theory, local governments can impose any kind of local tax, and not
only real estate tax, on the national government.
Under the minority's theory, many national government instrumentalities
with juridical personalities will also be subject to any kind of local tax, and
not only real estate tax. Some of the national government instrumentalities
vested by law with juridical personalities are: Bangko Sentral ng
Pilipinas,30 Philippine Rice Research Institute,31Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases
Conversion Development Authority,34Philippine Ports Authority,35 Cagayan
de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port
Authority,38 and Philippine National Railways.39
The minority's theory violates Section 133(o) of the Local Government
Code which expressly prohibits local governments from imposing any kind
of tax on national government instrumentalities. Section 133(o) does not
distinguish 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
instrumentalities, with or without juridical personalities. The determinative
test whether MIAA is exempt from local taxation is not whether MIAA is a
juridical person, but whether it is a national government instrumentality
under 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 on the national government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause
"[u]nless otherwise provided in this Code." This means that unless the
Local Government Code grants an express authorization, local
governments have no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local governments have no power
to tax the national government, its agencies and instrumentalities. As an
exception to this rule, local governments may tax the national government,
its agencies and instrumentalities only if the Local Government Code
expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption
in 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:
PROPERTY 1ST BATCH
SEC. 234. Exemptions from Real Property Tax The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any
of its political subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable
person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from
real estate tax. The exception to this exemption is when the government
gives the beneficial use of the real property to a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when
the national government, its agencies and instrumentalities are subject to
any 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 devoted to public use or public service but devoted to
the private gain of a taxable person.
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. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193
and 234. Following an accepted rule of construction, in case of
conflict the subsequent provisions should prevail. Therefore, MIAA,
as a juridical person, is subject to real property taxes, the general
exemptions attaching to instrumentalities under Section 133(o) of
the Local Government Code being qualified by Sections 193 and
234 of the same law. (Emphasis supplied)
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 that there is such a conflict, much less has any one presenteda
persuasive argument that there is such a conflict. The minority's
assumption of an irreconcilable conflict in the statutory provisions is an
egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193
because Section 193 expressly admits its subordination to other provisions
of the 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 193. When a provision of law grants a power but
withholds such power on certain matters, there is no conflict between the
grant of power and the withholding of power. The grantee of the power
simply cannot exercise the power on matters withheld from its power.
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 power to tax. Section 133 states that the taxing powers of local
governments "shall not extend to the levy" of any kind of tax on the
national government, its agencies and instrumentalities. There is no clearer
limitation on the taxing power than this.
Since Section 133 prescribes the "common limitations" on the taxing
powers of local governments, Section 133 logically prevails over Section
193 which grants local governments such taxing powers. By their very
meaning and purpose, the "common limitations" on the taxing power
prevail over the grant or exercise of the taxing power. If the taxing power of
local governments in Section 193 prevails over the limitations on such
taxing power in Section 133, then local governments can impose any kind
of tax on the national government, its agencies and instrumentalities a
gross absurdity.
Local governments have no power to tax the national government, its
agencies and instrumentalities, except as otherwise provided in the Local
Government Code pursuant to the saving clause in Section 133 stating
"[u]nless otherwise provided in this Code." This exception which is an
exception to the exemption of the Republic from real estate tax imposed by
local governments refers to Section 234(a) of the Code. The exception
to the exemption in Section 234(a) subjects real property owned by the
Republic, whether titled in the name of the national government, its
agencies or instrumentalities, to real estate tax if the beneficial use of such
property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of
the phrase "government-owned or controlled corporation" is not controlling.
PROPERTY 1ST BATCH
The minority points out that Section 2 of the Introductory Provisions of the
Administrative Code admits that its definitions are not controlling when it
provides:
SEC. 2. General Terms Defined. Unless the specific words of
the text, or the context as a whole, or a particular statute, shall
require a different meaning:
xxxx
The minority then concludes that reliance on the Administrative Code
definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the
Administrative Code recognizes that a statute may require a different
meaning than that defined in the Administrative Code. However, this does
not automatically mean that the definition in the Administrative Code does
not apply to the Local Government Code. Section 2 of the Administrative
Code clearly states that "unless the specific words x x x of a particular
statute shall require a different meaning," the definition in Section 2 of the
Administrative Code shall apply. Thus, unless there is specific language in
the Local Government Code defining the phrase "government-owned or
controlled corporation" differently from the definition in the Administrative
Code, the definition in the Administrative Code prevails.
The minority does not point to any provision in the Local Government Code
defining the phrase "government-owned or controlled corporation"
differently from the definition in the Administrative Code. Indeed, there is
none. The Local Government Code is silent on the definition of the phrase
"government-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 phrase "government-owned or controlled corporation"
applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code
"incorporates in a unified document the major structural, functional and
procedural principles and rules of governance." Thus, the Administrative
Code is the governing law defining the status and relationship of
government 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.
The minority also contends that the phrase "government-owned or
controlled corporation" should apply only to corporations organized under
the Corporation Code, the general incorporation law, and not to
corporations created by special charters. The minority sees no reason why
government corporations with special charters should have a capital stock.
Thus, the minority declares:
I submit that the definition of "government-owned or controlled
corporations" under the Administrative Code refer to those
corporations owned by the government or its instrumentalities
which are created not by legislative enactment, but formed and
organized under the Corporation Code through registration with the
Securities and Exchange Commission. In short, these are GOCCs
without original charters.
xxxx
It might as well be worth pointing out that there is no point in
requiring a capital structure for GOCCs whose full ownership is
limited by its charter to the State or Republic. Such GOCCs are not
empowered to declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with
the Constitution and existing legislations. It will also result in gross
absurdities.
First, the Administrative Code definition of the phrase "government-owned
or controlled corporation" does not distinguish between one incorporated
under the Corporation Code or under a special charter. Where the law
does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several
government-owned corporations organized as stock corporations. Prime
examples are the Land Bank of the Philippines and the Development Bank
of the Philippines. The special charter40 of the Land Bank of the Philippines
provides:
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SECTION 81. Capital. The authorized capital stock of the Bank
shall be nine billion pesos, divided into seven hundred and eighty
million common shares with a par value of ten pesos each, which
shall be fully subscribed by the Government, and one hundred and
twenty million preferred shares with a par value of ten pesos each,
which shall be issued in accordance with the provisions of Sections
seventy-seven and eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter41 of the Development Bank of the Philippines
provides:
SECTION 7. Authorized Capital Stock Par value. The capital
stock of the Bank shall be Five Billion Pesos to be divided into Fifty
Million common shares with par value of P100 per share. These
shares are available for subscription by the National Government.
Upon the effectivity of this Charter, the National Government shall
subscribe to Twenty-Five Million common shares of stock worth
Two Billion Five Hundred Million which shall be deemed paid for by
the Government with the net asset values of the Bank remaining
after the transfer of assets and liabilities as provided in Section 30
hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations
under their special charters are the Philippine Crop Insurance
Corporation,42 Philippine International Trading Corporation,43 and the
Philippine National Bank44 before it was reorganized as a stock corporation
under the Corporation Code. All these government-owned corporations
organized under special charters as stock corporations are subject to real
estate tax on real properties owned by them. To rule that they are not
government-owned or controlled corporations because they are not
registered with the Securities and Exchange Commission would remove
them from the reach of Section 234 of the Local Government Code, thus
exempting them from real estate tax.
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. The first condition is that the
government-owned or controlled corporation must be established for the
common good. The second condition is that the government-owned or
controlled corporation must meet the test of economic viability. Section 16,
Article XII of the 1987 Constitution provides:
 SEC. 16. The Congress shall not, except by general law, provide
for the formation, organization, or regulation of private
corporations. Government-owned or controlled corporations may
be created or established by special charters in the interest of the
common good and subject to the test of economic viability.
(Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to create
"government-owned or controlled corporations" through special charters
only if these entities are required to meet the twin conditions of common
good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters
unless they are made to comply with the two conditions of common good
and economic viability. The test of economic viability applies only to
government-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 development purposes these government-owned
or controlled corporations with special charters are usually organized as
stock corporations just like ordinary private corporations.
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 for the common good, services that every modern State must
provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations.
These instrumentalities are not the "government-owned or controlled
corporations" referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates
government instrumentalities vested with corporate powers but performing
essential governmental or public functions. Congress has plenary authority
to create government instrumentalities vested with corporate powers
provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special
charters corporations that perform economic or commercial activities, such
entities known as "government-owned or controlled corporations"
must meet the test of economic viability because they compete in the
market place.
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This is the situation of the Land Bank of the Philippines and the
Development Bank of the Philippines and similar government-owned or
controlled corporations, which derive their income to meet operating
expenses solely from commercial transactions in competition with the
private sector. The 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.
Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
follows:
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 know what happened in the past. If a
government corporation loses, then it makes its claim upon the
taxpayers' money through new equity infusions from 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 government, about P28 billion of this will go into equity
infusions to support a few government financial institutions. And
this is all taxpayers' money which 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.
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 market test so that they become
viable. And so, Madam President, I reiterate, for the committee's
consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC
VIABILITY OR THE ECONOMIC TEST," together with the common
good.45
Father Joaquin G. Bernas, a leading member of the Constitutional
Commission, explains in his textbook The 1987 Constitution of the
Republic of the Philippines: A Commentary:
 The second sentence was added by the 1986 Constitutional
Commission. The significant addition, however, is the phrase "in
the interest of the common good and subject to the test of
economic viability." The addition includes the ideas that they must
show capacity to function efficiently in business and that they
should not go into activities which the private sector can do better.
Moreover, economic viability is more than financial viability but also
includes capability to make profit and generate benefits not
quantifiable in financial terms.46(Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities
vested with corporate powers and performing essential public services.
The State is obligated to render essential public services regardless of the
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.
However, government-owned or controlled corporations with special
charters, organized essentially for economic or commercial objectives,
must meet the test of economic viability. These are the government-owned
or controlled corporations that are usually organized under their special
charters as stock corporations, like the Land Bank of the Philippines and
the Development Bank of the Philippines. These are the government-
owned or controlled corporations, along with government-owned or
controlled corporations organized under the Corporation Code, that fall
under the definition of "government-owned or controlled corporations" in
Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability because the
legislature did not create MIAA to compete in the market place. MIAA does
not compete in the market place because there is no competing
international airport operated by the private sector. MIAA performs an
essential public service as the primary domestic and international airport of
the Philippines. The operation of an international airport requires the
presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the
arrival and departure of passengers, screening out those without
visas or travel documents, or those with hold departure orders;
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2. The Bureau of Customs, to collect import duties or enforce the
ban on prohibited importations;
3. The quarantine office of the Department of Health, to enforce
health measures against the spread of infectious diseases into the
country;
4. The Department of Agriculture, to enforce measures against the
spread of plant and animal diseases into the country;
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
attack or seizure;
6. The Air Traffic Office of the Department of Transportation and
Communications, to authorize aircraft to enter or leave Philippine
airspace, as well as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises such as runway
and buildings for the government personnel, passengers, and
airlines, and to manage the airport operations.
All these agencies of government perform government functions essential
to the operation of an international airport.
MIAA performs an essential public service that every modern State must
provide its citizens. MIAA derives its revenues principally from the
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.
MIAA falls under the definition of a government instrumentality under
Section 2(10) of the Introductory Provisions of the Administrative Code,
which provides:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any 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, and
enjoying operational autonomy, usually through a charter. x x x
(Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make
MIAA a government-owned or controlled corporation. Without a change in
its capital structure, MIAA remains a government instrumentality under
Section 2(10) of the Introductory Provisions of the Administrative Code.
More importantly, as long as MIAA renders essential public services, it
need not comply with the test of economic viability. Thus, MIAA is outside
the scope of the phrase "government-owned or controlled corporations"
under Section 16, Article XII of the 1987 Constitution.
The minority belittles the use in the Local Government Code of the phrase
"government-owned or controlled corporation" as merely "clarificatory or
illustrative." This is fatal. The 1987 Constitution prescribes explicit
conditions for the creation of "government-owned or controlled
corporations." The Administrative Code defines what constitutes a
"government-owned or controlled corporation." To belittle this phrase as
"clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation
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 MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not
required to meet the 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 government instrumentality, MIAA is not
subject to any kind of tax by local 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 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.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to
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:
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Art. 420. The following things are property of public dominion:
(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;
(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. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and
seaports. 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 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.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the
Administrative Code, which governs the legal relation and status of
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
Government Code, MIAA as a government instrumentality is not a taxable
person because it is not subject to "[t]axes, fees or charges of any kind" by
local governments. The only exception is when MIAA leases its real
property to a "taxable person" as provided in Section 234(a) of the Local
Government Code, in which case the specific real property leased
becomes subject to real estate tax. Thus, only portions of the Airport Lands
and Buildings leased to taxable persons like private parties are subject to
real estate tax by the City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of
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
specifically mentions "ports x x x constructed by the State," which includes
public airports and seaports, as properties of public dominion and owned
by 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 Code. This Court has also repeatedly ruled that properties of
public dominion are not subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed
Resolutions of the Court of Appeals of 5 October 2001 and 27 September
2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and
Buildings of the Manila International Airport Authority EXEMPT from the
real estate tax imposed by the City of Paraaque. We declare VOID all the
real estate tax assessments, including the final notices of real estate tax
delinquencies, issued by the City of Paraaque on the Airport Lands and
Buildings of the Manila International Airport Authority, except for the
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
Authority.
No costs.
SO ORDERED.
G.R. No. 109791 July 14, 2003
PHILIPPINE PORTS AUTHORITY, petitioner,
vs.
CITY OF ILOILO, respondent.
AZCUNA, J.:
Before us is a petition for review on certiorari assailing the Decision of the
Regional Trial Court of Iloilo City, Branch 39, dated February 26, 1993 in
Civil Case No. 18477, a case for collection of a sum of money. Seeking to
raise questions purely of law, petitioner Philippine Ports Authority (PPA)
would want us to set aside the ruling ordering it to pay real property and
business taxes to respondent City of Iloilo.
The factual antecedents are summarized by the trial court:
This is an action for the "recovery of sum of money" filed by
[respondent] City of Iloilo, a public corporation organized under the
laws of the Republic of the Philippines, represented by the Hon.
PROPERTY 1ST BATCH
Rodolfo T. Ganzon as City Mayor, against petitioner, Philippine
Ports Authority (PPA), a government corporation created by P.D.
857.
[Respondent] seeks to collect from [petitioner] real property taxes
as well as business taxes, computed from the last quarter of 1984
up to fourth quarter of 1988.
[Respondent] alleges that [petitioner] is engaged in the business of
arrastre and stevedoring services and the leasing of real estate for
which it should be obligated to pay business taxes. It further
alleges that [petitioner] is the declared and registered owner of a
warehouse which is used in the operation of its business and is
also thereby subject to real property taxes.
It demands the aggregate amount of P510,888.86 in realty and
business taxes as of December 1988 (real property tax last
quarter of 1984 to 1988; business tax- 1984 to 1988) including its
corresponding interests and penalty charges.
On July 19, 1989, [petitioner] filed a motion to dismiss but [it] was
denied by this court. A motion for reconsideration was filed, but the
same was still denied, after which [petitioner] filed its answer.
During the pre-trial conference, the following factual and legal
issues were defined and clarified.
Factual Issues:
1. Whether or not [petitioner] is engaged in business;
2. Whether or not the assessment of tax by [respondent] is
accurate as of 4th quarter of 1988 from the year 1984; real
property tax in the amount of P180,953.93 and business tax in the
amount of P329,934.93 as of December 31, 1988.
Legal Issues:
1. Whether or not Philippine Ports Authority is exempt from the
payment of real property tax and business tax;
 2. Whether by filing a motion to dismiss, [petitioner] impliedly
admitted the allegations in the complaint;
3. Whether Philippine Ports Authority is engaged in business. If in
the negative, whether or not it is exempt from payment of business
taxes.
During trial, [respondent] presented two witnesses, namely: Mrs.
Rizalina F. Tulio and Mr. Leoncio Macrangala.
xxx xxx xxx
After [respondent] had rested its case, [petitioner] did not present
any evidence. Instead, its counsel asked the court to give him time
to file a memorandum, as said counsel is convinced that the issues
involved in this case are purely legal issues.
He has no quarrel as regards the computation of the real property
and business taxes made by [respondent]. He is convinced,
however, that the issue in this case involves a question of law and
that [petitioner] is not liable to pay any kind of taxes to the City of
Iloilo.1
The court a quo rendered its decision holding petitioner liable for real
property taxes from the last quarter of 1984 to December 1986, and for
business taxes with respect to petitioners lease of real property from the
last quarter of 1984 up to 1988. It, however, held that respondent may not
collect business taxes on petitioners arrastre and stevedoring services, as
these form part of petitioners governmental functions. The dispositive
portion of said decision states:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiff and against the defendant, ordering the latter
to pay the plaintiff, as follows:
1. the amount of P98,519.16 as real property tax, from [the] last
quarter of 1984 up to December 1986;
2. the amount of P3,828.07, as business tax, for leasing of real
estate from [the] last quarter of 1984 up to 1988.2
PROPERTY 1ST BATCH
Petitioner now seeks a review of the case, contending that the court a
quo decided a question of substance which has not been decided by us in
that:
(i) It decreed a property of public dominion (port facility) as subject
to realty taxes just because the mentioned property is being
administered by what it perceived to be a taxable government
corporation. And,
(ii) It declared that petitioner PPA is subject to "business taxes" for
leasing to private persons or entities real estate without considering
that petitioner PPA is not engaged in "business."3
In its Comment, respondent in addition raises the issue of whether or not
petitioner may change its theory on appeal. It points out that petitioner
never raised the issue that the subject property is of public dominion during
the trial nor did it mention it in the memorandum it filed with the lower court.
It further contends that such change of theory patently contradicts
petitioners admission in its pleadings and is disallowed under applicable
jurisprudence.4
The records show that the theory of petitioner before the trial court was
different from that of the present petition. In fact, even while at the trial
court stage, petitioner was not consistent in its theory.5 Initially in its
pleadings therein, it argued that as a government-owned corporation, it is
exempt from paying real property taxes by virtue of its specific exemption
in its charter,6 Section 40 of the Real Property Tax Code and Executive
Order No. 93. Subsequently, in the memorandum it filed with the trial court,
it omitted its earlier argument and changed its theory by alleging that it is a
government instrumentality, which, according to applicable jurisprudence,
may not be taxed by the local government. After obtaining an adverse
decision from the trial court, it adopts yet another stance on appeal before
us, contesting the taxability of its warehouse. It argued for the first time that
since "ports constructed by the State" are considered under the Civil Code
as properties of public dominion, its warehouse, which it insists to be part
of its port, should be treated likewise. To support this, it invokes Article 420
of the Civil Code, which provides:
Art. 420. The following things are property of public dominion:
 (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;
xxx xxx xxx
[Emphasis supplied]
Insisting that the subject warehouse is considered as part of its port, it
points to Section 3 (e) of its charter quoted hereunder:
e) "port" means a place where ships may anchor or tie up for the
purpose of shelter, repair, loading or discharge of cargo, or for
other such activities connected with water-borne commerce,
and including all the land and water areas and the structures,
equipment and facilities related to these functions. [Emphasis
supplied]
A perusal of the records shows that this thesis was never presented nor
discussed at the trial stage.
As a rule, a party who deliberately adopts a certain theory upon which the
case is tried and decided by the lower court will not be permitted to change
theory on appeal.7 Points of law, theories, issues and arguments not
brought to the attention of the lower court need not be, and ordinarily will
not be, considered by a reviewing court, as these cannot be raised for the
first time at such late stage. Basic considerations of due process underlie
this rule.8 It would be unfair to the adverse party who would have no
opportunity to present further evidence material to the new theory, which it
could have done had it been aware of it at the time of the hearing before
the trial court.9 To permit petitioner in this case to change its theory on
appeal would thus be unfair to respondent, and offend the basic rules of
fair play, justice and due process.10
Petitioner however cites an exception to the rule, as enunciated in Lianga
Lumber Co. v. Lianga Timber Co., Inc.,11wherein we said:
[I]n the interest of justice and within the sound discretion of the
appellate court, a party may change his theory on appeal only
when the factual bases thereof would not require presentation of
PROPERTY 1ST BATCH
any further evidence by the adverse party in order to enable it to
properly meet the issue raised in the new theory.
Petitioner contends that its new theory falls under the aforecited exception,
as the issue does not involve any disputed evidentiary matter.
Contrary to petitioners claim, we find that the new issue raised is not a
purely legal question. It must be emphasized that the enumeration of
properties of public dominion under Article 420 of the Civil Code
specifically states "ports constructed by the State." Thus, in order to
consider the port in the case at bar as falling under the said classification,
the fact that the port was constructed by the State must first be established
by sufficient evidence. This fact proved crucial in Santos v.
Moreno,12 where the issue raised was whether the canals constructed by
private persons were of public or private ownership. We ruled that the
canals were privately owned, thus:
Under Art. 420, canals constructed by the State and devoted and
devoted to public use are of public ownership. Conversely, canals
constructed by private persons within private lands and devoted
exclusively for private use must be of private ownership.
In the case at bar, no proof was adduced to establish that the port was
constructed by the State. Petitioner cannot have us automatically conclude
that its port qualified as "property of public dominion." It would be unfair to
respondent, which would be deprived of its opportunity to present evidence
to disprove the factual basis of the new theory. It is thus clear that
the Lianga exception cannot apply in the case at bar.
Moreover, as correctly pointed out by respondent, we cannot ignore the
fact that petitioners new position runs contrary to its own admission in the
pleadings filed in the trial court. Under paragraph 3 of respondents
complaint quoted hereunder, the fact of petitioners ownership of the
property was specifically alleged as follows:
III
Defendant is likewise the declared and registered owner of a
warehouse standing on Lot No. 1065 situated at Bgy. Concepcion,
City Proper, declared under Tax Declaration No. 56325. Xerox
 copy of the said Tax Declaration is hereto attached as annex "D"
and formns] an integral part of herein complaint;13
In its Answer, referring to the abovecited complaint, petitioner stated,
"Paragraph 3 is admitted."14 Notably, this admission was never questioned
nor put at issue during the trial.
Now before us, petitioner contradicts its earlier admission by claiming that
the subject warehouse is a property of public dominion. This inconsistency
is made more apparent by looking closely at what public dominion means.
Tolentino explains this in this wise:
Private ownership is defined elsewhere in the Code; but the
meaning of public dominion is nowhere defined. From the context
of various provisions, it is clear that public dominion does not carry
the idea of ownership; property of public dominion is not owned by
the State, but pertains to the State, which as territorial sovereign
exercises certain judicial prerogatives over such property. The
ownership of such property, which has the special characteristics
of a collective ownership for the general use and enjoyment, by
virtue of their application to the satisfaction of collective needs, is in
the social group, whether national, provincial, or municipal. Their
purpose is not to serve the State as a juridical person, but the
citizens; they are intended for the common and public welfare, and
so they cannot be the object of appropriation, either by the State or
by private persons.15 [Emphasis supplied]
Following the above, properties of public dominion are owned by the
general public and cannot be declared to be owned by a public
corporation, such as petitioner.
As the object of the pleadings is to draw the lines of battle, so to speak,
between the litigants and to indicate fairly the nature of the claims or
defenses of both parties, a party cannot subsequently take a position
contrary to, or inconsistent, with his pleadings.16 Unless a party alleges
palpable mistake or denies such admission, judicial admissions cannot be
controverted.17 Petitioner is thus bound by its admission of ownership of
the subject property and is barred from claiming otherwise.
We also note that petitioner failed to raise the issue of ownership during
the pre-trial. In its petition, it insists that to determine liability for real
PROPERTY 1ST BATCH
property tax, the ownership of the property must first be ascertained.18 In
the pre-trial order, however, to which petitioner did not object, nowhere
was the issue of ownership included in the stipulated factual or legal
issues.19
We have ruled that a pre-trial is primarily intended to make certain that all
issues necessary to the disposition of a case are properly raised. Thus to
obviate the element of surprise, parties are expected to disclose at the pre-
trial conference all issues of law and fact which they intend to raise at the
trial. Consequently, the determination of issues at a pre-trial conference
bars the consideration of other questions on appeal.20 Hence, in the case
at bar, the fact that the issue of ownership is outside of what has been
delimited during the pre-trial further justifies the disallowance of petitioners
new theory.
Therefore, on the basis of the foregoing considerations and in the absence
of compelling reasons to rule otherwise, we hold that petitioner may not be
permitted to change its theory at this stage. Well-settled is the rule that
questions that were not raised in the lower court cannot be raised for the
first time on appeal.21
In any case, granting that petitioners present theory is allowed at this
stage, we nevertheless find it untenable. Concededly, "ports constructed
by the State" are properties of the public dominion, as Article 420 of the
Civil Code enumerates these as properties "intended for public use." It
must be stressed however that what is being taxed in the present case is
petitioners warehouse, which, although located within the port, is distinct
from the port itself. In Light Rail Transit Authority v. Central Board of
Assessment Appeals et al.,22 petitioner therein similarly sought an
exemption from real estate taxes on its passenger terminals, arguing that
said properties are considered as part of the "public roads," which are
classified as property of public dominion in the Civil Code.23 We ruled
therein that:
[T]he properties of petitioner are not exclusively considered as
public roads being improvements placed upon the public road, and
this [separable] nature of the structure in itself physically
distinguishes it from a public road. Considering further that
carriageways or passenger terminals are elevated structures which
are not freely accessible to the public, vis--vis roads which are
 public improvements openly utilized by the public, the former are
entirely different from the latter.
Using the same reasoning, the warehouse in the case at bar may not be
held as part of the port, considering its separable nature as an
improvement upon the port, and the fact that it is not open for use by
everyone and freely accessible to the public. In the same way that we ruled
in one case that the exemption of public property from taxation does not
extend to improvements made thereon by homesteaders or occupants at
their own expense,24 we likewise uphold the taxability of the warehouse in
the instant case, it being a mere improvement built on an alleged property
of public dominion, assuming petitioners port to be so. Moreover,
petitioner may not invoke the definition of "port" in its charter to expand the
meaning of "ports constructed by the State" in the Civil Code to include
improvements built thereon. It must be noted that the charter itself limited
the use of said definition only for the interpretation of Presidential Decree
(P.D.) No. 857, its by-laws, regulations and rules,25 and not of other
statutes such as the Civil Code. Given these parameters, therefore,
petitioners move to present its new theory, even if allowed, would
nonetheless prove to be futile.
The trial court correctly ruled that for the assessed period of 1984 to 1988,
petitioners exemption from real property taxes was withdrawn by P.D. No.
1931, at least for the period of 1984 to 1986.
Originally, petitioner was exempt from real property taxes on the basis of
the Real Property Tax Code26 then governing, which provided:
SECTION 40. Exemptions from Real Property Tax. The
exemption shall be as follows:
(a) Real property owned by the Republic of the Philippines or any
of its political subdivisions and any government-owned corporation
so exempt by its charter: Provided; however, That this exemption
shall not apply to real property of the above-named entities the
beneficial use of which has been granted, for consideration or
otherwise, to a taxable person.
Petitioners charter, P.D. 857,27 further specifically exempted it from real
property taxes:
PROPERTY 1ST BATCH
SECTION 25. Exemption from Realty Taxes The Authority shall
be exempt from the payment of real property taxes imposed by the
Republic of the Philippines, its agencies, instrumentalities or
political subdivisions; Provided, That no tax exemptions shall be
extended to any subsidiaries of the Authority that may be
organized; Provided, finally, That investments in fixed assets shall
be deductible for income tax purposes.
It can thus be seen from the foregoing that petitioner, as a government-
owned or controlled corporation, enjoyed an exemption from real property
taxes.
On June 11, 1984, however, P.D. 1931 effectively withdrew all tax
exemption privileges granted to government-owned or controlled
corporations as stated in Section 1 thereof, which reads:
Sec. 1. The provisions of special or general law to the contrary
notwithstanding, all exemptions from the payment of duties, taxes,
fees, imposts and other charges heretofore granted in favor of
government-owned or controlled corporations including their
subsidiaries, are hereby withdrawn.
Under the same law, the exemption can be restored in special cases
through an application for restoration with the Secretary of
Finance,28 which, notably, petitioner did not avail.
Subsequently, Executive Order (E.O.) No. 93 was enacted on December
17, 1986 restoring tax exemptions provided under certain laws, one of
which is the Real Property Tax Code. The pertinent portion of said law
provides:
SECTION 1. The provisions of any general or special law to the
contrary notwithstanding, all tax and duty incentives granted to
government and private entities are hereby withdrawn, except:
xxx xxx xxx
e) those conferred under four basic codes namely:
(i) the Tariff and Customs Code, as amended;
 (ii) the National Internal Revenue Code, as amended;
(iii) the Local Tax Code, as amended;
(iv) the Real Property Tax Code, as amended;
[Emphasis supplied]
The abovecited laws, therefore, indicate that petitioners tax exemption
from real property taxes was withdrawn by P.D. 1931 effective June 11,
1984, but was subsequently restored by virtue of E.O. 93, starting
December 17, 1986.29 Hence, petitioner is liable for real property taxes on
its warehouse, computed from the last quarter of 1984 up to December
1986.
Petitioner, however, seeks to be excused from liability for taxes by invoking
the pronouncement in Basco v. PAGCOR30 (Basco) quoted hereunder:
PAGCOR has a dual role, to operate and to regulate gambling
casinos. The latter role is governmental, which places it in the
category of an agency or instrumentality of the Government. Being
an instrumentality of the Government, PAGCOR should be and
actually is exempt from local taxes. Otherwise, its operation might
be burdened, impeded or subject to control by a mere Local
government. [Emphasis supplied]
Petitioner points out that its exercise of regulatory functions as decreed by
its charter31 places it within the category of an "agency or instrumentality of
the government," which, according to Basco, is beyond the reach of local
taxation.
Reliance in the abovecited case is unavailing considering that P.D. 1931
was never raised therein, and given that the issue in said case focused on
the constitutionality of P.D. 1869, the charter of PAGCOR. The said
decision did not absolutely prohibit local governments from taxing
government instrumentalities. In fact we stated therein:
The power of local government to "impose taxes and fees" is
always subject to "limitations" which Congress may provide by law.
Since P.D. 1869 remains an "operative" law until "amended,
repealed or revoked"its "exemption clause" remains an
PROPERTY 1ST BATCH
exemption to the exercise of the power of local governments to
impose taxes and fees.32
Furthermore, in the more recent case of Mactan Cebu International Airport
Authority v. Marcos,33 where the Basco case was similarly invoked for tax
exemption, we stated: "[N]othing can prevent Congress from decreeing
that even instrumentalities or agencies of the Government performing
governmental functions may be subject to tax. Where it is done precisely to
fulfill a constitutional mandate and national policy, no one can doubt its
wisdom." The fact that tax exemptions of government-owned or controlled
corporations have been expressly withdrawn by the present Local
Government Code34 clearly attests against petitioners claim of absolute
exemption of government instrumentalities from local taxation.
Petitioner also contends that the term "government-owned or controlled
corporations" referred in P.D. 1931 covers only those not performing
governmental functions. This argument is without legal basis for it reads
into the law a distinction that is not there. It runs contrary to the clear intent
of the law to withdraw from all units of the government, including
government-owned or controlled corporations, their exemptions from taxes.
Had it been otherwise, the law would have said so.35
Moreover, the trial court correctly pointed out that if indeed petitioner were
not subject to local taxation, petitioners charter would not have specifically
provided for its exemption from the payment of real property tax. Its
exemption therein therefore proves that it was only an exception to the
general rule of taxability of petitioner. Given that said privilege was
withdrawn by subsequent law, petitioners claim for exemption from real
property taxes for the entire assessed period fails.
We affirm the finding of the lower court on petitioners liability for business
taxes for the lease of its building to private corporations. During the trial,
petitioner did not present any evidence to refute respondents proof of
petitioners income from the lease of its property. Neither did it present any
proof of exemption from business taxes. Instead, it emphasized its charter
provisions defining its functions as governmental in nature. It averred that it
allowed port users to occupy certain premises within the port area only to
ensure order and convenience in discharging its governmental functions. It
hence claimed that it is not engaged in business, as the act of leasing out
its property was not motivated by profit, but by its duty to manage and
control port operations.
The argument is unconvincing. As admitted by petitioner, it leases out its
premises to private persons for "convenience" and not necessarily as part
of its governmental function of administering port operations. In fact, its
charter classifies such act of leasing out port facilities as one of petitioners
corporate powers.36 Any income or profit generated by an entity, even of a
corporation organized without any intention of realizing profit in the conduct
of its activities, is subject to tax.37 What matters is the established fact that
it leased out its building to ten private entities from which it regularly
earned substantial income. Thus, in the absence of any proof of exemption
therefrom, petitioner is liable for the assessed business taxes.
In closing, we reiterate that in taxing government-owned or controlled
corporations, the State ultimately suffers no loss. In National Power Corp.
v. Presiding Judge, RTC, Br. XXV,38 we elucidated:
Actually, the State has no reason to decry the taxation of
NAPOCORs properties, as and by way of real property taxes. Real
property taxes, after all, form part and parcel of the financing
apparatus of the Government in development and nation-building,
particularly in the local government level.
xxx xxx xxx
To all intents and purposes, real property taxes are funds taken by
the State with one hand and given to the other. In no measure can
the government be said to have lost anything.
Finally, we find it appropriate to restate that the primary reason for the
withdrawal of tax exemption privileges granted to government-owned and
controlled corporations and all other units of government was that such
privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises, hence resulting in the need for
these entities to share in the requirements of development, fiscal or
otherwise, by paying the taxes and other charges due from them.39
WHEREFORE, the Petition is DENIED and the assailed Decision
AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
PROPERTY 1ST BATCH
G.R. No. 169836 July 31, 2007
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, OFFICE OF THE PRESIDENT, DEPARTMENT
OF FINANCE and the CITY OF ILOILO, respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the June 21, 2005 Decision1 of the
Court of Appeals in CA-G.R. SP No. 81228, which held that petitioner
Philippine Fisheries Development Authority (hereafter referred to as
Authority) is liable to pay real property taxes on the land and buildings of
the Iloilo Fishing Port Complex (IFPC) which are owned by the Republic of
the Philippines but operated and governed by the Authority.
The facts are not disputed.
On August 11, 1976, then President Ferdinand E. Marcos issued
Presidential Decree No. 977 (PD 977) creating the Authority and placing it
under the direct control and supervision of the Secretary of Natural
Resources. On February 8, 1982, Executive Order No. 772 (EO 772) was
issued amending PD 977, and renaming the Authority as the now
"Philippine Fisheries Development Authority," and attaching said agency to
the Ministry of Natural Resources. Upon the effectivity of the Administrative
Code (EO 292), the Authority became an attached agency of the
Department of Agriculture.2
Meanwhile, beginning October 31, 1981, the then Ministry of Public Works
and Highways reclaimed from the sea a 21-hectare parcel of land in
Barangay Tanza, Iloilo City, and constructed thereon the IFPC, consisting
of breakwater, a landing quay, a refrigeration building, a market hall, a
municipal shed, an administration building, a water and fuel oil supply
system and other port related facilities and machineries. Upon its
completion, the Ministry of Public Works and Highways turned over IFPC
to the Authority, pursuant to Section 11 of PD 977, which places fishing
port complexes and related facilities under the governance and operation
of the Authority. Notwithstanding said turn over, title to the land and
buildings of the IFPC remained with the Republic.
The Authority thereafter leased portions of IFPC to private firms and
individuals engaged in fishing related businesses.
Sometime in May 1988, the City of Iloilo assessed the entire IFPC for real
property taxes. The assessment remained unpaid until the alleged total tax
delinquency of the Authority for the fiscal years 1988 and 1989 amounted
to P5,057,349.67, inclusive of penalties and interests. To satisfy the tax
delinquency, the City of Iloilo scheduled on August 30, 1990, the sale at
public auction of the IFPC.
The Authority filed an injunction case with the Regional Trial Court. At the
pre-trial, the parties agreed to avail of administrative proceedings, i.e., for
the Authority to file a claim for tax exemption with the Iloilo City Assessors
Office. The latter, however, denied the claim for exemption, hence, the
Authority elevated the case to the Department of Finance (DOF).
In its letter-decision3 dated March 6, 1992, the DOF ruled that the Authority
is liable to pay real property taxes to the City of Iloilo because it enjoys the
beneficial use of the IFPC. The DOF added, however, that in satisfying the
amount of the unpaid real property taxes, the property that is owned by the
Authority shall be auctioned, and not the IFPC, which is a property of the
Republic.4
The Authority filed a petition before the Office of the President but it was
dismissed.5 It also denied the motion for reconsideration filed by the
Authority.6
On petition with the Court of Appeals, the latter affirmed the decision of the
Office of the President. It opined, however, that the IFPC may be sold at
public auction to satisfy the tax delinquency of the Authority.7 The
dispositive portion thereof, reads:
WHEREFORE, premises considered, the instant Petition for
Review is DENIED, and accordingly the June 30, 2003 Decision
and December 3, 2003 Order of the Office of the President are
hereby AFFIRMED.
SO ORDERED.8
Hence, this petition.
PROPERTY 1ST BATCH
The issues are as follows: Is the Authority liable to pay real property tax to
the City of Iloilo? If the answer is in the affirmative, may the IFPC be sold
at public auction to satisfy the tax delinquency?
To resolve said issues, the Court has to determine (1) whether the
Authority is a government owned or controlled corporation (GOCC) or an
instrumentality of the national government; and (2) whether the IFPC is a
property of public dominion.
The Court rules that the Authority 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 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 real property tax. Nonetheless, the
IFPC, being a property of public dominion cannot be sold at public auction
to satisfy the tax delinquency.
In Manila International Airport Authority (MIAA) v. Court of Appeals,9 the
Court made a distinction between a GOCC and an instrumentality. Thus:
Section 2(13) of the Introductory Provisions of the Administrative
Code of 1987 defines a government-owned or controlled
corporation as follows:
SEC. 2. General Terms Defined. x x x
(13) Government-owned or controlled corporation refers to
any agency organized as a stock or non-stock
corporation, vested with functions relating 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 fifty-one (51) percent
of its capital stock: x x x (Emphasis supplied)
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 divided into shares. MIAA has
no stockholders or voting shares.
 xxxx
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 divided into shares of stock. MIAA has
no stockholders or voting shares. Hence, MIAA is not a stock
corporation.
MIAA is also not a non-stock corporation because it has no
members. Section 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
officers." A non-stock corporation must have members. Even if we
assume that the Government is considered as the sole member of
MIAA, this will not make MIAA a non-stock corporation. Non-stock
corporations cannot distribute any part of their income to their
members. Section 11 of the MIAA Charter mandates MIAA to remit
20% of its annual gross operating income to the National Treasury.
This prevents MIAA from qualifying as a non-stock corporation.
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 purposes, like trade, industry,
agriculture and like chambers." MIAA is not organized for any of
these purposes. MIAA, a public utility, is organized to operate an
international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA
does not qualify as a government-owned or controlled
corporation.10 (Emphasis supplied)
Thus, for an entity to be considered as a GOCC, it must either be
organized as a stock or non-stock corporation. Two requisites must concur
before one may be classified as a stock corporation, namely: (1) that it has
capital stock divided into shares, and (2) 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 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.11
PROPERTY 1ST BATCH
On the basis of the parameters set in the MIAA case, the Authority should
be classified as an instrumentality of the national government. As such, it is
generally exempt from payment of real property tax, except those portions
which have been leased to private entities.
In the MIAA case, petitioner Philippine Fisheries Development Authority
was cited as among the instrumentalities of the national government. Thus
Some of the national government instrumentalities vested by
law with juridical personalities are: Bangko Sentral ng Pilipinas,
Philippine Rice Research Institute, Laguna Lake Development
Authority, Fisheries Development Authority, Bases Conversion
Development Authority, Philippine Ports Authority, Cagayan de Oro
Port Authority, San Fernando Port Authority, Cebu Port Authority,
and Philippine National Railways.
Indeed, the Authority is not a GOCC but an instrumentality of the
government. The Authority has a capital stock but it is not divided into
shares of stocks.12 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.
The Authority is actually a national government instrumentality which is
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, and enjoying operational autonomy, usually through a
charter.13 When the law vests in a government instrumentality corporate
powers, the instrumentality does not become a corporation. Unless the
government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers.
Thus, the Authority which is tasked with the special public function to carry
out the governments policy "to promote the development of the countrys
fishing industry and improve the efficiency in handling, preserving,
marketing, and distribution of fish and other aquatic products," exercises
the governmental powers of eminent domain,14 and the power to levy fees
and charges.15 At the same time, the Authority exercises "the general
corporate powers conferred by laws upon private and government-owned
or controlled corporations."16
The MIAA case held17 that unlike GOCCs, instrumentalities of the
national government, like MIAA, are exempt from local taxes pursuant to
Section 133(o) of the Local Government Code. This exemption, however,
admits of an exception with respect to real property taxes. Applying
Section 234(a) of the Local Government Code, the Court ruled that when
an instrumentality of the national government grants to a taxable person
the beneficial use of a real property owned by the Republic, said
instrumentality becomes liable to pay real property tax. Thus, while MIAA
was held to be an instrumentality of the national government which is
generally exempt from local taxes, it was at the same time declared liable
to pay real property taxes on the airport lands and buildings which it leased
to private persons. It was held that the real property tax assessments and
notices of delinquencies issued by the City of Pasay to MIAA are
void except those pertaining to portions of the airport which are leased to
private parties. Pertinent portions of the decision, reads:
Section 193 of the Local Government Code expressly withdrew the
tax exemption of all juridical persons "[u]nless otherwise
provided in this Code." Now, Section 133(o) of the Local
Government Code expressly provides otherwise, specifically
prohibiting local governments from imposing any kind of tax on
national government instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers
of Local Government Units. Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend
to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National
Government, its agencies and instrumentalities, and
local government units.
By express mandate of the Local Government Code, local
governments cannot impose any kind of tax on national
government instrumentalities like the MIAA. Local governments
PROPERTY 1ST BATCH
are devoid of power to tax the national government, its
agencies and instrumentalities. The taxing powers of local
governments do not extend to the national government, its
agencies and instrumentalities, "[u]nless otherwise provided in this
Code" as stated in the saving clause of Section 133. x x x
xxxx
The saving clause in Section 133 refers to the exception to the
exemption in 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:
SEC. 234. Exemptions from Real Property Tax The
following are exempted from payment of the real
property tax:
(a) Real property owned by the Republic of the Philippines
or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person.
x x x18 (Emphasis supplied)
WHEREFORE, we GRANT the petition. We SET ASIDE the
assailed Resolutions of the Court of Appeals of 5 October 2001
and 27 September 2002 in CA-G.R. SP No. 66878.
We DECLARE the Airport Lands and Buildings of the Manila
International Airport Authority EXEMPT from the real estate tax
imposed by the City of Paraaque. We declare VOID all the real
estate tax assessments, including the final notices of real estate
tax delinquencies, issued by the City of Paraaque on the Airport
Lands and Buildings of the Manila International Airport
Authority, except for the 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
Authority.
x x x x.19 (Emphasis added)
In light of the foregoing, the Authority should be classified as an
instrumentality of the national government which is liable to pay taxes only
with respect to the portions of the property, the beneficial use of which
were vested in private entities. 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 the law imposing the tax. Any doubt
whether a person, article or activity is taxable is resolved against taxation.
This rule applies with greater force when local governments seek to tax
national government instrumentalities.20
Thus, the 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 Authority fails to pay the real property taxes due thereon, said
portions cannot be sold at public auction to satisfy the tax delinquency.
In Chavez v. Public Estates Authority it was held that reclaimed lands are
lands of the public domain and cannot, without Congressional fiat, be
subject of a sale, public or private, thus:21
The salient provisions of CA No. 141, on government reclaimed,
foreshore and marshy lands of the public domain, are as follows:
Sec. 59. The lands disposable under this title shall be
classified as follows:
(a) Lands reclaimed by the Government by dredging,
filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering
upon the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
xxxx
Sec. 61. The lands comprised in classes (a), (b), and (c) of
section fifty-nine shall be disposed of to private parties by
lease only and not otherwise, as soon as the President, upon
recommendation by the Secretary of Agriculture, shall declare
PROPERTY 1ST BATCH
that the same are not necessary for the public service and are
open to disposition under this chapter. The lands included in
class (d) may be disposed of by sale or lease under the
provisions of this Act." (Emphasis supplied)
xxxx
Since then and until now, the only way the government can sell to
private parties government reclaimed and marshy disposable lands
of the public domain is for the legislature to pass a law authorizing
such sale. CA No. 141 does not authorize the President to
reclassify government reclaimed and 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 non-
agricultural purposes that the government could sell to private
parties. (Emphasis supplied)
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
auction. Article 420 of the Civil Code, provides:
ARTICLE 420. The following things are property of public
dominion:
(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;
(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 Iloilo fishing port which was constructed by the State for public use
and/or public service falls within the term "port" in the aforecited provision.
Being a property of public dominion the same cannot be subject to
execution or foreclosure sale.22 In like manner, the reclaimed land on which
the IFPC is built cannot be the object of a private or public sale without
Congressional authorization. Whether there are improvements in the
fishing port complex that should not be construed to be embraced within
the term "port," involves evidentiary matters that cannot be addressed 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 should be resolved against the
City of Iloilo.
In sum, the Court finds that the Authority is an instrumentality of the
national government, hence, it is liable to pay real property taxes assessed
by the City of Iloilo on the IFPC only with respect to those portions which
are leased to private entities. Notwithstanding said tax delinquency on the
leased portions of the IFPC, the latter or any part thereof, being a property
of public domain, cannot be sold at public auction. This means that the City
of Iloilo has to satisfy the tax delinquency through means other than the
sale at public auction of the IFPC.
WHEREFORE, the petition is GRANTED and the June 21, 2005 Decision
of the Court of Appeals in CA-G.R. SP No. 81228 is SET ASIDE. The real
property tax assessments issued by the City Iloilo on the land and
buildings of the Iloilo Fishing Port Complex, is declared VOID except those
pertaining to the portions leased to private parties. The City of Iloilo
is DIRECTED to refrain from levying on the Iloilo Fishing Port Complex to
satisfy the payment of the real property tax delinquency.
No costs.
SO ORDERED.
G.R. No. 191109 July 18, 2012
REPUBLIC OF THE PHILIPPINES, represented by the PHILIPPINE
RECLAMATION AUTHORITY (PRA), Petitioner,
vs.
CITY OF PARANAQUE, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, on pure questions of law, assailing the January 8, 2010
Order1 of the Regional Trial Court, Branch 195, Parafiaque City (RTC),
which ruled that petitioner Philippine Reclamation Authority (PRA) is a
government-owned and controlled corporation (GOCC), a taxable entity,
PROPERTY 1ST BATCH
and, therefore, . not exempt from payment of real property taxes. The
pertinent portion of the said order reads:
In view of the finding of this court that petitioner is not exempt from
payment of real property taxes, respondent Paraaque City Treasurer
Liberato M. Carabeo did not act xxx without or in excess of jurisdiction, or
with grave abuse of discretion amounting to lack or in excess of jurisdiction
in issuing the warrants of levy on the subject properties.
WHEREFORE, the instant petition is dismissed. The Motion for Leave to
File and Admit Attached Supplemental Petition is denied and the
supplemental petition attached thereto is not admitted.
The Public Estates Authority (PEA) is a government corporation created by
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,
1977 to provide a coordinated, economical and efficient reclamation of
lands, and the administration and operation of lands belonging to,
managed and/or operated by, the government with the object of
maximizing their utilization and hastening their development consistent
with public interest.
On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued
by then President Ferdinand Marcos, PEA was designated as the agency
primarily responsible for integrating, directing and coordinating all
reclamation projects for and on behalf of the National Government.
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 functions of the PEA relating to reclamation activities.
By virtue of its mandate, PRA reclaimed several portions of the foreshore
and offshore areas of Manila Bay, including those located in Paraaque
City, and 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, 7309, 7311, 9685, and 9686) over the reclaimed lands.
On February 19, 2003, then Paraaque City Treasurer Liberato M.
Carabeo (Carabeo) issued Warrants of Levy on PRAs reclaimed
properties (Central Business Park and Barangay San Dionisio) located in
Paraaque City based on the assessment for delinquent real property
taxes made by then Paraaque City Assessor Soledad Medina Cue for tax
years 2001 and 2002.
On March 26, 2003, PRA filed a petition for prohibition with prayer for
temporary restraining order (TRO) and/or writ of preliminary injunction
against Carabeo before the RTC.
On April 3, 2003, after due hearing, the RTC issued an order denying
PRAs petition for the issuance of a temporary restraining order.
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, 2003. In response, Carabeo sent a letter stating that the public auction
could not be deferred because the RTC had already denied PRAs TRO
application.
On April 25, 2003, the RTC denied PRAs prayer for the issuance of a writ
of preliminary injunction for being moot and academic considering that the
auction sale of the subject properties on April 7, 2003 had already been
consummated.
On August 3, 2009, after an exchange of several pleadings and the failure
of both parties to arrive at a compromise agreement, PRA filed a Motion for
Leave to File and Admit Attached Supplemental Petition which sought to
declare as null and void the assessment for real property taxes, the levy
based on the said assessment, the public auction sale conducted on April
7, 2003, and the Certificates of Sale issued pursuant to the auction sale.
On January 8, 2010, the RTC rendered its decision dismissing PRAs
petition. In ruling that PRA was not exempt from payment of real property
taxes, the 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 stock divided into no par value shares. In fact, PRA
admitted its corporate personality and that said properties were registered
in its name as shown by the certificates of title. Therefore, as a GOCC,
local tax exemption is withdrawn by virtue of Section 193 of Republic Act
(R.A.) No. 7160 Local 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
PROPERTY 1ST BATCH
already been expressly repealed by R.A. No. 7160 and that PRA failed to
comply with the procedural requirements in Section 206 thereof.
Not in conformity, PRA filed this petition for certiorari assailing the January
8, 2010 RTC Order based on the following GROUNDS
I
THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER
IS LIABLE TO PAY REAL PROPERTY TAX ON THE SUBJECT
RECLAIMED LANDS CONSIDERING
THAT PETITIONER IS AN INCORPORATED INSTRUMENTALITY OF
THE NATIONAL GOVERNMENT AND IS, THEREFORE, EXEMPT FROM
PAYMENT OF REAL PROPERTY TAX UNDER SECTIONS 234(A) AND
133(O) OF REPUBLIC ACT 7160 OR THE LOCAL GOVERNMENT CODE
VIS--VIS MANILA INTERNATIONAL AIRPORT AUTHORITY V. COURT
OF APPEALS.
II
THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER
THAT RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND,
HENCE, EXEMPT FROM REAL PROPERTY TAX.
PRA asserts that it is not a GOCC under Section 2(13) of the Introductory
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 test of economic viability. Instead, PRA is a government instrumentality
vested with corporate powers and performing an essential public service
pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. Although it has a capital stock divided into shares, it
is not authorized 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 and allotment of surplus and profits to
the stockholders.
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, professional, cultural, recreational, fraternal, literary, scientific,
social, civil service, or similar purposes, like trade, industry, agriculture and
like chambers as provided in Section 88 of the Corporation Code.
Moreover, PRA points out that it was not created to compete in the market
place as there was no competing reclamation company operated by the
private 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 the National Government holds title to real property does
not make said instrumentality a GOCC. Section 48, Chapter 12, Book I of
the Administrative Code of 1987 recognizes a scenario where a piece of
land owned by the Republic is titled in the name of a department, agency
or instrumentality.
Thus, PRA insists that, as an incorporated instrumentality of the National
Government, it is exempt from payment of real property tax except when
the beneficial use of the real property is granted to a taxable person. PRA
claims that based on Section 133(o) of the LGC, local governments cannot
tax the national government which delegate to local governments the
power to tax.
It explains that reclaimed lands are part of the public domain, owned by the
State, thus, exempt from the payment of real estate taxes. Reclaimed
lands retain their inherent potential as areas for public use or public
service. While the subject reclaimed lands are still in its hands, these lands
remain public lands and form part of the public domain. Hence, the
assessment of real property taxes made on said lands, as well as the levy
thereon, and the public sale thereof on April 7, 2003, including the
issuance of the certificates of sale in favor of the respondent Paraaque
City, are invalid and of no force and effect.
On the other hand, the City of Paraaque (respondent) argues that PRA
since its creation consistently represented itself to be a GOCC. PRAs 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 fact, PRA admitted in its original and amended petitions
and pre-trial brief filed with the RTC of Paraaque City that it was a GOCC.
Respondent further argues that PRA is a stock corporation with an
authorized capital stock divided into 3 million no par value shares, out of
which 2 million shares have been subscribed and fully paid up. Section 193
PROPERTY 1ST BATCH
of the LGC of 1991 has withdrawn tax exemption privileges granted to or
presently enjoyed by all persons, whether natural or juridical, including
GOCCs.
Hence, since PRA is a GOCC, it is not exempt from the payment of real
property tax.
THE COURTS RULING
The Court finds merit in the petition.
Section 2(13) of the Introductory Provisions of the Administrative Code of
1987 defines a GOCC as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with functions
relating 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 fifty-one
(51) percent of its capital stock: x x x.
On the other hand, Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any 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, and enjoying operational autonomy, usually
through a charter. x x x
From the above definitions, it is clear that a GOCC must be "organized as
a stock or non-stock corporation" while an instrumentality is vested by law
with corporate powers. Likewise, when the law makes a government
instrumentality operationally autonomous, the instrumentality remains part
of the National Government machinery although not integrated with the
department framework.
When the law vests in a government instrumentality corporate powers, the
instrumentality does not necessarily become a corporation. Unless the
government instrumentality is organized as a stock or non-stock
corporation, it remains a government instrumentality exercising not only
governmental but also corporate powers.
Many government instrumentalities are vested with corporate powers but
they do not become stock or non-stock corporations, which is a necessary
condition before an agency or instrumentality is deemed a GOCC.
Examples are the Mactan International Airport Authority, the Philippine
Ports Authority, the University of the Philippines, and Bangko Sentral ng
Pilipinas. All these government instrumentalities 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 Administrative Code.
These government 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 relationship and status of government
entities.2
Correlatively, 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."
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, Section 88 provides that non-stock corporations are
"organized for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like trade, industry, agriculture and like chambers."
Two requisites must concur before one may be classified as a stock
corporation, namely: (1) that it has capital stock divided into shares; and
(2) 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
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
PROPERTY 1ST BATCH
In the case at bench, PRA is not a GOCC because it is neither a stock nor
a non-stock corporation. It cannot be considered as a stock corporation
because 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, 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 authorizes PRA to distribute dividends,
surplus allotments or profits to its stockholders.
PRA cannot be considered a non-stock corporation either because it does
not 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 reclamation projects.
Furthermore, there is another reason why the PRA cannot be classified as
a GOCC. Section 16, Article XII of the 1987 Constitution provides as
follows:
Section 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-
owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of
economic viability.
The fundamental provision above authorizes Congress to create GOCCs
through special charters on two conditions: 1) the GOCC must be
established for the common good; and 2) the GOCC must meet the test of
economic viability. In this case, PRA may have passed the first condition of
common good but failed the second one - economic viability. Undoubtedly,
the purpose behind the creation of PRA was not for economic or
commercial activities. Neither was it created to compete in the market
place considering that there were no other competing reclamation
companies being operated by the private sector. As mentioned earlier,
PRA was created essentially to perform a public service considering that it
was primarily responsible for a coordinated, economical and efficient
reclamation, administration and operation of lands belonging to the
government with the object of maximizing their utilization and hastening
their development consistent with the public interest. Sections 2 and 4 of
P.D. No. 1084 reads, as follows:
Section 2. Declaration of policy. It is the declared policy of the State to
provide for a coordinated, economical and efficient reclamation of lands,
and the administration and operation of lands belonging to, managed
and/or operated by the government, with the object of maximizing their
utilization and hastening their development consistent with the public
interest.
Section 4. Purposes. The Authority is hereby created for the following
purposes:
(a) To reclaim land, including foreshore and submerged areas, by
dredging, filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide,
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.
(c) To provide for, operate or administer such services as may be
necessary for the efficient, economical and beneficial utilization of
the above properties.
The twin requirement of common good and economic viability was lengthily
discussed in the case of Manila International Airport Authority v. Court of
Appeals,9 the pertinent portion of which reads:
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.
The first condition is that the government-owned or controlled corporation
must be established for the common good. The second condition is that
the government-owned or controlled corporation must meet the test of
economic viability. Section 16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-
owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of
economic viability.
PROPERTY 1ST BATCH
The Constitution expressly authorizes the legislature to create
"government-owned or controlled corporations" through special charters
only if these entities are required to meet the twin conditions of common
good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters
unless they are made to comply with the two conditions of common good
and economic viability. The test of economic viability applies only to
government-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 development purposes these government-owned
or controlled corporations with special charters are usually organized as
stock corporations just like ordinary private corporations.
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 for the common good, services that every modern State must
provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations.
These instrumentalities are not the "government-owned or controlled
corporations" referred to in Section 16, Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates
government instrumentalities vested with corporate powers but performing
essential governmental or public functions. Congress has plenary authority
to create government instrumentalities vested with corporate powers
provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special
charters corporations that perform economic or commercial activities, such
entities known as "government-owned or controlled corporations"
must meet the test of economic viability because they compete in the
market place.
This is the situation of the Land Bank of the Philippines and the
Development Bank of the Philippines and similar government-owned or
controlled corporations, which derive their incometo meet operating
expenses solely from commercial transactions in competition with the
private sector. The 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.
Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
follows:
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
know what happened in the past. If a government corporation loses, then it
makes its claim upon the taxpayers' money through new equity infusions
from 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 government, about P28 billion of this will go into equity infusions to
support a few government financial institutions. And this is all taxpayers'
money which 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.
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 market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined
in this proposal by Commissioner Foz, the insertion of the standard of
"ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the
common good. 1wphi 1
Father Joaquin G. Bernas, a leading member of the Constitutional
Commission, explains in his textbook The 1987 Constitution of the
Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission.
The significant addition, however, is the phrase "in the interest of the
common good and subject to the test of economic viability." The addition
includes the ideas that they must show capacity to function efficiently in
business and that they should not go into activities which the private sector
can do better. Moreover, economic viability is more than financial viability
but also includes capability to make profit and generate benefits not
quantifiable in financial terms.
Clearly, the test of economic viability does not apply to government entities
vested with corporate powers and performing essential public services.
PROPERTY 1ST BATCH
The State is obligated to render essential public services regardless of the
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.
However, government-owned or controlled corporations with special
charters, organized essentially for economic or commercial objectives,
must meet the test of economic viability. These are the government-owned
or controlled corporations that are usually organized under their special
charters as stock corporations, like the Land Bank of the Philippines and
the Development Bank of the Philippines. These are the government-
owned or controlled corporations, along with government-owned or
controlled corporations organized under the Corporation Code, that fall
under the definition of "government-owned or controlled corporations" in
Section 2(10) of the Administrative Code. [Emphases supplied]
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, Article XII of the 1987 Constitution. The facts, the evidence on record
and jurisprudence on the issue support the position that PRA was not
organized either as a stock or a non-stock corporation. Neither was it
created by Congress to operate commercially and compete in the private
market. Instead, PRA is a government instrumentality vested with
corporate powers and performing an essential public service pursuant to
Section 2(10) of the Introductory Provisions of the Administrative Code.
Being an incorporated government instrumentality, it is exempt from
payment of real property tax.
Clearly, respondent has no valid or legal basis in taxing the subject
reclaimed lands managed by PRA. On the other hand, Section 234(a) of
the LGC, in relation to its Section 133(o), exempts PRA from paying realty
taxes and protects it from the taxing powers of local government units.
Sections 234(a) and 133(o) of the LGC provide, as follows:
SEC. 234. Exemptions from Real Property Tax The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
xxxx
SEC. 133. Common Limitations on the Taxing Powers of Local
Government Units. Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its
agencies and instrumentalities, and local government units. [Emphasis
supplied]
It is clear from Section 234 that real property owned by the Republic of the
Philippines (the Republic) is exempt from real property tax unless the
beneficial use thereof has been granted to a taxable person. In this case,
there 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 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 any kind on the National Government, its agencies and
instrumentalities x x x." The Administrative Code 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.
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 Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax exemption, unless "the
beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person."10
The rationale behind Section 133(o) has also been explained in the case of
the Manila International Airport Authority,11 to wit:
PROPERTY 1ST BATCH
Section 133(o) recognizes the basic principle that local governments
cannot tax the national government, which historically merely delegated to
local governments the power to tax. While the 1987 Constitution now
includes 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."
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 the law imposing the tax. Any doubt whether a person,
article or activity is taxable is resolved against taxation. This rule applies
with greater force when local governments seek to tax national government
instrumentalities.
Another rule is that a tax exemption is strictly construed against the
taxpayer claiming the exemption. However, when Congress grants an
exemption to a national government instrumentality from local taxation,
such exemption is construed liberally in favor of the national government
instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
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 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 liberally, in favor of non tax-liability of such agencies.
There is, moreover, no point in national and local governments taxing each
other, unless a sound and compelling policy requires such transfer of
public funds from one government pocket to another.
There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of
local governments. The only exception is when the legislature clearly
intended to tax government instrumentalities for the delivery of essential
public services for sound and compelling policy considerations. There must
be express language in the law empowering local governments to tax
national government instrumentalities. Any doubt whether such power
exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax national
government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede,
burden or in any manner control the operation of constitutional laws
enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government
over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the 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 instrumentality in such a way as to
prevent it from consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, emphasis supplied)
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 for regulation."
(U.S. v. Sanchez, 340 US 42)
The power to tax which was called by Justice Marshall as the "power to
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]
The Court agrees with PRA that the subject reclaimed lands are still part of
the public domain, owned by the State and, therefore, exempt from
payment of real estate taxes.
Section 2, Article XII of the 1987 Constitution reads in part, as follows:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
PROPERTY 1ST BATCH
the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities,
or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least
60 per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and
conditions as may provided by law. In cases of water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of
waterpower, beneficial use may be the measure and limit of the grant.
Similarly, Article 420 of the Civil Code enumerates properties belonging to
the State:
Art. 420. The following things are property of public dominion:
(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;
(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. [Emphases supplied]
Here, the subject lands are reclaimed lands, specifically portions of the
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 Court held that foreshore and submerged areas
irrefutably belonged to the public domain and were inalienable unless
reclaimed, classified as alienable lands open to disposition and further
declared no longer needed for public service. The fact that alienable lands
of the public domain were transferred to the PEA (now PRA) and issued
land patents or certificates of title in PEAs 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.
As the central implementing agency tasked to undertake reclamation
projects nationwide, with authority to sell reclaimed lands, PEA took the
place of DENR as the government agency charged with leasing or selling
reclaimed lands of the public domain. The reclaimed lands being leased or
sold by PEA are not private lands, in the same manner that DENR, when it
disposes of other alienable lands, does not dispose of private lands but
alienable lands of the public domain. Only when qualified private parties
acquire these lands will the lands become private lands. In the hands of
the government agency tasked and authorized to dispose of alienable of
disposable lands of the public domain, these lands are still public, not
private lands.
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 lands of the public domain and private lands. Thus, the mere fact that
alienable lands of the public domain like the Freedom Islands are
transferred to PEA and issued land patents or certificates of title in PEA's
name does not automatically make such lands private.13
Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of
the Administrative Code of 1987, thus:
SEC 14. Power to Reserve Lands of the Public and Private Dominion of
the Government.-
(1)The President shall have the power to reserve for settlement or public
use, and for specific 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 indicated
until otherwise provided by law or proclamation.
Reclaimed lands such as the subject lands in issue are reserved lands for
public use. They are properties of public dominion. The ownership of such
lands remains with the State unless they are withdrawn by law or
presidential proclamation from public use.
Under Section 2, Article XII of the 1987 Constitution, the foreshore and
submerged areas of Manila Bay are part of the "lands of the public domain,
waters x x x and other natural resources" and consequently "owned by the
State." As such, foreshore and submerged areas "shall not be alienated,"
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
PROPERTY 1ST BATCH
of the public domain. There must be a law or presidential proclamation
officially classifying these reclaimed lands as alienable or disposable and
open to 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.
As the Court has repeatedly ruled, properties of public dominion are not
subject to execution or foreclosure sale.14Thus, the assessment, levy and
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.
WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of
the Regional Trial Court, Branch 195, Paraaque City, is REVERSED and
SET ASIDE. All reclaimed properties owned by the Philippine Reclamation
Authority are hereby declared EXEMPT from real estate taxes. All real
estate tax assessments, including the final notices of real estate tax
delinquencies, issued by the City of Paraaque on the subject reclaimed
properties; the assailed auction sale, dated April 7, 2003; and the
Certificates of Sale subsequently issued by the Paraaque City Treasurer
in favor of the City of Paraaque, are all declared VOID.
SO ORDERED.
G.R. No. 193443 April 16, 2012
JEAN TAN, ROSELLER C. ANACINTO, CARLO LOILO ESPINEDA and
DAISY ALIADO MANAOIS, represented in this act by their Attorney-in-
Fact, MA. WILHELMINA E. TOBIAS, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
RESOLUTION
REYES, J.:
This is a petition for review under Rule 45 of the Decision1 dated July 6,
2009 and Resolution2 dated August 12, 2010 Resolution of the Court of
Appeals (CA) in CA-G.R. CV No. 88995. The facts leading to its filing are
as follows:
On June 14, 2001, the petitioners filed with the Regional Trial Court (RTC)
of Naic, Cavite, an application for land registration covering a parcel of land
identified as Lot 9972, Cad-459-D of Indang Cadastre, situated in
Barangay Bancod, Indang, Cavite and with an area of 6,920 square
meters.3 The petitioners alleged that they acquired the subject property
from Gregonio Gatdula pursuant to a Deed of Absolute Sale dated April 25,
1996; and they and their predecessors-in-interest have been in open,
continuous and exclusive possession of the subject property in the concept
of an owner for more than 30 years.4
After trial and hearing, the RTC issued a Decision on July 29, 2006,
granting the petitioners application, thus:
"WHEREFORE, in view of the foregoing, this Court confirming its previous
Order of general default, decrees and adjudges Lot No. 9972 consisting of
6,920 square meters, Cad. 459-D, Indang Cadastre and its technical
description as herein above-described situated in Brgy. Bancod, Indang,
Cavite, pursuant to the provisions of Act 496 as amended by P.D. 1529, as
it is hereby decreed and adjudged to be confirmed and registered in the
names of Jean Tan, of legal age, Filipino, single, with postal address at
Room 54 T. Pinpin St., Binondo, Manila; Roseller C. Anaci[n]to, of legal
age, Filipino, single, with postal address at Moncario Villag[e], Ampid-1,
San Mateo, Rizal; Carlo Loilo Espineda, of legal age, Filipino, with postal
address at Cluster F. Cogeo, Antipolo, Rizal and Daisy Aliado Manaois, of
legal age, Filipino and resident of Panghulo Road, Malabon, Metro Manila.
Once this decision becomes final, let the corresponding decree of
registration be issued by the Administrator, Land Registration Authority.
SO ORDERED."5
The CA gave due course to the appeal filed by the Republic of the
Philippines. By way of the assailed Decision, the CA ruled that the
petitioners failed to prove that they and their predecessors-in-interest have
been in possession of the subject property for the requisite period of 30
years. The CA posit:
We now determine if appellees have the right to register their title on such
land despite the fact that their possession commenced only after 12 June
1945. Records show that the appellees possession over the subject
property can be reckoned only from 21 June 1983, the date when
PROPERTY 1ST BATCH
according to evidence, the subject property became alienable and
disposable. From said date up to the filing of the application for registration
of title over the subject property on 14 June 2001, only eighteen (18) years
had lapsed. Thus, appellees possession of the subject property fell short
of the requirement of open, continuous and exclusive possession of at
least 30 years.
Moreover, there was no adequate evidence which would show that
appellees and their predecessors-in-interest exercised acts of dominion
over the subject land as to indicate possession in the concept of owner.
The testimonies of appellees witnesses regarding actual possession are
belied by the absence of evidence on actual use of or improvements on the
subject property. Appellees presented only various tax declarations to
prove possession. However, except for the Certification, showing payment
of tax due on tax declaration for the year 2003, there are no other evidence
showing that all the taxes due corresponding to the rest of the tax
declarations were in fact paid by appellees or their predecessors-in-
interest.
In sum, appellees were unable to prove that they or their predecessors-in-
interest have been in possession of the subject property for more than 30
years, which possession is characterized as open, continuous, exclusive,
and notorious, in the concept of an owner. Appellees failed to discharge
their duty of substantiating possession and title to the subject land.
WHEREFORE, the appeal is hereby GRANTED and the Decision dated 29
July 2006 of the Regional Trial Court (RTC) of Naic, Cavite, Branch 15 is
REVERSED and SET ASIDE.
SO ORDERED.6 (citation omitted)
The petitioners moved for reconsideration but this was denied by the CA in
its August 12, 2010 Resolution.7
The petitioners question the conclusion arrived at by the CA, alleging that
the evidence they presented prove that they and their predecessors-in-
interest have been in possession and occupation of the subject property for
more than 30 years. The petitioners claim that the following sufficed to
demonstrate that they acquired title over the subject property by
prescription:
a. the testimony of their attorney-in-fact, Ma. Wilhelmina Tobias, stating
that:
i. the petitioners have been in actual, notorious and open
possession of the subject property since the time they
purchased the same in 1996;
ii. the petitioners have regularly paid the taxes due on the
subject property;
iii. the petitioners predecessors-in-interest, Victorio Garcia,
Felipe Gatdula and Gregonio Gatdula, had been in
possession of the subject property for more than 30 years
and had religiously paid the taxes due thereon; and
iv. the subject property is agricultural, alienable and
disposable;
b. the testimony of the caretaker of the subject property, Margarito Pena,
stating that:
i. he resides near the subject property;
ii. he witnessed the execution of the deed of sale that
petitioners entered into with Gregonio Gatdula; and
iii. the petitioners and predecessors-in-interest have been
in possession of the subject property for more than 30
years;
c. the testimony of Ferdinand Encarnacion, a clerk in the Docket Division of
the Land Registration Authority (LRA), stating that:
i. no opposition to the petitioners application was filed
before the LRA;
ii. an examiner of the LRA found nothing wrong with the
petitioners application; and
PROPERTY 1ST BATCH
iii. no title covering the subject property was previously
issued;
d. Tax Declaration Nos. 2935, 2405 and 1823 for the years 1961, 1967 and
1974 in the name of Victorio Garcia;8
e. Tax Declaration Nos. 1534 and 3850 for the years 1980 and 1985 in the
name of Felipe Gatdula;9
f. Tax Declaration Nos. 22453-A and 2925 for the years 1991 and 1994 in
the name of Gregonio Gatdula;10
g. Tax Declaration Nos. 21956-A, 22096-A, 22097-A and 97-05078 in the
name of the petitioners;11
h. Resolution No. 69, Series of 1998, of the Sangguniang Bayan of Indang,
Cavite, which approved the reclassification of several lots, including the
subject property, from agricultural to residential/commercial;12
i. DARCO Conversion Order No. 040210005-(340)-99, Series of 2000,
issued by the Department of Agrarian Reform on July 13, 2000, which
converted several parcels of land, including the subject property, from
agricultural to residential/commercial;13
j. Certification issued by the Department of Environment and Natural
Resources (DENR) CALABARZON dated October 29, 2002, stating that
"the subject area falls within the Alienable and Disposable Land Project
No. 13-A of Indang, Cavite per LC Map 3091 certified on June 21, 1983".14
Issue
This Court is faced with the lone issue of whether the petitioners have
proven themselves qualified to the benefits under the relevant laws on the
confirmation of imperfect or incomplete titles.
Our Ruling
Commonwealth Act No. 141, otherwise known as the "Public Land Act"
governs the classification and disposition of lands forming part of the public
domain. Section 11 thereof provides that one of the modes of disposing
public lands suitable for agricultural purposes is by "confirmation of
imperfect or incomplete titles". Section 48 thereof enumerates those who
are considered to have acquired an imperfect or incomplete title over an
alienable and disposable public land.
Presidential Decree No. 1529 (P.D. No. 1529), otherwise known as the
"Property Registration Decree", is a codification of all the laws relative to
the registration of property and Section 14 thereof specifies those who are
qualified to register their incomplete title over an alienable and disposable
public land under the Torrens system. Particularly:
Section 14. Who may apply. The following persons may file in the proper
Court of First Instance an application for registration of title to land,
whether personally or through their authorized representatives:
(1) Those who by themselves or through their predecessors-in-
interest have 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 ownership since June
12, 1945, or earlier.
(2) Those who have acquired ownership of private lands by
prescription under the provision of existing laws.
(3) Those who have acquired ownership of private lands or
abandoned river beds by right of accession or accretion under the
existing laws.
(4) Those who have acquired ownership of land in any other
manner provided for by law.
As this Court clarified in Heirs of Malabanan v. Republic of the
Philippines,15 and Republic of the Philippines v. East Silverlane Realty
Development Corporation,16 Section 14(1) covers "alienable and
disposable lands" while Section 14(2) covers "private property". Thus, for
ones possession and occupation of an alienable and disposable public
land to give rise to an imperfect title, the same should have commenced on
June 12, 1945 or earlier. On the other, for one to claim that his possession
and occupation of private property has ripened to imperfect title, the same
should have been for the prescriptive period provided under the Civil Code.
Without need for an extensive extrapolation, the private property
PROPERTY 1ST BATCH
contemplated in Section 14(2) is patrimonial property as defined in Article
421 in relation to Articles 420 and 422 of the Civil Code.
Going further, it was explained in Heirs of Malabanan and East Silverlane,
that possession and occupation of an alienable and disposable public land
for the periods provided under the Civil Code will not convert it to
patrimonial or private property. There must be an express declaration that
the property is no longer intended for public service or the development of
national wealth. In the absence thereof, the property remains to be
alienable and disposable and may not be acquired by prescription under
Section 14(2) of P.D. No. 1529. Thus:
In Heirs of Malabanan, this Court ruled that possession and occupation of
an alienable and disposable public land for the periods provided under the
Civil Code do not automatically convert said property into private property
or release it from the public domain. There must be an express declaration
that the property is no longer intended for public service or development of
national wealth. Without such express declaration, the property, even if
classified as alienable or disposable, remains property of the State, and
thus, may not be acquired by prescription.
Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public
dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State." It is this provision
that 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 public use, and are intended for some public service or
for the development of the national wealth" are public dominion property.
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 is "intended for some public service or for the
development of the national wealth". (emphasis supplied)
Accordingly, there must be an express declaration by the State that
the public dominion property is no longer intended for public service
or the development 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 420(2), and thus
incapable of acquisition by prescription. It is only when such
alienable and disposable lands are expressly declared by the State to
be no longer intended for public service or for the development of the
national wealth that the period of acquisitive prescription can begin
to run. Such declaration shall be in the form of a law duly enacted by
Congress or a Presidential Proclamation in cases where the
President is duly authorized by law.
In other words, for one to invoke the provisions of Section 14(2) and set up
acquisitive prescription against the State, it is primordial that the status of
the property as patrimonial be first established. Furthermore, the period of
possession preceding the classification of the property as patrimonial
cannot be considered in determining the completion of the prescriptive
period.17
The petitioners application is obviously anchored on Section 14(2) of P.D.
No. 1529 as they do not claim to have possessed, by themselves or their
predecessors-in-interest, the subject property since June 12, 1945 or
earlier. That it was thru prescription that they had acquired an imperfect
title over the subject property is the foundation upon which the petitioners
rest their application.
Unfortunately, this Court finds the evidence presented by the petitioners to
be wanting. The petitioners failed to demonstrate that they and their
predecessors-in-interest possessed the property in the requisite manner,
which this Court explained as follows:
It is concerned with lapse of time in the manner and under conditions laid
down by law, namely, that the possession should be in the concept of an
owner, public, peaceful, uninterrupted and adverse. Possession is open
when it is patent, visible, apparent, notorious and not clandestine. It is
continuous when uninterrupted, unbroken and not intermittent or
occasional; exclusive when the adverse possessor can show exclusive
dominion over the land and an appropriation of it to his own use and
benefit; and notorious when it is so conspicuous that it is generally known
and talked of by the public or the people in the neighborhood. The party
who asserts ownership by adverse possession must prove the presence of
the essential elements of acquisitive prescription.18
Tax declarations per se do not qualify as competent evidence of actual
possession for purposes of prescription. More so, if the payment of the
taxes due on the property is episodic, irregular and random such as in this
PROPERTY 1ST BATCH
case. Indeed, how can the petitioners claim of possession for the entire
prescriptive period be ascribed any ounce of credibility when taxes were
paid only on eleven (11) occasions within the 40-year period from 1961 to
2001? In Wee v. Republic of the Philippines,19 this Court stated that:
It bears stressing that petitioner presented only five tax declarations (for
the years 1957, 1961, 1967, 1980 and 1985) for a claimed possession and
occupation of more than 45 years (1945-1993). This type of intermittent
and sporadic assertion of alleged ownership does not prove open,
continuous, exclusive and notorious possession and occupation. In any
event, in the absence of other competent evidence, tax declarations do not
conclusively establish either possession or declarants right to registration
of title.20 (emphasis supplied and citation omitted)
In East Silverlane, it was emphasized that adverse, continuous, open,
public possession in the concept of an owner is a conclusion of law and the
burden to prove it by clear, positive and convincing evidence is on the
applicant. A claim of ownership will not proper on the basis of tax
declarations if unaccompanied by proof of actual possession.21
While there was an attempt to supplement the tax declaration by
testimonial evidence, the same is futile and frivolous. The testimonies of
Margarito Pena and Ma. Wilhelmina Tobias do not merit consideration and
do not make up for the inherent inadequacy of the eleven (11) tax
declarations submitted by the petitioners. Such witnesses did not state
what specific acts of ownership or dominion were performed by the
petitioners and predecessors-in-interest and simply made that general
assertion that the latter possessed and occupied the subject property for
more than thirty (30) years, which, by all means, is a mere conclusion of
law. The RTC should have tackled evidence of such nature with a
disposition to incredulity, if not with an outright rejection.
1w phi 1
Furthermore, the petitioners application was filed after only (1) year from
the time the subject property may be considered patrimonial. DARCO
Conversion Order No. 040210005-(340)-99, Series of 2000, was issued by
the DAR only on July 13, 2000, which means that the counting of the thirty
(30)-year prescriptive period for purposes of acquiring ownership of a
public land under Section 14(2) can only start from such date. Before the
property was declared patrimonial by virtue of such conversion order, it
cannot be acquired by prescription. This is clear from the pronouncements
of this Court in Heirs of Malabanan quoted above and in Republic of the
Philippines v. Rizalvo,22which states:
On this basis, respondent would have been eligible for application for
registration because his claim of ownership and possession over the
subject property even exceeds thirty (30) years. However, it is
jurisprudentially clear that the thirty (30)-year period of prescription for
purposes of acquiring ownership and registration of public land under
Section 14 (2) of P.D. No. 1529 only begins from the moment the State
expressly declares that the public dominion property is no longer intended
for public service or the development of the national wealth or that the
property has been converted into patrimonial.23
WHEREFORE, premises considered, the instant petition is DENIED for
lack of merit. The July 6, 2009 Decision and August 12, 2010 Resolution of
the Court of Appeals are AFFIRMED.
SO ORDERED.
G.R. No. 192088 October 9, 2012
INITIATIVES FOR DIALOGUE AND EMPOWERMENT THROUGH
ALTERNATIVE LEGAL SERVICES, INC. (IDEALS, INC.), represented
by its Executive Director, Mr. Edgardo Ligon, and FREEDOM FROM
DEBT COALITION (FDC), represented by its Vice President Rebecca
L. Malay, AKBAYAN CITIZEN'S ACTION PARTY, represented by its
Chair Emeritus Loretta Anne P. Rosales, ALLIANCE OF
PROGRESSIVE LABOR, represented by its Chairperson, Daniel L.
Edralin, REP. WALDEN BELLO, in his capacity as duly-elected
Member of the House of Representatives, Petitioners,
vs.
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
CORPORATION (PSALM), represented by its Acting President and
Chief Executive Officer Atty. Ma. Luz L. Caminero, METROPOLITAN
WATERWORKS AND SEWERAGE SYSTEM (MWSS), represented by
its Administrator Atty. Diosdado M. Allado, NATIONAL IRRIGATION
ADMINISTRATION (NIA), represented by its Administrator Carlos S.
Salazar, KOREA WATER RESOURCES CORPORATION, represented
by its Chief Executive Officer, Kim Kuen-Ho and/or Attorneys-in-fact,
Atty. Anna Bianca L. Torres and Atty. Luther D. Ramos, FIRST GEN
NORTHERN ENERGY CORP., represented by its President, Mr.
PROPERTY 1ST BATCH
Federico R. Lopez, SAN MIGUEL CORP., represented by its President,
Mr. Ramon S. Ang, SNABOITIZ POWER-PANGASINAN INC.,
represented by its President, Mr. Antonio R. Moraza, TRANS-ASIA OIL
AND ENERGY DEVELOPMENT CORPORATION, represented by its
President and CEO, Mr. Francisco L. Viray, and DMCI POWER CORP.,
represented by its President, Mr. Nestor Dadivas, Respondents.
DECISION
VILLARAMA, J.:
Before us is a petition for certiorari and prohibition seeking to permanently
enjoin the sale of the Angat Hydro-Electric Power Plant (AHEPP) to Korea
Water Resources Corporation (K-Water) which won the public bidding
conducted by the Power Sector Assets and Liabilities Management
Corporation (PSALM).
The Facts
Respondent PSALM is a government-owned and controlled corporation
created by virtue of Republic Act No. 9136,1otherwise known as the
"Electric Power Industry Reform Act of 2001" (EPIRA). The EPIRAprovided
a framework for the restructuring of the electric power industry, including
the privatization of the assets of the National Power Corporation (NPC),
the transition to the desired competitive structure, and the definition of the
responsibilities of the various government agencies and private entities.
Said law mandated PSALM to manage the orderly sale, disposition, and
privatization of NPC generation assets, real estate and other disposable
assets, and Independent Power Producer (IPP) contracts with the objective
of liquidating all NPC financial obligations and stranded contract costs in
an optimal manner, which liquidation is to be completed within PSALMs
25-year term of existence.2
Sometime in August 2005, PSALM commenced the privatization of the
246-megawatt (MW) AHEPP located in San Lorenzo, Norzagaray,
Bulacan. AHEPPs main units built in 1967 and 1968, and 5 auxiliary units,
form part of the Angat Complex which includes the Angat Dam, Angat
Reservoir and the outlying watershed area. A portion of the AHEPP - the
10 MW Auxiliary Unit No. 4 completed on June 16, 1986 and the 18 MW
Auxiliary Unit No. 5 completed on January 14, 1993 - is owned by
respondent Metropolitan Waterworks and Sewerage System
(MWSS).3 The main units produce a total of 200 MW of power while the
auxiliary units yield the remaining 46 MW of power. The Angat Dam and
AHEPP are utilized for power generation, irrigation, water supply and flood
control purposes. Because of its multi-functional design, the operation of
the Angat Complex involves various government agencies, namely: (1)
NPC; (2) National Water Resources Board (NWRB); (3) MWSS; (4)
respondent National Irrigation Administration (NIA); and (5) Philippine
Atmospheric, Geophysical and Astronomical Services Administration
(PAG-ASA).
On December 15, 2009, PSALMs Board of Directors approved the Bidding
Procedures for the privatization of the AHEPP. An Invitation to Bid was
published on January 11, 12 and 13, 2010 in three major national
newspapers. Subject of the bid was the AHEPP consisting of 4 main units
and 3 auxiliary units with an aggregate installed capacity of 218 MW. The
two auxiliary units owned by MWSS were excluded from the bid.
The following terms and conditions for the purchase of AHEPP were set
forth in the Bidding Package:
IB-05 CONDITION OF THE SALE
The Asset shall be sold on an "AS IS, WHERE IS" basis.
The Angat Dam (which is part of the Non-Power Components) is a multi-
purpose hydro facility which currently supplies water for domestic use,
irrigation and power generation. The four main units of the Angat Plant
release water to an underground trailrace that flows towards the Bustos
Dam which is owned and operated by the National Irrigation Administration
("NIA") and provides irrigation requirements to certain areas in Bulacan.
The water from the auxiliary units 1, 2 and 3 flows to the Ipo Dam which is
owned and operated by MWSS and supplies domestic water to Metro
Manila and other surrounding cities.
The priority of water usage under Philippine Law would have to be
observed by the Buyer/Operator.
The Winning Bidder/Buyer shall be requested to enter into an operations
and maintenance agreement with PSALM for the Non-Power Components
in accordance with the terms and conditions of the O & M Agreement to be
issued as part of the Final Transaction Documents. The Buyer, as
PROPERTY 1ST BATCH
Operator, shall be required to operate and maintain the Non-Power
Components at its own cost and expense. PSALM is currently negotiating
a water protocol agreement with various parties which are currently the
MWSS, NIA, the National Water Resources Board and NPC. If required by
PSALM, the Buyer will be required to enter into the said water protocol
agreement as a condition to the award of the Asset.
The Buyer shall be responsible for securing the necessary rights to occupy
the land underlying the Asset.4 (Emphasis supplied.)
All participating bidders were required to comply with the following:
(a) submission of a Letter of Interest; (b) execution of Confidentiality
Agreement and Undertaking; and (c) payment of a non-refundable fee of
US$ 2,500 as Participation Fee.5 After holding pre-bid conferences and
forum discussions with various stakeholders, PSALM received the
following bids from six competing firms:
K-Water US$ 440,880,000.00
First Gen Northern Energy 365,000,678.00
Corporation
San Miguel Corporation 312,500,000.00
SNAboitiz Power-Pangasinan, Inc. 256,000,000.00
Trans-Asia Oil & Energy 237,000,000.00
Development Corporation
DMCI Power Corporation 188,890,000.00
On May 5, 2010, and after a post-bid evaluation, PSALMs Board of
Directors approved and confirmed the issuance of a Notice of Award to the
highest bidder, K-Water.6
On May 19, 2010, the present petition with prayer for a temporary
restraining order (TRO) and/or writ of preliminary injunction was filed by the
Initiatives for Dialogue and Empowerment Through Alternative Legal
Services, Inc. (IDEALS), Freedom from Debt Coalition (FDC), AKBAYAN
Citizens Action Party (AKBAYAN) and Alliance of Progressive Labor.
On May 24, 2010, this Court issued a Status QuoAnte Order directing the
respondents to maintain the status quo prevailing before the filing of the
petition and to file their respective Comments on the petition.7
 Arguments of the Parties
Petitioners contend that PSALM gravely abused its discretion when, in the
conduct of the bidding it disregarded and violated the peoples right to
information guaranteed under the Constitution, as follows: (1) the bidding
process was commenced by PSALM without having previously released to
the public critical information such as the terms and conditions of the sale,
the parties qualified to bid and the minimum bid price, as laid down in the
case of Chavez v. Public Estates Authority8; (2) PSALM refused to divulge
significant information requested by petitioners, matters which are of public
concern; and (3) the bidding was not conducted in an open and
transparent manner, participation was indiscriminately restricted to the
private sectors in violation of the EPIRA which provides that its provisions
shall be "construed in favor of the establishment, promotion, preservation
of competition and people empowerment so that the widest participation of
the people, whether directly or indirectly, is ensured."9
Petitioners also assail the PSALM in not offering the sale of the AHEPP to
MWSS which co-owned the Angat Complex together with NPC and NIA.
Being a mere co-owner, PSALM cannot sell the AHEPP without the
consent of co-owners MWSS and NIA, and being an indivisible thing,
PSALM has a positive obligation to offer its undivided interest to the other
co-owners before selling the same to an outsider. Hence, PSALMs
unilateral disposition of the said hydro complex facility violates the Civil
Code rules on co-ownership (Art. 498) and Sec. 47 (e) of the EPIRA which
granted PSALM the legal option of transferring possession, control and
operation of NPC generating assets like the AHEPP to another entity in
order "to protect potable water, irrigation and all other requirements
imbued with public interest."
As to the participation in the bidding of and award of contract to K-Water
which is a foreign corporation, petitioners contend that PSALM clearly
violated the constitutional provisions on the appropriation and utilization of
water as a natural resource, as implemented by the Water Code of the
Philippines limiting water rights to Filipino citizens and corporations which
are at least 60% Filipino-owned. Further considering the importance of the
Angat Dam which is the source of 97% of Metro Manilas water supply, as
well as irrigation for farmlands in 20 municipalities and towns in Pampanga
and Bulacan, petitioners assert that PSALM should prioritize such
domestic and community use of water over that of power generation.
PROPERTY 1ST BATCH
They maintain that the Philippine Government, along with its agencies and
subdivisions, have an obligation under international law, to recognize and
protect the legally enforceable human right to water of petitioners and the
public in general.
Petitioners cite the Advisory on the "Right to Water in Light of the
Privatization of the Angat Hydro-Electric Power Plant"10 dated November 9,
2009 issued by the Commission on Human Rights (CHR) urging the
Government to revisit and reassess its policy on water resources vis--vis
its concurrent obligations under international law to provide, and ensure
and sustain, among others, "safe, sufficient, affordable and convenient
access to drinking water." Since investment in hydropower business is
primarily driven by generation of revenues both for the government and
private sector, the CHR warns that once the AHEPP is privatized, there will
be less accessible water supply, particularly for those living in Metro Manila
and the Province of Bulacan and nearby areas which are currently
benefited by the AHEPP. The CHR believes that the management of
AHEPP is better left to MWSS being a government body and considering
the public interest involved. However, should the decision to privatize the
AHEPP become inevitable, the CHR strongly calls for specific and
concrete safeguards to ensure the right to water of all, as the domestic use
of water is more fundamental than the need for electric power.
Petitioners thus argue that the protection of their right to water and of
public interest requires that the bidding process initiated by PSALM be
declared null and void for violating such right, as defined by international
law and by domestic law establishing the States obligation to ensure water
security for its people.
In its Comment With Urgent Motion to Lift Status Quo Ante Order,
respondent PSALM prayed for the dismissal of the petition on the following
procedural grounds: (a) a petition for certiorari is not the proper remedy
because PSALM was not acting as a tribunal or board exercising judicial or
quasi-judicial functions when it commenced the privatization of AHEPP; (b)
the present petition is rendered moot by the issuance of a Notice of Award
in favor of K-Water; (c) assuming the petition is not mooted by such
contract award, this Court has no jurisdiction over the subject matter of the
controversy involving a political question, and also because if it were the
intent of Congress to exclude the AHEPP in the privatization of NPC
assets, it should have clearly expressed such intent as it did with the Agus
and Pulangui power plants under Sec. 47 of the EPIRA; (d) petitioners
lack of standing to question the bidding process for failure to show any
injury as a result thereof, while Rep. Walden Bello likewise does not have
such legal standing in his capacity as a duly elected member of the House
of Representatives as can be gleaned from the rulings in David v.
Arroyo11 and Philippine Constitutional Association v. Enriquez.12
On the alleged violation of petitioners right to information, PSALM avers
that it conducted the bidding in an open and transparent manner, through a
series of events in accordance with the governing rules on public bidding.
The non-disclosure of certain information in the invitation to bid was
understandable, such as the minimum or reserve price which are still
subject to negotiation and approval of PSALMs Board of Directors. The
ruling in Chavez v. Public Estates Authority13 is inapplicable since it
involved government property which has become unserviceable or was no
longer needed and thus fell under Sec. 79 of the Government Auditing
Code whereas the instant case concerns a hydroelectric power plant
adjacent to a dam which still provides water supply to Metro Manila. In the
bidding for the AHEPP, PSALM claims that it relied on the Rules and
Regulations Implementing the EPIRA, as well as COA Circular No. 89-296
on the general procedures for bidding by government agencies and
instrumentalities of assets that will be divested or government property that
will be disposed of. PSALM likewise avers that it was constrained to deny
petitioner IDEALS letter dated April 20, 2010 requesting documents
relative to the privatization of Angat Dam due to non-submission of a Letter
of Interest, Confidentiality and Undertaking and non-payment of the
Participation Fee. With regard to IDEALS request for information about the
winning bidder, as contained in its letter dated May 14, 2010, the same
was already referred to respondent K-Waters counsel for appropriate
action.
In any case, PSALM maintains that not all details relative to the
privatization of the AHEPP can be readily disclosed; the confidentiality of
certain matters was necessary to ensure the optimum bid price for the
property.
PSALM further refutes the assertion of petitioners that the Angat Complex
is an indivisible system and co-owned with MWSS and NIA. It contends
that MWSSs contribution in the funds used for the construction of the
AHEPP did not give rise to a regime of co-ownership as the said funds
were merely in exchange for the supply of water that MWSS would get
from the Angat Dam, while the Umiray-AngatTransbasin Rehabilitation
Project the improvement and repair of which were funded by MWSS, did
not imply a co-ownership as these facilities are located in remote places.
PROPERTY 1ST BATCH
Moreover, PSALM points out that PSALM, MWSS and NIA each was
issued a water permit, and are thus holders of separate water rights.
On the alleged violation of petitioners and the peoples right to water,
PSALM contends that such is baseless and proceeds from the mistaken
assumption that the Angat Dam was sold and as a result thereof, the
continuity and availability of domestic water supply will be interrupted.
PSALM stresses that only the hydroelectric facility is being sold and not the
Angat Dam which remains to be owned by PSALM, and that the NWRB
still governs the water allocation therein while the NPC-FFWSDO still
retains exclusive control over the opening of spillway gates during rainy
season. The foregoing evinces the continued collective control by
government agencies over the Angat Dam, which in the meantime, is in
dire need of repairs, the cost of which cannot be borne by the Government.
PSALM further debunks the nationality issue raised by petitioners, citing
previous opinions rendered by the Department of Justice (DOJ)
consistently holding that the utilization of water by a hydroelectric power
plant does not constitute appropriation of water from its natural source
considering that the source of water (dam) that enters the intake gate of
the power plant is an artificial structure. Moreover, PSALM is mindful of the
States duty to protect the publics right to water when it sold the AHEPP.
In fact, such concern as taken into consideration by PSALM in devising a
privatization scheme for the AHEPP whereby the water allocation is
continuously regulated by the NWRB and the dam and its spillway gates
remain under the ownership and control of NPC.
In its Comment,14 respondent MWSS asserts that by virtue of its various
statutory powers since its creation in 1971, which includes the
construction, maintenance and operation of dams, reservoir and other
waterworks within its territorial jurisdiction, it has supervision and control
over the Angat Dam given that the Angat Reservoir supplies approximately
97% of the water requirements of Metro Manila. Over the course of its
authority over the Angat Dam, Dykes and Reservoir, MWSS has incurred
expenses to maintain their upkeep, improve and upgrade their facilities.
Thus, in 1962, MWSS contributed about 20% for the construction cost of
the Angat Dam and Dykes (then equivalent to about P 21 million); in 1992,
MWSS contributed about P 218 million for the construction of Auxiliary Unit
No. 5; in 1998, MWSS contributed P 73.5 million for the construction cost
of the low level outlet; and subsequently, MWSS invested P 3.3 billion to
build the Umiray-AngatTransbasin Tunnel to supplement the water supply
available from the Angat Dam, which tunnel contributes a minimum of
about 9 cubic meters per second to the Angat Reservoir, thus increasing
power generation. MWSS argues that its powers over waterworks are
vested upon it by a special law (MWSS Charter) which prevails over the
EPIRA which is a general law, as well as other special laws, issuances and
presidential edicts. And as contained in Sec. 1 of the MWSS Charter,
which remains valid and effective, it is expressly provided that the
establishment, operation and maintenance of waterworks systems must
always be supervised by the State.
MWSS further alleges that after the enactment of EPIRA, it had expressed
the desire to acquire ownership and control of the AHEPP so as not to
leave the operation of the Angat Reservoir to private discretion that may
prejudice the water allocation to MWSS as dictated by NWRB rules.
Representations were thereafter made with the Office of the President
(OP) for the turn over of the management of these facilities to MWSS, and
joint consultation was also held with PSALM officials for the possibility of a
Management Committee to manage and control the Angat Dam Complex
under the chairmanship of the water sector, which position was supported
by former Secretary HermogenesEbdane of the Department of Public
Works and Highways (DPWH). In March 2008, PSALM proposed the
creation of an inter-agency technical working group (TWG) to draft the
Operations and Maintenance (O & M) Agreement for the AHEPP that will
be in effect after its privatization. PSALM likewise sought the view of the
Office of the Government Corporate Counsel (OGCC) which opined that
PSALM may turn over the facility to a qualified entity such as MWSS
without need of public bidding. In 2009, various local governments
supported the transfer of the control and management of the AHEPP to
MWSS, while the League of Cities and Municipalities interposed its
opposition to the privatization of the AHEPP fearing that it might increase
the cost of water in Metro Manila, and also because it will be
disadvantageous to the national government since the AHEPP only
contributes 246 MW of electricity to the Luzon Grid. Even the CHR has
advised the Government to reassess its privatization policy and to always
consider paramount the most basic resources necessary and
indispensable for human survival, which includes water.
MWSS further avers that upon the facilitation of the OGCC and
participated in by various stakeholders, including its two concessionaires,
Manila Water Company, Inc. and Maynilad Water Services, Inc., various
meetings and conferences were held relative to the drafting of the
PROPERTY 1ST BATCH
Memorandum of Agreement on the Angat Water Protocol. On April 20,
2010, the final draft of the Angat Water Protocol was finally complete.
However, as of June 18, 2010, only MWSS and NIA signed the said final
draft. MWSS thus contends that PSALM failed to institute any safeguards
as prescribed in Sec. 47 of the EPIRA when it proceeded with the
privatization of the AHEPP.
As to the issue of nationality requirement in the appropriation of water
resources under the Constitution, MWSS cites the case of Manila Prince
Hotel v. Government Service Insurance System15 which interpreted
paragraph 2, Sec. 10, Art. XII of the 1987 Constitution providing that "in the
grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos" to
imply "a mandatory, positive command which is complete in itself and
which needs no further guidelines or implementing laws or rules for its
enforcement x xx and is per se judicially enforceable." In this case, the
AHEPP is in dire danger of being wholly-owned by a Korean corporation
which probably merely considers it as just another business opportunity,
and as such cannot be expected to observe and ensure the smooth
facilitation of the more critical purposes of water supply and irrigation.
Respondent First Gen Northern Energy Corporation (FGNEC) also filed a
Comment16 disagreeing with the contentions of petitioners and respondent
MWSS on account of the following: (1) the NPC charter vested upon it
complete jurisdiction and control over watersheds like the Angat
Watershed surrounding the reservoir of the power plants, and hence Art.
498 of the Civil Code is inapplicable; (2) NPC, MWSS and NIA are not co-
owners of the various rights over the Angat Dam as in fact each of them
holds its own water rights; (3) the State through the EPIRA expressly
mandates PSALM to privatize all NPC assets, which necessarily includes
the AHEPP; (4) the privatization of the AHEPP will not affect the priority of
water for domestic and municipal uses as there are sufficient safeguards to
ensure the same, and also because the Water Code specifically mandates
that such use shall take precedence over other uses, and even the EPIRA
itself gives priority to use of water for domestic and municipal purposes
over power generation; (5) the Water Protocol also safeguards priority of
use of water for domestic purposes; (6) the bidding procedure for the
AHEPP was valid, and the bidding was conducted by PSALM in an open
and transparent manner; and (7) the right to information of petitioners and
the public in general was fully satisfied, and PSALM adopted reasonable
rules and regulations for the orderly conduct of its functions pursuant to its
mandate under the EPIRA.
FGNEC nevertheless prays of this Court to declare the nationality
requirements for the ownership, operation and maintenance of the AHEPP
as prescribed by the Constitution and pertinent laws. Considering the
allegation of petitioners that K-Water is owned by the Republic of South
Korea, FGNEC asserts that PSALM should not have allowed said entity to
participate in the bidding because under our Constitution, the exploration,
development and utilization of natural resources are reserved to Filipino
citizens or to corporations with 60% of their capital being owned by
Filipinos.
Respondent NIA filed its Comment17 stating that its interest in this case is
limited only to the protection of its water allocation drawn from the Angat
Dam as determined by the NWRB. Acknowledging that it has to share the
meager water resources with other government agencies in fulfilment of
their respective mandate, NIA submits that it is willing to sit down and
discuss issues relating to water allocation, as evidenced by the draft
Memorandum of Agreement on the Angat Water Protocol. Since the reliefs
prayed for in the instant petition will not be applicable to NIA which was not
involved in the bidding conducted by PSALM, it will thus not be affected by
the outcome of the case.
Respondents San Miguel Corporation (SMC), DMCI Power Corporation,
Trans-Asia Oil and Energy Development Corporation and SNAboitiz
Power-Pangasinan, Inc. filed their respective Comments18 with common
submission that they are not real parties-in-interest and should be
excluded from the case. They assert that PSALM acted pursuant to its
mandate to privatize the AHEPP when it conducted the bidding, and there
exists no reason for them to take any action to invalidate the said bidding
wherein they lost to the highest bidder K-Water.
On its part, respondent K-Water filed a Manifestation In Lieu of
Comment19 stating that it is not in a position to respond to petitioners
allegations, having justifiably relied on the mandate and expertise of
PSALM in the conduct of public bidding for the privatization of the AHEPP
and had no reason to question the legality or constitutionality of the
privatization process, including the bidding. K-Water submits that its
participation in the bidding for the AHEPP was guided at all times by an
abiding respect for the Constitution and the laws of the Philippines, and
hopes for a prompt resolution of the present petition to further strengthen
and enhance the investment environment considering the level of
investment entailed, not only in financial terms by providing a definitive
PROPERTY 1ST BATCH
resolution and reliable guidance for investors, whether Filipino or foreign,
as basis for effective investment and business decisions.
In their Consolidated Reply,20 petitioners contend that the instant petition is
not mooted with the issuance of a Notice of Award to K-Water because the
privatization of AHEPP is not finished until and unless the deed of absolute
sale has been executed. They cite the ruling in David v. Arroyo,21 that
courts will decide cases, otherwise moot and academic, if:
first, there is a grave violation of the Constitution; second, the exceptional
character of the situation and the paramount public interest is involved;
third, when constitutional issue raised requires formulation of controlling
principles to guide the bench, the bar and the public; and fourth, the case
is capable of repetition yet evading review.
Petitioners reiterate their legal standing to file the present suit in their
capacity as taxpayers, or as Filipino citizens asserting the promotion and
protection of a public right, aside from being directly injured by the
proceedings of PSALM. As to the absence of Certification and Verification
of Non-Forum Shopping from petitioner Bello in the file copy of PSALM, the
same was a mere inadvertence in photocopying the same.
On the matter of compliance with an open and transparent bidding,
petitioners also reiterate as held in Chavez v. Public Estates
Authority,22 that the Courts interpretation of public bidding applies to any
law which requires public bidding, especially since Sec. 79 of the
Government Auditing Code does not enumerate the data that must be
disclosed to the public. PSALM should have followed the minimum
requirements laid down in said case instead of adopting the "format
generally used by government entities in their procurement of goods,
infrastructure and consultancy services," considering that what was
involved in Chavez is an amended Joint Venture Agreement which seeks
to transfer title and ownership over government property. Petitioners point
out that the requirement under COA Circular 89-296 as regards
confidentiality covers only sealed proposals and not all information relating
to the AHEPP privatization. PSALMs simple referral of IDEALS request
letter to the counsel of K-Water is very telling, indicating PSALMs limited
knowledge about a company it allowed to participate in the bidding and
which even won the bidding.
On the transfer of water rights to K-Water, petitioners reiterate that this
violates the Water Code, and contrary to PSALMs statements, once NPC
transfers its water permit to K-Water, in accordance with the terms of the
Asset Purchase Agreement, NPC gives up its authority to extract or utilize
water from the Angat River. Petitioners further assert that the terms of the
sale of AHEPP allowing the buyer the operation and management of the
Non-Power Components, constitutes a relinquishment of government
control over the Angat Dam, in violation of Art. XII, Sec. 2 of the
Constitution. PSALM likewise has not stated that all stakeholders have
signed the Water Protocol. Such absence of a signed Water Protocol is
alarming in the light of PSALMs pronouncement that the terms of the sale
to K-Water would still subject to negotiation. Is PSALMs refusal to sign the
Water Protocol part of its strategy to negotiate the terms of the sale with
the bidders? If so, then PSALM is blithely and cavalierly bargaining away
the Filipinos right to water.
Responding to the claims of MWSS in its Comment, PSALM contends that
MWSSs allegations regarding the bidding process is belied by MWSSs
own admission that it held discussions with PSALM to highlight the
important points and issues surrounding the AHEPP privatization that
needed to be threshed out. Moreover, MWSS also admits having
participated, along with other agencies and stakeholders, various meetings
and conferences relative to the drafting of a Memorandum of Agreement
on the Angat Water Protocol.
As regards the Angat Dam, PSALM emphasizes that MWSS never
exercised jurisdiction and control over the said facility. PSALM points out
that the Angat Dam was constructed in 1967, or four years before the
enactment of Republic Act No. 6234, upon the commissioning thereof by
the NPC and the consequent construction by Grogun, Inc., a private
corporation. MWSS attempt to base its claim of jurisdiction over the Angat
Dam upon its characterization of EPIRA as a general law must likewise fail.
PSALM explains that EPIRA cannot be classified as a general law as it
applies to a particular portion of the State, i.e., the energy sector. The
EPIRA must be deemed an exception to the provision in the Revised
MWSS Charter on MWSSs general jurisdiction over waterworks systems.
PSALM stresses that pursuant to the EPIRA, PSALM took ownership of all
existing NPC generation assets, liabilities, IPP contracts, real estate and
other disposable assets, which necessarily includes the AHEPP Complex,
of which the Angat Dam is part. As to the OGCC opinion cited by MWSS to
support its position that control and management of the Angat Dam
PROPERTY 1ST BATCH
Complex should be turned over to MWSS, the OGCC had already issued a
second opinion dated August 20, 2008 which clarified the tenor of its
earlier Opinion No. 107, s. 2008, stating that "the disposal of the Angat
HEPP by sale through public bidding the principal mode of disposition
under EPIRA remains PSALMs primary option." Moreover, as pointed
out by the National Economic Development Authority (NEDA) in its letter
dated September 16, 2009, the ownership and operation of a hydropower
plant goes beyond the mandate of MWSS. This view is consistent with the
provisions of EPIRA mandating the transfer of ownership and control of
NPC generation assets, IPP Contracts, real estate and other disposable
assets to a private person or entity. Consequently, a transfer to another
government entity of the said NPC assets would be a clear violation of the
EPIRA. Even assuming such is allowed by EPIRA, it would not serve the
objective of the EPIRA, i.e., that of liquidating all NPCs financial
obligations and would merely transfer NPCs debts from the hands of one
government entity to another, the funds that would be utilized by MWSS in
the acquisition of the AHEPP would doubtless come from the pockets of
the Filipino people.
As regards the opposition of various local government units to the sale of
the AHEPP, PSALM said that a forum was held specifically to address their
concerns. After the said forum, these LGUs did not anymore raise the
same concerns; such inaction on their part could be taken as an
acquiescence to, and acceptance of, the explanations made by PSALM
during the forum.
PSALM had made it clear that it is only the AHEPP and not the Angat Dam
which was being privatized. The same wrong premise underpinned the
position of the CHR with its erroneous allegation that MWSS is allowed,
under its Revised Charter, to operate and maintain a power plant.
PSALM further contends that the sale of AHEPP to K-Water did not violate
the Constitutions provision on the States natural resources and neither is
the ruling in Manila Prince Hotel applicable as said case was decided
under different factual circumstances. It reiterates that the AHEPP, being a
generation asset, can be sold to a foreign entity, under the EPIRA, in
accordance with the policy reforms said law introduced in the power sector;
the EPIRA aims to enable open access in the electricity market and then
enable the government to concentrate more fully on the supply of basic
needs to the Filipino people. Owing to the competitive and open nature of
the generation sector, foreign corporation may own generation assets.
 Issues
The present controversy raised the following issues:
1) Legal standing of petitioners;
2) Mootness of the petition;
3) Violation of the right to information;
4) Ownership of the AHEPP;
5) Violation of Sec. 2, Art. XII of the Constitution;
6) Violation of the Water Code provisions on the grant of water rights; and
7) Failure of PSALM to comply with Sec. 47 (e) of EPIRA.
Mootness and Locus Standi
PSALMs contention that the present petition had already been mooted by
the issuance of the Notice of Award to K-Water is misplaced. Though
petitioners had sought the immediate issuance of injunction against the
bidding commenced by PSALM -- specifically enjoining it from proceeding
to the next step of issuing a notice of award to any of the bidders -- they
further prayed that PSALM be permanently enjoined from disposing of the
AHEPP through privatization. The petition was thus filed not only as a
means of enforcing the States obligation to protect the citizens "right to
water" that is recognized under international law and legally enforceable
under our Constitution, but also to bar a foreign corporation from exploiting
our water resources in violation of Sec. 2, Art. XII of the 1987 Constitution.
If the impending sale of the AHEPP to K-Water indeed violates the
Constitution, it is the duty of the Court to annul the contract award as well
as its implementation. As this Court held in Chavez v. Philippine Estates
Authority,23 "supervening events, whether intended or accidental, cannot
prevent the Court from rendering a decision if there is a grave violation of
the Constitution."
We also rule that petitioners possess the requisite legal standing in filing
this suit as citizens and taxpayers.
PROPERTY 1ST BATCH
"Legal standing" or locus standi has been defined as a personal and
substantial interest in the case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being
challenged, alleging more than a generalized grievance. The gist of the
question of standing is whether a party alleges "such personal stake in the
outcome of the controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court depends for
illumination of difficult constitutional questions."24 This Court, however, has
adopted a liberal attitude on the locus standi of a petitioner where the
petitioner is able to craft an issue of transcendental significance to the
people, as when the issues raised are of paramount importance to the
public.25Thus, when the proceeding involves the assertion of a public right,
the mere fact that the petitioner is a citizen satisfies the requirement of
personal interest.26
There can be no doubt that the matter of ensuring adequate water supply
for domestic use is one of paramount importance to the public. That the
continued availability of potable water in Metro Manila might be
compromised if PSALM proceeds with the privatization of the hydroelectric
power plant in the Angat Dam Complex confers upon petitioners such
personal stake in the resolution of legal issues in a petition to stop its
implementation.
Moreover, we have held that if the petition is anchored on the peoples
right to information on matters of public concern, any citizen can be the
real party in interest. The requirement of personal interest is satisfied by
the mere fact that the petitioner is a citizen, and therefore, part of the
general public which possesses the right. There is no need to show any
special interest in the result. It is sufficient that petitioners are citizens and,
as such, are interested in the faithful execution of the laws.27
Violation of Right to Information
The peoples right to information is provided in Section 7, Article III of the
Constitution, which reads:
Sec. 7. The right of the people to information on matters of public concern
shall be recognized. Access to official records, and to documents, and
papers pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law.
(Emphasis supplied.)
The peoples constitutional right to information is intertwined with the
governments constitutional duty of full public disclosure of all transactions
involving public interest.28 Section 28, Article II of the Constitution declares
the State policy of full transparency in all transactions involving public
interest, to wit:
Sec. 28. Subject to reasonable conditions prescribed by law, the State
adopts and implements a policy of full public disclosure of all its
transactions involving public interest. (Italics supplied.)
The foregoing constitutional provisions seek to promote transparency in
policy-making and in the operations of the government, as well as provide
the people sufficient information to exercise effectively other constitutional
rights. They are also essential to hold public officials "at all times x xx
accountable to the people," for unless citizens have the proper information,
they cannot hold public officials accountable for anything. Armed with the
right information, citizens can participate in public discussions leading to
the formulation of government policies and their effective implementation.
An informed citizenry is essential to the existence and proper functioning of
any democracy.29
Consistent with this policy, the EPIRA was enacted to provide for "an
orderly and transparent privatization" of NPCs assets and
liabilities.30 Specifically, said law mandated that "all assets of NPC shall be
sold in an open and transparent manner through public bidding."31
In Chavez v. Public Estates Authority32 involving the execution of an
Amended Joint Venture Agreement on the disposition of reclaimed lands
without public bidding, the Court held:
x x xBefore the consummation of the contract, PEA must, on its own and
without demand from anyone, disclose to the public matters relating to the
disposition of its property. These include the size, location, technical
description and nature of the property being disposed of, the terms and
conditions of the disposition, the parties qualified to bid, the minimum price
and similar information. PEA must prepare all these data and disclose
them to the public at the start of the disposition process, long before the
consummation of the contract, because the Government
PROPERTY 1ST BATCH
Auditing Code requires public bidding. If PEA fails to make this disclosure,
any citizen can demand from PEA this information at any time during the
bidding process.
Information, however, on on-going evaluation or review of bids or
proposals being undertaken by the bidding or review committee is not
immediately accessible under the right to information. While the evaluation
or review is still on-going, there are no "official acts, transactions, or
decisions" on the bids or proposals. However, once the committee makes
its official recommendation, there arises a "definite proposition" on the part
of the government. From this moment, the publics right to information
attaches, and any citizen can access all the non-proprietary information
leading to such definite proposition. In Chavez v. PCGG, the Court ruled as
follows:
"Considering the intent of the framers of the Constitution, we believe that it
is incumbent upon the PCGG and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed
settlement they have decided to take up with the ostensible owners and
holders of ill-gotten wealth. Such information, though, must pertain to
definite propositions of the government not necessarily to intra-agency or
inter-agency recommendations or communications during the stage when
common assertions are still in the process of being formulated or are in the
"exploratory" stage. There is need, of course, to observe the same
restrictions on disclosure of information in general, as discussed earlier
such as on matters involving national security, diplomatic or foreign
relations, intelligence and other classified information." (Emphasis
supplied.)
Chavez v. Public Estates Authority thus laid down the rule that the
constitutional right to information includes official information on on-going
negotiations before a final contract. The information, however, must
constitute definite propositions by the government and should not cover
recognized exceptions like privileged information, military and diplomatic
secrets and similar matters affecting national security and public order. In
addition, Congress has prescribed other limitations on the right to
information in several legislations.33
In this case, petitioners first letter dated April 20, 2010 requested for
documents such as Terms of Reference and proposed bids submitted by
the bidders. At that time, the bids were yet to be submitted at the bidding
scheduled on April 28, 2010. It is also to be noted that PSALMs website
carried news and updates on the sale of AHEPP, providing important
information on bidding activities and clarifications regarding the terms and
conditions of the Asset Purchase Agreement (APA) to be signed by
PSALM and the winning bidder (Buyer).34
In Chavez v. National Housing Authority,35 the Court held that pending the
enactment of an enabling law, the release of information through postings
in public bulletin boards and government websites satisfies the
constitutional requirement, thus:
It is unfortunate, however, that after almost twenty (20) years from birth of
the 1987 Constitution, there is still no enabling law that provides the
mechanics for the compulsory duty of government agencies to disclose
information on government transactions. Hopefully, the desired enabling
law will finally see the light of day if and when Congress decides to
approve the proposed "Freedom of Access to Information Act." In the
meantime, it would suffice that government agencies post on their bulletin
boards the documents incorporating the information on the steps and
negotiations that produced the agreements and the agreements
themselves, and if finances permit, to upload said information on their
respective websites for easy access by interested parties. Without any law
or regulation governing the right to disclose information, the NHA or any of
the respondents cannot be faulted if they were not able to disclose
information relative to the SMDRP to the public in general.36 (Emphasis
supplied.)
The Court, however, distinguished the duty to disclose information from the
duty to permit access to information on matters of public concern under
Sec. 7, Art. III of the Constitution. Unlike the disclosure of information
which is mandatory under the Constitution, the other aspect of the peoples
right to know requires a demand or request for one to gain access to
documents and paper of the particular agency. Moreover, the duty to
disclose covers only transactions involving public interest, while the duty to
allow access has a broader scope of information which embraces not only
transactions involving public interest, but any matter contained in official
communications and public documents of the government agency.37 Such
relief must be granted to the party requesting access to official records,
documents and papers relating to official acts, transactions, and decisions
that are relevant to a government contract.
PROPERTY 1ST BATCH
Here, petitioners second letter dated May 14, 2010 specifically requested
for detailed information regarding the winning bidder, such as company
profile, contact person or responsible officer, office address and Philippine
registration. But before PSALM could respond to the said letter, petitioners
filed the present suit on May 19, 2010. PSALMs letter-reply dated May 21,
2010 advised petitioners that their letter-re quest was referred to the
counsel of K-Water. We find such action insufficient compliance with the
constitutional requirement and inconsistent with the policy under EPIRA to
implement the privatization of NPC assets in an "open and transparent"
manner. PSALMs evasive response to the request for information was
unjustified because all bidders were required to deliver documents such as
company profile, names of authorized officers/representatives, financial
and technical experience.
Consequently, this relief must be granted to petitioners by directing PSALM
to allow petitioners access to the papers and documents relating to the
company profile and legal capacity of the winning bidder. Based on
PSALMs own press releases, K-Water is described as a Korean firm with
extensive experience in implementing and managing water resources
development projects in South Korea, and also contributed significantly to
the development of that countrys heavy and chemical industries and the
modernization of its national industrial structure.
AngatHEPP is Under the Jurisdiction of
the Department of Energy Through NPC
It must be clarified that though petitioners had alleged a co-ownership by
virtue of the joint supervision in the operation of the Angat Complex by
MWSS, NPC and NIA, MWSS actually recognized the ownership and
jurisdiction of NPC over the hydroelectric power plant itself. While MWSS
had initially sought to acquire ownership of the AHEPP without public
bidding, it now prays that PSALM be ordered to turn over the possession
and control of the said facility to MWSS. MWSS invokes its own authority
or "special powers" by virtue of its general jurisdiction over waterworks
systems, and in consideration of its substantial investments in the
construction of two auxiliary units in the AHEPP, as well as the
construction of the Umiray-AngatTransbasin Tunnel to supplement the
water intake at the Angat Reservoir which resulted in increased power
generation.
Records disclosed that as early as December 2005, following the decision
of PSALMs Board of Directors to commence the sale process of the
AHEPP along with Magat and AmlanHEPPs in August 2005, MWSS was
actively cooperating and working with PSALM regarding the proposed
Protocol for the Privatization of the AHEPP, specifically on the terms and
conditions for the management, control and operation of the Angat Dam
Complex taking into consideration the concerns of its concessionaires. A
Technical Working Group (TWG) similar to that formed for the Operation
and Management Agreement of Pantabangan and Magat dams was
created, consisting of representatives from PSALM, MWSS and other
concerned agencies, to formulate strategies for the effective
implementation of the privatization of AHEPP and appropriate structure for
the operation and management of the Angat Dam Complex.38
In March 2008, PSALM sought legal advice from the OGCC on available
alternatives to a sale structure for the AHEPP. On May 27, 2008, then
Government Corporate Counsel Alberto C. Agra issued Opinion No. 107,
s. 200839stating that PSALM is not limited to "selling" as a means of
fulfilling its mandate under the EPIRA, and that in dealing with the AHEPP,
PSALM has the following options:
1. Transfer the ownership, possession, control, and operation of the Angat
Facility to another entity, which may or may not be a private enterprise, as
specifically provided under Section 47 (e) of RA 9136;
2. Transfer the Angat Facility, through whatever form, to another entity for
the purpose of protecting the public interest.40
The OGCC cited COA Circular No. 89-296 which provides that government
property or assets that are no longer serviceable or needed "may be
transferred to other government entities/agencies without cost or at an
appraised value upon authority of the head or governing body of the
agency or corporation, and upon due accomplishment of an Invoice and
Receipt of Property." Pointing out the absence of any prohibition under
R.A. No. 9136 and its IRR for PSALM to transfer the AHEPP to another
government instrumentality, and considering that MWSS is allowed under
its charter to acquire the said facility, the OGCC expressed the view that
PSALM may, "in the interest of stemming a potential water crisis, turn over
the ownership, operations and management of the Angat Facility to a
qualified entity, such as the MWSS, without need of public bidding as the
latter is also a government entity."41
PROPERTY 1ST BATCH
Consequently, MWSS requested the Office of the President (OP) to
exclude the AHEPP from the list of NPC assets to be privatized under the
EPIRA. Said request was endorsed to the Department of Finance (DOF)
which requested the National Economic Development Authority (NEDA) to
give its comments. Meanwhile, on August 20, 2008, the OGCC issued a
Clarification42 on its Opinion No. 107, s. 2008 stating that the tenor of the
latter issuance was "permissive" and "necessarily, the disposal of the
AHEPP by sale through public bidding the principal mode of disposition
under x xx R.A. 9136 remains PSALMs primary option." The OGCC
further explained its position, thus:
If, in the exercise of PSALMs discretion, it determines that privatization by
sale through public bidding is the best mode to fulfill its mandate under
R.A. 9136, and that this mode will not contravene the States declared
policy on water resources, then the same is legally permissible.
Finally, in OGCC Opinion No. 107 s. 2008, this Office underscored "the
overriding policy of the State x xx recognizing that water is vital to national
development x xx and the crucial role which the Angat Facility plays in the
uninterrupted and adequate supply and distribution of potable water to
residents of Metro Manila." This Office reiterates "the primacy of the
States interest in mitigating the possible deleterious effects of an
impending "water crisis" encompassing areas even beyond Metro Manila."
Any transfer of the AHEPP to be undertaken by PSALM whether to a
private or public entity must not contravene the States declared policy of
ensuring the flow of clean, potable water under RA 6395 and 9136, and
Presidential Decree 1067. Hence, said transfer and/or privatization scheme
must ensure the preservation of the AHEPP as a vital source of water for
Metro Manila and the surrounding provinces.43(Emphasis supplied.)
On September 16, 2009, NEDA Deputy Director General Rolando G.
Tungpalan, by way of comment to MWSSs position, wrote the DOF stating
that MWSSs concern on ensuring an uninterrupted and adequate supply
of water for domestic use is amply protected and consistently addressed in
the EPIRA. Hence, NEDA concluded that there appears to be no basis to
exclude AHEPP from the list of NPC generation assets to be privatized and
no compelling reason to transfer its management, operations and control to
MWSS.44 NEDA further pointed out that:
Ownership and operation of a hydropower plant, however, goes
beyond the mandate of MWSS. To operate a power generation plant,
given the sectors legislative setup would require certification and permits
that has to be secured by the operator. MWSS does not have the technical
capability to undertake the operation and maintenance of the AHEPP nor
manage the contract of a contracted private party to undertake the task for
MWSS. While MWSS may tap NPC to operate and maintain the AHEPP,
this, similar to contracting out a private party, may entail additional
transaction costs, and ultimately result to higher generation
rates.45 (Emphasis supplied.)
Thereafter, MWSS sought the support of the DPWH in a letter dated
September 24, 2009 addressed to then Secretary Hermogenes E. Ebdane,
Jr., for the exclusion of the AHEPP from the list of NPC assets to be
privatized and instead transfer the ownership, possession and control
thereof to MWSS with reasonable compensation. Acting on the said
request, Secretary Ebdane, Jr. wrote a memorandum for the President
recommending that "the Angat Dam be excluded from the list of NPC
assets to be privatized, and that the ownership, management and control
of the Dam be transferred from NPC to MWSS, with reasonable
compensation."46
Based on the foregoing factual backdrop, there seems to be no dispute as
to the complete jurisdiction of NPC over the government-owned Angat
Dam and AHEPP.
The Angat Reservoir and Dam were constructed from 1964 to 1967 and
have become operational since 1968. They have multiple functions:
1) To provide irrigation to about 31,000 hectares of land in 20
municipalities and towns in Pampanga and Bulacan;
2) To supply the domestic and industrial water requirements of residents in
Metro Manila;
3) To generate hydroelectric power to feed the Luzon Grid; and
4) To reduce flooding to downstream towns and villages.47
The Angat Dam is a rockfill dam with a spillway equipped with three gates
at a spilling level of 219 meters and has storage capacity of about 850
million cubic meters. Water supply to the MWSS is released through five
auxiliary turbines where it is diverted to the two tunnels going to the Ipo
PROPERTY 1ST BATCH
Dam.48 The Angat Dam is one of the dams under the management of NPC
while the La Mesa and Ipo dams are being managed by MWSS. MWSS is
a government corporation existing by virtue of R.A. No. 6234.49 NAPOCOR
or NPC is also a government-owned corporation created under
Commonwealth Act (C.A.) No. 120,50 which, among others, was vested
with the following powers under Sec. 2, paragraph (g):
(g) To construct, operate and maintain power plants, auxiliary plants,
dams, reservoirs, pipes, mains, transmission lines, power stations and
substations, and other works for the purpose of developing hydraulic power
from any river, creek, lake, spring and waterfall in the Philippines and
supplying such power to the inhabitants thereof; to acquire, construct,
install, maintain, operate and improve gas, oil, or steam engines, and/or
other prime movers, generators and other machinery in plants and/or
auxiliary plants for the production of electric power; to establish, develop,
operate, maintain and administer power and lighting system for the use of
the Government and the general public; to sell electric power and to fix the
rates and provide for the collection of the charges for any service rendered:
Provided, That the rates of charges shall not be subject to revision by the
Public Service Commission;
x x x x (Emphasis supplied.)
On September 10, 1971, R.A. No. 6395 was enacted which revised the
charter of NPC, extending its corporate life to the year 2036. NPC
thereafter continued to exercise complete jurisdiction over dams and power
plants including the Angat Dam, Angat Reservoir and AHEPP. While the
NPC was expressly granted authority to construct, operate and maintain
power plants, MWSS was not vested with similar function. Section 3 (f), (o)
and (p) of R.A. No. 6234 provides that MWSSs powers and attributes
include the following
(f) To construct, maintain, and operate dams, reservoirs, conduits,
aqueducts, tunnels, purification plants, water mains, pipes, fire hydrants,
pumping stations, machineries and other waterworks for the purpose of
supplying water to the inhabitants of its territory, for domestic and other
purposes; and to purify, regulate and control the use, as well as prevent
the wastage of water;
xxxx
(o) To assist in the establishment, operation and maintenance of
waterworks and sewerage systems within its jurisdiction under cooperative
basis;
(p) To approve and regulate the establishment and construction of
waterworks and sewerage systems in privately owned subdivisions within
its jurisdiction; x xx. (Emphasis supplied.)
On December 9, 1992, by virtue of R.A. No. 7638,51 NPC was placed
under the Department of Energy (DOE) as one of its attached agencies.
Aside from its ownership and control of the Angat Dam and AHEPP, NPC
was likewise mandated to exercise complete jurisdiction and control over
its watershed, pursuant to Sec. 2 (n) and (o) of R.A. No. 6395 for
development and conservation purposes:
(n) To exercise complete jurisdiction and control over watersheds
surrounding the reservoirs of plants and/or projects constructed or
proposed to be constructed by the Corporation. Upon determination by the
Corporation of the areas required for watersheds for a specific project, the
Bureau of Forestry, the Reforestation Administration and the Bureau of
Lands shall, upon written advice by the Corporation, forthwith surrender
jurisdiction to the Corporation of all areas embraced within the watersheds,
subject to existing private rights, the needs of waterworks systems, and the
requirements of domestic water supply;
(o) In the prosecution and maintenance of its projects, the Corporation
shall adopt measures to prevent environmental pollution and promote the
conservation, development and maximum utilization of natural resources;
and
x x x x (Emphasis supplied.)
On December 4, 1965, Presidential Proclamation No. 505 was issued
amending Proclamation No. 71 by transferring the administration of the
watersheds established in Montalban, San Juan del Monte, Norzagaray,
Angat, San Rafael, Pearanda and Infanta, Provinces of Rizal, Bulacan,
Nueva Ecija and Quezon, to NPC. Subsequent executive issuances
Presidential Decree (P.D.) No. 1515 which was signed in June 1978 and
amended by P.D. No. 1749 in December 1980 led to the creation of the
PROPERTY 1ST BATCH
NPC Watershed Management Division which presently has 11 watershed
areas under its management.52
Privatization of AHEPP Mandatory Under EPIRA
With the advent of EPIRA in 2001, PSALM came into existence for the
principal purpose of managing the orderly sale, privatization and
disposition of generation assets, real estate and other disposable assets of
the NPC including IPP Contracts. Accordingly, PSALM was authorized to
take title to and possession of, those assets transferred to it. EPIRA
mandated that all such assets shall be sold through public bidding with the
exception of Agus and Pulangui complexes in Mindanao, the privatization
of which was left to the discretion of PSALM in consultation with
Congress,53 thus:
Sec. 47. NPC Privatization. Except for the assets of SPUG, the
generation assets, real estate, and other disposable assets as well as IPP
contracts of NPC shall be privatized in accordance with this Act. Within six
(6) months from the effectivity of this Act, the PSALM Corp. shall submit a
plan for the endorsement by the Joint Congressional Power Commission
and the approval of the President of the Philippines, on the total
privatization of the generation assets, x xx of NPC and thereafter,
implement the same, in accordance with the following guidelines, except
as provided for in paragraph (f) herein:
x xxx
(d) All assets of NPC shall be sold in an open and transparent manner
through public bidding, x xx;
x xxx
(f) The Agus and the Pulangui complexes in Mindanao shall be excluded
from among the generation companies that will be initially privatized. Their
ownership shall be transferred to the PSALM Corp. and both shall continue
to be operated by the NPC. Said complexes may be privatized not earlier
than ten (10) years from the effectivity of this Act, x xx.The privatization of
Agus and Pulangui complexes shall be left to the discretion of PSALM
Corp. in consultation with Congress;
x xxx (Emphasis supplied.)
The intent of Congress not to exclude the AHEPP from the privatization of
NPC generation assets is evident from the express provision exempting
only the aforesaid two power plants in Mindanao. Had the legislature
intended that PSALM should likewise be allowed discretion in case of NPC
generation assets other than those mentioned in Sec. 47, it could have
explicitly provided for the same. But the EPIRA exempted from
privatization only those two plants in Mindanao and the Small Power
Utilities Group (SPUG).54 Expressiouniusestexclusioalterius, the express
inclusion of one implies the exclusion of all others.55
It is a settled rule of statutory construction that the express mention of one
person, thing, or consequence implies the exclusion of all others. The rule
is expressed in the familiar maxim, expressiouniusestexclusioalterius.
The rule of expressiouniusestexclusioalterius is formulated in a number of
ways. One variation of the rule is principle that what is expressed puts an
end to that which is implied. Expressiumfacitcessaretacitum. Thus, where a
statute, by its terms, is expressly limited to certain matters, it may not, by
interpretation or construction, be extended to other matters.
x xxx
The rule of expressiouniusestexclusioalterius and its variations are canons
of restrictive interpretation. They are based on the rules of logic and the
natural workings of the human mind. They are predicated upon ones own
voluntary act and not upon that of others. They proceed from the premise
that the legislature would not have made specified enumeration in a statute
had the intention been not to restrict its meaning and confine its terms to
those expressly mentioned.56
The Court therefore cannot sustain the position of petitioners, adopted by
respondent MWSS, that PSALM should have exercised the discretion not
to proceed with the privatization of AHEPP, or at least the availability of the
option to transfer the said facility to another government entity such as
MWSS. Having no such discretion in the first place, PSALM committed no
grave abuse of discretion when it commenced the sale process of AHEPP
pursuant to the EPIRA.
In any case, the Court finds that the operation and maintenance of a
hydroelectric power plant is not among the statutorily granted powers of
MWSS. Although MWSS was granted authority to construct and operate
PROPERTY 1ST BATCH
dams and reservoirs, such was for the specific purpose of supplying water
for domestic and other uses, and the treatment, regulation and control of
water usage, and not power generation.57 Moreover, since the sale of
AHEPP by PSALM merely implements the legislated reforms for the
electric power industry through schemes that aim "to enhance the inflow of
private capital and broaden the ownership base of the power generation,
transmission and distribution sectors,"58 the proposed transfer to MWSS
which is another government entity contravenes that State policy. COA
Circular No. 89-296 likewise has no application to NPC generating assets
which are still serviceable and definitely needed by the Government for the
purpose of liquidating NPCs accumulated debts amounting to billions in
US Dollars. Said administrative circular cannot prevail over the EPIRA, a
special law governing the disposition of government properties under the
jurisdiction of the DOE through NPC.
Sale of Government-Owned AHEPP
to a Foreign Corporation Not Prohibited
But Only Filipino Citizens and Corporations
60% of whose capital is owned by Filipinos
May be Granted Water Rights
The core issue concerns the legal implications of the acquisition by K-
Water of the AHEPP in relation to the constitutional policy on our natural
resources.
Sec. 2, Art. XII of the 1987 Constitution provides in part:
SEC.2. All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities,
or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least
sixty per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and
conditions as may be provided by law. In case of water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of x xxx
water power, beneficial use may be the measure and limit of the grant.
Art. 9. Waters may be appropriated and used in accordance with the
x xxx (Emphasis supplied.) provisions of this Code.

The States policy on the management of water resources is implemented Appropriation of water, as used in this Code, is the acquisition of rights
through the regulation of water rights. Presidential Decree No. 1067, over the use of waters or the taking or diverting of waters from a natural
otherwise known as "The Water Code of the Philippines" is the basic law source in the manner and for any purpose allowed by law.
governing the ownership, appropriation utilization, exploitation,
development, conservation and protection of water resources and rights to Art. 10. Water may be appropriated for the following
land related thereto. The National Water Resources Council (NWRC) was purposes:
created in 1974 under P.D. No. 424 and was subsequently renamed as
National Water Resources Board (NWRB) pursuant to Executive Order No. x xxx
124-A.59 The NWRB is the chief coordinating and regulating agency for all
water resources management development activities which is tasked with
(d) Power generation
the formulation and development of policies on water utilization and
appropriation, the control and supervision of water utilities and franchises,
and the regulation and rationalization of water rates.60 x xxx

The pertinent provisions of Art. 3, P.D. No. 1067 provide: Art. 13. Except as otherwise herein provided, no person including
government instrumentalities or government-owned or controlled
corporations, shall appropriate water without a water right, which shall be
Art. 3. The underlying principles of this code are:
evidenced by a document known as a water permit.
a. All waters belong to the State.
Water right is the privilege granted by the government to appropriate and
use water.
b. All waters that belong to the State can not be the subject
to acquisitive prescription.
x xxx
c. The State may allow the use or development of waters
Art. 15. Only citizens of the Philippines, of legal age, as well as juridical
by administrative concession.
persons, who are duly qualified by law to exploit and develop water
resources, may apply for water permits. (Emphasis supplied.)
d. The utilization, exploitation, development, conservation
and protection of water resources shall be subject to the
It is clear that the law limits the grant of water rights only to Filipino citizens
control and regulation of the government through the
and juridical entities duly qualified by law to exploit and develop water
National Water Resources Council x xx
resources, including private corporations with sixty percent of their capital
owned by Filipinos. In the case of Angat River, the NWRB has issued
e. Preference in the use and development of waters shall separate water permits to MWSS, NPC and NIA.61
consider current usages and be responsive to the changing
needs of the country.
Under the EPIRA, the generation of electric power, a business affected
with public interest, was opened to private sector and any new generation

PROPERTY 1ST BATCH

company is required to secure a certificate of compliance from the Energy
Regulatory Commission (ERC), as well as health, safety and
environmental clearances from the concerned government agencies.
Power generation shall not be considered a public utility operation,62 and
hence no franchise is necessary. Foreign investors are likewise allowed
entry into the electric power industry. However, there is no mention of
water rights in the privatization of multi-purpose hydropower facilities.
Section 47 (e) addressed the issue of water security, as follows:
(e) In cases of transfer of possession, control, operation or privatization of
multi-purpose hydro facilities, safeguards shall be prescribed to ensure that
the national government may direct water usage in cases of shortage to
protect potable water, irrigation, and all other requirements imbued with
public interest;
x xxx (Emphasis supplied.)
This provision is consistent with the priority accorded to domestic and
municipal uses of water63 under the Water Code, thus:
Art. 22. Between two or more appropriators of water from the same
sources of supply, priority in time of appropriation shall give the better right,
except that in times of emergency the use of water for domestic and
municipal purposes shall have a better right over all other uses; Provided,
That, where water shortage is recurrent and the appropriator for municipal
use has a lower priority in time of appropriation, then it shall be his duty to
find an alternative source of supply in accordance with conditions
prescribed by the Board. (Emphasis supplied.)
Rule 23, Section 6 of the Implementing Rules and Regulations (IRR) of the
EPIRA provided for the structure of appropriation of water resources in
multi-purpose hydropower plants which will undergo privatization, as
follows:
Section 6. Privatization of Hydroelectric Generation Plants.
(a) Consistent with Section 47(e) of the Act and Section 4(f) of this Rule,
the Privatization of hydro facilities of NPC shall cover the power
component including assignable long-term water rights agreements for the
use of water, which shall be passed onto and respected by the buyers of
the hydroelectric power plants.
PROPERTY 1ST BATCH
(b) The National Water Resources Board (NWRB) shall ensure that the
allocation for irrigation, as indicated by the NIA and requirements for
domestic water supply as provided for by the appropriate Local Water
District(s) are recognized and provided for in the water rights agreements.
NPC or PSALM may also impose additional conditions in the shareholding
agreement with the winning bidders to ensure national security, including,
but not limited to, the use of water during drought or calamity.
(c) Consistent with Section 34(d) of the Act, the NPC shall continue to be
responsible for watershed rehabilitation and management and shall be
entitled to the environmental charge equivalent to one-fourth of one
centavo per kilowatt-hour sales (P0.0025/kWh), which shall form part of the
Universal Charge. This environmental fund shall be used solely for
watershed rehabilitation and management and shall bemanaged by NPC
under existing arrangements. NPC shall submit an annual report to the
DOE detailing the progress of the water shed rehabilitation program.
(d) The NPC and PSALM or NIA, as the case may be, shall continue to be
responsible for the dam structure and all other appurtenant structures
necessary for the safe and reliable operation of the hydropower plants. The
NPC and PSALM or NIA, as the case may be, shall enter into an
operations and maintenance agreement with the private operator of the
power plant to cover the dam structure and all other appurtenant facilities.
(Emphasis supplied.)
In accordance with the foregoing implementing regulations, and in
furtherance of the Asset Purchase Agreement64(APA), PSALM, NPC and
K-Water executed on April 28, 2010 an Operations and Maintenance
Agreement65 (O & M Agreement) for the administration, rehabilitation,
operation, preservation and maintenance, by K-Water as the eventual
owner of the AHEPP, of the Non-Power Components meaning the Angat
Dam, non-power equipment, facilities, installations, and appurtenant
devices and structures, including the water sourced from the Angat
Reservoir.
It is the position of PSALM that as the new owner only of the hydroelectric
power plant, K-Water will be a mere operator of the Angat Dam. In the
power generation activity, K-Water will have to utilize the waters already
extracted from the river and impounded on the dam. This process of
generating electric power from the dam water entering the power plant thus
does not constitute appropriation within the meaning of natural resource
utilization in the Constitution and the Water Code.
The operation of a typical hydroelectric power plant has been described as
follows:
Hydroelectric energy is produced by the force of falling water. The capacity
to produce this energy is dependent on both the available flow and the
height from which it falls. Building up behind a high dam, water
accumulates potential energy. This is transformed into mechanical energy
when the water rushes down the sluice and strikes the rotary blades of
turbine. The turbine's rotation spins electromagnets which generate current
in stationary coils of wire. Finally, the current is put through a transformer
where the voltage is increased for long distance transmission over power
lines.66
Foreign ownership of a hydropower facility is not prohibited under existing
laws. The construction, rehabilitation and development of hydropower
plants are among those infrastructure projects which even wholly-owned
foreign corporations are allowed to undertake under the Amended Build-
Operate-Transfer (Amended BOT) Law (R.A. No. 7718).67
Beginning 1987, the policy has been openness to foreign investments as
evident in the fiscal incentives provided for the restructuring and
privatization of the power industry in the Philippines, under the Power
Sector Restructuring Program (PSRP) of the Asian Development Bank.
The establishment of institutional and legal framework for the entry of
private sector in the power industry began with the issuance by President
Corazon C. Aquino of Executive Order No. 215 in 1987. Said order allowed
the entry of private sector the IPPs to participate in the power
generation activities in the country. The entry of IPPs was facilitated and
made attractive through the first BOT Law in 1990 (R.A. No. 6957) which
aimed to "minimize the burden of infrastructure projects on the national
government budget, minimize external borrowing for infrastructure projects,
and use the efficiency of the private sector in delivering a public good." In
1993, the Electric Power Crisis Act was passed giving the President
emergency powers to urgently address the power crisis in the
country.68 The full implementation of the restructuring and privatization of
the power industry was achieved when Congress passed the EPIRA in
2001.
PROPERTY 1ST BATCH
With respect to foreign investors, the nationality issue had been framed in
terms of the character or nature of the power generation process itself, i.e.,
whether the activity amounts to utilization of natural resources within the
meaning of Sec. 2, Art. XII of the Constitution. If so, then foreign
companies cannot engage in hydropower generation business; but if not,
then government may legally allow even foreign-owned companies to
operate hydropower facilities.
The DOJ has consistently regarded hydropower generation by foreign
entities as not constitutionally proscribed based on the definition of water
appropriation under the Water Code, thus:
Opinion No. 173, 1984
This refers to your request for opinion on the possibility of granting water
permits to foreign corporations authorized to do business in the Philippines
x xx
x xxx
x xx while the Water Code imposes a nationality requirement for the grant
of water permits, the same refers to the privilege "to appropriate and use
water." This should be interpreted to mean the extraction of water from its
natural source (Art. 9, P.D. No. 1067). Once removed therefrom, they
cease to be a part of the natural resources of the country and are the
subject of ordinary commerce and may be acquired by foreigners (Op. No.
55, series of 1939). x xx in case of a contract of lease, the water permit
shall be secured by the lessor and included in the lease as an
improvement. The water so removed from the natural source may be
appropriated/used by the foreign corporation leasing the property.
Opinion No. 14, S. 1995
The nationality requirement imposed by the Water Code refers to the
privilege "to appropriate and use water." This, we have consistently
interpreted to mean the extraction of water directly from its natural source.
Once removed from its natural source the water ceases to be a part of the
natural resources of the country and may be subject of ordinary commerce
and may even be acquired by foreigners. (Secretary of Justice Op. No.
173, s. 1984; No. 24, s. 1989; No. 100 s. 1994)
In fine, we reiterate our earlier view that a foreign entity may legally
process or treat water after its removal from a natural source by a qualified
person, natural or juridical.
Opinion No. 122, s. 1998
The crucial issue at hand is the determination of whether the utilization of
water by the power plant to be owned and operated by a foreign-owned
corporation (SRPC) will violate the provisions of the Water Code.
As proposed, the participation of SRPC to the arrangement commences
upon construction of the power station, consisting of a dam and a power
plant. After the completion of the said station, its ownership and control
shall be turned over to NPC. However, SRPC shall remain the owner of the
power plant and shall operate it for a period of twenty-five (25) years.
It appears that the dam, which will be owned and controlled by NPC, will
block the natural flow of the river. The power plant, which is situated next
to it, will entirely depend upon the dam for its water supply which will pass
through an intake gate situated one hundred (100) meters above the
riverbed. Due to the distance from the riverbed, water could not enter the
power plant absent the dam that traps the flow of the river. It appears
further that no water shall enter the power tunnel without specific dispatch
instructions from NPC, and such supplied water shall be used only by
SRPC for power generation and not for any other purpose. When electricity
is generated therein, the same shall be supplied to NPC for distribution to
the public. These facts x xx viewed in relation to the Water Code,
specifically Article 9 thereof, x xx clearly show that there is no
circumvention of the law.
This Department has declared that the nationality requirement imposed by
the Water Code refers to the privilege "to appropriate and use water" and
has interpreted this phrase to mean the extraction of water directly from its
natural source (Secretary of Justice Opinion No. 14, s. 1995). "Natural" is
defined as that which is produced without aid of stop, valves, slides, or
other supplementary means (see Websters New International Dictionary,
Second Edition, p. 1630). The water that is used by the power plant could
not enter the intake gate without the dam, which is a man-made structure.
Such being the case, the source of the water that enters the power plant is
of artificial character rather than natural. This Department is consistent in
ruling, that once water is removed from its natural source, it ceases to be a
PROPERTY 1ST BATCH
part of the natural resources of the country and may be the subject of
ordinary commerce and may even be acquired by foreigners. (Ibid., No.
173, s. 1984; No. 24, s. 1989; No. 100, s. 1994).
It is also significant to note that NPC, a government-owned and controlled
corporation, has the effective control over all elements of the extraction
process, including the amount and timing thereof considering that x xx the
water will flow out of the power tunnel and through the power plant, to be
used for the generation of electricity, only when the Downstream Gates are
opened, which occur only upon the specific water release instructions
given by NPC to SRPC. This specific feature of the agreement, taken
together with the above-stated analysis of the source of water that enters
the plant, support the view that the nationality requirement embodied in
Article XII, Section 2 of the present Constitution and in Article 15 of the
Water Code, is not violated.69
(Emphasis supplied.)
The latest executive interpretation is stated in DOJ Opinion No. 52, s. 2005
which was rendered upon the request of PSALM in connection with the
proposed sale structure for the privatization of hydroelectric and
geothermal generation assets (Gencos) of NPC. PSALM sought a ruling on
the legality of its proposed privatization scheme whereby the non-power
components (dam, reservoir and appurtenant structures and watershed
area) shall be owned by the State through government entities like NPC or
NIA which shall exercise control over the release of water, while the
ownership of the power components (power plant and related facilities) is
open to both Filipino citizens/corporations and 100% foreign-owned
corporations.
Sustaining the position of PSALM, then Secretary Raul M. Gonzalez
opined:
Premised on the condition that only the power components shall be
transferred to the foreign bidders while the non-power
components/structures shall be retained by state agencies concerned, we
find that both PSALMs proposal and position are tenable.
x xxx
x xx as ruled in one case by a U.S. court:
Where the State of New York took its natural resources consisting of
Saratoga Spring and, through a bottling process, put those resources into
preserved condition where they could be sold to the public in competition
with private waters, the state agencies were not immune from federal taxes
imposed upon bottled waters on the theory that state was engaged in the
sale of "natural resources."
Applied to the instant case, and construed in relation to the earlier-
mentioned constitutional inhibition, it would appear clear that while both
waters and geothermal steam are, undoubtedly "natural resources", within
the meaning of Section 2 Article XII of the present Constitution, hence,
their exploitation, development and utilization should be limited to Filipino
citizens or corporations or associations at least sixty per centum of the
capital of which is owned by Filipino citizens, the utilization thereof can be
opened even to foreign nationals, after the same have been extracted from
the source by qualified persons or entities. The rationale is because, since
they no longer form part of the natural resources of the country, they
become subject to ordinary commerce.
A contrary interpretation, i.e., that the removed or extracted natural
resources would remain inalienable especially to foreign nationals, can
lead to absurd consequences, e.g. that said waters and geothermal steam,
and any other extracted natural resources, cannot be acquired by foreign
nationals for sale within or outside the country, which could not have been
intended by the framers of the Constitution.
The fact that under the proposal, the non-power components and
structures shall be retained and maintained by the government entities
concerned is, to us, not only a sufficient compliance of constitutional
requirement of "full control and supervision of the State" in the exploitation,
development and utilization of natural resources. It is also an enough
safeguard against the evil sought to be avoided by the constitutional
reservation x xx.70 (Italics in the original, emphasis supplied.)
Appropriation of water, as used in the Water Code refers to the "acquisition
of rights over the use of waters or the taking or diverting of waters from a
natural source in the manner and for any purpose allowed by law."71 This
definition is not as broad as the concept of appropriation of water in
American jurisprudence:
PROPERTY 1ST BATCH
An appropriation of water flowing on the public domain consists in the
capture, impounding, or diversion of it from its natural course or channel
and its actual application to some beneficial use private or personal to the
appropriator, to the entire exclusion (or exclusion to the extent of the water
appropriated) of all other persons. x xx72
On the other hand, "water right" is defined in the Water Code as the
privilege granted by the government to appropriate and use
water.73 Blacks Law Dictionary defined "water rights" as "a legal right, in
the nature of a corporeal hereditament, to use the water of a natural
stream or water furnished through a ditch or canal, for general or specific
purposes, such as irrigation, mining, power, or domestic use, either to its
full capacity or to a measured extent or during a defined portion of the
time," or "the right to have the water flow so that some portion of it may be
reduced to possession and be made private property of individual, and it is
therefore the right to divert water from natural stream by artificial means
and apply the same to beneficial use."74
Under the Water Code concept of appropriation, a foreign company may
not be said to be "appropriating" our natural resources if it utilizes the
waters collected in the dam and converts the same into electricity through
artificial devices. Since the NPC remains in control of the operation of the
dam by virtue of water rights granted to it, as determined under DOJ
Opinion No. 122, s. 1998, there is no legal impediment to foreign-owned
companies undertaking the generation of electric power using waters
already appropriated by NPC, the holder of water permit. Such was the
situation of hydropower projects under the BOT contractual arrangements
whereby foreign investors are allowed to finance or undertake construction
and rehabilitation of infrastructure projects and/or own and operate the
facility constructed. However, in case the facility requires a public utility
franchise, the facility operator must be a Filipino corporation or at least
60% owned by Filipino.75
With the advent of privatization of the electric power industry which
resulted in its segregation into four sectors -- generation, transmission,
distribution and supply NPCs generation and transmission functions
were unbundled. Power generation and transmission were treated as
separate sectors governed by distinct rules under the new regulatory
framework introduced by EPIRA. The National Transmission Corporation
(TRANSCO) was created to own and operate the transmission assets and
perform the transmission functions previously under NPC. While the NPC
continues to undertake missionary electrification programs through the
SPUG, PSALM was also created to liquidate the assets and liabilities of
NPC.
Under the EPIRA, NPCs generation function was restricted as it was
allowed to "generate and sell electricity only from the undisposed
generating assets and IPP contracts of PSALM" and was prohibited from
incurring "any new obligations to purchase power through bilateral
contracts with generation companies or other suppliers."76 PSALM, on the
other hand, was tasked "to structure the sale, privatization or disposition of
NPC assets and IPP contracts and/or their energy output based on such
terms and conditions which shall optimize the value and sale prices of said
assets."77 In the case of multi-purpose hydropower plants, the IRR of R.A.
No. 9136 provided that their privatization would extend to water rights
which shall be transferred or assigned to the buyers thereof, subject to
safeguards mandated by Sec. 47(e) to enable the national government to
direct water usage in cases of shortage to protect water requirements
imbued with public interest.
Accordingly, the Asset Purchase Agreement executed between PSALM
and K-Water stipulated:
2.04 Matters Relating to the Non-Power Component
x xxx
Matters relating to Water Rights
NPC has issued a certification (the "Water Certification") wherein NPC
consents, subject to Philippine Law, to the (i) transfer of the Water Permit
to the BUYER or its Affiliate, and (ii) use by the BUYER or its Affiliate of the
water covered by the Water Permit from Closing Date up to a maximum
period of one (1) year thereafter to enable the BUYER to appropriate and
use water sourced from Angat reservoir for purposes of power generation;
provided, that should the consent or approval of any Governmental Body
be required for either (i) or (ii), the BUYER must secure such consent or
approval. The BUYER agrees and shall fully comply with the Water Permit
and the Water Certification. x xx
x xxx
Multi-Purpose Facility
PROPERTY 1ST BATCH
The BUYER is fully aware that the Non-Power Components is a multi-
purpose hydro-facility and the water is currently being appropriated for
domestic use, municipal use, irrigation and power generation. Anything in
this Agreement notwithstanding, the BUYER shall, at all times even after
the Payment Date, fully and faithfully comply with Philippine Law, including
the Instructions, the Rule Curve and Operating Guidelines and the Water
Protocol.78 (Emphasis supplied.)
Lease or transfer of water rights is allowed under the Water Code, subject
to the approval of NWRB after due notice and hearing.79 However, lessees
or transferees of such water rights must comply with the citizenship
requirement imposed by the Water Code and its IRR. But regardless of
such qualification of water permit holders/transferees, it is to be noted that
there is no provision in the EPIRA itself authorizing the NPC to assign or
transfer its water rights in case of transfer of operation and possession of
multi-purpose hydropower facilities. Since only the power plant is to be
sold and privatized, the operation of the non-power components such as
the dam and reservoir, including the maintenance of the surrounding
watershed, should remain under the jurisdiction and control of NPC which
continue to be a government corporation. There is therefore no necessity
for NPC to transfer its permit over the water rights to K-Water. Pursuant to
its purchase and operation/management contracts with K-Water, NPC may
authorize the latter to use water in the dam to generate electricity.
NPCs water rights remain an integral aspect of its jurisdiction and control
over the dam and reservoir. That the EPIRAitselfdid not ordain any transfer
of water rights leads us to infer that Congress intended NPC to continue
exercising full supervision over the dam, reservoir and, more importantly,
to remain in complete control of the extraction or diversion of water from
the Angat River. Indeed, there can be no debate that the best means of
ensuring that PSALM/NPC can fulfill the duty to prescribe "safeguards to
enable the national government to direct water usage to protect potable
water, irrigation, and all other requirements imbued with public interest" is
for it to retain the water rights over those water resources from where the
dam waters are extracted. In this way, the States full supervision and
control over the countrys water resources is also assured notwithstanding
the privatized power generation business.
Section 6 (a) of the IRR of R.A. No. 9136 insofar as it directs the transfer of
water rights in the privatization of multi-purpose hydropower facilities, is
thus merely directory.
It is worth mentioning that the Water Code explicitly provides that Filipino
citizens and juridical persons who may apply for water permits should be
"duly qualified by law to exploit and develop water resources."
Thus, aside from the grant of authority to construct and operate dams and
power plants, NPCs Revised Charter specifically authorized it
(f) To take water from any public stream, river, creek, lake, spring or
waterfall in the Philippines, for the purposes specified in this Act; to
intercept and divert the flow of waters from lands of riparian owners and
from persons owning or interested in waters which are or may be
necessary for said purposes, upon payment of just compensation therefor;
to alter, straighten, obstruct or increase the flow of water in streams or
water channels intersecting or connecting therewith or contiguous to its
works or any part thereof: Provided, That just compensation shall be paid
to any person or persons whose property is, directly or indirectly, adversely
affected or damaged thereby.80
The MWSS is likewise vested with the power to construct, maintain and
operate dams and reservoirs for the purpose of supplying water for
domestic and other purposes, as well to construct, develop, maintain and
operate such artesian wells and springs as may be needed in its operation
within its territory.81 On the other hand, NIA, also a water permit holder in
Angat River, is vested with similar authority to utilize water resources, as
follows:
(b) To investigate all available and possible water resources in the country
for the purpose of utilizing the same for irrigation, and to plan, design and
construct the necessary projects to make the ten to twenty-year period
following the approval of this Act as the Irrigation Age of the Republic of
the Philippines;82
(c) To construct multiple-purpose water resources projects designed
primarily for irrigation, and secondarily for hydraulic power development
and/or other uses such as flood control, drainage, land reclamation,
domestic water supply, roads and highway construction and reforestation,
among others, provided, that the plans, designs and the construction
thereof, shall be undertaken in coordination with the agencies concerned;83
To reiterate, there is nothing in the EPIRAwhich declares that it is
mandatory for PSALM or NPC to transfer or assign NPCs water rights to
PROPERTY 1ST BATCH
buyers of its multi-purpose hydropower facilities as part of the privatization
process. While PSALM was mandated to transfer the ownership of all
hydropower plants except those mentioned in Sec. 47 (f), any transfer of
possession, operation and control of the multi-purpose hydropower
facilities, the intent to preserve water resources under the full supervision
and control of the State is evident when PSALM was obligated to prescribe
safeguards to enable the national government to direct water usage to
domestic and other requirements "imbued with public interest." There is no
express requirement for the transfer of water rights in all cases where the
operation of hydropower facilities in a multi-purpose dam complex is turned
over to the private sector.
As the new owner of the AHEPP, K-Water will have to utilize the waters in
the Angat Dam for hydropower generation. Consistent with the goals of the
EPIRA, private entities are allowed to undertake power generation
activities and acquire NPCs generation assets. But since only the
hydroelectric power plants and appurtenances are being sold, the
privatization scheme should enable the buyer of a hydroelectric power
plant in NPCs multi-purpose dam complex to have beneficialuse of the
waters diverted or collected in the Angat Dam for its hydropower
generation activities, and at the same time ensure that the NPC retains full
supervision and control over the extraction and diversion of waters from
the Angat River.
In fine, the Court rules that while the sale of AHEPP to a foreign
corporation pursuant to the privatization mandated by the EPIRA did not
violate Sec. 2, Art. XII of the 1987 Constitution which limits the exploration,
development and utilization of natural resources under the full supervision
and control of the State or the States undertaking the same through joint
venture, co-production or production sharing agreements with Filipino
corporations 60% of the capital of which is owned by Filipino citizens, the
stipulation in the Asset Purchase Agreement and Operations and
Maintenance Agreement whereby NPC consents to the transfer of water
rights to the foreign buyer, K-Water, contravenes the aforesaid
constitutional provision and the Water Code.
1wphi1
Section 6, Rule 23 of the IRR of EPIRA, insofar as it ordered NPCs water
rights in multi-purpose hydropower facilities to be included in the sale
thereof, is declared as merely directoryand not an absolute condition in the
privatization scheme. In this case, we hold that NPC shall continue to be
the holder of the water permit even as the operational control and day-to-
day management of the AHEPP is turned over to K-Water under the terms
and conditions of their APA and O & M Agreement, whereby NPC grants
authority to K-Water to utilize the waters diverted or collected in the Angat
Dam for hydropower generation. Further, NPC and K-Water shall faithfully
comply with the terms and conditions of the Memorandum of Agreement
on Water Protocol, as well as with such other regulations and issuances of
the NWRB governing water rights and water usage.
WHEREFORE, the present petition for certiorari and prohibition with prayer
for injunctive relief/s is PARTLY GRANTED.
The following DISPOSITIONS are in ORDER:
1) The bidding conducted and the Notice of Award issued by
PSALM in favor of the winning bidder, KOREA WATER
RESOURCES CORPORATION (K-WATER), are declared VALID
and LEGAL;
2) PSALM is directed to FURNISH the petitioners with copies of all
documents and records in its files pertaining to K-Water;
3) Section 6 (a), Rule 23, IRR of the EPIRA, is hereby declared as
merely DIRECTORY, and not an absolute condition in all cases
where NPC-owned hydropower generation facilities are privatized;
4) NPC shall CONTINUE to be the HOLDER of Water Permit No.
6512 issued by the National Water Resources Board. NPC shall
authorize K-Water to utilize the waters in the Angat Dam for
hydropower generation, subject to the NWRBs rules and
regulations governing water right and usage. The Asset Purchase
Agreement and Operation & Management Agreement between
NPC/PSALM and K- Water are thus amended accordingly.
Except for the requirement of securing a water permit, K-Water
remains BOUND by its undertakings and warranties under the APA
and O & M Agreement;
5) NPC shall be a CO-PARTY with K-Water in the Water Protocol
Agreement with MWSS and NIA, and not merely as a conforming
authority or agency; and
PROPERTY 1ST BATCH
6) The Status Quo Ante Order issued by this Court on May 24,
2010 is hereby LIFTED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 157285 February 16, 2007
WOODRIDGE SCHOOL, INC., and MIGUELA JIMENEZ-
JAVIER, Petitioners,
vs.
ARB CONSTRUCTION CO., INC., Respondent.
DECISION
CORONA, J.:
Petitioners Woodridge School, Inc. (Woodridge) and Miguela Jimenez-
Javier come to us assailing the decision1dated September 30, 2002 and
resolution2 dated February 14, 2003 of the Court of Appeals in CA-G.R. CV
No. 515333 which, in turn, modified the ruling of the Regional Trial Court
(RTC) of Imus, Cavite awarding P500,000 to respondent ARB Construction
Co., Inc. (ARB) as reasonable indemnity for the use of ARB's road lot.3
Woodridge is the usufructuary of a parcel of land covered by Transfer
Certificate of Title (TCT) No. T-363902 in the name of spouses Ernesto T.
Matugas and Filomena U. Matugas. Its co-petitioner, Miguela Jimenez-
Javier, is the registered owner of the adjacent lot under TCT No. T-330688.
On the other hand, ARB is the owner and developer of Soldiers Hills
Subdivision in Bacoor, Cavite, which is composed of four phases. Phase I
of the subdivision was already accessible from the Marcos Alvarez
Avenue. To provide the same accessibility to the residents of Phase II of
the subdivision, ARB constructed the disputed road to link the two phases.
As found by the appellate court, petitioners' properties sit right in the
middle of several estates: Phase I of Soldiers Hills Subdivision in the north,
a creek in the east and Green Valley Subdivision the farther east, a road
within Soldiers Hills Subdivision IV which leads to the Marcos Alvarez
Avenue in the west and Phase III of Soldiers Hills Subdivision in the south.
Initially, petitioners offered to pay ARB P50,000 as indemnity for the use of
the road. Adamant, ARB refused the offer and fenced the perimeter of the
road fronting the properties of petitioners. By doing so, ARB effectively cut
off petitioners' access to and from the public highway.
After failing to settle the matter amicably, petitioners jointly filed a
complaint4 in the RTC of Imus, Cavite to enjoin ARB from depriving them of
the use of the disputed subdivision road and to seek a compulsory right of
way after payment of proper indemnity. On November 24, 1995, the trial
court rendered its decision in favor of petitioners:
The reasons why this case is not one for a right of way as an easement are
not difficult to discern.
The questioned road is part and parcel of the road network of Soldiers Hills
IV, Phase II. This road was constructed pursuant to the approved
subdivision plan of Soldiers Hills IV, Phase II. As such, the road has
already been withdrawn from the commerce of men as the ownership of
which was automatically vested in the government without need of any
compensation, although it is still registered in the name of the [ARB], the
moment the subdivision plan was approved. While it is not yet donated to
the government [,] [it] is of no moment for donating this road to the
government is a mere formality.
Differently stated, the government automatically becomes the owner of the
subdivisions' roads the moment the subdivision plan is approved. From
that time on, the roads are withdrawn from the commerce of men even [if]
the titles are still registered in the name of the subdivision owners and the
roads are not yet donated to the government. Thus, the subdivision owner
can no longer sell or alienate the roads for they are already owned by the
government; thus, even if [petitioners] want to buy this road, and the [ARB]
wants to sell the same, this transaction cannot materialize for the above-
stated reasons. Accordingly, [ARB] cannot prevent/prohibit plaintiffs from
using the road as the same belongs to the government.
xxx xxx xxx
PROPERTY 1ST BATCH
WHEREFORE, [ARB] is ordered to cease and desist from preventing
[petitioners] in using the subject road or any other road in the subdivision.
xxx xxx xxx
SO ORDERED. 5 (citations omitted)
ARB elevated the case to the Court of Appeals.6 Finding merit in the
appeal, the appellate court reversed the decision of the lower court. It
explained that the 1991 case of White Plains Subdivision[7] did not apply
to the present case which was decided under a different factual milieu:
In the assailed Decision, the Court below relied on the ruling of the
Supreme Court in White Plains Association, Inc. vs. Legaspi (193 SCRA
765). The ruling is not applicable. In the White Plains case, the disputed
area was specifically set aside by the Quezon City Government, with the
concurrence of the owner and developer of the White Plains Subdivision in
Quezon City, for the purpose of constructing a major thoroughfare open to
the general public. The case was filed by the association of homeowners of
White Plains in Quezon City when the owner-developer sought to
convert the disputed lot to residential lots. The Supreme Court initially held
that the disputed lot was not longer within the commerce of men, it having
been segregated for a particular purpose, that of being used as "part of a
mandatory open space reserved for public use to be improved into the
widened Katipunan Road". It was within this context that the Supreme
Court held that "ownership was automatically vested in the Quezon City
government and/or the Republic of the Philippines, without need of paying
any compensation".8
The appellate court went on to rule that a compulsory right of way exists in
favor of petitioners as "[t]here is no other existing adequate outlet to and
from [petitioners'] properties to the Marcos Alvarez Avenue other than the
subject existing road lot designated as Lot No. 5827-F-1 belonging to
[ARB]."9 In addition, it awarded P500,000 to ARB as reasonable indemnity
for the use of the road lot.
Acting on petitioners' motion for reconsideration, the appellate court
justified the monetary award in this manner:
In [o]ur Decision, [w]e awarded the amount of P500,000.00 merely as
reasonable indemnity for the use of the road lot, not the alienation thereof.
The amount was based on equitable considerations foremost of which is
that, while there is no alienation to speak of, the easement is of long-
standing, that is, until a shorter and adequate outlet is established.
Moreover, [ARB] should be compensated for the wear and tear that
[petitioners'] use of the road would contribute to; it is [ARB] which is solely
to be credited for the completion of the road lot. Going by the conservative
valuation of the Municipality of Bacoor, Cavite presented by [petitioners],
the 4,760 sq. m. road lot would cost P1,904,000 but as stated what is
compensated is the use of the road lot not its alienation.
[Petitioners'] original offer cannot be considered a reasonable indemnity,
there being a knotty legal question involved and it is not [ARB's] fault that
the parties had to resort to the courts for a resolution.10
Unsatisfied with the ruling of the appellate court, petitioners filed this
petition for review on certiorari insisting that ARB is not entitled to be paid
any indemnity.
Petitioners argue that the contested road lot is a property of public
dominion pursuant to Article 42011 of the Civil Code. Specifically,
petitioners point out that the disputed road lot falls under the category
"others of similar character" which is the last clause of Article 420
(1).12 Hence, it is a property of public dominion which can be used by the
general public without need for compensation. Consequently, it is wrong
for ARB to exclude petitioners from using the road lot or to make them pay
for the use of the same.
We disagree.
In the case of Abellana, Sr. v. Court of Appeals,13 the Court held that "the
road lots in a private subdivision are private property, hence, the local
government should first acquire them by donation, purchase, or
expropriation, if they are to be utilized as a public road."14 Otherwise, they
remain to be private properties of the owner-developer.
Contrary to the position of petitioners, the use of the subdivision roads by
the general public does not strip it of its private character. The road is not
converted into public property by mere tolerance of the subdivision owner
of the public's passage through it. To repeat, "the local government should
first acquire them by donation, purchase, or expropriation, if they are to be
utilized as a public road."15
PROPERTY 1ST BATCH
Likewise, we hold the trial court in error when it ruled that the subject road
is public property pursuant to Section 2 of Presidential Decree No.
1216.16 The pertinent portion of the provision reads:
Section 2. xxx xxx xxx
Upon their completion as certified to by the Authority, the roads, alleys,
sidewalks and playgrounds shall be donated by the owner or developer to
the city or municipality and it shall be mandatory for the local governments
to accept them provided, however, that the parks and playgrounds may be
donated to the Homeowners Association of the project with the consent of
the city or municipality concerned
The law is clear. The transfer of ownership from the subdivision owner-
developer to the local government is not automatic but requires a positive
act from the owner-developer before the city or municipality can acquire
dominion over the subdivision roads. Therefore, until and unless the roads
are donated,17 ownership remains with the owner-developer.18
Since no donation has been made in favor of any local government and the
title to the road lot is still registered in the name of ARB, the disputed
property remains private.
This is not to say that ARB may readily exclude petitioners from passing
through the property. As correctly pointed out by the Court of Appeals, the
circumstances clearly make out a case of legal easement of right of way. It
is an easement which has been imposed by law and not by the parties and
it has "for (its) object either public use or the interest of private persons."19
To be entitled to a legal easement of right of way, the following requisites
must concur: (1) the dominant estate is surrounded by other immovables
and has no adequate outlet to a public highway; (2) payment of proper
indemnity; (3) the isolation was not due to acts of the proprietor of the
dominant estate and (4) the right of way claimed is at the point least
prejudicial to the servient estate.20
The appellate and trial courts found that the properties of petitioners are
enclosed by other estates without any adequate access to a public
highway except the subject road lot which leads to Marcos Alvarez
Avenue.21 Although it was shown that the shortest distance from the
properties to the highway is toward the east across a creek, this alternative
route does not provide an adequate outlet for the students of the proposed
school. This route becomes marshy as the creek overflows during the rainy
season and will endanger the students attending the school.
All told, the only requisite left unsatisfied is the payment of proper
indemnity.
Petitioners assert that their initial offer of P50,000 should be sufficient
compensation for the right of way. Further, they should not be held
accountable for the increase in the value of the property since the delay
was attributable to the stubborn refusal of ARB to accept their offer.22
Again, we are not persuaded.
In the case of a legal easement, Article 649 of the Civil Code prescribes
the parameters by which the proper indemnity may be fixed. Since the
intention of petitioners is to establish a permanent passage, the second
paragraph of Article 649 of the Civil Code particularly applies:
Art 649. xxx xxx xxx
Should this easement be established in such a manner that its use may be
continuous for all the needs of the dominant estate, establishing a
permanent passage, the indemnity shall consist of the value of the
land occupied and the amount of the damage caused to the servient
estate. xxx. (Emphasis supplied)
On that basis, we further hold that the appellate court erred
in arbitrarily awarding indemnity for the use of the road lot.
The Civil Code categorically provides for the measure by which the proper
indemnity may be computed: value of the land occupied plus the amount of
the damage caused to the servient estate. Settled is the rule in statutory
construction that "when the law is clear, the function of the courts is simple
application."23 Thus, to award the indemnity using factors different from that
given by the law is a complete disregard of these clear statutory provisions
and is evidently arbitrary. This the Court cannot countenance. The Civil
Code has clearly laid down the parameters and we cannot depart from
them. Verba legis non est recedendum.
PROPERTY 1ST BATCH
Having settled the legal issues, we order the remand of this case to the
trial court for reception of evidence and determination of the limits of the
property to be covered by the easement, the proper indemnity to be paid
and the respective contributions of petitioners.
For the guidance of the trial court, the fact that the disputed road lot is used
by the general public may be taken in consideration to mitigate the amount
of damage that the servient estate is entitled to, in the sense that the wear
and tear of the subject road is not entirely attributable to petitioners.
WHEREFORE, this petition is partially GRANTED. The September 30,
2002 Decision and February 14, 2003 resolution of the Court of Appeals in
CA-G.R. CV No. 515333 are ANNULLED and SET ASIDE in so far as
petitioners are ordered to pay an indemnity of P500,000. The case is
hereby remanded to the trial court for reception of evidence and
determination of the limits of the property to be covered by the easement,
the proper indemnity to be paid and the respective contributions of
petitioners.
SO ORDERED.
G.R. No. L-21024 July 28, 1969
CENON MATEO, petitioner-appellant,
vs.
HON. FLORENCIO MORENO, in his capacity as SECRETARY OF
PUBLIC WORKS AND COMMUNICATIONS, defendant-appellee.
Antonio M. Albano and C.S. de Guzman for petitioner-appellant.
Office of the Solicitor General for defendant-appellee.
MAKALINTAL, J.:
This case, elevated to the Court of Appeals by the petitioner for review of
the decision of the Court of First Instance of Manila dismissing his petition
for injunction, was subsequently Certified to us under Section 31 of
Republic Act No. 296.
Sometime in 1959 a number of residents of Guiguinto, Bulacan, sent a
letter-complaint to the Highway District Engineer of that province asking
that the Sapang Cabay, a public navigable stream, which had been
blocked by means of dikes and dams and converted into fishponds, be
ordered reopened and restored to its original condition. The letter was
referred to the Secretary of Public Works and Communications, who
caused an investigation to be conducted pursuant to Republic Act No.
2056. Acting on the report which the investigator submitted to him, the
Secretary rendered his decision on August 10, 1959, finding that the
Sapang Cabay was a public navigable stream and ordering Cenon Mateo,
the herein petitioner-appellant, who had in the meantime acquired the
property inside which the said creek is situated, to remove the dikes and
dams therein constructed within thirty days from notice; otherwise they
would be removed at his expense. Mateo moved to reconsider but was
turned down, whereupon he filed the basic petition to restrain the
respondent Secretary from enforcing his decision. The petition, as already
stated, was dismissed by the Court a quo. The certification of the appeal to
us was upon motion of both parties in view of the constitutional question
involved.
Five errors are ascribed to the decision of dismissal, to wit: (1) in not
holding that the respondent Secretary had no jurisdiction to conduct the
investigation (of the original complaint) and order the removal of the dikes
and dams constructed in the fishponds of the appellant; (2) in not holding
that Republic Act No. 2056 is unconstitutional because it unduly delegates
judicial power to the Secretary and unlawfully deprives the appellant and
others similarly situated of their property without due process of law; (3)
granting that Republic Act No. 2056 is constitutional, in not holding that it is
inapplicable to the instant case; (4) in finding that the Sapang Cabay is a
public navigable waterway belonging to the public domain; (5) in
disregarding and failing to give legal effect to the Torrens Certificate of title
of the appellant covering the property in question; and (6) in not issuing the
writ of injunction prayed for.
The first two errors assigned are interrelated. They pose the argument that
when the question at issue is whether or not a certain body of water is
private property or constitutes a navigable stream or river of the public
domain, the same is essentially judicial and therefore beyond the
jurisdiction of the Secretary of Public Works and Communications to
inquire into and decide; and that insofar as Republic Act No. 2056 purports
to confer that power upon him it does so in violation of the Constitution.
The constitutionality of the aforesaid statute has been upheld by this Court
in Lovina vs. Moreno, G.R. No. L-17821, November 29, 1963, shortly
before the present appeal was submitted for decision. That case held,
PROPERTY 1ST BATCH
furthermore, that the absence of any mention of a navigable stream within
a property covered by a certificate of title does not preclude a subsequent
investigation and determination of its existence nor make it private property
of the title holder; that the findings of fact made by the Secretary of Public
Works and Communications should be respected in the absence of
illegality, error of law, fraud or imposition, as long as such findings are
supported by substantial evidence; and that the ownership of a navigable
stream or of the bed thereof is not subject to acquisitive prescription.
In the memorandum filed by the petitioner-appellant after Lovina vs.
Moreno was decided, he submits that all but one of the issues he raised
have been settled by that decision, and that the only issue which remains
is the applicability of Republic Act No. 2056 in the instant case. He
concedes the authority of the Secretary to decide, after hearing, whether or
not a river or creek is navigable and therefore belongs to the public
domain; whether or not the dikes and dams complained against encroach
upon or obstruct such navigable river or creek, or communal fishing
grounds; and whether or not the dikes and dams constitute public nuisance
or prohibited constructions. The plea, however, is that in the light of the
facts established at the investigation ordered by the respondent Secretary
his conclusion that Sapang Cabay is a public navigable creek constitutes a
grave abuse of discretion.
We see nothing in the argument which would justify a departure in the
present case from the "substantial-evidence" rule as a limitation upon the
scope of judicial review in administrative cases. Substantial evidence, it
has been held, "is more than a scintilla. It means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion." 1
Under this rule the courts are not supposed to reassess the evidence,
determine its preponderance on either side, and substitute its own findings
for those of the administrative agency. All that the court does is to inquire
from the record if the findings are based on substantial evidence. If so, the
findings are deemed conclusive.
In the present case the evidence in support of the respondent Secretary's
decision is more than merely substantial. The testimony of several
witnesses is correctly summarized in the brief submitted by the Solicitor
General, as follows:
 Ocular inspection of the entire length of the creek up to Guiguinto,
shows that portions of the creek are closed by dikes (pp. 85, 92, 93
Exh. 1, Def.), that traces of the path of the Cabay Creek within
petitioner-appellant's fishpond are still visible by the nature of the
mud; that a man-made canal detours the creek from its original
path (Ibid., 89); that the widest portion of the creek is from 70 to 75
meters wide (Ibid., 97); that Juan Bernardo, 79 years old in 1959,
and resident of Guiguinto from birth, testified (that) as a result of
the closing of said creek for fishpond purposes, it deprived the
public the use of the same for fishing, gathering fruits and fuel, and
that surrounding areas are overflooded during heavy rain as water
from creek could not be drained to the river (Ibid., 95-96, 98); that
in 1917, he complained to the Chief of Police, Demetrio Bernardo,
against the construction of dikes across said Cabay Creek (Ibid.,
98); that he used to go fishing on said creek before its closure
(Ibid., 98); that they usually rode on boats in entering the creek
(Ibid., 98-99); that Jose Mojica, 70 years old in 1959, and a
resident of Guiguinto, testified that Petra Gatmaitan was the
second claimant to said creek, the first being Venancio Gatmaitan;
that the same was sold to Modesto Pascual, then to Encarnacion
Jacobo and lastly to present petitioner-appellant (Ibid., 107); that
petitioner-appellant used a bulldozer to elevate the dikes crossing
the creek which encloses the fishpond (Ibid, 108); that they used to
fish on said creek before its closure, gather nipa palms and fuel,
and catch shrimps (Ibid., 109); that they used bancas along the
creek before its closure, particularly when carrying rice seedlings to
distant ricefields for planting purposes (Ibid., 111); that during the
flood season the creek is waistdeep and even more, and
surrounding ricelands are overflooded (Ibid., 111); that Isidra de la
Cruz, 65 years old in 1959, and a resident of Guiguinto, testified
that she drafted a resolution complaining against the issuance of
title covering said creek (Ibid., 117-118); that Agripino de la Cruz
testified that the creek is public property across which a tall dike
was constructed (Ibid., 118-120); that the surrounding ricelands are
flooded during heavy rains because the man-made canal is not
sufficient to contain the volume of water coming from the creek
(Ibid., 121); that he knew that Guiguinto folks made use of fishtraps
for catching fish therefrom (Ibid., 122); that in his children days, he
used to see bancas going thru the creek; that although before its
closure overflooding did not usually occur even after continuous
heavy rains, things have changed now and overflooding occurs
frequently (Ibid., 123-124); that Julian Manicad, 70 years old in
PROPERTY 1ST BATCH
1959, declared that before its closure, people fished there,
gathered fuel and nipa palms, but it is different now, and the
surrounding areas are easily flooded whenever there is heavy rain
(Ibid., 143); that the people of Guiguinto once complained to the
authorities about said closure (Ibid., 144); that before its closure,
he and his brother-in-law used to go fishing there, riding on a
banca (Ibid., 159-160); that Pedro Dionisio, 64 years in 1959,
declared that before its closure, they used to fish, gather firewood
and nipa palms on said creek; that its closure has caused the
flooding of surrounding areas, thereby resulting in poor rice
harvests (Ibid., 152-154); that ocular inspection further showed that
there is a man-made canal about 5 feet deep and between 4 to 8
wide which diverts the water from the main path of Cabay Creek as
said canal is within the fishpond; that the canal ends at Guiguinto
River (Ibid., 185-186); that portions of Cabay Creek is within
respondent-appellant's fishpond and the water therein is deep
enough for bancas to sail over it (Ibid., 190-191).
The documentary evidence shows that as long ago as 1941 there were
already complaints against the closure of the Sapang Cabay by the
petitioner-appellant's predecessor-in-interest, Modesto Pascual; that the
municipal council of Guiguinto passed a resolution on November 22 of the
same year, requesting the Secretary of Public Works and Communications
to order the removal of the obstruction; that the administrative proceedings
for that purpose were interrupted by the war, but reopened in 1948, and
again in 1952, pursuant to similar resolutions of the same municipal
council; and that in 1954 the Secretary of Public Works and
Communications rendered a decision ordering Encarnacion Jacobo, who
was then the owner from whom the petitioner-appellant subsequently
bought the property, to remove the dikes she had constructed. It is true
that Encarnacion Jacobo was able to get her free patent application
approved in 1953 and to secure the corresponding certificate of title, but
said title did not change the public character of the Sapang Cabay, the
same being covered by one of the exceptions mentioned in Section 39 of
Act No. 496. 2
WHEREFORE, the decision appealed from is affirmed, with costs. 1wph1.
G.R. No. L-28379 March 27, 1929
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant-
appellant,
vs.
CONSORCIA CABANGIS, ET AL., claimants-appellees.
Attorney-General Jaranilla for appellant.
Abad Santos, Camus & Delgado for appellees.
VILLA-REAL, J.:
The Government of the Philippine Islands appeals to this court from the
judgment of the Court of First Instance of Manila in cadastral proceeding
No. 373 of the Court of First Instance of Manila, G. L. R. O. Cadastral
Record No. 373, adjudicating the title and decreeing the registration of lots
Nos. 36, 39 and 40, block 3055 of the cadastral survey of the City of
Manila in favor of Consuelo, Consorcia, Elvira and Tomas, surnamed
Cabangis, in equal parts, and dismissing the claims presented by the
Government of the Philippine Islands and the City of Manila.
In support of its appeal, the appellant assigns the following alleged errors
as committed by the trial court in its judgment, to wit:
1. The lower court erred in not holding that the lots in question are
of the public domain, the same having been gained from the sea
(Manila Bay) by accession, by fillings made by the Bureau of Public
Works and by the construction of the break-water (built by the
Bureau of Navigation) near the mouth of Vitas Estero.
2. The lower court erred in holding that the lots in question formed
part of the big parcel of land belonging to the spouses Maximo
Cabangis and Tita Andres, and in holding that these spouses and
their successors in interest have been in continuous, public,
peaceful and uninterrupted possession of said lots up to the time
this case came up.
3. The lower court erred in holding that said lots existed before, but
that due to the current of the Pasig River and to the action of the
big waves in Manila Bay during the south-west monsoons, the
same disappeared.
PROPERTY 1ST BATCH
4. The lower court erred in adjudicating the registration of the lands
in question in the name of the appellees, and in denying the
appellant's motion for a new trial.
A preponderance of the evidence in the record which may properly be
taken into consideration in deciding the case, proves the following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City
of Manila, G. L. R. O. Record No. 373, were formerly a part of a large
parcel of land belonging to the predecessor of the herein claimants and
appellees. From the year 1896 said land began to wear away, due to the
action of the waves of Manila Bay, until the year 1901 when the said lots
became completely submerged in water in ordinary tides, and remained in
such a state until 1912 when the Government undertook the dredging of
Vitas Estuary in order to facilitate navigation, depositing all the sand and
silt taken from the bed of the estuary on the low lands which were
completely covered with water, surrounding that belonging to the Philippine
Manufacturing Company, thereby slowly and gradually forming the lots, the
subject matter of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the
purposes of taxation, and it was only in the year 1926 that Dr. Pedro Gil, in
behalf of the claimants and appellees, declared lot No. 40 for such
purpose.
In view of the facts just stated, as proved by a preponderance of the
evidence, the question arises: Who owns lots 36, 39 and 40 in question?
The claimants-appellees contend that inasmuch as the said lots once
formed a part of a large parcel of land belonging to their predecessors,
whom they succeeded, and their immediate predecessor in interest,
Tomas Cabangis, having taken possession thereof as soon as they were
reclaimed, giving his permission to some fishermen to dry their fishing nets
and deposit their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is
 1. That devoted to public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, riverbanks,
shorts, roadsteads, and that of a similar character.
xxx xxx xxx
Article 1, case 3, of the Law of Waters of August 3, 1866, provides as
follows:
ARTICLE 1. The following are part of the national domain open to
public use:
xxx xxx xxx
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 highest equinoctial tides. Where the
tides are not appreciable, the shore begins on the land side at the
line reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil., 223), with
reference to article 339 of the Civil Code just quoted, this court said:
We should not be understood, by this decision, to hold that in a case of
gradual encroachment or erosion by the ebb and flow of the tide, private
property may not become 'property of public ownership,' as defined in
article 339 of the code, where it appears that the owner has to all intents
and purposes abandoned it and permitted it to be totally destroyed, so as
to become a part of the 'playa' (shore of the seas), 'rada' (roadstead), or
the like. . . .
In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the
following:
With relative frequency the opposite phenomenon occurs; that is,
the sea advances and private properties are permanently invaded
by the waves, and in this case they become part of the shore or
beach. They then pass to the public domain, but the owner thus
dispossessed does not retain any right to the natural products
resulting from their new nature; it is a de facto case of eminent
domain, and not subject to indemnity.
PROPERTY 1ST BATCH
Now then , when said land was reclaimed, did the claimants-appellees or
their predecessors recover it as their original property?
As we have seen, the land belonging to the predecessors of the herein
claimants-appellees began to wear way in 1896, owing to the gradual
erosion caused by the ebb and flow of the tide, until the year 1901, when
the waters of Manila Bay completely submerged a portion of it, included
within lots 36, 39 and 40 here in question, remaining thus under water until
reclaimed as a result of certain work done by the Government in 1912.
According to the above-cited authorities said portion of land, that is, lots
36, 39 and 40, which was private property, became a part of the public
domain. The predecessors of the herein claimants-appellees could have
protected their land by building a retaining wall, with the consent of
competent authority, in 1896 when the waters of the sea began to wear it
away, in accordance with the provisions of Article 29 of the aforecited Law
of Waters of August 3, 1866, and their failure to do so until 1901, when a
portion of the same became completely covered by said waters, remaining
thus submerged until 1912, constitutes abandonment.
Now then: The lots under discussion having been reclaimed from the seas
as a result of certain work done by the Government, to whom do they
belong?
The answer to this question is found in article 5 of the aforementioned Law
of Waters, which is as follows:
ART. 5. Lands reclaimed from the sea in consequence of works
constructed by the State, or by the provinces, pueblos or private
persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the
terms of the grant of authority.
The fact that from 1912 some fishermen had been drying their fishing nets
and depositing their bancas on lots 36, 39 and 40, by permission of Tomas
Cabangis, does not confer on the latter or his successors the ownership of
said lots, because, as they were converted into public land, no private
person could acquire title thereto except in the form and manner
established by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil.,
324), cited by the claimants-appellees, this court, admitting the findings
and holdings of the lower court, said the following:
If we heed the parol evidence, we find that the seashore was
formerly about one hundred brazas distant from the land in
question; that, in the course of time, and by the removal of a
considerable quantity of sand from the shore at the back of the
land for the use of the street car company in filling in Calle
Cervantes, the sea water in ordinary tides now covers part of the
land described in the petition.
The fact that certain land, not the bed of a river or of the sea, is
covered by sea water during the period of ordinary high tide, is not
a reason established by any law to cause the loss thereof,
especially when, as in the present case, it becomes covered by
water owing to circumstances entirely independent of the will of the
owner.
In the case of Director of Lands vs. Aguilar (G.R. No. 22034), also cited by
1 Manila, cited above, the rise of the waters of the sea that covered the lands
the claimants-appellees, wherein the Government adduced no evidence in
support of its contention, the lower court said in part:
The contention of the claimants Cabangis is to the effect that said
lots are a part of the adjoining land adjudicated to their deceased
father, Don Tomas Cabangis, which, for over fifty years had
belonged to their deceased grandmother, Tita Andres, and that,
due to certain improvements made in Manila Bay, the waters of the
sea covered a large part of the lots herein claimed.
The Government of the Philippine Islands also claims the
ownership of said lots, because, at ordinary high tide, they are
covered by the sea.
Upon petition of the parties, the lower court made an ocular
inspection of said lots on September 12, 1923, and on said
inspection found some light material houses built thereon, and that
on that occasion the waters of the sea did not reach the aforesaid
lots.
PROPERTY 1ST BATCH
From the evidence adduced at the trial of this cause, it may be
inferred that Tita Andres, during her lifetime was the owner of a
rather large parcel of land which was adjudicated by a decree to
her son Tomas Cabangis; the lots now in question are contiguous
to that land and are covered by the waters of the sea at
extraordinary high tide; some 50 years before the sea did not reach
said strip of land, and on it were constructed, for the most part, light
material houses, occupied by the tenants of Tita Andres, to whom
they paid rent. Upon her death, her son Tomas Cabangis
succeeded to the possession, and his children succeeded him,
they being the present claimants, Consuelo, Jesus, Tomas, and
Consorcia Cabangis.
The Government of the Philippine Islands did not adduce any
evidence in support of its contention, with the exception of registry
record No. 8147, to show that the lots here in question were not
excluded from the application presented in said proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of
there in dispute, was due not to the action of the tide but to the fact that a
large quantity of sand was taken from the sea at the side of said land in
order to fill in Cervantes Street, and this court properly held that because of
this act, entirely independent of the will of the owner of said land, the latter
could not lose the ownership thereof, and the mere fact that the waters of
the sea covered it as a result of said act, is not sufficient to convert it into
public land, especially, as the land was high and appropriate for building
purposes.
In the case of the Director of Lands vs. Aguilar also cited by the claimants-
appellees, the Insular Government did not present any evidence in support
of its contention, thus leaving uncontradicted the evidence adduced by the
claimants Aguilar et al., as to the ownership, possession and occupation of
said lots.
In the instant case the evidence shows that from 1896, the waves of
Manila Bay had been gradually and constantly washing away the sand that
formed the lots here in question, until 1901, when the sea water completely
covered them, and thus they remained until the year 1912. In the latter
year they were reclaimed from the sea by filling in with sand and silt
extracted from the bed of Vitas Estuary when the Government dredged
said estuary in order to facilitate navigation. Neither the herein claimants-
appellees nor their predecessors did anything to prevent their destruction.
In conclusion, then, we hold that the lots in question having disappeared
on account of the gradual erosion due to the ebb and flow of the tide, and
having remained in such a state until they were reclaimed from the sea by
the filling in done by the Government, they are public land. (Aragon vs.
Insular Government, 19 Phil., 223; Francisco vs. Government of the
Philippine Islands, 28 Phil., 505).
By virtue whereof, the judgment appealed from is reversed and lots Nos.
36, 39 and 40 of cadastral proceeding No. 373 of the City of Manila are
held to be public land belonging to the Government of the United States
under the administration and control of the Government of the Philippine
Islands. So ordered.
G.R. No. 100709 November 14, 1997
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF
LANDS, petitioner,
vs.
COURT OF APPEALS, JOSEFINA L. MORATO, SPOUSES NENITA CO
and ANTONIO QUILATAN AND THE REGISTER OF DEEDS OF
QUEZON PROVINCE, respondents.
PANGANIBAN, J.:
Will the lease and/or mortgage of a portion of a realty acquired through
free 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?
The Case
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, 1991 which answered the said questions in the negative. 2 Respondent
Court's dismissed 3 petitioner's appeal and affirmed in toto the decision of the
Regional Trial Court 4 of Calauag, Quezon, dated December 28, 1983 in Civil
PROPERTY 1ST BATCH
Case No. C-608. In turn, the Regional Trial Court's decision dismissed
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
the public domain.
The Facts
The petition of the solicitor general, representing the Republic of the
Philippines, recites the following facts: 5
Sometime in December, 1972, respondent Morato filed 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, the
patent was approved and the Register of Deeds of Quezon
at Lucena City issued on February 4, 1974 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 from the
date of the issuance of the patent (Sections 118 and 124 of
CA No. 141, as amended).
Subsequently, the District Land Officer in Lucena City,
acting upon reports that respondent Morato had
encumbered the land in violation of the condition of the
patent, conducted an investigation. Thereafter, it was
established that the subject land is a portion of the Calauag
Bay, five (5) to six (6) feet deep under water during high
tide and two (2) feet deep at low tide, and not suitable to
vegetation. Moreover, on October 24, 1974, a portion of the
land was mortgaged by respondent Morato to respondents
Nenita Co and Antonio Quilatan for P10,000.00 (pp. 2, 25,
Folder of Exhibits). The spouses Quilatan constructed a
house on the land. Another portion of the land was leased
to Perfecto Advincula on February 2, 1976 at P100.00 a
month, where a warehouse was constructed.
On November 5, 1978, petitioner filed an amended
complaint against respondents Morato, spouses Nenita Co
and Antonio Quilatan, and the Register of Deeds of
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, Records).
After trial, the lower court, on December 28, 1983,
rendered a decision dismissing petitioner's complaint. In
finding for private respondents, the lower court ruled that
there was no violation of the 5-year period ban against
alienating or encumbering the land, because the 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.
Thereafter, the Republic of the Philippines filed the present petition. 6
The Issues
Petitioner alleges that the following errors were committed by Respondent
Court: 7
I
Respondent court erred in holding that the patent granted
and certificate of title issued to Respondent Morato cannot
be cancelled and annulled since the certificate of title
becomes indefeasible after one year from the issuance of
the title.
II
Respondent Court erred in holding that the questioned land
is part of a disposable public land and not a foreshore land.
The Court's Ruling
The petition is meritorious.
First Issue: Indefeasibility of a Free Patent Title
PROPERTY 1ST BATCH
In resolving the first issue against petitioner, Respondent Court held: 8
. . . As ruled in Heirs of Gregorio Tengco vs. Heirs of Jose
Alivalas, 168 SCRA 198. ". . . The rule is well-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 long as the land
disposed of is really part of the disposable land of the
public domain, and becomes indefeasible and
incontrovertible upon the expiration of one year from the
date of promulgation of the order of the Director of Lands
for the issuance of the patent. (Republic v. Heirs of Carle,
105 Phil. 1227 (1959); Ingaran v. Ramelo, 107 Phil. 498
(1960); Lopez v. Padilla, (G.R. No. L-27559, May 18, 1972,
45 SCRA 44). A homestead patent, one registered under
the Land Registration Act, becomes as indefeasible as a
Torrens Title. (Pamintuan v. San Agustin, 43 Phil. 558
(1982); El Hogar Filipino v. Olviga, 60 Phil. 17 (1934);
Duran v. Oliva, 113 Phil. 144 (1961); Pajomayo v. Manipon,
G.R. No. L-33676, June 30, 1971, 39 SCRA 676). (p. 203).
Again, in Lopez vs. Court of Appeals, 169 SCRA 271,
citing Iglesia ni Cristo v. Hon. Judge, CFI of Nueva Ecija,
Branch I, (123 SCRA 516 (1983) and Pajomayo, et
al. v. Manipon, et al. (39 SCRA 676 (1971) held that once a
homestead patent granted in accordance with the Public
Land Act is registered pursuant to Section 122 of Act 496,
the certificate of title issued in virtue of said patent has the
force and effect of a Torrens Title issued under the Land
Registration Act.
Indefeasibility of the title, however, may not bar the 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:
But, as correctly pointed out by the respondent Court of
Appeals, Dr. Aliwalas' title to the property having become
incontrovertible, such may no longer be collaterally
attacked. If indeed there had been any fraud 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 Lands
v. Jugado, G.R. No. L-14702, May 21, 1961, 2 SCRA 32;
Lopez v. Padilla, supra). (p. 204).
Petitioner contends that the grant of Free Patent (IV-3) 275 and the
subsequent issuance of Original Certificate of Title No. P-17789 to
Respondent Josefina L. Morato were subject to the conditions provided for
in Commonwealth Act (CA) No. 141. It alleges that on October 24, 1974, or
nine (9) months and eight (8) days after the grant of the patent, mortgaged
a portion of the land" to Respondent Nenita Co, who thereafter constructed
a house thereon. Likewise, on February 2, 1976 and "within the five-year
prohibitory period," Respondent Morato "leased a portion of the land to
Perfecto Advincula at a monthly rent of P100.00 who, shortly thereafter,
constructed a house of concrete materials on the subject land." 9 Further,
petitioner argues that the defense of indefeasibility of title is "inaccurate." The
original certificate of title issued to Respondent Morato "contains the seeds of
its own cancellation": such certificate specifically states on its face that "it is
subject to the provisions of Sections 118, 119, 121, 122, 124 of CA No. 141,
as amended." 10
Respondent Morato counters by stating that although a "portion of the land
was previously leased," it resulted "from the fact that Perfecto Advincula
built a warehouse in the subject land without [her] prior consent." The
mortgage executed over the improvement "cannot be considered a
violation of the said grant since it can never affect the ownership." 11 She
states further:
. . . . the appeal of the petitioner was dismissed not
because of the principle of indefeasibility of title but mainly
due to failure of the latter to support and prove the alleged
violations of respondent Morato. The records of this case
will readily show that although petitioner was able to
establish that Morato committed some acts during the
prohibitory period of 5 years, a perusal thereof will also
show that what petitioner was able to prove never
constituted a violation of the grant. 12
Respondent-Spouses Quilatan, on the other hand, state that the mortgage
contract they entered into with Respondent Morato "can never be
considered as [an] 'alienation' inasmuch as the ownership over the
property remains with the owner." 13 Besides, it is the director of lands and
PROPERTY 1ST BATCH
not the Republic of the Philippines who is the real party in interest in this case,
contrary to the provision of the Public Land Act which states that actions for
reversion should be instituted by the solicitor general in the name of Republic
of the Philippines. 14
We find for petitioner.
Quoted below are relevant sections of Commonwealth Act No. 141,
otherwise known as the Public Land Act:
Sec. 118. Except in favor of the Government or any of its
branches, units or institutions, or legally constituted
banking corporations, lands acquired under free patent or
homestead provisions shall not be subject to encumbrance
or alienation from the date of the approval of the application
and for a term of five years from and after the date of
issuance of the patent or grant nor shall they become liable
to the satisfaction of 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, associations, or corporations.
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 of the Secretary
of Agriculture and Natural Resources, which approval shall
not be denied except on constitutional and legal grounds.
(As amended by Com. Act No. 456, approved June 8,
1939.)
xxx xxx xxx
Sec. 121. Except with the consent of the grantee and the
approval of the Secretary of Agriculture and Natural
Resources, and solely for educational, religious, or
charitable purposes or for a right of way, no corporation,
association, or partnership may acquire or have any right,
title, interest, or property right whatsoever to any land
granted under the free patent, homestead, or individual
sale provisions of this Act or to any permanent
 improvement on such land. (As amended by Com. Act No.
615, approved May 5, 1941)
Sec. 122. No land originally acquired in any manner under
the provisions of this Act, nor any permanent improvement
on such land, shall be encumbered, alienation or
transferred, except to persons, corporations, association, or
partnerships who may acquire lands of the public domain
under this Act or to corporations organized in the
Philippines authorized therefore by their charters.
Except in cases of hereditary successions, no land or any
portion thereof originally acquired under the free patent,
homestead, or individual sale provisions of this Act, or any
permanent improvement on such land, shall be transferred
or assigned to any individual, nor shall such land or any
permanent improvement thereon be leased to such
individual, when the area of said land, added to that of this
own, shall exceed one hundred and forty-four
hectares. Any transfer, assignment, or lease made in
violation hereto shall be null and void. (As amended by
Com Act No. 615, Id.).
xxx xxx xxx
Sec. 124. Any acquisition, conveyance, alienation, transfer,
or other contract made or executed in violation of any of the
provisions of sections one hundred and eighteen, one
hundred and twenty, one hundred and twenty-one, one
hundred and twenty-two, and one hundred and twenty-
three of this Act shall be unlawful and null and void from its
execution and shall produce the effect of annulling and
cancelling the grant, title, patent, or permit originally issued,
recognized or confirmed, actually or presumatively, and
cause the reversion of the property and its improvements to
the State. (Emphasis supplied)
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 cancellation of the grant and the reversion of the land to the public
PROPERTY 1ST BATCH
domain. Encumbrance has been defined as "[a]nything that impairs the
use or transfer of property; anything which constitutes a burden on the title;
a burden or charge upon property; a claim or lien upon property." It may be
a "legal claim on an estate for the discharge of which the estate is liable;
and embarrassment of the estate or property so that it cannot be disposed
of without being subject to it; an estate, interest, or right in lands,
diminishing their value to the general owner; a liability resting upon an
estate." 15 Do the contracts of lease and mortgage executed within five (5)
years from the issuance of the patent constitute an "encumbrance" and violate
the terms and conditions of such patent? Respondent Court answered in the
negative: 16
From the evidence adduced by both parties, it has been
proved that the area of the portion of the land, subject
matter of the lease contract (Exh. "B") executed by and
between Perfecto Advincula and Josefina L. Morato is 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 Advincula does
not significantly affect Morato's ownership and possession.
Above all, the circumstances under which the lease was
executed do not reflect a voluntary and blatant intent to
violate the conditions provided for in the patent issued in
her favor. On the contrary, Morato was compelled to enter
into that contract of lease
out of sympathy and the goodness of her heart to
accommodate a fellow man. . . .
It is indisputable, however, that Respondent Morato cannot fully use or
enjoy the land during the duration of the lease contract. This restriction on
the enjoyment of her property sufficiently meets the definition of an
encumbrance under Section 118 of the Public Land Act, because such
contract "impairs the use of the property" by the grantee. In a contract of
lease which is consensual, bilateral, onerous and commutative, the owner
temporarily grants the use of his or her property to another who undertakes
to pay rent therefor. 17 During the term of the lease, the grantee of the patent
cannot enjoy the beneficial use of the land leased. As already observed, the
Public Land Act does not permit a grantee of a free patent from encumbering
any portion of such land. Such encumbrance is a ground for the nullification of
the award.
Morato's resort to equity, i.e. that the lease was executed allegedly out of
the goodness of her heart without any intention of violating the law, cannot
help her. Equity, which has been aptly described as "justice outside
legality," is applied only in the absence of, and never against, statutory law
or judicial rules of procedure. Positive rules prevail over all abstract
arguments based on equity contra legem. 18
Respondents failed to justify their position that the mortgage should not be
considered an encumbrance. Indeed, we do not find any support for such
contention. The questioned mortgage falls squarely within the term
"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
such mortgage would necessarily result in the auction of the property. 20
Even if only part of the property has been sold or alienated within the
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 land should not be encumbered, sold or alienated within
five years from the issuance of
the patent. The sale or the alienation of part of the homestead violates that
condition. 21
The prohibition against the encumbrance lease and mortgage included
of a homestead which, by analogy applies to a free patent, is mandated
by the rationale for the grant, viz.: 22
It is well-known that the homestead laws were designed to
distribute disposable agricultural lots of the State to land-
destitute citizens for their home and cultivation. Pursuant to
such benevolent intention the State prohibits the sale or
incumbrance of the homestead (Section 116) within five
years after the grant of the patent. After that five-year
period the law impliedly permits alienation of the
homestead; but in line with the primordial purpose to favor
the homesteader and his family the statute provides that
such alienation or conveyance (Section 117) shall be
subject to the right of repurchase by the homesteader, his
widow or heirs within five years. This section 117 is
undoubtedly a complement of section 116. It aims to
preserve and keep in the family of the homesteader that
PROPERTY 1ST BATCH
portion of 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
repurchase exists not only when the original homesteader
makes the conveyance, but also when it is made by his
widow or heirs. This construction is clearly deducible from
the terms of the statute.
By express provision of Section 118 of Commonwealth Act 141 and in
conformity with the policy of the law, any transfer or alienation of a free
patent or homestead within five years from the issuance of the patent is
proscribed. Such transfer nullifies said alienation and constitutes a cause
for the reversion of the property to the State.
The prohibition against any alienation or encumbrance of the land grant is
a proviso attached to the approval of every application. 23 Prior to the
fulfillment of the requirements of law, Respondent Morato had only an inchoate
right to the property; such property remained part of the public domain and,
therefore, not susceptible to alienation or encumbrance. Conversely, when a
"homesteader has complied with all the terms and conditions which entitled
him to a patent for [a] particular tract of public land, he acquires a vested
interest therein and has to be regarded an equitable owner
thereof." 24However, for Respondent Morato's title of ownership over the
patented land to be perfected, she should have complied with the
requirements of the law, one of which was to keep the property for herself and
her family within the prescribed period of five (5) years. Prior to the fulfillment
of all requirements of the law, Respondent Morato's title over the property was
incomplete. Accordingly, if the requirements are not complied with, the State
as the grantor could petition for the annulment of the patent and the
cancellation of the title.
Respondent Morato cannot use the doctrine of the indefeasibility of her
Torrens title to bar the state from questioning its transfer or encumbrance.
The certificate of title issued to her clearly stipulated that its award was
"subject to the conditions provided for in Sections 118, 119, 121, 122 and
124 of Commonwealth Act (CA) No. 141." Because she violated Section
118, the reversion of the property to the public domain necessarily follows,
pursuant to Section 124.
Second Issue: Foreshore Land
Revert to the Public Domain
There is yet another reason for granting this petition.
land in question reads:
Although Respondent Court found that the subject land was foreshore
land, it nevertheless sustained the award thereof to Respondent Morato: 25
First of all, the issue here is whether the land in question, is
really part of the foreshore lands. The Supreme Court
defines foreshore land in the case of Republic vs. Alagad,
169 SCRA 455, 464, as follows:
Otherwise, where the rise in water level is
due to, the "extraordinary" action of nature,
rainful, for instance, the portions inundated
thereby are not considered part of the bed
or basin of the body of water in question. It
cannot therefore be said to be foreshore
land but land outside of the public dominion,
and land capable of registration as private
property.
A foreshore land, on the other hand has
been defined as follows:
. . . that part of (the land)
which is between high
and low water and left dry
by the flux and reflux of the
tides . . . . (Republic vs.
C.A., Nos. L-43105, L-
43190, August 31, 1984,
131 SCRA 532;
Government vs. Colegio de
San Jose, 53 Phil 423)
The strip of land that lies
between the high and low
water marks and that is
alternatively wet and dry
according to the flow of the
tide. (Rep. vs. CA, supra,
539).
PROPERTY 1ST BATCH
The factual findings of the lower court regarding the nature of the parcel of
Evidence disclose that the marginal area of
the land radically changed sometime in
1937 up to 1955 due to a strong earthquake
followed by frequent storms eventually
eroding the land. From 1955 to 1968,
however, gradual reclamation was
undertaken by the lumber company owned
by the Moratos. Having thus restored the
land thru mostly human hands employed by
the lumber company, the area continued to
be utilized by the owner of the sawmill up to
the time of his death in 1965. On or about
March 17, 1973, there again was a strong
earthquake unfortunately causing
destruction to hundreds of residential
houses fronting the Calauag Bay including
the Santiago Building, a cinema house
constructed of concrete materials. The
catastrophe totally caused the sinking of a
concrete bridge at Sumulong river also in
the municipality of Calauag, Quezon.
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 than that
which the area suffered in 1937. The Court
noted with the significance of the
newspaper clipping entitled "Baryo ng
Mangingisda Kinain ng Dagat" (Exh. "11").
xxx xxx xxx
Evidently this was the condition of the land
when on or about December 5, 1972
defendant Josefina L. Morato filed with the
Bureau of Lands her free 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 for a free patent,
defendant had the land area surveyed and
an approved plan (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 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).
Being supported by substantial evidence and for failure of
the appellant to show cause which would warrant
disturbance, the aforecited findings of the lower court, must
be respected.
Petitioner correctly contends, however, that Private Respondent Morato
cannot own foreshore land:
Through the encroachment or erosion by the ebb and flow
of the tide, a portion of the subject land was invaded by the
waves and sea advances. During high tide, at least half of
the land (632.5 square meters) is 6 feet deep under water
and three (3) feet deep during low tide. The Calauag Bay
shore has extended up to a portion of the questioned land.
While at the time of the grant of free patent to respondent
Morato, the land was not reached by the water, however,
due to gradual sinking of the land caused by natural
calamities, the sea advances had permanently invaded a
portion of subject land. As disclosed at the trial, through the
testimony of the court-appointed commissioner, Engr.
Abraham B. Pili, the land was under water during high tide
in the month of August 1978. The water margin covers half
of the property, but during low tide, the water is about a
kilometer (TSN, July 19, 1979, p. 12). Also, in 1974, after
PROPERTY 1ST BATCH
the grant of the patent, the land was covered with
vegetation, but it disappeared in 1978 when the land was
reached by the tides (Exh. "E-1", "E-14"). In fact, in its
decision dated December 28, 1983, the lower court
observed that the erosion of the land was caused by
natural calamities that struck the place in 1977 (Cf.
Decision, pp. 17-18). 26
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 thereof was immersed in water for reasons not her own doing." 27
As a general rule, findings of facts of the Court of Appeals are binding and
conclusive upon this Court, unless such factual findings are palpably
unsupported by the evidence on record or unless the judgment itself is
based on a misapprehension of facts. 28 The application for a free patent was
made in 1972. From the undisputed factual findings of the Court of Appeals,
however, the land has since become foreshore. Accordingly, it can no longer
be subject of a free patent under the Public Land Act. Government of the
Philippine Islands vs. Cabagis 29 explained the rationale for this proscription:
Article 339, subsection 1, of the Civil Code, reads:
Art. 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State,
riverbanks, shores, roadsteads, and that of a similar
character.
xxx xxx xxx
Article 1, case 3, of the law of Waters of August 3, 1866,
provides as follows:
Art. 1. The following are part of the national domain open to
public use.
xxx xxx xxx
 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 highest
equinoctal tides. Where the tides are not appreciable, the
shore begins on the land side at the line reached by the
sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil.
223), with reference to article 339 of the Civil Code just
quoted, this Court said:
We should not be understood, by this decision, to hold that
in a case of gradual encroachment or erosion by the ebb
and flow of the tide, private property may not become
"property of public ownership." as defined in article 339 of
the code, where it appear that the owner has to all intents
and purposes abandoned it and permitted it to be totally
destroyed, so as to become a part of the "playa" (shore of
the sea), "rada" (roadstead), or the like. . . .
In the Enciclopedia Juridica Espaola, volume XII, page
558, we read the following:
With relative frequency the opposite phenomenon occurs;
that is, the sea advances and private properties are
permanently invaded by the waves, and in this case 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 resulting from their
new nature; it is a de facto case of eminent domain, and
not subject to indemnity.
In comparison, Article 420 of the Civil Code provides:
Art. 420. The following things are property of public
dominion:
(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;
PROPERTY 1ST BATCH
(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.
When the sea moved towards the estate and the tide invaded it, the
invaded property became foreshore land and passed to the realm of the
public domain. In fact, the Court in Government vs. Cabangis 30 annulled
the registration of land subject of cadastral proceedings when the parcel
subsequently became foreshore land. 31 In another case, the Court voided the
registration decree of a trial court and held that said court had no jurisdiction to
award foreshore land to any private person or entity. 32 The subject land in this
case, being foreshore land, should therefore be returned to the public domain.
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 Morato and the subsequent Original Certificate of Title No. P-
17789. The subject land therefore REVERTS to the State. No costs.
SO ORDERED.
G.R. No. 133250 July 9, 2002
FRANCISCO I. CHAVEZ, petitioner,
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY
DEVELOPMENT CORPORATION, respondents.
CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of
preliminary injunction and a temporary restraining order. The petition seeks
to compel the Public Estates Authority ("PEA" for brevity) to disclose all
facts on PEA's then on-going renegotiations with Amari Coastal Bay and
Development Corporation ("AMARI" for brevity) to reclaim portions of
Manila Bay. The petition further seeks to enjoin PEA from signing a new
agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of
Public Highways, signed a contract with the Construction and Development
Corporation of the Philippines ("CDCP" for brevity) to reclaim certain
foreshore and offshore areas of Manila Bay. The contract also included the
construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP
obligated itself to carry out all the works in consideration of fifty percent of
the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued
Presidential 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 President Marcos issued Presidential Decree No. 1085
transferring to PEA the "lands reclaimed in the foreshore and offshore of
the Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation
Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum
directing PEA to amend its contract with CDCP, so that "[A]ll future works
in 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:
"(i) CDCP shall undertake all reclamation, construction, and such
other works in the MCCRRP as may be agreed upon by the
parties, 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 escalation, retention and other terms and conditions
provided for in Presidential Decree No. 1594. All the financing
required for such works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and 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 areas of land
reclaimed by CDCP in the MCCRRP as of December 30, 1981
which have not yet been sold, transferred or otherwise disposed of
by CDCP as of said date, which areas consist of approximately
Ninety-Nine Thousand Four Hundred Seventy Three (99,473)
square meters in the Financial Center Area covered by land pledge
PROPERTY 1ST BATCH
No. 5 and approximately Three Million Three 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 Area and the First
Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino issued Special
Patent No. 3517, granting and transferring to PEA "the parcels of land so
reclaimed 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, 1988, the Register of Deeds of the Municipality of
Paraaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312,
in the name of PEA, covering the three reclaimed islands known as the
"Freedom Islands" located at the southern portion of the Manila-Cavite
Coastal Road, Paraaque City. The Freedom Islands have a total land
area of One Million Five Hundred Seventy Eight Thousand Four Hundred
and Forty One (1,578,441) square meters or 157.841 hectares.
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 submerged areas surrounding these islands to complete the
configuration in 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 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
On November 29, 1996, then Senate President Ernesto Maceda delivered
a privilege speech in the Senate and denounced the JVA as the
"grandmother of all scams." As a result, the Senate Committee on
Government Corporations 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 Report No. 560 dated September 16,
1997.7 Among the conclusions of their report are: (1) the reclaimed lands
PEA seeks to transfer to AMARI under the 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 JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential
Administrative Order No. 365 creating a Legal Task Force to conduct a
study 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 Presidential Legal Counsel,9 and the Government
Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA,
contrary to the conclusions reached by the Senate Committees.11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published
reports that there were on-going renegotiations between PEA and AMARI
under an order issued by then President Fidel V. Ramos. According to
these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo
and retired Navy Officer Sergio Cruz composed the negotiating panel of
PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for
Prohibition with Application for the Issuance of a Temporary Restraining
Order and Preliminary Injunction docketed as G.R. No. 132994 seeking to
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
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a
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 by PEA of the reclaimed lands to AMARI. Petitioner prays that
PEA publicly disclose the terms of any renegotiation of the JVA, invoking
Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on
the right of 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 of the public domain to private corporations.
Finally, petitioner asserts that he seeks to enjoin the loss of billions of
pesos in properties of the State that are of public dominion.
After several motions for extension of time, PEA and AMARI filed their
13
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 issuance of a temporary restraining order; and (c) to set
PROPERTY 1ST BATCH
the case for hearing on oral argument. Petitioner filed a Reiterative Motion
for Issuance of a TRO dated May 26, 1999, which the Court denied in a
Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the
petition and required the parties to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture
Agreement ("Amended JVA," for brevity). On May 28, 1999, the Office of
the President under the administration of then President Joseph E. Estrada
approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President,
petitioner now prays that on "constitutional and statutory grounds the
renegotiated contract be declared null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE
PETITION ARE MOOT AND ACADEMIC BECAUSE OF
SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING
TO OBSERVE THE PRINCIPLE GOVERNING THE HIERARCHY
OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-
EXHAUSTION OF ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING
THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO
INFORMATION INCLUDES OFFICIAL INFORMATION ON ON-
GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT
VENTURE AGREEMENT FOR THE TRANSFER TO AMARI OF
 CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED,
VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR
RAISING THE ISSUE OF WHETHER THE AMENDED JOINT
VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO
THE GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are
moot and academic because of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of
the on-going negotiations for a new agreement." The petition also prays
that the Court enjoin PEA from "privately entering into, perfecting and/or
executing any new agreement with AMARI."
PEA and AMARI claim the petition is now moot and academic because
AMARI furnished petitioner on June 21, 1999 a copy of the signed
Amended JVA containing the terms and conditions agreed upon in the
renegotiations. 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 the Amended JVA on March 30, 1999. Moreover, the Office
of the President has approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional
issue by simply fast-tracking the signing and approval of the Amended JVA
before the Court could act on the issue. Presidential approval does not
resolve the constitutional issue or remove it from the ambit of judicial
review.
We rule that the signing of the Amended JVA by PEA and AMARI and its
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
constitutional grounds necessarily includes preventing its implementation if
in the meantime PEA and AMARI have signed one in violation of the
Constitution. Petitioner's principal basis in assailing the renegotiation of the
JVA is its violation of Section 3, Article XII of the Constitution, which
PROPERTY 1ST BATCH
prohibits the government from alienating lands of the public domain to
private corporations. If the Amended JVA indeed violates the Constitution,
it is the duty of the Court to enjoin its implementation, and if already
implemented, to annul the effects of such unconstitutional contract.
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 becomes more compelling for the Court to resolve the
issue to insure the government itself does not violate a provision of the
Constitution intended to safeguard the national patrimony. Supervening
events, whether intended or accidental, cannot prevent the Court from
rendering a decision if there is a 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 AMARI. Even in cases where
supervening events had made the cases moot, the Court did not hesitate
to resolve the legal or constitutional issues raised to formulate controlling
principles to guide the bench, bar, and the public.17
Also, the instant petition is a case of first impression. All previous decisions
of the Court involving Section 3, Article XII of the 1987 Constitution, or its
counterpart provision in the 1973 Constitution,18 covered agricultural
lands sold to private corporations which acquired the lands from private
parties. The transferors of the private corporations claimed or could claim
the right to judicial confirmation of their imperfect titles19 under Title
II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant
case, AMARI seeks to acquire from PEA, a public corporation, reclaimed
lands and submerged areas for non-agricultural purposes
by purchase under PD No. 1084 (charter of PEA) and Title III of CA No.
141. Certain undertakings by AMARI under the Amended JVA constitute
the consideration for the purchase. Neither AMARI nor PEA can claim
judicial confirmation of their 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 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 expired on December
31, 1987.20
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 JVA, PEA is obligated to transfer to AMARI the latter's
seventy percent proportionate share in the reclaimed areas as the
reclamation progresses. The Amended JVA even allows AMARI to
mortgage at any time the entire reclaimed area to raise financing for the
reclamation project.21
Second issue: whether the petition merits dismissal for failing to
observe the principle governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking
relief directly from the Court. The principle of hierarchy of courts applies
generally to cases involving factual questions. As it is not a trier of facts,
the Court cannot entertain cases involving factual issues. The instant case,
however, raises constitutional issues of transcendental importance to the
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 of the Constitution. We resolve to exercise primary jurisdiction
over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion
of administrative remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to
disclose publicly certain information without first asking PEA the needed
information. PEA claims petitioner's direct resort to the Court violates the
principle of exhaustion of administrative remedies. It also violates the rule
that mandamus may issue only if there is no other plain, speedy and
adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Taada v. Tuvera23 where the
Court granted the petition for mandamus even if the petitioners there did
not initially demand from the Office of the President the publication of the
presidential decrees. PEA points out that in Taada, the Executive
Department had 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
Taada to make an initial 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 renegotiation of the JVA. Thus, PEA asserts
PROPERTY 1ST BATCH
that the Court must apply the principle of exhaustion of administrative
remedies to the instant case in view of the failure of petitioner here to
demand initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a
government corporation. Under Section 79 of the Government Auditing
Code,26 the disposition of government lands to private parties requires
public bidding. PEA was under a positive legal duty to disclose to the
public the terms and conditions for the sale of its lands. The law
obligated PEA to make this public disclosure even without demand from
petitioner or from 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 bidding. Considering that PEA had
an affirmative statutory duty to make the public disclosure, and was even in
breach of this legal duty, petitioner had the right to seek direct judicial
intervention.
Moreover, and this alone is determinative of this issue, the principle of
exhaustion of administrative remedies does not apply when the issue
involved is a purely legal or constitutional question.27 The principal issue in
the instant case is the capacity of AMARI to acquire lands held by PEA in
view of the constitutional ban prohibiting the alienation of lands of the
public domain to private corporations. We rule that the principle of
exhaustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to
institute mandamus proceedings to enforce his constitutional right to
information without a showing that PEA refused to perform an affirmative
duty imposed on PEA by the Constitution. PEA also claims that petitioner
has not shown that he will suffer any concrete 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 review.
The petitioner has standing to bring this taxpayer's suit because the
petition 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 on matters of public concern. Second is the application of a
constitutional 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 worth billions of pesos, information which the
Constitution and statutory law mandate PEA to disclose. The thrust of the
second issue is to prevent PEA from alienating hundreds of hectares of
alienable lands of the public domain in violation of the Constitution,
compelling PEA to comply with a constitutional duty to the nation.
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 -
"Besides, petitioner emphasizes, the matter of recovering the ill-
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
acts or orders of government agencies or instrumentalities, if the
issues raised are of 'paramount public interest,' and if they
'immediately affect the social, economic and moral well being of the
people.'
Moreover, the mere fact that he is a citizen satisfies the
requirement of personal interest, when the proceeding involves the
assertion of a public right, such as in this case. He invokes several
decisions of this Court which have set aside the procedural matter
of locus standi, when the subject of the case involved public
interest.
xxx
In Taada v. Tuvera, the Court asserted that when the issue
concerns a public right and the object of mandamus is to obtain the
enforcement of a public duty, the people are regarded as the real
parties in interest; and because it is sufficient that petitioner is a
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
of the action. In the aforesaid case, the petitioners sought to
enforce their right to be informed on matters of public concern, a
right then recognized in Section 6, Article IV of the 1973
Constitution, in connection with the rule that laws in order to be
valid and enforceable must be published in the Official Gazette or
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otherwise effectively promulgated. In ruling for the petitioners' legal
standing, the Court declared that the right they sought to be
enforced 'is a public right recognized by no less than the
fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Taada,
further declared that 'when a mandamus proceeding involves the
assertion of a public right, the requirement of personal interest is
satisfied by the mere fact that petitioner is a citizen and, therefore,
part of the general 'public' which possesses the right.'
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
Manila International Container Terminal, 'public interest [was]
definitely involved considering the important role [of the subject
contract] . . . in the economic development of the country and the
magnitude of the financial consideration involved.' We concluded
that, as a consequence, the disclosure provision in the Constitution
would constitute sufficient authority for upholding the petitioner's
standing.
Similarly, the instant petition is anchored on the right of the people
to information and access to official records, documents and
papers a right guaranteed under Section 7, Article III of the 1987
Constitution. Petitioner, a former solicitor general, is a Filipino
citizen. Because of the satisfaction of the two basic requisites laid
down by decisional law to sustain petitioner's legal standing, i.e. (1)
the enforcement of a public right (2) espoused by a Filipino citizen,
we rule that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen, involves the
enforcement of constitutional rights - to information and to the equitable
diffusion of natural resources - matters of transcendental public
importance, the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes
official information on on-going negotiations before a final
agreement.
Section 7, Article III of the Constitution explains the people's right to
information on matters of public concern in this manner:
"Sec. 7. The right of the people to information on matters of public
concern shall be recognized. Access to official records, and to
documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government research
data used as basis for policy development, shall be afforded the
citizen, subject to such limitations as may be provided by law."
(Emphasis supplied)
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
Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the
State adopts and implements a policy of full public disclosure of
all its transactions involving public interest." (Emphasis
supplied)
These twin provisions of the Constitution seek to promote transparency in
policy-making and in the operations of the government, as well as provide
the people sufficient information to exercise effectively other constitutional
rights. These twin provisions are essential to the exercise of freedom of
expression. If the government does not disclose its official acts,
transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing.
These twin provisions are also essential to hold public officials "at all times
x x x accountable to the people,"29 for unless citizens have the proper
information, they cannot hold public officials accountable for anything.
Armed with the right information, citizens can participate in public
discussions leading to the formulation of government policies and their
effective implementation. An informed citizenry is essential to the existence
and proper functioning of any democracy. As explained by the Court
in Valmonte v. Belmonte, Jr.30
"An essential element of these freedoms is to keep open a
continuing dialogue or process of communication between the
government and the people. It is in the interest of the State that the
channels for free political discussion be maintained to the end that
PROPERTY 1ST BATCH
the government may perceive and be responsive to the people's
will. Yet, this open dialogue can be effective only to the extent that
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."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going
negotiations the right to information is limited to "definite propositions of the
government." PEA maintains the right does not include access to "intra-
agency or inter-agency recommendations or communications during the
stage when common assertions are still in the process of being formulated
or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-
decisional stage or before the closing of the transaction. To support its
contention, AMARI cites the following discussion in the 1986 Constitutional
Commission:
"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 of the contract, or does he refer to the contract
itself?
Mr. Ople: The 'transactions' used here, I suppose is generic
and therefore, it can cover both steps leading to a contract
and already a consummated contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations
leading to the consummation of the transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the
national interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before
petitioner can invoke the right. Requiring government officials to reveal
their deliberations at the pre-decisional stage will degrade the quality of
decision-making in government agencies. Government officials will hesitate
to express their real sentiments during deliberations if there is immediate
public dissemination of their discussions, putting them under all kinds of
pressure before they decide.
We must first distinguish between information the law on public bidding
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, disclose to the public matters relating to the disposition of its
property. These include the size, location, technical description and nature
of the property being disposed of, the terms and conditions of the
disposition, the parties qualified to bid, the minimum price and similar
information. PEA must prepare all these data and disclose them to the
public at the start of the disposition process, long before the consummation
of the contract, because the Government Auditing Code requires public
bidding. If PEA fails to make this disclosure, any citizen can demand from
PEA this information at any time during the bidding process.
Information, however, on on-going evaluation or review of bids or
proposals being undertaken by the bidding or review committee is not
immediately accessible under the right to information. While the evaluation
or review is still on-going, there are no "official acts, transactions, or
decisions" on the bids or proposals. However, once the committee makes
its official recommendation, there arises a "definite proposition" on the
part of the government. From this moment, the public's right to information
attaches, and any citizen can access all the non-proprietary information
leading to such definite proposition. In Chavez v. PCGG,33 the Court ruled
as follows:
"Considering the intent of the framers of the Constitution, we
believe that it is incumbent upon the PCGG and its officers, as well
as other government representatives, to disclose sufficient public
information on any proposed settlement they have decided to take
up with the ostensible owners and holders of ill-gotten wealth. Such
information, though, must pertain to definite propositions of the
government, not necessarily to intra-agency or inter-agency
recommendations or communications during the stage when
common assertions are still in the process of being formulated or
are in the "exploratory" stage. There is need, of course, to observe
the same restrictions on disclosure of information in general, as
discussed earlier such as on matters involving national security,
PROPERTY 1ST BATCH
diplomatic or foreign relations, intelligence and other classified
information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986
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 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 is consummated, it may be too late for the public to expose its
defects.1wphi1.nt
Requiring a consummated contract will keep the public in the dark until the
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 Constitution could not have intended. Such a requirement will prevent
the citizenry from participating in the public discussion of
any proposed contract, 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 State of its avowed "policy of full disclosure of all
its transactions involving public interest."
The right covers three categories of information which are "matters of
public 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 part of the public records in the custody of government
agencies or officials. The second category refers to documents and papers
recording, evidencing, establishing, confirming, supporting, justifying or
explaining official acts, transactions or decisions of government agencies
or officials. The third category refers to research data, whether raw,
collated or processed, owned by the government and used in formulating
government policies.
The information that petitioner may access on the renegotiation of the JVA
includes evaluation reports, recommendations, legal and expert opinions,
minutes of meetings, terms of reference and other documents attached to
such reports or minutes, all relating to the JVA. However, the right to
information does not compel PEA to prepare lists, abstracts, summaries
and the like 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 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 conduct the inspection and copying.35
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
affecting national security, and information on investigations of crimes by
law enforcement agencies before the prosecution of the accused, which
courts have long recognized as confidential.37 The right may also be
subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is
privileged information rooted in the separation of powers. The information
does not cover Presidential conversations, correspondences, or
discussions during closed-door Cabinet meetings which, like internal
deliberations of the Supreme Court and other collegiate courts, or
executive sessions of either house of Congress,38 are recognized as
confidential. This kind of information cannot be pried open by a co-equal
branch of government. A frank exchange of exploratory ideas and
assessments, free from the glare of publicity and pressure by interested
parties, is essential to protect the independence of decision-making of
those tasked to exercise Presidential, Legislative and Judicial power.39 This
is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes
official information on on-going negotiations before a final contract. The
information, however, must constitute definite propositions by the
government and should not cover recognized exceptions like privileged
information, military and diplomatic secrets and similar matters affecting
national security and public order.40 Congress has also prescribed other
limitations on the right to information in several legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer
to AMARI of lands, reclaimed or to be reclaimed, violate the
Constitution.
The Regalian Doctrine
PROPERTY 1ST BATCH
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 waters of the public domain. Upon the Spanish conquest of the
Philippines, ownership of all "lands, territories and possessions" in the
Philippines passed to the Spanish Crown.42 The King, as the sovereign
ruler and representative of the people, acquired and owned all lands and
territories in the Philippines except those he disposed of by grant or sale to
private individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine
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 acquired from the Government, either by purchase or by
grant, belong to the 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.
Ownership and Disposition of Reclaimed Lands
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 the lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. Later, on November 29,
1919, the Philippine 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 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 government to corporations and
individuals. CA No. 141 continues to this day as the general law
governing the classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets
and 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:
 "Article 5. Lands reclaimed from the sea in consequence of works
constructed by the State, or by the provinces, pueblos or private
persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the
terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged
to the party undertaking the reclamation, provided the government issued
the necessary permit and did not reserve ownership of the reclaimed land
to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as
follows:
"Art. 339. Property of public dominion is
1. That devoted to public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, riverbanks,
shores, roadsteads, and that of a similar character;
2. That belonging exclusively to the State which, without being of
general public use, is employed in some public service, or in the
development of the national wealth, such as walls, fortresses, and
other works for the defense of the territory, and mines, until granted
to private individuals."
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 some specific public service and open only to those authorized to
use the property.
Property of public dominion referred not only to property devoted to public
use, but also to property not so used but employed to develop the
national wealth. This class of property constituted property of public
dominion although employed for some economic or commercial activity to
increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of
property of public dominion into private property, to wit:
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"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."
This provision, however, was not self-executing. The legislature, or the
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
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which
regulated the lease of reclaimed and foreshore lands. The salient
provisions of this law were as follows:
"Section 1. The control and disposition of the foreshore as
defined in existing law, and the title to all Government or public
lands made or reclaimed by the Government by dredging or
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
Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause all
Government or public lands made or reclaimed by the Government
by dredging or filling or otherwise to be divided into lots or blocks,
with the necessary streets and alleyways located thereon, and
shall cause plats and plans of such surveys to be prepared and
filed with the Bureau of Lands.
(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
purposes will be leased for commercial and business
purposes, x x x.
xxx
(e) The leases above provided for shall be disposed of to the
highest and best bidder therefore, subject to such regulations
 and safeguards as the Governor-General may by executive order
prescribe." (Emphasis supplied)
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 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 private parties, these reclaimed lands
were available only for lease to private parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of
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 reclaimed from the sea by private parties with government
permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874,
the Public Land Act.46 The salient provisions of Act No. 2874, on reclaimed
lands, were as follows:
"Sec. 6. The Governor-General, upon the recommendation of
the Secretary of Agriculture and Natural Resources, shall from
time to time classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of
alienable or disposable public lands, the Governor-General, upon
recommendation by the Secretary of Agriculture and Natural
Resources, shall from time to time declare what lands are
open to disposition or concession under this Act."
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Sec. 8. Only those lands shall be declared open to disposition
or concession which have been officially delimited or
classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither
timber nor mineral land, shall be classified as suitable for
residential purposes or for commercial, industrial, or other
productive purposes other than agricultural purposes, and
shall be open to disposition or concession, shall be disposed of
under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be
classified as follows:
(a) Lands reclaimed by the Government by dredging,
filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering
upon the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of
section fifty-six shall be disposed of to private parties by lease
only and not otherwise, as soon as the Governor-General,
upon recommendation by the Secretary of Agriculture and
Natural Resources, shall declare that the same are not
necessary for the public service and are open to
disposition under this chapter. The lands included in class (d)
may be disposed of by sale or lease under the provisions of
this Act." (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 disposition or concession." Section 8 of the Act limited
alienable or disposable lands only to those lands which have been
"officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this
title48 shall be classified" as government reclaimed, foreshore and marshy
lands, as well as other lands. All these lands, however, must be suitable for
residential, commercial, industrial or other productive non-
agricultural purposes. These provisions vested upon the Governor-
General the power to classify inalienable lands of the public domain into
disposable lands of the public domain. These 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.
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 otherwise." The Governor-General, before allowing the lease of
these lands to private parties, must formally declare that the lands were
"not necessary for the public service." Act No. 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, foreshore and marshy lands
remained sui generis, as the only alienable or disposable lands of the
public domain that the government could not sell to private parties.
The rationale behind this State policy is obvious. Government reclaimed,
foreshore and marshy public lands for non-agricultural purposes retain
their 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 service.
Act No. 2874 did not authorize the reclassification of government
reclaimed, foreshore and marshy lands into other non-agricultural lands
under Section 56 (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
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government reclaimed, foreshore and marshy lands to private parties,
unless the legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the
sea 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.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by
the Filipino people. The 1935 Constitution, in adopting the Regalian
doctrine, declared in Section 1, Article XIII, that
"Section 1. All agricultural, timber, and mineral lands of the public
domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation,
development, or utilization shall be limited to citizens of the
Philippines or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens, subject to
any existing right, grant, lease, or concession at the time of the
inauguration of the Government established under this
Constitution. Natural resources, with the exception of public
agricultural land, shall not be alienated, and no license,
concession, or lease for the exploitation, development, or utilization
of any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for another twenty-five
years, except as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water
power, in which cases beneficial use may be the measure and limit
of the grant." (Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except
public agricultural lands, which were the only natural resources the State
could alienate. Thus, foreshore lands, considered part of the State's
natural 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 alienable agricultural lands of the public domain. Government
reclaimed and marshy lands of the public domain, being neither timber nor
mineral lands, fell under the classification of public agricultural
lands.50 However, government reclaimed and marshy lands, although
subject to classification as disposable public agricultural lands, could only
be leased and not sold to private parties because of Act No. 2874.
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
1935 Constitution did not prohibit individuals and corporations from
acquiring government reclaimed and marshy lands of the public domain
that were classified as agricultural lands under existing public land laws.
Section 2, Article XIII of the 1935 Constitution provided 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 lands by purchase in excess of one hundred and
forty hectares, or by lease in excess of one thousand and
twenty-four hectares, or by homestead in excess of twenty-four
hectares. Lands adapted to grazing, not exceeding two thousand
hectares, may be leased to an individual, private corporation, or
association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not
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
retaining for the government title and ownership of government reclaimed
and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth
Act 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 lands of the public domain other than timber and mineral
lands.51
Section 6 of CA No. 141 empowers the President to classify lands of the
public domain into "alienable or disposable"52 lands of the public domain,
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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 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 "officially delimited and classified." Sections 6, 7 and 8
of CA No. 141 read as follows:
"Sec. 6. The President, upon the recommendation of the
Secretary of Agriculture and Commerce, shall from time to
time classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from
one class to another,53 for the purpose of their administration and
disposition.
Sec. 7. For the purposes of the administration and disposition of
alienable or disposable public lands, the President, upon
recommendation by the Secretary of Agriculture and
Commerce, shall from time to time declare what lands are
open to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition
or concession which have been officially delimited and
classified and, when practicable, surveyed, and which have not
been reserved for public or quasi-public uses, nor appropriated
by the Government, nor in any manner become private property,
nor those on which a private right authorized and recognized by
this Act or any other valid law may be claimed, or which, having
been reserved or appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the
public domain, the President must first officially classify these lands as
alienable or disposable, and then declare them open to disposition or
concession. There must be no law reserving these lands for public or
quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore
and marshy lands of the public domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being
neither timber nor mineral land, is intended to be used for
residential purposes or for commercial, industrial, or other
productive purposes other than agricultural, and is open to
disposition or concession, shall be disposed of under the
provisions of this chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be
classified as follows:
(a) Lands reclaimed by the Government by dredging,
filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering
upon the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased
or sold, as the case may be, to any person, corporation, or
association authorized to purchase or lease public lands for
agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of
section fifty-nine shall be disposed of to private parties by
lease only and not otherwise, as soon as the 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 this chapter. The lands included in
class (d) may be disposed of by sale or lease under the
provisions of this Act." (Emphasis supplied)
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
these lands are intended for residential, commercial, industrial or other
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non-agricultural purposes. As before, Section 61 allowed only the lease of
such 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 marshy disposable lands of the public domain. Foreshore
lands, however, became inalienable under the 1935 Constitution which
only allowed the lease of these lands to qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the
public domain intended for residential, commercial, industrial or other
productive purposes other than agricultural "shall be disposed of under
the provisions of this chapter and not otherwise." 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 purposes must comply with Chapter IX, Title III of
CA No. 141,54 unless a subsequent law amended or repealed these
provisions.
In his concurring opinion in the landmark case of Republic Real Estate
Corporation v. Court of Appeals,55Justice Reynato S. Puno summarized
succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion intended for public
use. So too are lands reclaimed by the government by dredging,
filling, or other means. Act 1654 mandated that the control and
disposition of the foreshore and lands under water remained in the
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
were to be "disposed of to private parties by lease only and not
otherwise." Before leasing, however, the Governor-General, upon
recommendation of the Secretary of Agriculture and Natural
Resources, had first to determine that the land reclaimed was not
necessary for the public service. This requisite must have been
met before the land could be disposed of. But even then, the
foreshore and lands under water were not to be alienated and
sold to private parties. The disposition of the reclaimed land
was only by lease. The land remained property of the State."
(Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth
Act No. 141 has remained in effect at present."
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
Constitution took effect. The prohibition on the sale of foreshore lands,
however, became a constitutional edict under the 1935 Constitution.
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 reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and
marshy disposable lands of the public domain continued to be only leased
and not sold to private parties.56 These lands remained sui generis, as the
only alienable or disposable lands of the public domain the government
could not sell to private parties.
Since then and until now, the only way the government can sell to private
parties government reclaimed and marshy disposable lands of the public
domain is for the legislature to pass a law authorizing such sale. CA No.
141 does not authorize the President to reclassify government reclaimed
and 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 non-agricultural purposes that the government could sell to
private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional
authority before lands under Section 59 that the government previously
transferred to government units or entities could be sold to private parties.
Section 60 of CA No. 141 declares that
"Sec. 60. x x x The area so leased or sold shall be such as shall, in
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
and forty-four hectares: Provided, however, That this limitation
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
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interest; but the land so granted, donated, or transferred to a
province, municipality or branch or subdivision of the
Government shall not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, except when
authorized by Congress: x x x." (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors
the legislative authority required in Section 56 of Act No. 2874.
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 lands that could be acquired from the State. These government units
and 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 used to circumvent constitutional limitations on ownership
of alienable or 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 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
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. 63. Whenever it is decided that lands covered by this chapter
are not needed for public purposes, the Director of Lands shall ask
the Secretary of Agriculture and Commerce (now the Secretary of
Natural Resources) for authority to dispose of the same. Upon
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 sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and
adjudication shall be made to the highest bidder. x x x."
(Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all
leases or sales of alienable or disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal
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 agricultural land of the public domain open to disposition
under CA No. 141. The 1935 Constitution prohibited the alienation of all
natural resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of
public dominion found in the Civil Code of 1889. Articles 420 and 422 of
the Civil Code of 1950 state that
"Art. 420. The following things are property of public dominion:
(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;
(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.
x x x.
Art. 422. Property of public dominion, when no longer intended for
public use or for public service, shall form part of the patrimonial
property of the State."
Again, the government must formally declare that the property of public
dominion is no longer needed for public use or public service, before the
same could be classified as patrimonial property of the State.59 In the case
of government reclaimed and marshy lands of the public domain, the
declaration of their being disposable, as well as the manner of their
disposition, is governed by the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of
public dominion those properties of the State which, without being for
public use, are intended for public service or the "development of the
national wealth." Thus, government reclaimed and marshy lands of the
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State, even if not employed for public use or public service, if developed to
enhance the national wealth, are classified as property of public dominion.
Dispositions under the 1973 Constitution
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
"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
belong to the State. With the exception of agricultural,
industrial or commercial, residential, and resettlement lands
of the public domain, natural resources shall not be alienated,
and no license, concession, or lease for the 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 twenty-five years, except as to
water rights for irrigation, water supply, fisheries, or industrial uses
other than the development of water power, in which cases,
beneficial use may be the measure and the limit of the grant."
(Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with
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
lands." However, the term "public agricultural lands" in the 1935
Constitution 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 domain. Both the 1935 and 1973
Constitutions, therefore, prohibited the alienation of all natural
resources except agricultural lands of the public domain.
The 1973 Constitution, however, limited the alienation of lands of the public
domain to individuals who were citizens of the Philippines. Private
corporations, even if wholly owned by Philippine citizens, were no longer
allowed to acquire alienable lands of the public domain unlike in the 1935
Constitution. Section 11, Article XIV of the 1973 Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into account
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
leased to, any qualified individual, corporation, or association, and
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 such lands by lease in excess of five hundred hectares
or acquire by purchase, homestead or grant, in excess of twenty-
four hectares. No private corporation or association may hold by
lease, concession, license or permit, timber or forest lands and
other timber or forest resources in excess of one hundred thousand
hectares. However, such area may be increased by the Batasang
Pambansa upon recommendation of the National Economic and
Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold
alienable lands of the public domain only through lease. Only individuals
could now 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 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 domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential
Decree No. 1084 creating PEA, a wholly government owned and controlled
corporation with a special charter. Sections 4 and 8 of PD No. 1084, vests
PEA with the following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for the following
purposes:
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(a) To reclaim land, including foreshore and submerged areas,
by dredging, filling or other means, or to acquire reclaimed
land;
(b) To develop, improve, acquire, administer, deal in, subdivide,
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;
(c) To provide for, operate or administer such service as may be
necessary for the efficient, economical and beneficial utilization of
the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall,
in carrying out the purposes for which it is created, have the
following powers and functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area
permitted to private corporations by statute.
(j) To reclaim lands and to construct work across, or otherwise,
any stream, watercourse, canal, ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be
necessary for the attainment of the purposes and objectives herein
specified." (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 ebb and flow of the tide.61 Submerged areas are those
permanently under water regardless of the ebb and flow of the
tide.62 Foreshore and submerged areas indisputably belong to the public
domain63 and are inalienable unless reclaimed, classified as alienable
lands open to disposition, and further declared no longer needed for public
service.
The ban in the 1973 Constitution on private corporations from acquiring
alienable lands of the public domain did not apply to PEA since it was then,
and until today, a fully owned government corporation. The constitutional
ban applied then, as it still applies now, only to "private corporations and
associations." PD No. 1084 expressly empowers PEA "to hold lands of
the public domain" even "in excess of the area permitted to private
corporations by statute." Thus, PEA can hold title to private lands, as
well as title to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable
lands of the public domain, there must be legislative authority empowering
PEA to sell these lands. This legislative authority is necessary in view of
Section 60 of CA No.141, which states
"Sec. 60. x x x; but the land so granted, donated or transferred to a
province, municipality, or branch or subdivision of the Government
shall not be alienated, encumbered or otherwise disposed of in a
manner affecting its title, except when authorized by Congress;
x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its
reclaimed foreshore and submerged alienable lands of the public domain.
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. Hence, such legislative authority could only benefit private
individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has
adopted the Regalian doctrine. The 1987 Constitution declares that all
natural 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, Article XII of the 1987 Constitution state that
"Section 2. All lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces of potential energy,
PROPERTY 1ST BATCH
fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception
of agricultural lands, all other natural resources shall not be
alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the
State. x x x.
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 by
law according to the uses which they may be devoted. Alienable
lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a
period not exceeding twenty-five years, renewable for not
more than twenty-five years, and not to exceed one thousand
hectares in area. Citizens of the Philippines may lease not more
than five hundred hectares, or acquire not more than twelve
hectares thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform,
the Congress shall determine, by law, the size of lands of the
public domain which may be acquired, developed, held, or leased
and the conditions therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution
banning private corporations from acquiring any kind of alienable land
of the public domain. Like the 1973 Constitution, the 1987 Constitution
allows private corporations to hold alienable lands of the public
domain only through lease. As in the 1935 and 1973 Constitutions, the
general law governing the lease to private corporations of reclaimed,
foreshore and marshy alienable lands of the public domain is still CA No.
141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring,
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:
"FR. BERNAS: Mr. Vice-President, my questions have reference to
page 3, line 5 which says:
`No private corporation or association may hold alienable lands of
the public domain except by lease, not to exceed one thousand
hectares in area.'
If we recall, this provision did not exist under the 1935 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 the
reason for this is. In some of the cases decided in 1982 and
1983, it was indicated that the purpose of this is to prevent
large landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo,
there were instances where the Iglesia ni Cristo was not allowed to
acquire a mere 313-square meter land where a chapel stood
because the Supreme Court said it would be in violation of this."
(Emphasis supplied)
In Ayog v. Cusi,64 the Court explained the rationale behind this
constitutional ban in this way:
"Indeed, one purpose of the constitutional prohibition against
purchases of public agricultural lands by private corporations is to
equitably diffuse land ownership or to encourage 'owner-
cultivatorship and the economic family-size farm' and to prevent a
recurrence of cases like the instant case. Huge landholdings by
corporations or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge landholdings, the
Constitution could have simply limited the size of alienable lands of the
public domain that corporations could acquire. The Constitution could have
followed the limitations on individuals, who could acquire not more than 24
PROPERTY 1ST BATCH
hectares of alienable lands of the public domain under the 1973
Constitution, and not more than 12 hectares under the 1987 Constitution.
If the constitutional intent is to encourage economic family-size farms,
placing the land in the name of a corporation would be more effective in
preventing the break-up of farmlands. If the farmland is registered in the
name of a corporation, upon the death of the owner, his heirs would inherit
shares in the corporation instead of subdivided parcels of the farmland.
This would prevent the continuing break-up of farmlands into smaller and
smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional
limitation on individuals from acquiring more than the allowed area of
alienable lands of the public domain. Without the constitutional ban,
individuals who already acquired the maximum area of alienable lands of
the public domain could easily set up corporations to acquire more
alienable public lands. An individual could own as many corporations as
his means would allow him. An individual could even hide his ownership of
a corporation by putting his nominees as stockholders of the corporation.
The corporation is a convenient vehicle to circumvent the constitutional
limitation on acquisition by individuals of alienable lands of the public
domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to
transfer ownership of only a limited area of alienable land of the public
domain to a qualified individual. This constitutional intent is safeguarded by
the provision prohibiting corporations from acquiring alienable lands of the
public domain, since the vehicle to circumvent the constitutional intent is
removed. The available alienable public lands are gradually decreasing in
the face of an ever-growing population. The most effective way to insure
faithful adherence to this constitutional intent is to grant or sell alienable
lands of the public domain only to individuals. This, it would seem, is the
practical benefit arising from the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas
clause, consists of three properties, namely:
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
meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the
three islands;" and
3. "[A]t AMARI's option as approved by PEA, an additional 350
hectares more or less to regularize the configuration of the
reclaimed area."65
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 x."66
In short, the Amended JVA covers a reclamation area of 750
hectares. Only 157.84 hectares of the 750-hectare reclamation project
have been reclaimed, and the rest of the 592.15 hectares are still
submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of
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 Freedom Islands. AMARI will further shoulder all the
reclamation costs of all 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 reclaimed area less 30 percent earmarked for
common areas. Title to 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, 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,
when requested in writing by AMARI, shall then cause the
issuance and delivery of the proper certificates of title
covering 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 seventy percent (70%) of the titles pertaining to AMARI, until
PROPERTY 1ST BATCH
such time when a corresponding proportionate area of additional
land pertaining to PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a
maximum of 367.5 hectares of reclaimed land which will be titled in
its name.
To implement the Amended JVA, PEA delegated to the unincorporated
PEA-AMARI joint venture PEA's statutory authority, rights and privileges to
reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the
Amended JVA states that
"PEA hereby contributes to the joint venture its rights and privileges
to perform Rawland Reclamation and Horizontal Development as
well as own the Reclamation Area, thereby granting the Joint
Venture the full and exclusive right, authority and privilege to
undertake the Project in accordance with the Master Development
Plan."
The Amended JVA is the product of a renegotiation of the original JVA
dated April 25, 1995 and its supplemental agreement dated August 9,
1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire
and own under the Amended JVA 367.5 hectares of reclaimed foreshore
and submerged areas in Manila Bay in view of Sections 2 and 3, Article XII
of the 1987 Constitution which state that:
"Section 2. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be
alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain shall be
limited to agricultural lands. Private corporations or associations
 may not hold such alienable lands of the public domain except
by lease, x x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged Areas
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 Memorandum,67 PEA admits that
"Under the Public Land Act (CA 141, as amended), reclaimed
lands are classified as alienable and disposable lands of the
public domain:
'Sec. 59. The lands disposable under this title shall be
classified as follows:
(a) Lands reclaimed by the government by dredging, filling,
or other means;
x x x.'" (Emphasis supplied)
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
alienable and disposable lands of the public domain."69 The Legal Task
Force concluded that
"D. Conclusion
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
PEA, as owner, may validly convey the same to any qualified
person without violating the Constitution or any statute.
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
has passed on to PEA by statutory grant."
PROPERTY 1ST BATCH
Under Section 2, Article XII of the 1987 Constitution, the foreshore and
submerged areas of Manila Bay are part of the "lands of the public domain,
waters x x x and other natural resources" and consequently "owned by the
State." As such, foreshore and submerged areas "shall not be alienated,"
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 domain. There must be a law or presidential proclamation
officially classifying these reclaimed lands as alienable or disposable and
open to 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.71
Section 8 of CA No. 141 provides that "only those lands shall be declared
open to disposition or concession which have been officially delimited
and 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 Department attempted to sell the Roppongi property in Tokyo,
Japan, which was acquired by the Philippine Government for use as the
Chancery of the Philippine Embassy. Although the Chancery had
transferred to another location thirteen years earlier, the Court still ruled
that, under Article 42274 of the Civil Code, a property of public dominion
retains such character until formally declared otherwise. The Court ruled
that
"The fact that the Roppongi site has not been used for a long time
for actual Embassy service does not automatically convert it to
patrimonial property. Any such conversion happens only if the
property is withdrawn from public use (Cebu Oxygen and
Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property
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
being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]."
(Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of
special 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 issued Special Patent No. 3517 in the name of PEA for
the 157.84 hectares comprising the partially reclaimed Freedom Islands.
Subsequently, on April 9, 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 patents. To this day, these
certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a
special 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 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.
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 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 1987 Constitution classifies lands of the public domain into
"agricultural, forest or timber, mineral lands, and national parks." Being
neither timber, mineral, nor national park lands, the reclaimed Freedom
Islands necessarily fall under the classification of agricultural lands of the
public domain. Under the 1987 Constitution, agricultural lands of the public
domain are the only natural resources that the State may alienate to
qualified private parties. All 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.
AMARI claims that the Freedom Islands are private lands because CDCP,
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
ownership of reclaimed lands may be given to the party constructing the
works, then it cannot be said that reclaimed lands are lands of the public
domain which the State may not alienate."75 Article 5 of the Spanish Law of
Waters reads as follows:
PROPERTY 1ST BATCH
"Article 5. Lands reclaimed from the sea in consequence of works
constructed by the State, or by the provinces, pueblos or private
persons, with proper permission, shall become the property of the
party constructing such works, unless otherwise provided by the
terms of the grant of authority." (Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could
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
terms of the grant of authority." This clearly meant that no one could
reclaim from the sea without permission from the State because the sea is
property of public dominion. It also meant that the State could grant or
withhold ownership of the reclaimed land because any reclaimed land, like
the sea from which it emerged, belonged to the State. Thus, a private
person reclaiming from the sea without permission from the State could not
acquire ownership of the reclaimed land which would remain property of
public dominion like the sea it replaced.76 Article 5 of the Spanish Law of
Waters of 1866 adopted the time-honored principle of land ownership that
"all lands that were not acquired from the government, either by purchase
or by grant, belong to the public domain."77
Article 5 of the Spanish Law of Waters must be read together with laws
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
alienable or disposable before the government can alienate them. These
lands must not be reserved for public or quasi-public
purposes.78 Moreover, the contract between CDCP and the government
was executed after the effectivity of the 1973 Constitution which barred
private corporations from acquiring any kind of alienable land of the public
domain. This contract could not have converted the Freedom Islands into
private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws
authorizing the reclamation of areas under water and revested solely in the
National Government the power to reclaim lands. Section 1 of PD No. 3-A
declared that
"The provisions of any law to the contrary notwithstanding, the
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)
 x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866
because reclamation of areas under water could now be undertaken only
by the National Government or by a person contracted by the National
Government. 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.
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 through a proper contract executed by it with any person
or entity." Under such contract, a private party receives compensation for
reclamation services 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. The reclaimed land can be used as payment in
kind only if the reclaimed land is first classified as alienable or disposable
land open to disposition, and then declared no longer needed for public
service.
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
submerged areas as alienable or disposable lands of the public
domain open to disposition. These submerged areas are not covered by
any patent or certificate of title. There can be no dispute that these
submerged areas form part of the public domain, and in their present state
are inalienable and outside the commerce of man. Until reclaimed from
the sea, these submerged 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 agricultural lands, which under the
Constitution are the only natural resources that the State may alienate.
Once reclaimed and transformed into public agricultural lands, the
government may then officially classify these lands as alienable or
disposable lands open to disposition. Thereafter, the government 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 domain and within the commerce of man.
PROPERTY 1ST BATCH
The classification of PEA's reclaimed foreshore and submerged lands into
alienable or disposable lands open to disposition is necessary because
PEA is tasked under its charter to undertake public services that require
the use of lands of the public domain. Under Section 5 of PD No. 1084, the
functions of PEA include the following: "[T]o own or operate railroads,
tramways and other kinds of land transportation, x x x; [T]o construct,
maintain and operate such systems of sanitary sewers as may be
necessary; [T]o construct, maintain and operate such storm drains as may
be necessary." PEA is empowered to issue "rules and regulations as may
be necessary for the proper use by private parties of any or all of the
highways, roads, utilities, buildings and/or any of its properties and to
impose or collect fees or tolls for their use." Thus, part of 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 PEA by
its charter constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall
be primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government." The
same section also states that "[A]ll reclamation projects shall be approved
by the 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; 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 reclaim foreshore and submerged lands of the
public domain. EO No. 525 recognized PEA as the government entity "to
undertake the reclamation of lands and ensure their maximum utilization
in promoting public welfare and 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 public service. 1wphi1.nt
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
domain. Otherwise, reclaimed foreshore and submerged lands of the
public domain would automatically become alienable once reclaimed by
PEA, whether or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No.
1084 or EO No. 525, vests in the Department of Environment and Natural
Resources ("DENR" for brevity) the following powers and functions:
 "Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable
and disposable public lands, mineral resources and, in the
process of exercising such control, impose appropriate taxes, fees,
charges, rentals and any such form of levy and collect such
revenues for the exploration, development, utilization or gathering
of such resources;
xxx
(14) Promulgate rules, regulations and guidelines on the
issuance of licenses, permits, concessions, lease agreements
and such other privileges concerning the development,
exploration and utilization of the country's marine, freshwater,
and brackish water and over all aquatic resources of the
country and shall continue to oversee, supervise and police
our natural resources; cancel or cause to cancel such privileges
upon failure, non-compliance or violations of any regulation, order,
and for all other causes which are in furtherance of the
conservation of natural resources and supportive of the national
interest;
(15) Exercise exclusive jurisdiction on the management and
disposition of all lands of the public domain and serve as the
sole agency responsible for classification, sub-classification,
surveying and titling of lands in consultation with appropriate
agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the
State, DENR exercises "supervision and control over alienable and
disposable public 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 reclaimed or not. This means that PEA
needs authorization from DENR before PEA can undertake reclamation
projects in Manila Bay, or in any part of the country.
PROPERTY 1ST BATCH
DENR also exercises exclusive jurisdiction over the disposition of all lands
of the public domain. Hence, DENR decides whether reclaimed lands of
PEA should be classified as alienable under Sections 681 and 782 of CA No.
141. Once DENR decides that the reclaimed lands should be so classified,
it then recommends to the President the issuance of a proclamation
classifying the lands as alienable or disposable lands of the public domain
open to 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.
In short, DENR is vested with the power to authorize the reclamation of
areas under water, while PEA is vested with the power to undertake the
physical 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 the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.
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 mere transfer by the National Government of lands of the
public domain to PEA does not make the lands alienable or disposable
lands of the public domain, much less patrimonial lands of PEA.
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 needed for public service, lands reclaimed by PEA remain inalienable
lands of the public domain. Only such an official classification and formal
declaration can convert reclaimed lands into alienable or disposable lands
of the public domain, open to disposition under the Constitution, Title I and
Title III83 of CA No. 141 and other applicable laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable
lands of 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 government "shall not be alienated, encumbered, or
otherwise disposed of in a manner affecting its title, except when
authorized by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised
Administrative Code of 1987, which states that
"Sec. 48. Official Authorized to Convey Real Property. Whenever
real property of the Government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of
the government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real property
belonging to the Government. The Court declared that -
"It is not for the President to convey real property of the
government on his or her own sole will. Any such conveyance
must be authorized and approved by a law enacted by the
Congress. It requires executive and legislative concurrence."
(Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative
authority allowing PEA to sell its reclaimed lands. PD No. 1085, issued on
February 4, 1977, provides that
"The land reclaimed in the foreshore and offshore area of
Manila Bay pursuant to the contract for the reclamation and
construction of the Manila-Cavite Coastal Road Project between
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
area is hereby transferred, conveyed and assigned to the
ownership and administration of the Public Estates
Authority established pursuant to PD No. 1084; Provided,
however, That the rights and interests of the Construction and
Development Corporation of the Philippines pursuant to the
aforesaid contract shall be recognized and respected.
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
PROPERTY 1ST BATCH
aforesaid contract between the Republic of the Philippines and the
Construction and Development Corporation of the Philippines.
In consideration of the foregoing transfer and assignment, the
Public Estates Authority shall issue in favor of the Republic of the
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.
The Secretary of Public Highways and the General Manager of the
Public Estates Authority shall execute such contracts or
agreements, including appropriate agreements with the
Construction and Development Corporation of the Philippines, as
may be necessary to implement the above.
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 his assignees of such portion or portions of the land
reclaimed or to be reclaimed as provided for in the above-
mentioned contract. On the basis of such patents, the Land
Registration Commission shall issue the corresponding
certificate of title." (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979,
provides that -
"Sec. 3. All lands reclaimed by PEA shall belong to or be
owned by the PEA which shall be responsible for its
administration, development, utilization or disposition in
accordance with the 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 Presidential Decree No. 1084."
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 and administration" of lands reclaimed from Manila Bay to
PEA, while EO No. 525 declared that lands reclaimed by PEA "shall
belong to or be owned by PEA." EO No. 525 expressly states that PEA
should dispose of its reclaimed lands "in accordance with the provisions of
Presidential Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve,
acquire, administer, deal in, subdivide, dispose, lease and sell any and all
kinds of lands x x x owned, managed, controlled and/or operated by the
government."87(Emphasis supplied) There is, therefore, legislative
authority granted to PEA to sell its lands, whether patrimonial or
alienable lands of the public domain. PEA may sell to private parties
its patrimonial properties in accordance with the PEA charter free from
constitutional limitations. The constitutional ban on private corporations
from acquiring alienable lands of the public domain does not apply to the
sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands of the public
domain to private individuals since, with the legislative authority, there is
no longer any statutory prohibition against such sales and the
constitutional ban does not apply to individuals. PEA, however, cannot sell
any of its alienable or disposable lands of the public domain to private
corporations since Section 3, Article XII of the 1987 Constitution expressly
prohibits such sales. The legislative authority benefits only individuals.
Private corporations remain barred from acquiring any kind of alienable
land of the public domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands
could be transferred by PEA to the "contractor or his assignees" (Emphasis
supplied) would not apply to private corporations but only to individuals
because of the constitutional ban. Otherwise, the provisions of PD No.
1085 would violate both the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or
disposable lands open to disposition, and further declared no longer
needed for public 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 No. 141 requiring public auction, in the absence
of a law exempting PEA from holding a public auction.88 Special Patent No.
3517 expressly states that the patent is issued by authority of the
Constitution and PD No. 1084, "supplemented by Commonwealth Act No.
141, as amended." This is an acknowledgment that the provisions of CA
PROPERTY 1ST BATCH
No. 141 apply to the disposition of 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 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.
Moreover, under Section 79 of PD No. 1445, otherwise known as the
Government Auditing Code, the government is required to sell valuable
government property through public bidding. Section 79 of PD No. 1445
mandates that
"Section 79. When government property has become
unserviceable for any cause, or is no longer needed, it shall, upon
application of the officer accountable therefor, be inspected by the
head of the agency or his duly 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
valuable, it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award or
similar body in the presence of the auditor concerned or other
authorized representative of the Commission, after advertising by
printed notice in the Official Gazette, or for not less than three
consecutive days in any newspaper of general circulation, or
where the value of the property does not warrant the expense of
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 private sale at such price as may be fixed by the same
committee or body concerned and approved by the
Commission."
It is only when the public auction fails that a negotiated sale is allowed, in
which case the Commission on Audit must approve the selling price.90 The
Commission on Audit implements Section 79 of the Government Auditing
Code through Circular No. 89-29691 dated January 27, 1989. This circular
emphasizes that government assets must be disposed of only through
public auction, and a negotiated sale can be resorted to only in case of
"failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for
PEA's reclaimed foreshore and submerged alienable lands of the public
domain. Private corporations are barred from bidding at the auction sale of
any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on
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 favor of the winning bidder.92 No one, however,
submitted a bid. On December 23, 1994, the Government Corporate
Counsel advised PEA it could sell the Freedom Islands through
negotiation, without need of another public bidding, because of the failure
of the public bidding on December 10, 1991.93
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 granted an option to AMARI to reclaim another 350 hectares. The
original JVA, a negotiated contract, enlarged the reclamation area to 750
hectares.94 The failure of public bidding on December 10, 1991, involving
only 407.84 hectares,95 is not a valid justification for a negotiated sale of
750 hectares, almost double the area publicly auctioned. Besides, the
failure of public bidding happened on December 10, 1991, more than three
years before the signing of the original JVA on April 25, 1995. The
economic situation in the country had greatly improved during the
intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987
Constitution is absolute and clear: "Private corporations or associations
may 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, recognizes the constitutional ban. Section 6 of RA No. 6957 states
"Sec. 6. Repayment Scheme. - For the financing, construction,
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
PROPERTY 1ST BATCH
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
payments, such as, but not limited to, the grant of a portion or
percentage of the reclaimed land, subject to the constitutional
requirements with respect to the ownership of the land: x x x."
(Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of
a government BOT project, cannot acquire reclaimed alienable lands of the
public domain in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and
AMARI, authorizes local governments in land reclamation projects to pay
the contractor or developer in kind consisting of a percentage of the
reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation,
and Management of Infrastructure Projects by the Private Sector. x
xx
xxx
In case of land reclamation or construction of industrial estates, the
repayment plan may consist of the grant of a portion or percentage
of the reclaimed land or the industrial estate constructed."
Although Section 302 of the Local Government Code does not contain a
proviso similar to that of the BOT Law, the constitutional restrictions on
land ownership automatically apply even though not expressly mentioned
in the Local Government Code.
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 individual, portions of the reclaimed land, not exceeding 12
hectares96 of non-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 direct collision with Section 3, Article XII of the 1987
Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the
reclaimed lands to public respondent PEA transformed such lands of the
public domain to private lands." This theory is echoed by AMARI which
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 and AMARI contend that with the issuance of Special Patent No.
3517 and the corresponding certificates of titles, the 157.84 hectares
comprising the Freedom Islands have become private lands of PEA. In
support of their theory, PEA and AMARI cite the following rulings of the
Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held
"Once the patent was granted and the corresponding certificate of
title was issued, the land ceased to be part of the public domain
and became private property over which the Director of Lands has
neither control nor jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared -
"After the registration and issuance of the certificate and duplicate
certificate of title based on a public land patent, the land covered
thereby automatically comes under the operation of Republic Act
496 subject to all the safeguards provided therein."3. Heirs of
Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled
- involves the registration under the Torrens System of a 12.8-hectare public
"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
once the patent is registered and a certificate of title is issued, the
land ceases to be part of the public domain and becomes private
property over which the Director of Lands has neither control nor
jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where the Court held
PROPERTY 1ST BATCH
"When the lots in dispute were certified as disposable on May 19,
1971, and free patents were issued covering the same in favor of
the private respondents, the said lots ceased to be part of the
public domain and, therefore, the Director of Lands lost jurisdiction
over the same."
5.Republic v. Court of Appeals,101 where the Court stated
"Proclamation No. 350, dated October 9, 1956, of President
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
Registration Act. Such land grant is constitutive of a 'fee simple'
title or absolute title in favor of petitioner Mindanao Medical 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 the Government
of the United States or to the Government of the Philippines are
alienated, granted or conveyed to persons or to public or private
corporations, the same shall be brought forthwith under the
operation of this Act (Land Registration Act, Act 496) and shall
become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and
the corresponding certificates of titles issued to private parties. These
four cases 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 comes under the Torrens System. The fifth case cited
land granted by the 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 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 Mindanao Medical Center under
Section 122 of Act No. 496. This fifth case is an example of a public land
being registered under Act No. 496 without the land losing its character as
a property of public dominion.
In the instant case, the only patent and certificates of title issued are those
in the name of PEA, a wholly government owned corporation performing
public as well as proprietary functions. No patent or certificate of title has
been issued to any private party. No one is asking the Director of Lands to
cancel 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 sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the
registrant private or public ownership of the land. Registration is not a
mode 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 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
Jurisprudence holding that upon the grant of the patent or issuance of the
certificate of title the alienable land of the public domain automatically
becomes private land cannot apply to government units and entities 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:
"NOW, THEREFORE, KNOW YE, that by authority of the
Constitution of the Philippines and in conformity with the provisions
of Presidential Decree No. 1084, supplemented by
Commonwealth Act No. 141, as amended, there are hereby
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)
square meters; the technical description of which are hereto
attached and made an integral part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on
matters not covered by PD No. 1084. Section 60 of CA No. 141 prohibits,
"except when authorized by Congress," the sale of alienable lands of the
public domain that are transferred to government units or entities. Section
60 of CA 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 title.104Alienable lands of the public domain held by
government entities under Section 60 of CA No. 141 remain public lands
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because they cannot be alienated or encumbered unless Congress passes
a law authorizing their disposition. Congress, however, cannot authorize
the sale to private corporations of reclaimed alienable lands of the public
domain because of the constitutional ban. Only individuals can benefit from
such law.
The grant of legislative authority to sell public lands in accordance with
Section 60 of CA No. 141 does not automatically convert alienable lands of
the public domain into private or patrimonial lands. The alienable lands of
the public domain must be transferred to qualified private parties, or to
government entities not tasked to dispose of public lands, before these
lands can become private or patrimonial lands. Otherwise, the
constitutional ban will become illusory if Congress can declare lands of the
public domain as private or patrimonial lands in the hands of a government
agency tasked to dispose of public lands. This will allow private
corporations to acquire directly from government agencies limitless areas
of lands which, prior to such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the
National Government to reclaim foreshore and submerged areas of the
public domain. Thus, EO No. 525 declares that
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily
Responsible for all Reclamation Projects
Whereas, there are several reclamation projects which are ongoing
or being proposed to be undertaken in various parts of the country
which need to be evaluated for consistency with national programs;
Whereas, there is a need to give further institutional support to the
Government's declared policy to provide for a coordinated,
economical and efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation
of areas shall be limited to the National Government or any person
authorized by it under proper contract;
 Whereas, a central authority is needed to act on behalf of the
National Government which shall ensure a coordinated and
integrated approach in the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public
Estates Authority as a government corporation to undertake
reclamation of lands and ensure their maximum utilization in
promoting public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the President
with continuing authority to reorganize the national government
including the transfer, abolition, or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
the Philippines, by virtue of the powers vested in me by the
Constitution and pursuant to Presidential Decree No. 1416, do
hereby order and direct the following:
Section 1. The Public Estates Authority (PEA) shall be
primarily 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 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
any national government agency or entity authorized under its
charter shall be undertaken in consultation with the PEA upon
approval of the President.
x x x ."
As the central implementing agency tasked to undertake reclamation
projects nationwide, with authority to sell reclaimed lands, PEA took the
place of DENR as the government agency charged with leasing or selling
reclaimed lands of the public domain. The reclaimed lands being leased or
sold by PEA are not private lands, in the same manner that DENR, when it
disposes of other alienable lands, does not dispose of private lands but
alienable lands of the public domain. Only when qualified private parties
acquire these lands will the lands become private lands. In the hands of
the government agency tasked and authorized to dispose of alienable
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of disposable lands of the public domain, these lands are still public,
not private lands.
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 lands of the public domain and private lands. Thus, the mere fact that
alienable lands of the public domain like the Freedom Islands are
transferred to PEA and issued land patents or certificates of title in PEA's
name does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be
transferred 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 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 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 Filipinos, now numbering over
80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands
of 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 hundreds of hectares of alienable lands of the public domain
under the guise that in the hands of PEA these lands are private lands.
This will result in corporations amassing huge landholdings never before
seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This 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 prohibited private corporations from
acquiring any kind of public land, and the 1987 Constitution has
unequivocally reiterated this prohibition.
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 registered under the Torrens System or Act No. 496, now PD No.
1529, without losing their character as public lands. Section 122 of Act No.
496, and Section 103 of PD No. 1529, respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands
belonging to the x x x Government of the Philippine Islands are
alienated, granted, or conveyed to persons or the public or
private corporations, the same shall be brought forthwith under
the operation of this Act and shall become registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is
by the Government alienated, granted or conveyed to any person,
the same shall be brought forthwith under the operation of this
Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any person" in
Section 103 of PD No. 1529 includes conveyances of public lands to public
corporations.
Alienable lands of the public domain "granted, donated, or transferred to a
province, municipality, or branch or subdivision of the 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, 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 affecting its title, except when authorized by Congress."
This provision refers to government reclaimed, foreshore and marshy lands
of the public domain that have been titled but still cannot be alienated or
encumbered unless expressly authorized by Congress. The need for
legislative authority prevents the registered land of the public domain from
becoming private land that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the
public domain may be registered under the Torrens System. Section 48,
Chapter 12, Book I of the Code states
"Sec. 48. Official Authorized to Convey Real Property. Whenever
real property of the Government is authorized by law to be
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conveyed, the deed of conveyance shall be executed in behalf of
the government by the following:
(1) x x x
(2) For property belonging to the Republic of the Philippines,
but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head of
the agency or instrumentality." (Emphasis supplied)
Thus, private property purchased by the National Government for
expansion 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 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 site may likewise be titled in the name of the
municipality.106 All these properties become properties of the public
domain, and if already registered under Act No. 496 or PD No. 1529,
remain registered land. There is no requirement or provision in any existing
law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of
eminent domain become unquestionably part of the public domain.
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
"Sec. 85. Land taken by eminent domain. Whenever any registered
land, or interest therein, is expropriated or taken by eminent
domain, the National Government, province, city or municipality, 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,
the particular property or interest expropriated, the number of the
certificate of title, and the nature of the public use. A memorandum
of the right or interest taken shall be made on each certificate of
title by the Register of Deeds, and where the fee simple is taken, a
new certificate shall be issued in favor of the National
Government, province, city, municipality, or any other agency
or 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
authority taking the land or interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not
exclusively private or patrimonial lands. Lands of the public domain may
also be registered pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI
of the Freedom Islands or of the lands to be reclaimed from submerged
areas 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 CDCP under its 1973 contract with the Republic."
Whether the Amended JVA is a sale or a joint venture, the fact remains
that the Amended JVA requires PEA to "cause the issuance and delivery
of the certificates of title conveying AMARI's Land Share in the name of
AMARI."107
This stipulation still contravenes Section 3, Article XII of the 1987
Constitution which provides that private corporations "shall not hold such
alienable lands of the public domain except by lease." The transfer of title
and 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 No. 141,108 the Government Auditing Code,109 and
Section 3, Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore
and submerged areas form part of the public domain and are inalienable.
Lands reclaimed from foreshore and submerged areas also form part of
the public domain and are also inalienable, unless converted pursuant to
law into alienable or disposable lands of the public domain. Historically,
lands reclaimed by the government are sui generis, not available for sale
to private 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 distributed equitably among our ever-growing
population. To insure such 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
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inalienable natural resources of the State, or seek to circumvent the
constitutional ban on alienation of lands of the public domain to private
corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom
Islands, now covered by certificates of title in the name of PEA,
are alienable lands of the public domain. PEA may lease these
lands to private corporations but may not sell or transfer ownership
of these lands to private corporations. PEA may only sell these
lands to Philippine citizens, subject to the ownership limitations in
the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain
inalienable natural resources of the public domain until classified
as alienable or disposable lands open to disposition and declared
no longer needed for public service. The government can make
such classification and declaration only after PEA has reclaimed
these submerged areas. Only then can these lands qualify as
agricultural lands of the public domain, which are the only natural
resources the government can alienate. In their present state, the
592.15 hectares of submerged areas are inalienable and outside
the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private
corporation, ownership of 77.34 hectares110of the Freedom Islands,
such transfer is void for being contrary to Section 3, Article XII of
the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI
ownership of 290.156 hectares111 of still submerged areas of
Manila Bay, such transfer is void for being contrary to Section 2,
Article XII of the 1987 Constitution which prohibits the alienation of
natural resources other than agricultural lands of the public
domain. PEA may reclaim these submerged areas. Thereafter, the
government can classify the reclaimed lands as alienable or
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 XII
 of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of
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 commerce of men," are "inexistent and void from the beginning." The
Court must perform its duty to defend and uphold the Constitution, and
therefore declares the Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper forum to raise the
issue of whether the Amended JVA is grossly disadvantageous to the
government.
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.
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
which is hereby declared NULL and VOID ab initio.
SO ORDERED.
G.R. No. 164527 August 15, 2007
FRANCISCO I. CHAVEZ, Petitioner,
vs.
NATIONAL HOUSING AUTHORITY, R-II BUILDERS, INC., R-II
HOLDINGS, INC., HARBOUR CENTRE PORT TERMINAL, INC., and
MR. REGHIS ROMERO II, Respondents.
DECISION
VELASCO, JR., J.:
In this Petition for Prohibition and Mandamus with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction under Rule 65,
petitioner, in his capacity as taxpayer, seeks:
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to declare NULL AND VOID the Joint Venture Agreement (JVA) dated
March 9, 1993 between the National Housing Authority and R-II Builders,
Inc. and the Smokey Mountain Development and Reclamation Project
embodied therein; the subsequent amendments to the said JVA; and all
other agreements signed and executed in relation thereto including, but
not limited to the Smokey Mountain Asset Pool Agreement dated 26
September 1994 and the separate agreements for Phase I and Phase II of
the Projectas well as all other transactions which emanated therefrom,
for being UNCONSTITUTIONAL and INVALID;
to enjoin respondentsparticularly respondent NHAfrom further
implementing and/or enforcing the said project and other agreements
related thereto, and from further deriving and/or enjoying any rights,
privileges and interest therefrom x x x; and
to compel respondents to disclose all documents and information relating
to the projectincluding, but not limited to, any subsequent agreements
with respect to the different phases of the project, the revisions over the
original plan, the additional works incurred thereon, the current financial
condition of respondent R-II Builders, Inc., and the transactions made
respecting the project.1
The Facts
On March 1, 1988, then President Corazon C. Aquino issued
Memorandum Order No. (MO) 1612 approving and directing the
implementation of the Comprehensive and Integrated Metropolitan Manila
Waste Management Plan (the Plan). The Metro Manila Commission, in
coordination with various government agencies, was tasked as the lead
agency to implement the Plan as formulated by the Presidential Task
Force on Waste Management created by Memorandum Circular No. 39. A
day after, on March 2, 1988, MO 161-A3 was issued, containing the
guidelines which prescribed the functions and responsibilities of fifteen (15)
various government departments and offices tasked to implement the Plan,
namely: Department of Public Works and Highway (DPWH), Department of
Health (DOH), Department of Environment and Natural Resources
(DENR), Department of Transportation and Communication, Department of
Budget and Management, National Economic and Development Authority
(NEDA), Philippine Constabulary Integrated National Police, Philippine
Information Agency and the Local Government Unit (referring to the City of
Manila), Department of Social Welfare and Development, Presidential
Commission for Urban Poor, National Housing Authority (NHA),
Department of Labor and Employment, Department of Education, Culture
and Sports (now Department of Education), and Presidential Management
Staff.
Specifically, respondent NHA was ordered to "conduct feasibility studies
and develop low-cost housing projects at the dumpsite and absorb
scavengers in NHA resettlement/low-cost housing projects."4 On the other
hand, the DENR was tasked to "review and evaluate proposed projects
under the Plan with regard to their environmental impact, conduct regular
monitoring of activities of the Plan to ensure compliance with
environmental standards and assist DOH in the conduct of the study on
hospital waste management."5
At the time MO 161-A was issued by President Aquino, Smokey Mountain
was a wasteland in Balut, Tondo, Manila, where numerous Filipinos
resided in subhuman conditions, collecting items that may have some
monetary value from the garbage. The Smokey Mountain dumpsite is
bounded on the north by the Estero Marala, on the south by the property of
the National Government, on the east by the property of B and I Realty
Co., and on the west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey
Mountain low-cost housing project which resulted in the formulation of the
"Smokey Mountain Development Plan and Reclamation of the Area Across
R-10" or the Smokey Mountain Development and Reclamation Project
(SMDRP; the Project). The Project aimed to convert the Smokey Mountain
dumpsite into a habitable housing project, inclusive of the reclamation of
the area across R-10, adjacent to the Smokey Mountain as the enabling
component of the project.6 Once finalized, the Plan was submitted to
President Aquino for her approval.
On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act
No. [RA] 6957) was enacted.7 Its declared policy under Section 1 is "[t]o
recognize the indispensable role of the private sector as the main engine
for national growth and development and provide the most appropriate
favorable incentives to mobilize private resources for the purpose." Sec. 3
authorized and empowered "[a]ll government infrastructure agencies,
including government-owned and controlled corporations and local
government units x x x to enter into contract with any duly pre-qualified
private contractor for the financing, construction, operation and
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maintenance of any financially viable infrastructure facilities through the
build-operate-transfer or build and transfer scheme."
RA 6957 defined "build-and-transfer" scheme as "[a] contractual
arrangement whereby the contractor undertakes the construction, including
financing, of a given infrastructure facility, and its turnover after the
completion to the government agency or local government unit concerned
which shall pay the contractor its total investment expended on the project,
plus reasonable rate of return thereon." The last paragraph of Sec. 6 of the
BOT Law provides that the repayment scheme in the case of "land
reclamation or the building of industrial estates" may consist of "[t]he grant
of a portion or percentage of the reclaimed land or industrial estate built,
subject to the constitutional requirements with respect to the ownership of
lands."
On February 10, 1992, Joint Resolution No. 038 was passed by both
houses of Congress. Sec. 1 of this resolution provided, among other
things, that:
Section 1. There is hereby approved the following national infrastructure
projects for implementation under the provisions of Republic Act No. 6957
and its implementing rules and regulations:
xxxx
(d) Port infrastructure like piers, wharves, quays, storage handling, ferry
service and related facilities;
xxxx
(k) Land reclamation, dredging and other related development facilities;
(l) Industrial estates, regional industrial centers and export processing
zones including steel mills, iron-making and petrochemical complexes and
related infrastructure and utilities;
xxxx
(p) Environmental and solid waste management-related facilities such as
collection equipment, composting plants, incinerators, landfill and tidal
barriers, among others; and
(q) Development of new townsites and communities and related facilities.
This resolution complied with and conformed to Sec. 4 of the BOT Law
requiring the approval of all national infrastructure projects by the
Congress.
On January 17, 1992, President Aquino proclaimed MO 4159 approving
and directing the implementation of the SMDRP. Secs. 3 and 4 of the
Memorandum Order stated:
Section 3. The National Housing Authority is hereby directed to implement
the Smokey Mountain Development Plan and Reclamation of the Area
Across R-10 through a private sector joint venture scheme at the least cost
to the government.
Section 4. The land area covered by the Smokey Mountain dumpsite is
hereby conveyed to the National Housing Authority as well as the area to
be reclaimed across R-10. (Emphasis supplied.)
In addition, the Public Estates Authority (PEA) was directed to assist in the
evaluation of proposals regarding the technical feasibility of reclamation,
while the DENR was directed to (1) facilitate titling of Smokey Mountain
and of the area to be reclaimed and (2) assist in the technical evaluation of
proposals regarding environmental impact statements.10
In the same MO 415, President Aquino created an Executive Committee
(EXECOM) to oversee the implementation of the Plan, chaired by the
National Capital Region-Cabinet Officer for Regional Development (NCR-
CORD) with the heads of the NHA, City of Manila, DPWH, PEA, Philippine
Ports Authority (PPA), DENR, and Development Bank of the Philippines
(DBP) as members.11 The NEDA subsequently became a member of the
EXECOM. Notably, in a September 2, 1994 Letter,12 PEA General
Manager Amado Lagdameo approved the plans for the reclamation project
prepared by the NHA.
In conformity with Sec. 5 of MO 415, an inter-agency technical committee
(TECHCOM) was created composed of the technical representatives of the
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EXECOM "[t]o assist the NHA in the evaluation of the project proposals,
assist in the resolution of all issues and problems in the project to ensure
that all aspects of the development from squatter relocation, waste
management, reclamation, environmental protection, land and house
construction meet governing regulation of the region and to facilitate the
completion of the project."13
Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-
Qualify and Bid for the right to become NHAs joint venture partner in the
implementation of the SMDRP. The notices were published in newspapers
of general circulation on January 23 and 26 and February 1, 14, 16, and
23, 1992, respectively. Out of the thirteen (13) contractors who responded,
only five (5) contractors fully complied with the required pre-qualification
documents. Based on the evaluation of the pre-qualification documents,
the EXECOM declared the New San Jose Builders, Inc. and R-II Builders,
Inc. (RBI) as the top two contractors.14
Thereafter, the TECHCOM evaluated the bids (which include the Pre-
feasibility Study and Financing Plan) of the top two (2) contractors in this
manner:
(1) The DBP, as financial advisor to the Project, evaluated their
Financial Proposals;
(2) The DPWH, PPA, PEA and NHA evaluated the Technical
Proposals for the Housing Construction and Reclamation;
(3) The DENR evaluated Technical Proposals on Waste
Management and Disposal by conducting the Environmental
Impact Analysis; and
(4) The NHA and the City of Manila evaluated the socio-economic
benefits presented by the proposals.
On June 30, 1992, Fidel V. Ramos assumed the Office of the President
(OP) of the Philippines.
On August 31, 1992, the TECHCOM submitted its recommendation to the
EXECOM to approve the R-II Builders, Inc. (RBI) proposal which garnered
the highest score of 88.475%.
Subsequently, the EXECOM made a Project briefing to President Ramos.
As a result, President Ramos issued Proclamation No. 3915 on September
9, 1992, which reads:
WHEREAS, the National Housing Authority has presented a viable
conceptual plan to convert the Smokey Mountain dumpsite into a habitable
housing project, inclusive of the reclamation of the area across Road
Radial 10 (R-10) adjacent to the Smokey Mountain as the enabling
component of the project;
xxxx
These parcels of land of public domain are hereby placed under the
administration and disposition of the National Housing Authority to develop,
subdivide and dispose to qualified beneficiaries, as well as its development
for mix land use (commercial/industrial) to provide employment
opportunities to on-site families and additional areas for port-related
activities.
In order to facilitate the early development of the area for disposition, the
Department of Environment and Natural Resources, through the Lands
and Management Bureau, is hereby directed to approve the boundary and
subdivision survey and to issue a special patent and title in the name of the
National Housing Authority, subject to final survey and private rights, if any
there be. (Emphasis supplied.)
On October 7, 1992, President Ramos authorized NHA to enter into a Joint
Venture Agreement with RBI "[s]ubject to final review and approval of the
Joint Venture Agreement by the Office of the President."16
On March 19, 1993, the NHA and RBI entered into a Joint Venture
Agreement17 (JVA) for the development of the Smokey Mountain dumpsite
and the reclamation of the area across R-10 based on Presidential Decree
No. (PD) 75718 which mandated NHA "[t]o undertake the physical and
socio-economic upgrading and development of lands of the public domain
identified for housing," MO 161-A which required NHA to conduct the
feasibility studies and develop a low-cost housing project at the Smokey
Mountain, and MO 415 as amended by MO 415-A which approved the
Conceptual Plan for Smokey Mountain and creation of the EXECOM and
TECHCOM. Under the JVA, the Project "involves the clearing of Smokey
Mountain for eventual development into a low cost medium rise housing
PROPERTY 1ST BATCH
complex and industrial/commercial site with the reclamation of the area
directly across [R-10] to act as the enabling component of the
Project."19 The JVA covered a lot in Tondo, Manila with an area of two
hundred twelve thousand two hundred thirty-four (212,234) square meters
and another lot to be reclaimed also in Tondo with an area of four hundred
thousand (400,000) square meters.
The Scope of Work of RBI under Article II of the JVA is as follows:
a) To fully finance all aspects of development of Smokey Mountain
and reclamation of no more than 40 hectares of Manila Bay area
across Radial Road 10.
b) To immediately commence on the preparation of feasibility
report and detailed engineering with emphasis to the expedient
acquisition of the Environmental Clearance Certificate (ECC) from
the DENR.
c) The construction activities will only commence after the
acquisition of the ECC, and
d) Final details of the contract, including construction, duration and
delivery timetables, shall be based on the approved feasibility
report and detailed engineering.
Other obligations of RBI are as follows:
2.02 The [RBI] shall develop the PROJECT based on the Final
Report and Detailed Engineering as approved by the Office of the
President. All costs and expenses for hiring technical personnel,
date gathering, permits, licenses, appraisals, clearances, testing
and similar undertaking shall be for the account of the [RBI].
2.03 The [RBI] shall undertake the construction of 3,500 temporary
housing units complete with basic amenities such as plumbing,
electrical and sewerage facilities within the temporary housing
project as staging area to temporarily house the squatter families
from the Smokey Mountain while development is being undertaken.
These temporary housing units shall be turned over to the [NHA]
for disposition.
 2.04 The [RBI] shall construct 3,500 medium rise low cost
permanent housing units on the leveled Smokey Mountain
complete with basic utilities and amenities, in accordance with the
plans and specifications set forth in the Final Report approved by
the [NHA]. Completed units ready for mortgage take out shall be
turned over by the [RBI] to NHA on agreed schedule.
2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area
directly across [R-10] as contained in Proclamation No. 39 as the
enabling component of the project and payment to the [RBI] as its
asset share.
2.06 The [RBI] shall likewise furnish all labor materials and
equipment necessary to complete all herein development works to
be undertaken on a phase to phase basis in accordance with the
work program stipulated therein.
The profit sharing shall be based on the approved pre-feasibility report
submitted to the EXECOM, viz:
For the developer (RBI):
1. To own the forty (40) hectares of reclaimed land.
2. To own the commercial area at the Smokey Mountain area
composed of 1.3 hectares, and
3. To own all the constructed units of medium rise low cost
permanent housing units beyond the 3,500 units share of the
[NHA].
For the NHA:
1. To own the temporary housing consisting of 3,500 units.
2. To own the cleared and fenced incinerator site consisting of 5
hectares situated at the Smokey Mountain area.
PROPERTY 1ST BATCH
3. To own the 3,500 units of permanent housing to be constructed
by [RBI] at the Smokey Mountain area to be awarded to qualified
on site residents.
4. To own the Industrial Area site consisting of 3.2 hectares, and
5. To own the open spaces, roads and facilities within the Smokey
Mountain area.
In the event of "extraordinary increase in labor, materials, fuel and non-
recoverability of total project expenses,"20the OP, upon recommendation of
the NHA, may approve a corresponding adjustment in the enabling
component.
The functions and responsibilities of RBI and NHA are as follows:
For RBI:
4.01 Immediately commence on the preparation of the FINAL REPORT
with emphasis to the expedient acquisition, with the assistance of the
[NHA] of Environmental Compliance Certificate (ECC) from the
Environmental Management Bureau (EMB) of the [DENR]. Construction
shall only commence after the acquisition of the ECC. The Environment
Compliance Certificate (ECC) shall form part of the FINAL REPORT.
The FINAL REPORT shall provide the necessary subdivision and housing
plans, detailed engineering and architectural drawings, technical
specifications and other related and required documents relative to the
Smokey Mountain area.
With respect to the 40-hectare reclamation area, the [RBI] shall have the
discretion to develop the same in a manner that it deems necessary to
recover the [RBIs] investment, subject to environmental and zoning rules.
4.02 Finance the total project cost for land development, housing
construction and reclamation of the PROJECT.
4.03 Warrant that all developments shall be in compliance with the
requirements of the FINAL REPORT.
4.04 Provide all administrative resources for the submission of project
accomplishment reports to the [NHA] for proper evaluation and supervision
on the actual implementation.
4.05 Negotiate and secure, with the assistance of the [NHA] the grant of
rights of way to the PROJECT, from the owners of the adjacent lots for
access road, water, electrical power connections and drainage facilities.
4.06 Provide temporary field office and transportation vehicles (2 units),
one (1) complete set of computer and one (1) unit electric typewriter for the
[NHAs] field personnel to be charged to the PROJECT.
For the NHA:
4.07 The [NHA] shall be responsible for the removal and relocation of all
squatters within Smokey Mountain to the Temporary Housing Complex or
to other areas prepared as relocation areas with the assistance of the
[RBI]. The [RBI] shall be responsible in releasing the funds allocated and
committed for relocation as detailed in the FINAL REPORT.
4.08 Assist the [RBI] and shall endorse granting of exemption fees in the
acquisition of all necessary permits, licenses, appraisals, clearances and
accreditations for the PROJECT subject to existing laws, rules and
regulations.
4.09 The [NHA] shall inspect, evaluate and monitor all works at the
Smokey Mountain and Reclamation Area while the land development and
construction of housing units are in progress to determine whether the
development and construction works are undertaken in accordance with
the FINAL REPORT. If in its judgment, the PROJECT is not pursued in
accordance with the FINAL REPORT, the [NHA] shall require the [RBI] to
undertake necessary remedial works. All expenses, charges and penalties
incurred for such remedial, if any, shall be for the account of the [RBI].
4.10 The [NHA] shall assist the [RBI] in the complete electrification of the
PROJECT. x x x
4.11 Handle the processing and documentation of all sales transactions
related to its assets shares from the venture such as the 3,500 units of
permanent housing and the allotted industrial area of 3.2 hectares.
PROPERTY 1ST BATCH
4.12 All advances outside of project costs made by the [RBI] to the [NHA]
shall be deducted from the proceeds due to the [NHA].
4.13 The [NHA] shall be responsible for the acquisition of the Mother Title
for the Smokey Mountain and Reclamation Area within 90 days upon
submission of Survey returns to the Land Management Sector. The land
titles to the 40-hectare reclaimed land, the 1.3 hectare commercial area at
the Smokey Mountain area and the constructed units of medium-rise
permanent housing units beyond the 3,500 units share of the [NHA] shall
be issued in the name of the [RBI] upon completion of the project.
However, the [RBI] shall have the authority to pre-sell its share as
indicated in this agreement.
The final details of the JVA, which will include the construction duration,
costs, extent of reclamation, and delivery timetables, shall be based on the
FINAL REPORT which will be contained in a Supplemental Agreement to
be executed later by the parties.
The JVA may be modified or revised by written agreement between the
NHA and RBI specifying the clauses to be revised or modified and the
corresponding amendments.
If the Project is revoked or terminated by the Government through no fault
of RBI or by mutual agreement, the Government shall compensate RBI for
its actual expenses incurred in the Project plus a reasonable rate of return
not exceeding that stated in the feasibility study and in the contract as of
the date of such revocation, cancellation, or termination on a schedule to
be agreed upon by both parties.
As a preliminary step in the project implementation, consultations and
dialogues were conducted with the settlers of the Smokey Mountain
Dumpsite Area. At the same time, DENR started processing the application
for the Environmental Clearance Certificate (ECC) of the SMDRP. As a
result however of the consultative dialogues, public hearings, the report on
the on-site field conditions, the Environmental Impact Statement (EIS)
published on April 29 and May 12, 1993 as required by the Environmental
Management Bureau of DENR, the evaluation of the DENR, and the
recommendations from other government agencies, it was discovered that
design changes and additional work have to be undertaken to successfully
implement the Project.21
Thus, on February 21, 1994, the parties entered into another agreement Under the ARJVA, RBI shall construct 2,992 temporary housing units, a
denominated as the Amended and Restated Joint Venture reduction from 3,500 units under the JVA.27However, it was required to
Agreement22 (ARJVA) which delineated the different phases of the Project. construct 3,520 medium-rise low-cost permanent housing units instead of
Phase I of the Project involves the construction of temporary housing units 3,500 units under the JVA. There was a substantial change in the design of
for the current residents of the Smokey Mountain dumpsite, the clearing the permanent housing units such that a "loft shall be incorporated in each
and leveling-off of the dumpsite, and the construction of medium-rise low- unit so as to increase the living space from 20 to 32 square meters. The
cost housing units at the cleared and leveled dumpsite.23 Phase II of the additions and changes in the Original Project Component are as follows:
Project involves the construction of an incineration area for the on-site
disposal of the garbage at the dumpsite.24 The enabling component or ORIGINAL CHANGES/REVISIONS
consideration for Phase I of the Project was increased from 40 hectares of
reclaimed lands across R-10 to 79 hectares.25 The revision also provided 1. TEMPORARY HOUSING
for the enabling component for Phase II of 119 hectares of reclaimed lands
contiguous to the 79 hectares of reclaimed lands for Phase
Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure
I.26 Furthermore, the amended contract delineated the scope of works and
Sheet usable life of 3 years, gauge 26 G.I. roofing sheets
the terms and conditions of Phases I and II, thus:
future 12 SM floor area. use as permanent structures for
factory and warehouses mixed 17 sm & 12 sm floor area.
The PROJECT shall consist of Phase I and Phase II.
2. MEDIUM RISE MASS
Phase I shall involve the following:
HOUSING
a. the construction of 2,992 units of temporary housing for the
affected residents while clearing and development of Smokey
Box type precast Shelter Conventional and precast
Mountain [are] being undertaken
component 20 square meter concrete structures, 32 square
floor area with 2.4 meter meter floor area with loft floor
b. the clearing of Smokey Mountain and the subsequent height; bare type, 160 units/ (sleeping quarter) 3.6 m. floor
construction of 3,520 units of medium rise housing and the building. height, painted and improved
development of the industrial/commercial site within the Smokey
Mountain area
architectural faade, 80 units/building.
c. the reclamation and development of a 79 hectare area directly
3. MITIGATING MEASURES
across Radial Road 10 to serve as the enabling component of
Phase I
3.1 For reclamation work Use of clean dredgefill material
below the MLLW and SM material mixed with dredgefill
Phase II shall involve the following:
above MLLW.
a. the construction and operation of an incinerator plant that will
a. 100% use of Smokey Mountain material as
conform to the emission standards of the DENR
dredgefill Use of Steel Sheet Piles needed for
longer depth of embedment.
b. the reclamation and development of 119-hectare area
contiguous to that to be reclaimed under Phase I to serve as the
b. Concrete Sheet Piles short depth of embedment
enabling component of Phase II.

PROPERTY 1ST BATCH

 c. Silt removal approximately Need to remove more
than 3.0
1.0 meter only meters of silt after sub-soil investigation.28
These material and substantial modifications served as
justifications for the increase in the share of RBI from 40 hectares
to 79 hectares of reclaimed land.
Under the JVA, the specific costs of the Project were not stipulated
but under the ARJVA, the stipulated cost for Phase I was pegged
at six billion six hundred ninety-three million three hundred eighty-
seven thousand three hundred sixty-four pesos (PhP
6,693,387,364).
In his February 10, 1994 Memorandum, the Chairperson of the
SMDRP EXECOM submitted the ARJVA for approval by the OP.
After review of said agreement, the OP directed that certain terms
and conditions of the ARJVA be further clarified or amended
preparatory to its approval. Pursuant to the Presidents directive,
the parties reached an agreement on the clarifications and
amendments required to be made on the ARJVA.
On August 11, 1994, the NHA and RBI executed an Amendment
To the Amended and Restated Joint Venture Agreement
(AARJVA)29 clarifying certain terms and condition of the ARJVA,
which was submitted to President Ramos for approval, to wit:
Phase II shall involve the following:
a. the construction and operation of an incinerator plant
that will conform to the emission standards of the DENR
b. the reclamation and development of 119-hectare area
contiguous to that to be reclaimed under Phase I to serve
as the enabling component of Phase II, the exact size and
configuration of which shall be approved by the SMDRP
Committee30
Other substantial amendments are the following:
PROPERTY 1ST BATCH
4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to
read as follows:
2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of
the Manila Bay area directly across Radial Road 10 (R-10) to serve
as payment to the DEVELOPER as its asset share for Phase I and
to develop such land into commercial area with port facilities;
provided, that the port plan shall be integrated with the Philippine
Port Authoritys North Harbor plan for the Manila Bay area and
provided further, that the final reclamation and port plan for said
reclaimed area shall be submitted for approval by the Public
Estates Authority and the Philippine Ports Authority, respectively:
provided finally, that subject to par. 2.02 above, actual reclamation
work may commence upon approval of the final reclamation plan
by the Public Estates Authority.
xxxx
9. A new paragraph to be numbered 5.05 shall be added to Article
V of the ARJVA, and shall read as follows:
5.05. In the event this Agreement is revoked, cancelled or terminated by
the AUTHORITY through no fault of the DEVELOPER, the AUTHORITY
shall compensate the DEVELOPER for the value of the completed portions
of, and actual expenditures on the PROJECT plus a reasonable rate of
return thereon, not exceeding that stated in the Cost Estimates of Items of
Work previously approved by the SMDRP Executive Committee and the
AUTHORITY and stated in this Agreement, as of the date of such
revocation, cancellation, or termination, on a schedule to be agreed upon
by the parties, provided that said completed portions of Phase I are in
accordance with the approved FINAL REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August
31, 199431 increasing the proposed area for reclamation across R-10 from
40 hectares to 79 hectares,32 to wit:
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by the law, and as
recommended by the SMDRP Executive Committee, do hereby authorize
the increase of the area of foreshore or submerged lands of Manila Bay to
be reclaimed, as previously authorized under Proclamation No. 39 (s.
1992) and Memorandum Order No. 415 (s. 1992), from Four Hundred
Thousand (400,000) square meters, more or less, to Seven Hundred
Ninety Thousand (790,000) square meters, more or less.
On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued
Special Patent No. 3591 conveying in favor of NHA an area of 211,975
square meters covering the Smokey Mountain Dumpsite.
In its September 7, 1994 letter to the EXECOM, the OP through then
Executive Secretary Teofisto T. Guingona, Jr., approved the ARJVA as
amended by the AARJVA.
On September 8, 1994, the DENR issued Special Patent 3592 pursuant to
Proclamation No. 39, conveying in favor of NHA a 401,485-square meter
area.
On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty
Corporation (HIGC), now known as the Home Guaranty Corporation, and
the Philippine National Bank (PNB)33 executed the Smokey Mountain Asset
Pool Formation Trust Agreement (Asset Pool Agreement).34 Thereafter, a
Guaranty Contract was entered into by NHA, RBI, and HIGC.
On June 23, 1994, the Legislature passed the Clean Air Act.35 The Act
made the establishment of an incinerator illegal and effectively barred the
implementation of the planned incinerator project under Phase II. Thus, the
off-site disposal of the garbage at the Smokey Mountain became
necessary.36
The land reclamation was completed in August 1996.37
Sometime later in 1996, pursuant likewise to Proclamation No. 39, the
DENR issued Special Patent No. 3598 conveying in favor of NHA an
additional 390,000 square meter area.
During the actual construction and implementation of Phase I of the
SMDRP, the Inter-Agency Technical Committee found and recommended
to the EXECOM on December 17, 1997 that additional works were
necessary for the completion and viability of the Project. The EXECOM
approved the recommendation and so, NHA instructed RBI to implement
the change orders or necessary works.38
PROPERTY 1ST BATCH
Such necessary works comprised more than 25% of the original contract
price and as a result, the Asset Pool incurred direct and indirect costs.
Based on C1 12 A of the Implementing Rules and Regulations of PD 1594,
a supplemental agreement is required for "all change orders and extra
work orders, the total aggregate cost of which being more than twenty-five
(25%) of the escalated original contract price."
The EXECOM requested an opinion from the Department of Justice (DOJ)
to determine whether a bidding was required for the change orders and/or
necessary works. The DOJ, through DOJ Opinion Nos. 119 and 155 dated
August 26, 1993 and November 12, 1993, opined that "a rebidding,
pursuant to the aforequoted provisions of the implementing rules (referring
to PD 1594) would not be necessary where the change orders inseparable
from the original scope of the project, in which case, a negotiation with the
incumbent contractor may be allowed."
Thus, on February 19, 1998, the EXECOM issued a resolution directing
NHA to enter into a supplemental agreement covering said necessary
works.
On March 20, 1998, the NHA and RBI entered into a Supplemental
Agreement covering the aforementioned necessary works and submitted it
to the President on March 24, 1998 for approval.
Outgoing President Ramos decided to endorse the consideration of the
Supplemental Agreement to incoming President Joseph E. Estrada. On
June 30, 1998, Estrada became the 13th Philippine President.
However, the approval of the Supplemental Agreement was unacted upon
for five months. As a result, the utilities and the road networks were
constructed to cover only the 79-hectare original enabling component
granted under the ARJVA. The 220-hectare extension of the 79-hectare
area was no longer technically feasible. Moreover, the financial crises and
unreliable real estate situation made it difficult to sell the remaining
reclaimed lots. The devaluation of the peso and the increase in interest
cost led to the substantial increase in the cost of reclamation.
On August 1, 1998, the NHA granted RBIs request to suspend work on the
SMDRP due to "the delay in the approval of the Supplemental Agreement,
the consequent absence of an enabling component to cover the cost of the
necessary works for the project, and the resulting inability to replenish the
Asset Pool funds partially used for the completion of the necessary
works."39
As of August 1, 1998 when the project was suspended, RBI had "already
accomplished a portion of the necessary works and change orders which
resulted in [RBI] and the Asset Pool incurring advances for direct and
indirect cost which amount can no longer be covered by the 79-hectare
enabling component under the ARJVA."40
Repeated demands were made by RBI in its own capacity and on behalf of
the asset pool on NHA for payment for the advances for direct and indirect
costs subject to NHA validation.
In November 1998, President Estrada issued Memorandum Order No. 33
reconstituting the SMDRP EXECOM and further directed it to review the
Supplemental Agreement and submit its recommendation on the
completion of the SMDRP.
The reconstituted EXECOM conducted a review of the project and
recommended the amendment of the March 20, 1998 Supplemental
Agreement "to make it more feasible and to identify and provide new
sources of funds for the project and provide for a new enabling component
to cover the payment for the necessary works that cannot be covered by
the 79-hectare enabling component under the ARJVA."41
The EXECOM passed Resolution Nos. 99-16-01 and 99-16-0242 which
approved the modification of the Supplemental Agreement, to wit:
a) Approval of 150 hectares additional reclamation in order to make
the reclamation feasible as part of the enabling component.
b) The conveyance of the 15-hectare NHA Vitas property (actually
17 hectares based on surveys) to the SMDRP Asset Pool.
c) The inclusion in the total development cost of other additional,
necessary and indispensable infrastructure works and the revision
of the original cost stated in the Supplemental Agreement dated
March 20, 1998 from PhP 2,953,984,941.40 to PhP
2,969,134,053.13.
d) Revision in the sharing agreement between the parties.
PROPERTY 1ST BATCH
In the March 23, 2000 OP Memorandum, the EXECOM was authorized to
proceed and complete the SMDRP subject to certain guidelines and
directives.
After the parties in the case at bar had complied with the March 23, 2000
Memorandum, the NHA November 9, 2000 Resolution No. 4323 approved
"the conveyance of the 17-hectare Vitas property in favor of the existing or
a newly created Asset Pool of the project to be developed into a mixed
commercial-industrial area, subject to certain conditions."
On January 20, 2001, then President Estrada was considered resigned.
On the same day, President Gloria M. Arroyo took her oath as the 14th
President of the Philippines.
As of February 28, 2001, "the estimated total project cost of the SMDRP
has reached P8.65 billion comprising of P4.78 billion in direct cost and
P3.87 billion in indirect cost,"43 subject to validation by the NHA.
On August 28, 2001, NHA issued Resolution No. 4436 to pay for "the
various necessary works/change orders to SMDRP, to effect the
corresponding enabling component consisting of the conveyance of the
NHAs Vitas Property and an additional 150-hectare reclamation area" and
to authorize the release by NHA of PhP 480 million "as advance to the
project to make the Permanent Housing habitable, subject to
reimbursement from the proceeds of the expanded enabling component."44
On November 19, 2001, the Amended Supplemental Agreement (ASA)
was signed by the parties, and on February 28, 2002, the Housing and
Urban Development Coordinating Council (HUDCC) submitted the
agreement to the OP for approval.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed "to submit the
works covered by the PhP 480 million [advance to the Project] and the
ASA to public bidding."45 On August 28, 2002, the HUDCC informed RBI of
the decision of the Cabinet.
In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the
decision of the government "to bid out the remaining works under the ASA
thereby unilaterally terminating the Project with RBI and all the agreements
related thereto." RBI demanded the payment of just compensation "for all
accomplishments and costs incurred in developing the SMDRP plus a
reasonable rate of return thereon pursuant to Section 5.05 of the ARJVA
and Section 6.2 of the ASA."46
Consequently, the parties negotiated the terms of the termination of the
JVA and other subsequent agreements.
On August 27, 2003, the NHA and RBI executed a Memorandum of
Agreement (MOA) whereby both parties agreed to terminate the JVA and
other subsequent agreements, thus:
1. TERMINATION
1.1 In compliance with the Cabinet directive dated 30 July
2002 to submit the works covered by the P480 Million and
the ASA to public bidding, the following agreements
executed by and between the NHA and the DEVELOPER
are hereby terminated, to wit:
a. Joint Venture Agreement (JVA) dated 19 March
1993
b. Amended and Restated Joint Venture Agreement
(ARJVA) dated 21 February 1994
c. Amendment and Restated Joint Venture
Agreement dated 11 August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated
19 November 2001.
xxxx
5. SETTLEMENT OF CLAIMS
5.1 Subject to the validation of the DEVELOPERs claims, the NHA
hereby agrees to initially compensate the Developer for the
abovementioned costs as follows:
PROPERTY 1ST BATCH
a. Direct payment to DEVELOPER of the amounts herein
listed in the following manner:
a.1 P250 Million in cash from the escrow account in
accordance with Section 2 herewith;
a.2 Conveyance of a 3 hectare portion of the Vitas
Industrial area immediately after joint determination
of the appraised value of the said property in
accordance with the procedure herein set forth in
the last paragraph of Section 5.3. For purposes of
all payments to be made through conveyance of
real properties, the parties shall secure from the
NHA Board of Directors all documents necessary
and sufficient to effect the transfer of title over the
properties to be conveyed to RBI, which documents
shall be issued within a reasonable period.
5.2 Any unpaid balance of the DEVELOPERS claims determined
after the validation process referred to in Section 4 hereof, may be
paid in cash, bonds or through the conveyance of properties or any
combination thereof. The manner, terms and conditions of payment
of the balance shall be specified and agreed upon later within a
period of three months from the time a substantial amount
representing the unpaid balance has been validated pursuant
hereto including, but not limited to the programming of quarterly
cash payments to be sourced by the NHA from its budget for debt
servicing, from its income or from any other sources.
5.3 In any case the unpaid balance is agreed to be paid, either
partially or totally through conveyance of properties, the parties
shall agree on which properties shall be subject to conveyance.
The NHA and DEVELOPER hereby agree to determine the
valuation of the properties to be conveyed by getting the average
of the appraisals to be made by two (2) mutually acceptable
independent appraisers.
Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI)
entered into an agreement with the asset pool for the development and
operations of a port in the Smokey Mountain Area which is a major
component of SMDRP to provide a source of livelihood and employment
for Smokey Mountain residents and spur economic growth. A Subscription 2. Even assuming that respondents NHA and R-II builders were
Agreement was executed between the Asset Pool and HCPTI whereby the given the power and authority to reclaim foreshore and submerged
asset pool subscribed to 607 million common shares and 1,143 million land, they were never given the authority by the denr to do so.
preferred shares of HCPTI. The HCPTI preferred shares had a premium
and penalty interest of 7.5% per annum and a mandatory redemption II
feature. The asset pool paid the subscription by conveying to HCPTI a 10-
hectare land which it acquired from the NHA being a portion of the Respondent R-II builders cannot acquire the reclaimed foreshore and
reclaimed land of the SMDRP. Corresponding certificates of titles were submerged land areas because:
issued to HCPTI, namely: TCT Nos. 251355, 251356, 251357, and
251358.
1. The reclaimed foreshore and submerged parcels of land are
inalienable public lands which are beyond the commerce of man.
Due to HCPTIs failure to obtain a license to handle foreign containerized
cargo from PPA, it suffered a net income loss of PhP 132,621,548 in 2002
2. Assuming arguendo that the subject reclaimed foreshore and
and a net loss of PhP 15,540,063 in 2003. The Project Governing Board of
submerged parcels of land were already declared alienable lands
the Asset Pool later conveyed by way of dacion en pago a number of
of the public domain, respondent R-II builders still could not acquire
HCPTI shares to RBI in lieu of cash payment for the latters work in
the same because there was never any declaration that the said
SMDRP.
lands were no longer needed for public use.
On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the
3. Even assuming that the subject reclaimed lands are alienable
instant petition which impleaded as respondents the NHA, RBI, R-II
and no longer needed for public use, respondent R-II builders still
Holdings, Inc. (RHI), HCPTI, and Mr. Reghis Romero II, raising
cannot acquire the same because there was never any law
constitutional issues.
authorizing the sale thereof.
The NHA reported that thirty-four (34) temporary housing structures and
4. There was never any public bidding awarding ownership of the
twenty-one (21) permanent housing structures had been turned over by
subject land to respondent R-II builders.
respondent RBI. It claimed that 2,510 beneficiary-families belonging to the
poorest of the poor had been transferred to their permanent homes and
benefited from the Project. 5. Assuming that all the requirements for a valid transfer of
alienable public had been performed, respondent R-II Builders,
being private corporation is nonetheless expresslyprohibited by the
The Issues
Philippine Constitution to acquire lands of the public domain.
The grounds presented in the instant petition are:
III
I
Respondent harbour, being a private corporation whose majority stocks
are owned and controlled by respondent Romeros Corporations R-II
Neither respondent NHA nor respondent R-II builders may validly reclaim builders and R-II Holdings is disqualified from being a transferee of public
foreshore and submerged land because: land.

1. Respondent NHA and R-II builders were never granted any IV

power and authority to reclaim lands of the public domain as this
power is vested exclusively with the PEA.

PROPERTY 1ST BATCH

Respondents must be compelled to disclose all information related to the
smokey mountain development and reclamation project.
The Courts Ruling
Before we delve into the substantive issues raised in this petition, we will
first deal with several procedural matters raised by respondents.
Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the
petition.
Only a person who stands to be benefited or injured by the judgment in the
suit or entitled to the avails of the suit can file a complaint or
petition.47 Respondents claim that petitioner is not a proper party-in-interest
as he was unable to show that "he has sustained or is in immediate or
imminent danger of sustaining some direct and personal injury as a result
of the execution and enforcement of the assailed contracts or
agreements."48 Moreover, they assert that not all government contracts can
justify a taxpayers suit especially when no public funds were utilized in
contravention of the Constitution or a law.
We explicated in Chavez v. PCGG49 that in cases where issues of
transcendental public importance are presented, there is no necessity to
show that petitioner has experienced or is in actual danger of suffering
direct and personal injury as the requisite injury is assumed. We find our
ruling in Chavez v. PEA50 as conclusive authority on locus standi in the
case at bar since the issues raised in this petition are averred to be in
breach of the fair diffusion of the countrys natural resources and the
constitutional right of a citizen to information which have been declared to
be matters of transcendental public importance. Moreover, the pleadings
especially those of respondents readily reveal that public funds have been
indirectly utilized in the Project by means of Smokey Mountain Project
Participation Certificates (SMPPCs) bought by some government
agencies.
Hence, petitioner, as a taxpayer, is a proper party to the instant petition
before the court.
Whether petitioners direct recourse to this Court was proper
PROPERTY 1ST BATCH
Respondents are one in asserting that petitioner circumvents the principle
of hierarchy of courts in his petition. Judicial hierarchy was made clear in
the case of People v. Cuaresma, thus:
There is after all a hierarchy of courts. That hierarchy is determinative of
the venue of appeals, and should also serve as a general determinant of
the appropriate forum for petitions for the extraordinary writs. A becoming
regard for that judicial hierarchy most certainly indicates that petitions for
the issuance of extraordinary writs against first level ("inferior") courts
should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals. A direct invocation of the Supreme Courts
original jurisdiction to issue these writs should be allowed only when there
are special and important reasons therefor, clearly and specifically set out
in the petition. This is established policy. It is a policy that is necessary to
prevent inordinate demands upon the Courts time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to
prevent further over-crowding of the Courts docket.51 x x x
The OSG claims that the jurisdiction over petitions for prohibition and
mandamus is concurrent with other lower courts like the Regional Trial
Courts and the Court of Appeals. Respondent NHA argues that the instant
petition is misfiled because it does not introduce special and important
reasons or exceptional and compelling circumstances to warrant direct
recourse to this Court and that the lower courts are more equipped for
factual issues since this Court is not a trier of facts. Respondents RBI and
RHI question the filing of the petition as this Court should not be unduly
burdened with "repetitions, invocation of jurisdiction over constitutional
questions it had previously resolved and settled."
In the light of existing jurisprudence, we find paucity of merit in
respondents postulation.
While direct recourse to this Court is generally frowned upon and
discouraged, we have however ruled in Santiago v. Vasquez that such
resort to us may be allowed in certain situations, wherein this Court ruled
that petitions for certiorari, prohibition, or mandamus, though cognizable by
other courts, may directly be filed with us if "the redress desired cannot be
obtained in the appropriate courts or where exceptional compelling
circumstances justify availment of a remedy within and calling for the
exercise of [this Courts] primary jurisdiction."52
1avvphi1
The instant petition challenges the constitutionality and legality of the
SMDRP involving several hectares of government land and hundreds of
millions of funds of several government agencies. Moreover, serious
constitutional challenges are made on the different aspects of the Project
which allegedly affect the right of Filipinos to the distribution of natural
resources in the country and the right to information of a citizenmatters
which have been considered to be of extraordinary significance and grave
consequence to the public in general. These concerns in the instant action
compel us to turn a blind eye to the judicial structure meant to provide an
orderly dispensation of justice and consider the instant petition as a
justified deviation from an established precept.
Core factual matters undisputed
Respondents next challenge the projected review by this Court of the
alleged factual issues intertwined in the issues propounded by petitioner.
They listed a copious number of questions seemingly factual in nature
which would make this Court a trier of facts.53
We find the position of respondents bereft of merit.
For one, we already gave due course to the instant petition in our January
18, 2005 Resolution.54 In said issuance, the parties were required to make
clear and concise statements of established facts upon which our decision
will be based.
Secondly, we agree with petitioner that there is no necessity for us to make
any factual findings since the facts needed to decide the instant petition
are well established from the admissions of the parties in their
pleadings55 and those derived from the documents appended to said
submissions. Indeed, the core facts which are the subject matter of the
numerous issues raised in this petition are undisputed.
Now we will tackle the issues that prop up the instant petition.
Since petitioner has cited our decision in PEA as basis for his postulations
in a number of issues, we first resolve the queryis PEA applicable to the
case at bar?
A juxtaposition of the facts in the two cases constrains the Court to rule in
the negative.
PROPERTY 1ST BATCH
The Court finds that PEA is not a binding precedent to the instant petition
because the facts in said case are substantially different from the facts and
circumstances in the case at bar, thus:
(1) The reclamation project in PEA was undertaken through a JVA
entered into between PEA and AMARI. The reclamation project in
the instant NHA case was undertaken by the NHA, a national
government agency in consultation with PEA and with the approval
of two Philippine Presidents;
(2) In PEA, AMARI and PEA executed a JVA to develop the
Freedom Islands and reclaim submerged areas without public
bidding on April 25, 1995. In the instant NHA case, the NHA and
RBI executed a JVA after RBI was declared the winning bidder on
August 31, 1992 as the JVA partner of the NHA in the SMDRP
after compliance with the requisite public bidding.
(3) In PEA, there was no law or presidential proclamation
classifying the lands to be reclaimed as alienable and disposal
lands of public domain. In this RBI case, MO 415 of former
President Aquino and Proclamation No. 39 of then President
Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598,
classified the reclaimed lands as alienable and disposable;
(4) In PEA, the Chavez petition was filed before the amended JVA
was executed by PEA and AMARI. In this NHA case, the JVA and
1avv phi1
subsequent amendments were already substantially implemented.
Subsequently, the Project was terminated through a MOA signed
on August 27, 2003. Almost one year later on August 5, 2004, the
Chavez petition was filed;
(5) In PEA, AMARI was considered to be in bad faith as it signed
the amended JVA after the Chavez petition was filed with the Court
and after Senate Committee Report No. 560 was issued finding
that the subject lands are inalienable lands of public domain. In the
instant petition, RBI and other respondents are considered to have
signed the agreements in good faith as the Project was terminated
even before the Chavez petition was filed;
(6) The PEA-AMARI JVA was executed as a result of direct
negotiation between the parties and not in accordance with the
 BOT Law. The NHA-RBI JVA and subsequent amendments
constitute a BOT contract governed by the BOT Law; and
(7) In PEA, the lands to be reclaimed or already reclaimed were
transferred to PEA, a government entity tasked to dispose of public
lands under Executive Order No. (EO) 525.56 In the NHA case, the
reclaimed lands were transferred to NHA, a government entity NOT
tasked to dispose of public land and therefore said alienable lands
were converted to patrimonial lands upon their transfer to NHA.57
Thus the PEA Decision58 cannot be considered an authority or precedent
to the instant case. The principle of stare decisis59 has no application to the
different factual setting of the instant case.
We will now dwell on the substantive issues raised by petitioner. After a
perusal of the grounds raised in this petition, we find that most of these
issues are moored on our PEA Decision which, as earlier discussed, has
no application to the instant petition. For this reason alone, the petition can
already be rejected. Nevertheless, on the premise of the applicability of
said decision to the case at bar, we will proceed to resolve said issues.
First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may
validly reclaim foreshore and submerged land because they were not given
any power and authority to reclaim lands of the public domain as this
power was delegated by law to PEA.
Asserting that existing laws did not empower the NHA and RBI to reclaim
lands of public domain, the Public Estates Authority (PEA), petitioner
claims, is "the primary authority for the reclamation of all foreshore and
submerged lands of public domain," and relies on PEA where this Court
held:
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall
be primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government." The
same section also states that "[A]ll reclamation projects shall be approved
by the President upon recommendation of the PEA, and shall be
PROPERTY 1ST BATCH
undertaken by the PEA or through a proper contract executed by it with
any person or entity; 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 reclaim foreshore and submerged lands of the
public domain. EO No. 525 recognized PEA as the government entity "to
undertake the reclamation of lands and ensure their maximum utilization in
promoting public welfare and interests." 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 public service.60
In the Smokey Mountain Project, petitioner clarifies that the reclamation
was not done by PEA or through a contract executed by PEA with another
person or entity but by the NHA through an agreement with respondent
RBI. Therefore, he concludes that the reclamation is null and void.
Petitioners contention has no merit.
EO 525 reads:
Section 1. The Public Estates Authority (PEA) shall be primarily
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 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 any national government agency or entity authorized under its
charter shall be undertaken in consultation with the PEA upon approval of
the President. (Emphasis supplied.)
The aforequoted provision points to three (3) requisites for a legal and valid
reclamation project, viz:
(1) approval by the President;
(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:
a. by PEA
 b. by any person or entity pursuant to a contract it executed
with PEA
c. by the National Government agency or entity authorized
under its charter to reclaim lands subject to consultation
with PEA
Without doubt, PEA under EO 525 was designated as the agency primarily
responsible for integrating, directing, and coordinating all reclamation
projects. Primarily means "mainly, principally, mostly, generally." Thus, not
all reclamation projects fall under PEAs authority of supervision,
integration, and coordination. The very charter of PEA, PD 1084,61 does
not mention that PEA has the exclusive and sole power and authority to
reclaim lands of public domain. EO 525 even reveals the exception
reclamation projects by a national government agency or entity authorized
by its charter to reclaim land. One example is EO 405 which authorized the
Philippine Ports Authority (PPA) to reclaim and develop submerged areas
for port related purposes. Under its charter, PD 857, PPA has the power
"to reclaim, excavate, enclose or raise any of the lands" vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under
EO 525 is primarily responsible for integrating, directing and coordinating
reclamation projects, such authority is NOT exclusive and such power to
reclaim may be granted or delegated to another government agency or
entity or may even be undertaken by the National Government itself, PEA
being only an agency and a part of the National Government.
Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation
phase of SMDRP. After a scrutiny of the facts culled from the records, we
find that the project met all the three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a
matter of fact, two Philippine Presidents approved the same, namely:
Presidents Aquino and Ramos. President Aquino sanctioned the
reclamation of both the SMDRP housing and commercial-industrial sites
through MO 415 (s. 1992) which approved the SMDRP under Sec. 1 and
directed NHA "x x x to implement the Smokey Mountain Development Plan
and Reclamation of the Area across R-10 through a private sector joint
venture scheme at the least cost to government" under Section 3.
PROPERTY 1ST BATCH
For his part, then President Ramos issued Proclamation No. 39 (s. 1992)
which expressly reserved the Smokey Mountain Area and the Reclamation
Area for a housing project and related commercial/industrial development.
Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which
authorized the increase of the Reclamation Area from 40 hectares of
foreshore and submerged land of the Manila Bay to 79 hectares. It speaks
of the reclamation of 400,000 square meters, more or less, of the foreshore
and submerged lands of Manila Bay adjoining R-10 as an enabling
component of the SMDRP.
As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591
covering 211,975 square meters of Smokey Mountain, Special Patent No.
3592 covering 401,485 square meters of reclaimed land, and Special
Patent No. 3598 covering another 390,000 square meters of reclaimed
land were issued by the DENR.
Thus, the first requirement of presidential imprimatur on the SMDRP has
been satisfied.
2. The requisite favorable endorsement of the reclamation phase was
impliedly granted by PEA. President Aquino saw to it that there was
coordination of the project with PEA by designating its general manager as
member of the EXECOM tasked to supervise the project implementation.
The assignment was made in Sec. 2 of MO 415 which provides:
Section 2. An Executive Committee is hereby created to oversee the
implementation of the Plan, chaired by the NCR-CORD, with the heads of
the following agencies as members: The National Housing Authority, the
City of Manila, the Department of Public Works and Highways, the Public
Estates Authority, the Philippine Ports Authority, the Department of
Environment and Natural Resources and the Development Bank of the
Philippines. (Emphasis supplied.)
The favorable recommendation by PEA of the JVA and subsequent
amendments were incorporated as part of the recommendations of the
EXECOM created under MO 415. While there was no specific
recommendation on the SMDRP emanating solely from PEA, we find that
the approbation of the Project and the land reclamation as an essential
component by the EXECOM of which PEA is a member, and its
submission of the SMDRP and the agreements on the Project to the
President for approval amply met the second requirement of EO 525.
3. The third element was also presentthe reclamation was undertaken
either by PEA or any person or entity under contract with PEA or by the
National Government agency or entity authorized under its charter to
reclaim lands subject to consultation with PEA. It cannot be disputed that
the reclamation phase was not done by PEA or any person or entity under
contract with PEA. However, the reclamation was implemented by the
NHA, a national government agency whose authority to reclaim lands
under consultation with PEA is derived from its charterPD 727 and other
pertinent lawsRA 727962 and RA 6957 as amended by RA 7718.
While the authority of NHA to reclaim lands is challenged by petitioner, we
find that the NHA had more than enough authority to do so under existing
laws. While PD 757, the charter of NHA, does not explicitly mention
"reclamation" in any of the listed powers of the agency, we rule that the
NHA has an implied power to reclaim land as this is vital or incidental to
effectively, logically, and successfully implement an urban land reform and
housing program enunciated in Sec. 9 of Article XIII of the 1987
Constitution.
Basic in administrative law is the doctrine that a government agency or
office has express and implied powers based on its charter and other
pertinent statutes. Express powers are those powers granted, allocated,
and delegated to a government agency or office by express provisions of
law. On the other hand, implied powers are those that can be inferred or
are implicit in the wordings of the law63 or conferred by necessary or fair
implication in the enabling act.64 In Angara v. Electoral Commission, the
Court clarified and stressed that when a general grant of power is
conferred or duty enjoined, every particular power necessary for the
exercise of the one or the performance of the other is also conferred by
necessary implication.65 It was also explicated that when the statute does
not specify the particular method to be followed or used by a government
agency in the exercise of the power vested in it by law, said agency has
the authority to adopt any reasonable method to carry out its functions.66
The power to reclaim on the part of the NHA is implicit from PD 757, RA
7279, MO 415, RA 6957, and PD 3-A,67viz:
1. NHAs power to reclaim derived from PD 757 provisions:
PROPERTY 1ST BATCH
a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to
attain the goals of NHA:
Section 3. Progress and Objectives. The Authority shall have the following
purposes and objectives:
xxxx
b) To undertake housing, development, resettlement or other
activities as would enhance the provision of housing to every
Filipino;
c) To harness and promote private participation in housing
ventures in terms of capital expenditures, land, expertise, financing
and other facilities for the sustained growth of the housing industry.
(Emphasis supplied.)
Land reclamation is an integral part of the development of resources for
some of the housing requirements of the NHA. Private participation in
housing projects may also take the form of land reclamation.
b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the
Tondo Foreshore Development Authority (TFDA), has the power to
reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's
Homesite and Housing Corporation (PHHC), the Presidential Assistant on
Housing Resettlement Agency (PAHRA), the Tondo Foreshore
Development Authority (TFDA), the Central Institute for the Training and
Relocation of Urban Squatters (CITRUS), the Presidential Committee for
Housing and Urban Resettlement (PRECHUR), Sapang Palay
Development Committee, Inter-Agency Task Force to Undertake the
Relocation of Families in Barrio Nabacaan, Villanueva, Misamis Oriental
and all other existing government housing and resettlement agencies, task
forces and ad-hoc committees, are hereby dissolved. Their powers and
functions, balance of appropriations, records, assets, rights, and choses in
action, are transferred to, vested in, and assumed by the Authority. x x x
(Emphasis supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its
objectives, powers, and functions. Sec. 2 provides:
Section 2. Objectives and Purposes. The Authority shall have the following
purposes and objectives:
a) To undertake all manner of activity, business or development
projects for the establishment of harmonious, comprehensive,
integrated and healthy living community in the Tondo
Foreshoreland and its resettlement site;
b) To undertake and promote the physical and socio-economic
amelioration of the Tondo Foreshore residents in particular and the
nation in general (Emphasis supplied.)
The powers and functions are contained in Sec. 3, to wit:
a) To develop and implement comprehensive and integrated urban
renewal programs for the Tondo Foreshore and Dagat-dagatan
lagoon and/or any other additional/alternative resettlement site and
to formulate and enforce general and specific policies for its
development which shall ensure reasonable degree of compliance
with environmental standards.
b) To prescribe guidelines and standards for the reservation,
conservation and utilization of public lands covering the Tondo
Foreshore land and its resettlement sites;
c) To construct, acquire, own, lease, operate and maintain
infrastructure facilities, housing complex, sites and services;
d) To determine, regulate and supervise the establishment and
operation of housing, sites, services and commercial and industrial
complexes and any other enterprises to be constructed or
established within the Tondo Foreshore and its resettlement sites;
e) To undertake and develop, by itself or through joint ventures
with other public or private entities, all or any of the different
phases of development of the Tondo Foreshore land and its
resettlement sites;
f) To acquire and own property, property-rights and interests, and
encumber or otherwise dispose of the same as it may deem
appropriate (Emphasis supplied.)
PROPERTY 1ST BATCH
From the foregoing provisions, it is readily apparent that the TFDA has the
explicit power to develop public lands covering the Tondo foreshore land
and any other additional and alternative resettlement sites under letter b,
Sec. 3 of PD 570. Since the additional and/or alternative sites adjacent to
Tondo foreshore land cover foreshore and submerged areas, the
reclamation of said areas is necessary in order to convert them into a
comprehensive and integrated resettlement housing project for the slum
dwellers and squatters of Tondo. Since the powers of TFDA were assumed
by the NHA, then the NHA has the power to reclaim lands in the Tondo
foreshore area which covers the 79-hectare land subject of Proclamations
Nos. 39 and 465 and Special Patents Nos. 3592 and 3598.
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which
embrace the authority to reclaim land, thus:
Sec. 6. Powers and functions of the Authority.The Authority shall have
the following powers and functions to be exercised by the Board in
accordance with its established national human settlements plan prepared
by the Human Settlements Commission:
(a) Develop and implement the comprehensive and integrated housing
program provided for in Section hereof;
xxxx
(c) Prescribe guidelines and standards for the reservation, conservation
and utilization of public lands identified for housing and resettlement;
xxxx
(e) Develop and undertake housing development and/or resettlement
projects through joint ventures or other arrangements with public and
private entities;
xxxx
(k) Enter into contracts whenever necessary under such terms and
conditions as it may deem proper and reasonable;
(l) Acquire property rights and interests and encumber or otherwise
dispose the same as it may deem appropriate;
xxxx
(s) Perform such other acts not inconsistent with this Decree, as may be
necessary to effect the policies and objectives herein declared. (Emphasis
supplied.)
The NHAs authority to reclaim land can be inferred from the aforequoted
provisions. It can make use of public lands under letter (c) of Sec. 6 which
includes reclaimed land as site for its comprehensive and integrated
housing projects under letter (a) which can be undertaken through joint
ventures with private entities under letter (e). Taken together with letter (s)
which authorizes NHA to perform such other activities "necessary to effect
the policies and objectives" of PD 757, it is safe to conclude that the NHAs
power to reclaim lands is a power that is implied from the exercise of its
explicit powers under Sec. 6 in order to effectively accomplish its policies
and objectives under Sec. 3 of its charter. Thus, the reclamation of land is
an indispensable component for the development and construction of the
SMDRP housing facilities.
2. NHAs implied power to reclaim land is enhanced by RA 7279.
PD 757 identifies NHAs mandate to "[d]evelop and undertake housing
development and/or resettlement projects through joint ventures or other
arrangements with public and private entities."
The power of the NHA to undertake reclamation of land can be inferred
from Secs. 12 and 29 of RA 7279, which provide:
Section 12. Disposition of Lands for Socialized Housing.The National
Housing Authority, with respect to lands belonging to the National
Government, and the local government units with respect to other lands
within their respective localities, shall coordinate with each other to
formulate and make available various alternative schemes for the
disposition of lands to the beneficiaries of the Program. These schemes
shall not be limited to those involving transfer of ownership in fee simple
but shall include lease, with option to purchase, usufruct or such other
variations as the local government units or the National Housing Authority
may deem most expedient in carrying out the purposes of this Act.
PROPERTY 1ST BATCH
xxxx
Section 29. Resettlement.With two (2) years from the effectivity of this
Act, the local government units, in coordination with the National Housing
Authority, shall implement the relocation and resettlement of persons living
in danger areas such as esteros, railroad tracks, garbage dumps,
riverbanks, shorelines, waterways, and in other public places as sidewalks,
roads, parks, and playgrounds. The local government unit, in coordination
with the National Housing Authority, shall provide relocation or
resettlement sites with basic services and facilities and access to
employment and livelihood opportunities sufficient to meet the basic needs
of the affected families. (Emphasis supplied.)
Lands belonging to the National Government include foreshore and
submerged lands which can be reclaimed to undertake housing
development and resettlement projects.
3. MO 415 explains the undertaking of the NHA in SMDRP:
WHEREAS, Memorandum Order No. 161-A mandated the National
Housing Authority to conduct feasibility studies and develop low-cost
housing projects at the dumpsites of Metro Manila;
WHEREAS, the National Housing Authority has presented a viable
Conceptual Plan to convert the Smokey Mountain dumpsite into a
habitable housing project inclusive of the reclamation area across R-10 as
enabling component of the Project;
WHEREAS, the said Plan requires the coordinated and synchronized
efforts of the City of Manila and other government agencies and
instrumentalities to ensure effective and efficient implementation;
WHEREAS, the government encourages private sector initiative in the
implementation of its projects. (Emphasis supplied.)
Proceeding from these "whereas" clauses, it is unequivocal that
reclamation of land in the Smokey Mountain area is an essential and vital
power of the NHA to effectively implement its avowed goal of developing
low-cost housing units at the Smokey Mountain dumpsites. The
interpretation made by no less than the President of the Philippines as
Chief of the Executive Branch, of which the NHA is a part, must
necessarily command respect and much weight and credit.
4. RA 6957 as amended by RA 7718the BOT Lawserves as an
exception to PD 1084 and EO 525.
Based on the provisions of the BOT Law and Implementing Rules and
Regulations, it is unequivocal that all government infrastructure agencies
like the NHA can undertake infrastructure or development projects using
the contractual arrangements prescribed by the law, and land reclamation
is one of the projects that can be resorted to in the BOT project
implementation under the February 10, 1992 Joint Resolution No. 3 of the
8th Congress.
From the foregoing considerations, we find that the NHA has ample implied
authority to undertake reclamation projects.
Even without an implied power to reclaim lands under NHAs charter, we
rule that the authority granted to NHA, a national government agency, by
the President under PD 3-A reinforced by EO 525 is more than sufficient
statutory basis for the reclamation of lands under the SMDRP.
PD 3-A is a law issued by then President Ferdinand E. Marcos under his
martial law powers on September 23, 1972. It provided that "[t]he
provisions of any law to the contrary notwithstanding, the reclamation of
areas, underwater, whether foreshore or inland, shall be limited to the
National Government or any person authorized by it under the proper
contract." It repealed, in effect, RA 1899 which previously delegated the
right to reclaim lands to municipalities and chartered cities and revested it
to the National Government.68 Under PD 3-A, "national government" can
only mean the Executive Branch headed by the President. It cannot refer
to Congress as it was dissolved and abolished at the time of the issuance
of PD 3-A on September 23, 1972. Moreover, the Executive Branch is the
only implementing arm in the government with the equipment, manpower,
expertise, and capability by the very nature of its assigned powers and
functions to undertake reclamation projects. Thus, under PD 3-A, the
Executive Branch through the President can implement reclamation of
lands through any of its departments, agencies, or offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084
creating the PEA, which was granted, among others, the power "to reclaim
PROPERTY 1ST BATCH
land, including foreshore and submerged areas by dredging, filling or other
means or to acquire reclaimed lands." The PEAs power to reclaim is not
however exclusive as can be gleaned from its charter, as the President
retained his power under PD 3-A to designate another agency to reclaim
lands.
On February 14, 1979, EO 525 was issued. It granted PEA primary
responsibility for integrating, directing, and coordinating reclamation
projects for and on behalf of the National Government although other
national government agencies can be designated by the President to
reclaim lands in coordination with the PEA. Despite the issuance of EO
525, PD 3-A remained valid and subsisting. Thus, the National
Government through the President still retained the power and control over
all reclamation projects in the country.
The power of the National Government through the President over
reclamation of areas, that is, underwater whether foreshore or inland, was
made clear in EO 54369 which took effect on June 24, 2006. Under EO
543, PEA was renamed the Philippine Reclamation Authority (PRA) and
was granted the authority to approve reclamation projects, a power
previously reposed in the President under EO 525. EO 543 reads:
Section 1. The power of the President to approve reclamation projects is
hereby delegated to the Philippine Reclamation Authority [formerly PEA],
through its governing board, subject to compliance with existing laws and
rules and subject to the condition that reclamation contracts to be executed
with any person or entity go through public bidding.
Section 2. Nothing in the Order shall be construed as diminishing the
Presidents authority to modify, amend or nullify PRAs action.
Section 3. All executive issuances inconsistent with this Executive Order
are hereby repealed or amended accordingly. (Emphasis supplied.)
Sec. 2 of EO 543 strengthened the power of control and supervision of the
President over reclamation of lands as s/he can modify, amend, or nullify
the action of PEA (now PRA).
From the foregoing issuances, we conclude that the Presidents delegation
to NHA, a national government agency, to reclaim lands under the
SMDRP, is legal and valid, firmly anchored on PD 3-A buttressed by EO
525 notwithstanding the absence of any specific grant of power under its
charter, PD 757.
Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands
Petitioner Chavez puts forth the view that even if the NHA and RBI were
granted the authority to reclaim, they were not authorized to do so by the
DENR.
Again, reliance is made on our ruling in PEA where it was held that the
DENRs authority is necessary in order for the government to validly
reclaim foreshore and submerged lands. In PEA, we expounded in this
manner:
As manager, conservator and overseer of the natural resources of the
State, DENR exercises "supervision and control over alienable and
disposable public 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 reclaimed or not. This means that PEA
needs authorization from DENR before PEA can undertake reclamation
projects in Manila Bay, or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands
of the public domain. Hence, DENR decides whether reclaimed lands of
PEA should be classified as alienable under Sections 6 and 7 of CA No.
141. Once DENR decides that the reclaimed lands should be so classified,
it then recommends to the President the issuance of a proclamation
classifying the lands as alienable or disposable lands of the public domain
open to 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.
In short, DENR is vested with the power to authorize the reclamation of
areas under water, while PEA is vested with the power to undertake the
physical reclamation of areas under water, whether directly or through
private contractors. DENR is also empowered to classify lands of the public
PROPERTY 1ST BATCH
domain into alienable or disposable lands subject to the approval of the
President. On the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.70
Despite our finding that PEA is not a precedent to the case at bar, we find
after all that under existing laws, the NHA is still required to procure
DENRs authorization before a reclamation project in Manila Bay or in any
part of the Philippines can be undertaken. The requirement applies to PEA,
NHA, or any other government agency or office granted with such power
under the law.
Notwithstanding the need for DENR permission, we nevertheless find
petitioners position bereft of merit.
The DENR is deemed to have granted the authority to reclaim in the
Smokey Mountain Project for the following reasons:
1. Sec. 17, Art. VII of the Constitution provides that "the President shall
have control of all executive departments, bureaus and offices." The
President is assigned the task of seeing to it that all laws are faithfully
executed. "Control," in administrative law, means "the power of an officer
to alter, modify, nullify or set aside what a subordinate officer has done in
the performance of his duties and to substitute the judgment of the former
for that of the latter."71
As such, the President can exercise executive power motu proprio and can
supplant the act or decision of a subordinate with the Presidents own. The
DENR is a department in the executive branch under the President, and it
is only an alter ego of the latter. Ordinarily the proposed action and the
staff work are initially done by a department like the DENR and then
submitted to the President for approval. However, there is nothing infirm or
unconstitutional if the President decides on the implementation of a certain
project or activity and requires said department to implement it. Such is a
presidential prerogative as long as it involves the department or office
authorized by law to supervise or execute the Project. Thus, as in this
case, when the President approved and ordered the development of a
housing project with the corresponding reclamation work, making DENR a
member of the committee tasked to implement the project, the required
authorization from the DENR to reclaim land can be deemed satisfied. It
cannot be disputed that the ultimate power over alienable and disposable
public lands is reposed in the President of the Philippines and not the
DENR Secretary. To still require a DENR authorization on the Smokey
Mountain when the President has already authorized and ordered the
implementation of the Project would be a derogation of the powers of the
President as the head of the executive branch. Otherwise, any department
head can defy or oppose the implementation of a project approved by the
head of the executive branch, which is patently illegal and unconstitutional.
In Chavez v. Romulo, we stated that when a statute imposes a specific
duty on the executive department, the President may act directly or order
the said department to undertake an activity, thus:
[A]t the apex of the entire executive officialdom is the President. Section
17, Article VII of the Constitution specifies [her] power as Chief executive
departments, bureaus and offices. [She] shall ensure that the laws be
faithfully executed. As Chief Executive, President Arroyo holds the steering
wheel that controls the course of her government. She lays down policies
in the execution of her plans and programs. Whatever policy she chooses,
she has her subordinates to implement them. In short, she has the power
of control. Whenever a specific function is entrusted by law or regulation to
her subordinate, she may act directly or merely direct the performance of a
duty x x x. Such act is well within the prerogative of her office (emphasis
supplied).72
Moreover, the power to order the reclamation of lands of public domain is
reposed first in the Philippine President. The Revised Administrative Code
of 1987 grants authority to the President to reserve lands of public domain
for settlement for any specific purpose, thus:
Section 14. Power to Reserve Lands of the Public and Private Domain of
the Government.(1) The President shall have the power to reserve for
settlement or public use, and for specific 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
indicated until otherwise provided by law or proclamation. (Emphasis
supplied.)
President Aquino reserved the area of the Smokey Mountain dumpsite for
settlement and issued MO 415 authorizing the implementation of the
Smokey Mountain Development Project plus the reclamation of the area
across R-10. Then President Ramos issued Proclamation No. 39 covering
the 21-hectare dumpsite and the 40-hectare commercial/industrial area,
PROPERTY 1ST BATCH
and Proclamation No. 465 and MO 415 increasing the area of foreshore
and submerged lands of Manila Bay to be reclaimed from 40 to 79
hectares. Having supervision and control over the DENR, both Presidents
directly assumed and exercised the power granted by the Revised
Administrative Code to the DENR Secretary to authorize the NHA to
reclaim said lands. What can be done indirectly by the DENR can be done
directly by the President. It would be absurd if the power of the President
cannot be exercised simply because the head of a department in the
executive branch has not acted favorably on a project already approved by
the President. If such arrangement is allowed then the department head
will become more powerful than the President.
2. Under Sec. 2 of MO 415, the DENR is one of the members of the
EXECOM chaired by the NCR-CORD to oversee the implementation of the
Project. The EXECOM was the one which recommended approval of the
project plan and the joint venture agreements. Clearly, the DENR retained
its power of supervision and control over the laws affected by the Project
since it was tasked to "facilitate the titling of the Smokey Mountain and of
the area to be reclaimed," which shows that it had tacitly given its authority
to the NHA to undertake the reclamation.
3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos.
3591 and 3592 while then Secretary Victor O. Ramos issued Special
Patent No. 3598 that embraced the areas covered by the reclamation.
These patents conveyed the lands to be reclaimed to the NHA and granted
to said agency the administration and disposition of said lands for
subdivision and disposition to qualified beneficiaries and for development
for mix land use (commercial/industrial) "to provide employment
opportunities to on-site families and additional areas for port related
activities." Such grant of authority to administer and dispose of lands of
public domain under the SMDRP is of course subject to the powers of the
EXECOM of SMDRP, of which the DENR is a member.
4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its
power of supervision and control over the lands of public domain covered
by the Project.
Based on these reasons, it is clear that the DENR, through its acts and
issuances, has ratified and confirmed the reclamation of the subject lands
for the purposes laid down in Proclamations Nos. 39 and 465.
Third Issue: Whether respondent RBI can acquire reclaimed
foreshore and submerged lands considered as inalienable and
outside the commerce of man
Petitioner postulates that respondent RBI cannot acquire the reclaimed
foreshore and submerged areas as these are inalienable public lands
beyond the commerce of man based on Art. 1409 of the Civil Code which
provides:
Article 1409. The following contracts are inexistent and void from the
beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order or public policy;
xxxx
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources
are owned by the State and they cannot be alienated except for alienable
agricultural lands of the public domain. One of the States natural
resources are lands of public domain which include reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there
must be a law or presidential proclamation officially classifying these
reclaimed lands as alienable and disposable and open to disposition or
concession. Absent such law or proclamation, the reclaimed lands cannot
be the enabling component or consideration to be paid to RBI as these are
beyond the commerce of man.
We are not convinced of petitioners postulation.
The reclaimed lands across R-10 were classified alienable and disposable
lands of public domain of the State for the following reasons, viz:
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First, there were three (3) presidential proclamations classifying the
reclaimed lands across R-10 as alienable or disposable hence open to
disposition or concession, to wit:
(1) MO 415 issued by President Aquino, of which Sec. 4 states that
"[t]he land covered by the Smokey Mountain Dumpsite is hereby
conveyed to the National Housing Authority as well as the area to
be reclaimed across R-10."
The directive to transfer the lands once reclaimed to the NHA
implicitly carries with it the declaration that said lands are alienable
and disposable. Otherwise, the NHA cannot effectively use them in
its housing and resettlement project.
(2) Proclamation No. 39 issued by then President Ramos by which
the reclaimed lands were conveyed to NHA for subdivision and
disposition to qualified beneficiaries and for development into a
mixed land use (commercial/industrial) to provide employment
opportunities to on-site families and additional areas for port-
related activities. Said directive carries with it the pronouncement
that said lands have been transformed to alienable and disposable
lands. Otherwise, there is no legal way to convey it to the
beneficiaries.
(3) Proclamation No. 465 likewise issued by President Ramos
enlarged the reclaimed area to 79 hectares to be developed and
disposed of in the implementation of the SMDRP. The authority put
into the hands of the NHA to dispose of the reclaimed lands tacitly
sustains the conversion to alienable and disposable lands.
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR
anchored on Proclamations Nos. 39 and 465 issued by President Ramos,
without doubt, classified the reclaimed areas as alienable and disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465
are explicit declarations that the lands to be reclaimed are classified as
alienable and disposable. We find however that such conclusion is derived
and implicit from the authority given to the NHA to transfer the reclaimed
lands to qualified beneficiaries.
The query is, when did the declaration take effect? It did so only after the
special patents covering the reclaimed areas were issued. It is only on
such date that the reclaimed lands became alienable and disposable lands
of the public domain. This is in line with the ruling in PEA where said issue
was clarified and stressed:
PD No. 1085, coupled with President Aquinos actual issuance of a special
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 Aquinos issuance
of a land patent also 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.73 (Emphasis supplied.)
Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly
taken together with Special Patent Nos. 3591, 3592, and 3598 more than
satisfy the requirement in PEA that "[t]here must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or
disposable and open to disposition or concession (emphasis supplied)."74
Apropos the requisite law categorizing reclaimed land as alienable or
disposable, we find that RA 6957 as amended by RA 7718 provides ample
authority for the classification of reclaimed land in the SMDRP for the
repayment scheme of the BOT project as alienable and disposable lands
of public domain. Sec. 6 of RA 6957 as amended by RA 7718 provides:
For the financing, construction, 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 share in
the revenue of the project or other non-monetary payments, such as, but
not limited to, the grant of a portion or percentage of the reclaimed land,
subject to the constitutional requirements with respect to the ownership of
the land. (Emphasis supplied.)
While RA 6957 as modified by RA 7718 does not expressly declare that
the reclaimed lands that shall serve as payment to the project proponent
have become alienable and disposable lands and opened for disposition;
nonetheless, this conclusion is necessarily implied, for how else can the
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land be used as the enabling component for the Project if such
classification is not deemed made?
It may be argued that the grant of authority to sell public lands, pursuant to
PEA, does not convert alienable lands of public domain into private or
patrimonial lands. We ruled in PEA that "alienable lands of public domain
must be transferred to qualified private parties, or to government entities
not tasked to dispose of public lands, before these lands can become
private or patrimonial lands (emphasis supplied)."75 To lands reclaimed by
PEA or through a contract with a private person or entity, such reclaimed
lands still remain alienable lands of public domain which can be transferred
only to Filipino citizens but not to a private corporation. This is because
PEA under PD 1084 and EO 525 is tasked to hold and dispose of alienable
lands of public domain and it is only when it is transferred to Filipino
citizens that it becomes patrimonial property. On the other hand, the NHA
is a government agency not tasked to dispose of public lands under its
charterThe Revised Administrative Code of 1987. The NHA is an "end-
user agency" authorized by law to administer and dispose of reclaimed
lands. The moment titles over reclaimed lands based on the special
patents are transferred to the NHA by the Register of Deeds, they are
automatically converted to patrimonial properties of the State which can be
sold to Filipino citizens and private corporations, 60% of which are owned
by Filipinos. The reason is obvious: if the reclaimed land is not converted
to patrimonial land once transferred to NHA, then it would be useless to
transfer it to the NHA since it cannot legally transfer or alienate lands of
public domain. More importantly, it cannot attain its avowed purposes and
goals since it can only transfer patrimonial lands to qualified beneficiaries
and prospective buyers to raise funds for the SMDRP.
From the foregoing considerations, we find that the 79-hectare reclaimed
land has been declared alienable and disposable land of the public
domain; and in the hands of NHA, it has been reclassified as patrimonial
property.
Petitioner, however, contends that the reclaimed lands were inexistent
prior to the three (3) Presidential Acts (MO 415 and Proclamations Nos. 39
and 465) and hence, the declaration that such areas are alienable and
disposable land of the public domain, citing PEA, has no legal basis.
Petitioners contention is not well-taken.
Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking
into consideration the special patents issued by the DENR demonstrates
the inherent weakness of his proposition. As was ruled in PEA cited by
petitioner himself, "PD No. 1085, coupled with President Aquinos actual
issuance of a special patent covering the Freedom Islands is equivalent to
an official proclamation classifying the Freedom islands as alienable or
disposable lands of public domain." In a similar vein, the combined and
collective effect of Proclamations Nos. 39 and 465 with Special Patents
Nos. 3592 and 3598 is tantamount to and can be considered to be an
official declaration that the reclaimed lots are alienable or disposable lands
of the public domain.
The reclaimed lands covered by Special Patents Nos. 3591, 3592, and
3598, which evidence transfer of ownership of reclaimed lands to the NHA,
are official acts of the DENR Secretary in the exercise of his power of
supervision and control over alienable and disposable public lands and his
exclusive jurisdiction over the management and disposition of all lands of
public domain under the Revised Administrative Code of 1987. Special
Patent No. 3592 speaks of the transfer of Lots 1 and 2, and RI-003901-
000012-D with an area of 401,485 square meters based on the survey and
technical description approved by the Bureau of Lands. Lastly, Special
Patent No. 3598 was issued in favor of the NHA transferring to said agency
a tract of land described in Plan RL-00-000013 with an area of 390,000
square meters based on the survey and technical descriptions approved by
the Bureau of Lands.
The conduct of the survey, the preparation of the survey plan, the
computation of the technical description, and the processing and
preparation of the special patent are matters within the technical area of
expertise of administrative agencies like the DENR and the Land
Management Bureau and are generally accorded not only respect but at
times even finality.76 Preparation of special patents calls for technical
examination and a specialized review of calculations and specific details
which the courts are ill-equipped to undertake; hence, the latter defer to the
administrative agency which is trained and knowledgeable on such
matters.77
Subsequently, the special patents in the name of the NHA were submitted
to the Register of Deeds of the City of Manila for registration, and
corresponding certificates of titles over the reclaimed lots were issued
based on said special patents. The issuance of certificates of titles in
NHAs name automatically converts the reclaimed lands to patrimonial
PROPERTY 1ST BATCH
properties of the NHA. Otherwise, the lots would not be of use to the
NHAs housing projects or as payment to the BOT contractor as the
enabling component of the BOT contract. The laws of the land have to be
applied and interpreted depending on the changing conditions and times.
Tempora mutantur et legis mutantur in illis (time changes and laws change
with it). One such law that should be treated differently is the BOT Law (RA
6957) which brought about a novel way of implementing government
contracts by allowing reclaimed land as part or full payment to the
contractor of a government project to satisfy the huge financial
requirements of the undertaking. The NHA holds the lands covered by
Special Patents Nos. 3592 and 3598 solely for the purpose of the SMDRP
undertaken by authority of the BOT Law and for disposition in accordance
with said special law. The lands become alienable and disposable lands of
public domain upon issuance of the special patents and become
patrimonial properties of the Government from the time the titles are issued
to the NHA.
As early as 1999, this Court in Baguio v. Republic laid down the
jurisprudence that:
It is true that, once a patent is registered and the corresponding certificate
of title is issued, the land covered by them ceases to be part of the public
domain and becomes private property, and the Torrens Title issued
pursuant to the patent becomes indefeasible upon the expiration of one
year from the date of issuance of such patent.78
The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga,
Sr.,79 Heirs of Carlos Alcaraz v. Republic,80 and the more recent case of
Doris Chiongbian-Oliva v. Republic of the Philippines.81 Thus, the 79-
hectare reclaimed land became patrimonial property after the issuance of
certificates of titles to the NHA based on Special Patents Nos. 3592 and
3598.
One last point. The ruling in PEA cannot even be applied retroactively to
the lots covered by Special Patents Nos. 3592 (40 hectare reclaimed land)
and 3598 (39-hectare reclaimed land). The reclamation of the land under
SMDRP was completed in August 1996 while the PEA decision was
rendered on July 9, 2002. In the meantime, subdivided lots forming parts of
the reclaimed land were already sold to private corporations for value and
separate titles issued to the buyers. The Project was terminated through a
Memorandum of Agreement signed on August 27, 2003. The PEA decision
became final through the November 11, 2003 Resolution. It is a settled
precept that decisions of the Supreme Court can only be applied
prospectively as they may prejudice vested rights if applied retroactively.
In Benzonan v. Court of Appeals, the Court trenchantly elucidated the
prospective application of its decisions based on considerations of equity
and fair play, thus:
At that time, the prevailing jurisprudence interpreting section 119 of R.A.
141 as amended was that enunciated in Monge and Tupas cited above.
The petitioners Benzonan and respondent Pe and the DBP are bound by
these decisions for pursuant to Article 8 of the Civil Code "judicial
decisions applying or interpreting the laws of the Constitution shall form a
part of the legal system of the Philippines." But while our decisions form
part of the law of the land, they are also subject to Article 4 of the Civil
Code which provides that "laws shall have no retroactive effect unless the
contrary is provided." This is expressed in the familiar legal maxim lex
prospicit, non respicit, the law looks forward not backward. The rationale
against retroactivity is easy to perceive. The retroactive application of a law
usually divests rights that have already become vested or impairs the
obligations of contract and hence, is unconstitutional.
The same consideration underlies our rulings giving only prospective effect
to decisions enunciating new doctrines. Thus, we emphasized in People v.
Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is
overruled and a different view is adopted, the new doctrine should be
applied prospectively and should not apply to parties who had relied on the
old doctrine and acted on the faith thereof.82
Fourth Issue: Whether respondent RBI can acquire reclaimed
lands when there was no declaration that said lands are no
longer needed for public use
Petitioner Chavez avers that despite the declaration that the reclaimed
areas are alienable lands of the public domain, still, the reclamation is
flawed for there was never any declaration that said lands are no longer
needed for public use.
We are not moved by petitioners submission.
PROPERTY 1ST BATCH
Even if it is conceded that there was no explicit declaration that the lands
are no longer needed for public use or public service, there was however
an implicit executive declaration that the reclaimed areas R-10 are not
necessary anymore for public use or public service when President Aquino
through MO 415 conveyed the same to the NHA partly for housing project
and related commercial/industrial development intended for disposition to
and enjoyment of certain beneficiaries and not the public in general and
partly as enabling component to finance the project.
President Ramos, in issuing Proclamation No. 39, declared, though
indirectly, that the reclaimed lands of the Smokey Mountain project are no
longer required for public use or service, thus:
These parcels of land of public domain are hereby placed under the
administration and disposition of the National Housing Authority to develop,
subdivide and dispose to qualified beneficiaries, as well as its development
for mix land use (commercial/industrial) to provide employment
opportunities to on-site families and additional areas for port related
activities. (Emphasis supplied.)
While numerical count of the persons to be benefited is not the determinant
whether the property is to be devoted to public use, the declaration in
Proclamation No. 39 undeniably identifies only particular individuals as
beneficiaries to whom the reclaimed lands can be sold, namelythe
Smokey Mountain dwellers. The rest of the Filipinos are not qualified;
hence, said lands are no longer essential for the use of the public in
general.
In addition, President Ramos issued on August 31, 1994 Proclamation No.
465 increasing the area to be reclaimed from forty (40) hectares to
seventy-nine (79) hectares, elucidating that said lands are undoubtedly set
aside for the beneficiaries of SMDRP and not the publicdeclaring the
power of NHA to dispose of land to be reclaimed, thus: "The authority to
administer, develop, or dispose lands identified and reserved by this
Proclamation and Proclamation No. 39 (s.1992), in accordance with the
SMDRP, as enhance, is vested with the NHA, subject to the provisions of
existing laws." (Emphasis supplied.)
MO 415 and Proclamations Nos. 39 and 465 are declarations that
proclaimed the non-use of the reclaimed areas for public use or service as
the Project cannot be successfully implemented without the withdrawal of
said lands from public use or service. Certainly, the devotion of the
reclaimed land to public use or service conflicts with the intended use of
the Smokey Mountain areas for housing and employment of the Smokey
Mountain scavengers and for financing the Project because the latter
cannot be accomplished without abandoning the public use of the subject
land. Without doubt, the presidential proclamations on SMDRP together
with the issuance of the special patents had effectively removed the
reclaimed lands from public use.
More decisive and not in so many words is the ruling in PEA which we
earlier cited, that "PD No. 1085 and President Aquinos issuance of a land
patent also constitute a declaration that the Freedom Islands are no longer
needed for public service." Consequently, we ruled in that case that the
reclaimed lands are "open to disposition or concession to qualified
parties."83
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with
the special patents have classified the reclaimed lands as alienable and
disposable and open to disposition or concession as they would be
devoted to units for Smokey Mountain beneficiaries. Hence, said lands are
no longer intended for public use or service and shall form part of the
patrimonial properties of the State under Art. 422 of the Civil Code.84 As
discussed a priori, the lands were classified as patrimonial properties of the
NHA ready for disposition when the titles were registered in its name by
the Register of Deeds.
Moreover, reclaimed lands that are made the enabling components of a
BOT infrastructure project are necessarily reclassified as alienable and
disposable lands under the BOT Law; otherwise, absurd and illogical
consequences would naturally result. Undoubtedly, the BOT contract will
not be accepted by the BOT contractor since there will be no consideration
for its contractual obligations. Since reclaimed land will be conveyed to the
contractor pursuant to the BOT Law, then there is an implied declaration
that such land is no longer intended for public use or public service and,
hence, considered patrimonial property of the State.
Fifth Issue: Whether there is a law authorizing sale of
reclaimed lands
PROPERTY 1ST BATCH
Petitioner next claims that RBI cannot acquire the reclaimed lands because
there was no law authorizing their sale. He argues that unlike PEA, no
legislative authority was granted to the NHA to sell reclaimed land.
This position is misplaced.
Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his
view that the NHA is not empowered by any law to sell reclaimed land,
thus:
Section 60. Any tract of land comprised under this title may be leased or
sold, as the case may be, to any person, corporation or association
authorized to purchase or lease public lands for agricultural purposes. The
area of the land so leased or sold shall be such as shall, in the judgment of
the Secretary of Agriculture and Natural Resources, be reasonably
necessary for the purposes for which such sale or lease if requested and
shall in no case exceed one hundred and forty-four hectares: Provided,
however, That this limitation shall not apply to grants, donations, transfers,
made to a province, municipality or branch or subdivision of the
Government 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 Government shall
not be alienated, encumbered, or otherwise disposed of in a manner
affecting its title, except when authorized by Congress; Provided, further,
That any person, corporation, association or partnership disqualified from
purchasing public land for agricultural purposes under the provisions of this
Act, may lease land included under this title suitable for industrial or
residential purposes, but the lease granted shall only be valid while such
land is used for the purposes referred to. (Emphasis supplied.)
Reliance on said provision is incorrect as the same applies only to "a
province, municipality or branch or subdivision of the Government." The
NHA is not a government unit but a government corporation performing
governmental and proprietary functions.
In addition, PD 757 is clear that the NHA is empowered by law to transfer
properties acquired by it under the law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have
the following powers and functions to be exercised by the Boards in
accordance with the established national human settlements plan prepared
by the Human Settlements Commission:
xxxx
(k) Enter into contracts whenever necessary under such terms and
conditions as it may deem proper and reasonable;
(l) Acquire property rights and interests, and encumber or otherwise
dispose the same as it may deem appropriate (Emphasis supplied.)
Letter (l) is emphatic that the NHA can acquire property rights and interests
and encumber or otherwise dispose of them as it may deem appropriate.
The transfer of the reclaimed lands by the National Government to the
NHA for housing, commercial, and industrial purposes transformed them
into patrimonial lands which are of course owned by the State in its private
or proprietary capacity. Perforce, the NHA can sell the reclaimed lands to
any Filipino citizen or qualified corporation.
Sixth Issue: Whether the transfer of reclaimed lands to RBI
was done by public bidding
Petitioner also contends that there was no public bidding but an awarding
of ownership of said reclaimed lands to RBI. Public bidding, he says, is
required under Secs. 63 and 67 of CA 141 which read:
Section 63. Whenever it is decided that lands covered by this chapter are
not needed for public purposes, the Director of Lands shall ask the
Secretary of Agriculture and Commerce for authority to dispose of the
same. Upon 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 sales of agricultural public land, that the Government will lease or
sell, as the case may be, the lots or blocks specified in the advertisement,
for the purpose stated in the notice and subject to the conditions specified
in this chapter.
xxxx
PROPERTY 1ST BATCH
Section 67. The lease or sale shall be made through oral bidding; and
adjudication shall be made to the highest bidder. However, where an
applicant has made improvements on the land by virtue of a permit issued
to him by competent authority, the sale or lease shall be made by sealed
bidding as prescribed in section twenty-six of this Act, the provisions of
which shall be applied whenever applicable. If all or part of the lots remain
unleased or unsold, the Director of Lands shall from time to time announce
in the Official Gazette or in any other newspapers of general circulation,
the lease of sale of those lots, if necessary.
He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the
reclaimed lands were conveyed to RBI by negotiated contract and not by
public bidding as required by law.
This stand is devoid of merit.
There is no doubt that respondent NHA conducted a public bidding of the
right to become its joint venture partner in the Smokey Mountain Project.
Notices or Invitations to Bid were published in the national dailies on
January 23 and 26, 1992 and February 1, 14, 16, and 23, 1992. The
bidding proper was done by the Bids and Awards Committee (BAC) on
May 18, 1992. On August 31, 1992, the Inter-Agency Techcom made up of
the NHA, PEA, DPWH, PPA, DBP, and DENR opened the bids and
evaluated them, resulting in the award of the contract to respondent RBI on
October 7, 1992.
On March 19, 1993, respondents NHA and RBI signed the JVA. On
February 23, 1994, said JVA was amended and restated into the ARJVA.
On August 11, 1994, the ARJVA was again amended. On September 7,
1994, the OP approved the ARJVA and the amendments to the ARJVA.
From these factual settings, it cannot be gainsaid that there was full
compliance with the laws and regulations governing public biddings
involving a right, concession, or property of the government.
Petitioner concedes that he does not question the public bidding on the
right to be a joint venture partner of the NHA, but the absence of bidding in
the sale of alienable and disposable lands of public domain pursuant to CA
141 as amended.
Petitioners theory is incorrect.
Secs. 63 and 67 of CA 141, as amended, are in point as they refer to
government sale by the Director of Lands of alienable and disposable
lands of public domain. This is not present in the case at bar. The lands
reclaimed by and conveyed to the NHA are no longer lands of public
domain. These lands became proprietary lands or patrimonial properties of
the State upon transfer of the titles over the reclaimed lands to the NHA
and hence outside the ambit of CA 141. The NHA can therefore legally
transfer patrimonial land to RBI or to any other interested qualified buyer
without any bidding conducted by the Director of Lands because the NHA,
unlike PEA, is a government agency not tasked to sell lands of public
domain. Hence, it can only hold patrimonial lands and can dispose of such
lands by sale without need of public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445 which requires public
bidding "when government property has become unserviceable for any
cause or is no longer needed." It appears from the Handbook on Property
and Supply Management System, Chapter 6, that reclaimed lands which
have become patrimonial properties of the State, whose titles are
conveyed to government agencies like the NHA, which it will use for its
projects or programs, are not within the ambit of Sec. 79. We quote the
determining factors in the Disposal of Unserviceable Property, thus:
Determining Factors in the Disposal of Unserviceable Property
Property, which can no longer be repaired or reconditioned;
Property whose maintenance costs of repair more than outweigh
the benefits and services that will be derived from its continued
use;
Property that has become obsolete or outmoded because of
changes in technology;
Serviceable property that has been rendered unnecessary due to
change in the agencys function or mandate;
Unused supplies, materials and spare parts that were procured in
excess of requirements; and
Unused supplies and materials that [have] become dangerous to
use because of long storage or use of which is determined to be
hazardous.85
Reclaimed lands cannot be considered unserviceable properties. The
reclaimed lands in question are very much needed by the NHA for the
Smokey Mountain Project because without it, then the projects will not be
PROPERTY 1ST BATCH
successfully implemented. Since the reclaimed lands are not unserviceable
properties and are very much needed by NHA, then Sec. 79 of PD 1445
does not apply.
More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial
properties like reclaimed lands transferred to a government agency like the
NHA which has entered into a BOT contract with a private firm. The reason
is obvious. If the patrimonial property will be subject to public bidding as
the only way of disposing of said property, then Sec. 6 of RA 6957 on the
repayment scheme is almost impossible or extremely difficult to implement
considering the uncertainty of a winning bid during public auction.
Moreover, the repayment scheme of a BOT contract may be in the form of
non-monetary payment like the grant of a portion or percentage of
reclaimed land. Even if the BOT partner participates in the public bidding,
there is no assurance that he will win the bid and therefore the payment in
kind as agreed to by the parties cannot be performed or the winning bid
prize might be below the estimated valuation of the land. The only way to
harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec.
79 of PD 1445 as inapplicable to BOT contracts involving patrimonial
lands. The law does not intend anything impossible (lex non intendit aliquid
impossibile).
Seventh Issue: Whether RBI, being a private corporation,
is barred by the Constitution to acquire lands of public domain
Petitioner maintains that RBI, being a private corporation, is expressly
prohibited by the 1987 Constitution from acquiring lands of public domain.
Petitioners proposition has no legal mooring for the following reasons:
1. RA 6957 as amended by RA 7718 explicitly states that a
contractor can be paid "a portion as percentage of the reclaimed
land" subject to the constitutional requirement that only Filipino
citizens or corporations with at least 60% Filipino equity can
acquire the same. It cannot be denied that RBI is a private
corporation, where Filipino citizens own at least 60% of the stocks.
Thus, the transfer to RBI is valid and constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable
lands covered by said proclamations were converted to alienable
and disposable lands of public domain. When the titles to the
 reclaimed lands were transferred to the NHA, said alienable and
disposable lands of public domain were automatically classified as
lands of the private domain or patrimonial properties of the State
because the NHA is an agency NOT tasked to dispose of alienable
or disposable lands of public domain. The only way it can transfer
the reclaimed land in conjunction with its projects and to attain its
goals is when it is automatically converted to patrimonial properties
of the State. Being patrimonial or private properties of the State,
then it has the power to sell the same to any qualified person
under the Constitution, Filipino citizens as private corporations,
60% of which is owned by Filipino citizens like RBI.
3. The NHA is an end-user entity such that when alienable lands of
public domain are transferred to said agency, they are
automatically classified as patrimonial properties. The NHA is
similarly situated as BCDA which was granted the authority to
dispose of patrimonial lands of the government under RA 7227.
The nature of the property holdings conveyed to BCDA is
elucidated and stressed in the May 6, 2003 Resolution in Chavez
v. PEA, thus:
BCDA is an entirely different government entity. BCDA is authorized by law
to sell specific government lands that have long been declared by
presidential proclamations as military reservations for use by the different
services of the armed forces under the Department of National Defense.
BCDAs mandate is specific and limited in area, while PEAs mandate is
general and national. BCDA holds government lands that have been
granted to end-user government entitiesthe military services of the
armed forces. In contrast, under Executive Order No. 525, PEA holds the
reclaimed public lands, not as an end-user entity, but as the government
agency "primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government."
x x x Well-settled is the doctrine that public land granted to an end-user
government agency for a specific public use may subsequently be
withdrawn by Congress from public use and declared patrimonial property
to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that
declares specific military reservations no longer needed for defense or
military purposes and reclassifies such lands as patrimonial property for
sale to private parties.
PROPERTY 1ST BATCH
Government owned lands, as long as they are patrimonial property, can be
sold to private parties, whether Filipino citizens or qualified private
corporations. Thus, the so-called Friar Lands acquired by the government
under Act No. 1120 are patrimonial property which even private
corporations can acquire by purchase. Likewise, reclaimed alienable lands
of the public domain if sold or transferred to a public or municipal
corporation for a monetary consideration become patrimonial property in
the hands of the public or municipal corporation. Once converted to
patrimonial property, the land may be sold by the public or municipal
corporation to private parties, whether Filipino citizens or qualified private
corporations.86 (Emphasis supplied.)
The foregoing Resolution makes it clear that the SMDRP was a program
adopted by the Government under Republic Act No. 6957 (An Act
Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and For Other Purposes), as
amended by RA 7718, which is a special law similar to RA 7227.
Moreover, since the implementation was assigned to the NHA, an end-user
agency under PD 757 and RA 7279, the reclaimed lands registered under
the NHA are automatically classified as patrimonial lands ready for
disposition to qualified beneficiaries.
The foregoing reasons likewise apply to the contention of petitioner that
HCPTI, being a private corporation, is disqualified from being a transferee
of public land. What was transferred to HCPTI is a 10-hectare lot which is
already classified as patrimonial property in the hands of the NHA. HCPTI,
being a qualified corporation under the 1987 Constitution, the transfer of
the subject lot to it is valid and constitutional.
Eighth Issue: Whether respondents can be compelled to disclose
all information related to the SMDRP
Petitioner asserts his right to information on all documents such as
contracts, reports, memoranda, and the like relative to SMDRP.
Petitioner asserts that matters relative to the SMDRP have not been
disclosed to the public like the current stage of the Project, the present
financial capacity of RBI, the complete list of investors in the asset pool,
the exact amount of investments in the asset pool and other similar
important information regarding the Project.
He prays that respondents be compelled to disclose all information
regarding the SMDRP and furnish him with originals or at least certified
true copies of all relevant documents relating to the said project including,
but not limited to, the original JVA, ARJVA, AARJVA, and the Asset Pool
Agreement.
This relief must be granted.
The right of the Filipino people to information on matters of public concern
is enshrined in the 1987 Constitution, thus:
ARTICLE II
xxxx
SEC. 28. Subject to reasonable conditions prescribed by law, the State
adopts and implements a policy of full public disclosure of all its
transactions involving public interest.
ARTICLE III
SEC. 7. The right of the people to information on matters of public concern
shall be recognized. Access to official records, and to documents, and
papers pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law.
In Valmonte v. Belmonte, Jr., this Court explicated this way:
[A]n essential element of these freedoms is to keep open a continuing
dialogue or process of communication between the government and the
people. It is in the interest of the State that the channels for free political
discussion be maintained to the end that the government may perceive
and be responsive to the peoples will. Yet, this open dialogue can be
effective only to the extent that 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.87
In PEA, this Court elucidated the rationale behind the right to information:
PROPERTY 1ST BATCH
These twin provisions of the Constitution seek to promote transparency in
policy-making and in the operations of the government, as well as provide
the people sufficient information to exercise effectively other constitutional
rights. These twin provisions are essential to the exercise of freedom of
expression. If the government does not disclose its official acts,
transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing.
These twin provisions are also essential to hold public officials "at all times
x x x accountable to the people," for unless citizens have the proper
information, they cannot hold public officials accountable for anything.
Armed with the right information, citizens can participate in public
discussions leading to the formulation of government policies and their
effective implementation. An informed citizenry is essential to the existence
and proper functioning of any democracy.88
Sec. 28, Art. II compels the State and its agencies to fully disclose "all of its
transactions involving public interest." Thus, the government agencies,
without need of demand from anyone, must bring into public view all the
steps and negotiations leading to the consummation of the transaction and
the contents of the perfected contract.89 Such information must pertain to
"definite propositions of the government," meaning official
recommendations or final positions reached on the different matters
subject of negotiation. The government agency, however, need not
disclose "intra-agency or inter-agency recommendations or
communications during the stage when common assertions are still in the
process of being formulated or are in the exploratory stage." The limitation
also covers privileged communication like information on military and
diplomatic secrets; information affecting national security; information on
investigations of crimes by law enforcement agencies before the
prosecution of the accused; information on foreign relations, intelligence,
and other classified information.
It is unfortunate, however, that after almost twenty (20) years from birth of
the 1987 Constitution, there is still no enabling law that provides the
mechanics for the compulsory duty of government agencies to disclose
information on government transactions. Hopefully, the desired enabling
law will finally see the light of day if and when Congress decides to
approve the proposed "Freedom of Access to Information Act." In the
meantime, it would suffice that government agencies post on their bulletin
boards the documents incorporating the information on the steps and
negotiations that produced the agreements and the agreements
themselves, and if finances permit, to upload said information on their
respective websites for easy access by interested parties. Without any law
or regulation governing the right to disclose information, the NHA or any of
the respondents cannot be faulted if they were not able to disclose
information relative to the SMDRP to the public in general.
The other aspect of the peoples right to know apart from the duty to
disclose is the duty to allow access to information on matters of public
concern under Sec. 7, Art. III of the Constitution. The gateway to
information opens to the public the following: (1) official records; (2)
documents and papers pertaining to official acts, transactions, or
decisions; and (3) government research data used as a basis for policy
development.
Thus, the duty to disclose information should be differentiated from the
duty to permit access to information. There is no need to demand from the
government agency disclosure of information as this is mandatory under
the Constitution; failing that, legal remedies are available. On the other
hand, the interested party must first request or even demand that he be
allowed access to documents and papers in the particular agency. A
request or demand is required; otherwise, the government office or agency
will not know of the desire of the interested party to gain access to such
papers and what papers are needed. The duty to disclose covers only
transactions involving public interest, while the duty to allow access has a
broader scope of information which embraces not only transactions
involving public interest, but any matter contained in official
communications and public documents of the government agency.
We find that although petitioner did not make any demand on the NHA to
allow access to information, we treat the petition as a written request or
demand. We order the NHA to allow petitioner access to its official records,
documents, and papers relating to official acts, transactions, and decisions
that are relevant to the said JVA and subsequent agreements relative to
the SMDRP.
Ninth Issue: Whether the operative fact doctrine applies to the instant
petition
Petitioner postulates that the "operative fact" doctrine is inapplicable to the
present case because it is an equitable doctrine which could not be used to
countenance an inequitable result that is contrary to its proper office.
PROPERTY 1ST BATCH
On the other hand, the petitioner Solicitor General argues that the
existence of the various agreements implementing the SMDRP is an
operative fact that can no longer be disturbed or simply ignored, citing
Rieta v. People of the Philippines.90
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of
Appeals, wherein it is stated that a legislative or executive act, prior to its
being declared as unconstitutional by the courts, is valid and must be
complied with, thus:
As the new Civil Code puts it: "When the courts declare a law to be
inconsistent with the Constitution, the former shall be void and the latter
shall govern. Administrative or executive acts, orders and regulations shall
be valid only when they are not contrary to the laws of the Constitution." It
is understandable why it should be so, the Constitution being supreme and
paramount. Any legislative or executive act contrary to its terms cannot
survive.
Such a view has support in logic and possesses the merit of simplicity. It
may not however be sufficiently realistic. It does not admit of doubt that
prior to the declaration of nullity such challenged legislative or executive
act must have been in force and had to be complied with. This is so as until
after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and
may have changed their positions. What could be more fitting than that in a
subsequent litigation regard be had to what has been done while such
legislative or executive act was in operation and presumed to be valid in all
respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is the governmental organ
which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise
the power of judicial review that may lead to a declaration of nullity. It
would be to deprive the law of its quality of fairness and justice then, if
there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual
existence of a statute, prior to such a determination [of unconstitutionality],
is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration.
The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects, with respect to particular relations,
individual and corporate, and particular conduct, private and official." This
language has been quoted with approval in a resolution in Araneta v. Hill
and the decision in Manila Motor Co., Inc. v. Flores. An even more recent
instance is the opinion of Justice Zaldivar speaking for the Court in
Fernandez v. Cuerva and Co.91 (Emphasis supplied.)
This doctrine was reiterated in the more recent case of City of Makati v.
Civil Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Governments order of
suspension, as we have no reason to do so, much less retroactively apply
such nullification to deprive private respondent of a compelling and valid
reason for not filing the leave application. For as we have held, a void act
though in law a mere scrap of paper nonetheless confers legitimacy upon
past acts or omissions done in reliance thereof. Consequently, the
existence of a statute or executive order prior to its being adjudged void is
an operative fact to which legal consequences are attached. It would
indeed be ghastly unfair to prevent private respondent from relying upon
the order of suspension in lieu of a formal leave application.92 (Emphasis
supplied.)
The principle was further explicated in the case of Rieta v. People of the
Philippines, thus:
In similar situations in the past this Court had taken the pragmatic and
realistic course set forth in Chicot County Drainage District vs. Baxter Bank
to wit:
The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence
affording no basis for the challenged decree. x x x It is quite clear,
however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence
of a statute, prior to [the determination of its invalidity], is an operative fact
and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various
PROPERTY 1ST BATCH
aspects with respect to particular conduct, private and official. Questions
of rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in the
light of the nature both of the statute and of its previous application,
demand examination. These questions are among the most difficult of
those which have engaged the attention of courts, state and federal, and it
is manifest from numerous decisions that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified.
In the May 6, 2003 Resolution in Chavez v. PEA,93 we ruled that De
Agbayani94 is not applicable to the case considering that the prevailing law
did not authorize private corporations from owning land. The prevailing law
at the time was the 1935 Constitution as no statute dealt with the same
issue.
In the instant case, RA 6957 was the prevailing law at the time that the
joint venture agreement was signed. RA 6957, entitled "An Act Authorizing
The Financing, Construction, Operation And Maintenance Of Infrastructure
Projects By The Private Sector And For Other Purposes," which was
passed by Congress on July 24, 1989, allows repayment to the private
contractor of reclaimed lands.95 Such law was relied upon by respondents,
along with the above-mentioned executive issuances in pushing through
with the Project. The existence of such law and issuances is an "operative
fact" to which legal consequences have attached. This Court is constrained
to give legal effect to the acts done in consonance with such executive and
legislative acts; to do otherwise would work patent injustice on
respondents.
Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in
certain cases, the transfer of land, although illegal or unconstitutional, will
not be invalidated on considerations of equity and social justice. However,
in that case, we did not apply the same considering that PEA, respondent
in said case, was not entitled to equity principles there being bad faith on
its part, thus:
There are, moreover, special circumstances that disqualify Amari from
invoking equity principles. Amari cannot claim good faith because even
before Amari signed the Amended JVA on March 30, 1999, petitioner had
already filed the instant case on April 27, 1998 questioning precisely the
qualification of Amari to acquire the Freedom Islands. Even before the
filing of this petition, two Senate Committees had already approved on
September 16, 1997 Senate Committee Report No. 560. This Report
concluded, after a well-publicized investigation into PEAs sale of the
Freedom Islands to Amari, that the Freedom Islands are inalienable lands
of the public domain. Thus, Amari signed the Amended JVA knowing and
assuming all the attendant risks, including the annulment of the Amended
JVA.96
Such indicia of bad faith are not present in the instant case. When the
ruling in PEA was rendered by this Court on July 9, 2002, the JVAs were
all executed. Furthermore, when petitioner filed the instant case against
respondents on August 5, 2004, the JVAs were already terminated by
virtue of the MOA between the NHA and RBI. The respondents had no
reason to think that their agreements were unconstitutional or even
questionable, as in fact, the concurrent acts of the executive department
lent validity to the implementation of the Project. The SMDRP agreements
have produced vested rights in favor of the slum dwellers, the buyers of
reclaimed land who were issued titles over said land, and the agencies and
investors who made investments in the project or who bought SMPPCs.
These properties and rights cannot be disturbed or questioned after the
passage of around ten (10) years from the start of the SMDRP
implementation. Evidently, the "operative fact" principle has set in. The
titles to the lands in the hands of the buyers can no longer be invalidated.
The Courts Dispositions
Based on the issues raised in this petition, we find that the March 19, 1993
JVA between NHA and RBI and the SMDRP embodied in the JVA, the
subsequent amendments to the JVA and all other agreements signed and
executed in relation to it, including, but not limited to, the September 26,
1994 Smokey Mountain Asset Pool Agreement and the agreement on
Phase I of the Project as well as all other transactions which emanated
from the Project, have been shown to be valid, legal, and constitutional.
Phase II has been struck down by the Clean Air Act.
With regard to the prayer for prohibition, enjoining respondents particularly
respondent NHA from further implementing and/or enforcing the said
Project and other agreements related to it, and from further deriving and/or
enjoying any rights, privileges and interest from the Project, we find the
same prayer meritless.
Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:
PROPERTY 1ST BATCH
Sec. 2. Petition for prohibition.When the proceedings of any tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-
judicial or ministerial functions, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess
of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter
specified therein, or otherwise granting such incidental reliefs as law and
justice may require.
It has not been shown that the NHA exercised judicial or quasi-judicial
functions in relation to the SMDRP and the agreements relative to it.
Likewise, it has not been shown what ministerial functions the NHA has
with regard to the SMDRP.
A ministerial duty is one which is so clear and specific as to leave no room
for the exercise of discretion in its performance. It is a duty which an officer
performs in a given state of facts in a prescribed manner in obedience to
the mandate of legal authority, without regard to the exercise of his/her
own judgment upon the propriety of the act done.97
Whatever is left to be done in relation to the August 27, 2003 MOA,
terminating the JVA and other related agreements, certainly does not
involve ministerial functions of the NHA but instead requires exercise of
judgment. In fact, Item No. 4 of the MOA terminating the JVAs provides for
validation of the developers (RBIs) claims arising from the termination of
the SMDRP through the various government agencies.98 Such validation
requires the exercise of discretion.
In addition, prohibition does not lie against the NHA in view of petitioners
failure to avail and exhaust all administrative remedies. Clear is the rule
that prohibition is only available when there is no adequate remedy in the
ordinary course of law.
More importantly, prohibition does not lie to restrain an act which is already
a fait accompli. The "operative fact" doctrine protecting vested rights bars
the grant of the writ of prohibition to the case at bar. It should be
remembered that petitioner was the Solicitor General at the time SMDRP
was formulated and implemented. He had the opportunity to question the
SMDRP and the agreements on it, but he did not. The moment to
challenge the Project had passed.
On the prayer for a writ of mandamus, petitioner asks the Court to compel
respondents to disclose all documents and information relating to the
project, including, but not limited to, any subsequent agreements with
respect to the different phases of the Project, the revisions of the original
plan, the additional works incurred on the Project, the current financial
condition of respondent RBI, and the transactions made with respect to the
project. We earlier ruled that petitioner will be allowed access to official
records relative to the SMDRP. That would be adequate relief to satisfy
petitioners right to the information gateway.
WHEREFORE, the petition is partially granted.
The prayer for a writ of prohibition is DENIED for lack of merit.
The prayer for a writ of mandamus is GRANTED. Respondent NHA is
ordered to allow access to petitioner to all public documents and official
records relative to the SMDRPincluding, but not limited to, the March 19,
1993 JVA between the NHA and RBI and subsequent agreements related
to the JVA, the revisions over the original plan, and the additional works
incurred on and the transactions made with respect to the Project.
No costs.
SO ORDERED.
G.R. No. L-36847 July 20, 1983
SERAFIN B. YNGSON, plaintiff-appellant,
vs.
THE HON. SECRETARY OF AGRICULTURE and NATURAL
RESOURCES, ANITA V. DE GONZALES and JOSE M.
LOPEZ, defendants-appellees.
GUTIERREZ, JR., J.:
PROPERTY 1ST BATCH
This is an appeal from the decision of the Court of First Instance of Negros
Occidental which upheld the orders of the Secretary of Agriculture and
Natural Resources and the Office of the President regarding the disposition
of swamplands for conversion into fishponds. Originally taken to the Court
of Appeals, the case was elevated to this Court on a finding that only a
pure question of law was involved in the appeal.
There is no dispute over the facts. The Court of Appeals adopted the
statement of facts in the Solicitor-General's brief. We do the same:
The subject matter of the case at bar are the same
mangrove swamps with an area of about 66 hectares, more
or less, situated in sitio Urbaso, barrio Mabini, municipality
of Escalante, province of the Negros Occidental. In view of
the potentialities and possibilities of said area for fishpond
purposes, several persons filed their applications with the
Bureau of Fisheries, to utilize the same for said purposes.
The first applicant was Teofila Longno de Ligasan who filed
her application on January 14, 1946, followed by Custodio
Doromal who filed his on October 28, 1947. Both
applications were rejected, however, because said area
were then still considered as communal forest and
therefore not yet available for fishpond purposes.
On March 19, 1952, petitioner-appellant Serafin B. Yngson
filed a similar application for fishpond permit with the
Bureau of Fisheries followed by those of the respondents-
appellees, Anita de Gonzales and Jose M. Lopez, who filed
their respective applications with the same bureau on
March 19 and April 24, 1953. When the applications were
filed by the aforesaid parties in the instant case, said area
was not yet available for fishpond purposes and the same
was only released for said purpose on January 14, 1954.
The conflicting claims of the aforesaid parties were brought
to the attention of the Director of the Bureau of Fisheries
who issued an order on April 10, 1954 awarding the whole
area in favor of the petitioner-appellant and rejecting the
claims of the respondents-appellees (pp. 1-3, Rec. on
Appeal). Appellants Anita V. de Gonzales and Jose M.
Lopez appealed the order of the Director of Fisheries to the
Department of Agriculture and Natural Resources where
 their appeals were docketed as D.A.N.R. Cases Nos. 901
and 901-A (p. 3, Rec. on Appeal).
In an order dated April 5, 1955, the Honorable Secretary of
the Department of Agriculture and Natural Resources set
aside the order of the Director of the Bureau of Fisheries
and caused the division of the area in question into three
portions giving each party an area of one-third (1/3) of the
whole area covered by their respective applications (pp. 4-
5, Rec. on Appeal). Appellant filed a petition for review
dated July 6, 1955 from the aforesaid order of the
Department of Agriculture and Natural Resources but the
same was dismissed by the Office of the President of the
Philippines on December 20, 1955 (pp. 5-8, Rec. on
Appeal). A motion for reconsideration filed by the appellant
on February 15, 1956 was likewise denied on August 3,
1956. A second and third motion for reconsiderations filed
by the appellant was also denied on August 5, 1958 and
October 26, 1960, respectively (p. 18, Rec. on Appeal).
Not satisfied with one-third of the 66 hectares, Mr. Yngson filed a petition
for certiorari with the Court of First Instance against the Executive
Secretary, Office of the President, the Secretary of Agriculture and Natural
Resources, Anita V. Gonzales, and Jose M. Lopez.
The petitioner-appellant asked that the orders of the public respondents be
declared null and void and that the order of the Director of Fisheries
awarding the entire area to him be reinstated.
The Court of First Instance of Negros Occidental dismissed the petition on
the ground that plaintiff had not established such "capricious and whimsical
exercise of judgment" on the part of the Department of Agriculture and
Natural Resources and the Office of the President of the Philippines as to
constitute grave abuse of discretion justifying review by the courts in a
special civil action.
The plaintiff-appellant made the following assignments of errors:
I
PROPERTY 1ST BATCH
THE LOWER COURT ERRED IN HOLDING THAT THE PLAINTIFF HAS
NOT ESTABLISHED SUCH 'CAPRICIOUS AND WHIMSICAL EXERCISE
OF JUDGMENT ON THE PART OF THE DEFENDANTS- APPELLEES
DEPARTMENT OF AGRICULTURE AND NATURAL RESOURCES AND
THE OFFICE OF THE PRESIDENT OF THE PHILIPPINES AS TO
CONSTITUTE GRAVE ABUSE OF DISCRETION, JUSTIFYING REVIEW
THEREOF IN A SPECIAL CIVIL ACTION BY THE COURT.
II
THE LOWER COURT ERRED IN SUSTAINING THE RULE OF THE
DEFENDANTS-APPELLEES ADMINISTRATIVE OFFICES IN EFFECT
ITSELF HOLDING THAT THE 'PRIORITY RULE' ESTABLISHED IN
PARAGRAPHS (a) AND (d), SECTION 14, FISHERY ADMINISTRATIVE
ORDER NO. 14 IS NOT APPLICABLE TO FISHPOND APPLICATIONS
FILED PRIOR TO THE CERTIFICATION OF THE BUREAU OF
FORESTRY THAT THE AREA APPLIED FOR IS AVAILABLE FOR
FISHPOND PURPOSES; IN TREATING THE APPLICATIONS OF THE
APPELLANT AND THAT OF THE APPELLEES LOPEZ AND GONZALES
ON EQUAL FOOTING ONLY AND IN ORDERING THE DIVISION OF THE
AREA INVOLVED IN THESE APPLICATIONS INTO THREE EQUAL
PARTS AWARDING ONE-THIRD SHARE EACH TO THESE
APPLICANTS.
III
THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT.
Did the administrative agencies having jurisdiction over leases of public
lands for development into fishponds gravely abuse their discretion in
interpreting and applying their own rules? This is the only issue in this
case.
The pertinent provisions of Fisheries Administrative Order No. 14 read:
SEC. 14. Priority Right of Application-In determining the
priority of application or right to a permit or lease the
following rules shall be observed:
 (a) When two or more applications are filed for the same
area, which is unoccupied and unimproved, the first
applicant shall have the right of preference thereto.
xxx xxx xxx
(d) A holder of fishpond application which has been
rejected or cancelled by the Director of Fisheries by reason
of the fact that the area covered thereby has been certified
by the Director of Forestry as not available for fishpond
purposes, SHALL NOT LOSE his right as a PRIOR
APPLICANT therefore, if LATER ON, the area applied for is
certified by the Director of Forestry as available for
fishpond purposes, provided that not more than one (1)
year has expired since the rejection or cancellation of his
application, in which case, his fishpond application which
was rejected or cancelled before, shall be reinstated and
given due course, and all other fishpond applications filed
for the same area shall be rejected.
The five applicants for the 66 hectares of swampland filed their
applications on the following dates:
1. Teofila L. de Ligasan January 14, 1946.
2. Custodio Doromal October 28, 1947
3. Serafin B. Yngson March 19, 1952
4. Anita V. Gonzales March 19, 1953
5. Jose M. Lopez April 24, 1953
The mangrove swampland was released and made available for fishpond
purposes only on January 14, 1954. It is clear, therefore, that all five
applications were filed prematurely. There was no land available for lease
permits and cnversion into fishponds at the time all five applicants filed
their applications.
PROPERTY 1ST BATCH
After the area was opened for development, the Director of Fisheries
inexplicably gave due course to Yngzon's application and rejected those of
Anita V. Gonzales and Jose M. Lopez. The reason given was Yngzon's
priority of application.
We see no error in the decision of the lower court. The administrative
authorities committed no grave abuse of discretion.
It is elementary in the law governing the disposition of lands of the public
domain that until timber or forest lands are released as disposable and
alienable neither the Bureau of Lands nor the Bureau of Fisheries has
authority to lease, grant, sell, or otherwise dispose of these lands for
homesteads, sales patents, leases for grazing or other purposes, fishpond
leases, and other modes of utilization. (Mapa v. Insular Government, 10
Phil. 175; Ankron v. Government of the Philippine Islands, 40 Phil. 10; Vda.
de Alfafara v. Mapa, 95 Phil. 125; Director of Forestry v. Muoz, 23 SCRA
1184).
The Bureau of Fisheries has no jurisdiction to administer and dispose of
swamplands or mangrove lands forming part of the public domain while
such lands are still classified as forest land or timberland and not released
for fishery or other purposes.
All the applications being premature, not one of the applicants can claim to
have a preferential right over another. The priority given in paragraph "d" of
Section 14 is only for those applications filed so close in time to the actual
opening of the swampland for disposition and utilization, within a period of
one year, as to be given some kind of administrative preferential treatment.
Whether or not the administrative agencies could validly issue such an
administrative order is not challenged in this case. The validity of
paragraph "d" is not in issue because petitioner-appellant Yngson is clearly
not covered by the provision. His application was filed almost two years
before the release of the area for fishpond purposes. The private
respondents, who filed their applications within the one-year period, do not
object to sharing the area with the petitioner-appellant, in spite of the fact
that the latter has apparently the least right to the fishpond leases. As a
matter of fact, the respondent Secretary's order states that all three
applications must be considered as having been filed at the same time on
the day the area was released to the Bureau of Fisheries and to share the
lease of the 66 hectares among the three of them equally. The private
respondents accept this order. They pray that the decision of the lower
court be affirmed in toto.
The Office of the President holds the view that the only purpose of the
provision in question is to redeem a rejected premature application and to
consider it filed as of the date the area was released and not to grant a
premature application a better right over another of the same category. We
find such an interpretation as an exercise of sound discretion which should
not be disturbed. In the case of Salaria v. Buenviaje (81 SCRA 722) we
reiterated the rule that the construction of the officer charged with
implementing and enforcing the provision of a statute should be given
controlling weight. Similarly, in Pastor v. Echavez (79 SCRA 220) we held
that in the absence of a clear showing of abuse, the discretion of the
appropriate department head must be respected. The records show that
the above rulings should also apply to the present case.
During the pendency of this petition, petitioner Yngson filed a motion to
have Patricio Bayoborda, Rene Amamio, and nine other respondents,
declared in contempt of court. Petitioner charged that Bayoborda and
Amamio entered the property in controversy and without petitioner's
consent, laid stakes on the ground alleging that the same were boundaries
of the areas they were claiming; that the other respondents likewise
entered the property on different dates and destroyed petitioner's hut and
the uppermost part of his fishpond and started to build houses and to
occupy the same. In their comment, the respondents in the contempt
motion denied petitioner's charges. Bayoborda and Amamio stated that
they were bona-fide applicants for fishpond purposes of areas outside the
22 hectares alloted for the petitioner and that they were authorized to place
placards in the areas they applied for. As evidence the respondents
attached a copy of the resolution of the Presidential Action Committee on
Land Problems (PACLAP) showing that their applications have been duly
received and acknowledged by the latter and in compliance with
government regulations, they placed markers and signs in their respective
boundaries. The resolution likewise stated that these markers and signs
were subsequently destroyed and later on Mr. Yngson started
development by building dikes in the area applied for, which he has no
authority to do so due to the present conflict. The resolution further
prohibited Yngson from constructing any improvements in any area outside
his 22 hectares and also prohibited Bayoborda and Amamio from entering
and making constructions in the applied for areas pending the issuance of
their permits.
PROPERTY 1ST BATCH
The petitioner has failed to show that the acts committed by the
respondents were a direct disturbance in the proper administration of
justice and processes of the law which constitutes contempt of court. If
there were any violations of petitioner's rights, he should resort to PACLAP
which issued the resolution between him and respondents or file, as he
alleged he did, a criminal complaint or other action before the courts. The
motion also raises factual considerations including boundaries and
geographical locations more proper for a trial court.
We have held that contempt of court presupposes contumacious and
arrogant defiance of the court. (De Midgely v. Ferandos, 64 SCRA 23;
Matutina v. Judge Buslon, 109 Phil. 140,142)
The petitioner has failed to show a contempt of court which we can take
cognizance of and punish. If any of his property or other rights over his
one-third's share of the disputed property are violated, he can pursue the
correct action before the proper lower court.
WHEREFORE, the judgment appealed from is hereby AFFIRMED. The
motion for contempt is also DENIED for lack of merit. Costs against
petitioner-appellant.
SO ORDERED.
G.R. No. 168661 October 26, 2007
ESTATE OF THE LATE JESUS S. YUJUICO, represented by
ADMINISTRATORS BENEDICTO V. YUJUICO and EDILBERTO V.
YUJUICO; and AUGUSTO Y. CARPIO, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES and the COURT OF
APPEALS, Respondents.
DECISION
VELASCO, JR., J.:
In 1973, Fermina Castro filed an application for the registration and
confirmation of her title over a parcel of land with an area of 17,343 square
meters covered by plan (LRC) Psu-964 located in the Municipality of
Paraaque, Province of Rizal (now Paraaque City), in the Pasig-Rizal
Court of First Instance (CFI), Branch 22. The application was docketed
LRC Case No. N-8239. The application was opposed by the Office of the
Solicitor General (OSG) on behalf of the Director of Lands, and by
Mercedes Dizon, a private party. Both oppositions were stricken from the
records since the opposition of Dizon was filed after the expiration of the
period given by the court, and the opposition of the Director of Lands was
filed after the entry of the order of general default. After considering the
evidence, the trial court rendered its April 26, 1974 Decision. The
dispositive portion reads:
____________________________
* As per September 3, 2007 raffle.
WHEREFORE, the Court hereby declares the applicant, Fermina Castro,
of legal age, single, Filipino and a resident of 1515 F. Agoncillo St., Corner
J. Escoda St., Ermita, Manila, the true and absolute owner of the land
applied for situated in the Municipality of Paraaque, Province of Rizal,
with an area of 17,343 square meters and covered by plan (LRC) Psu-964
and orders the registration of said parcel of land in her name with her
aforementioned personal circumstances.
Once this decision becomes final and executory, let the corresponding
order for the issuance of the decree be issued.
SO ORDERED.1
The Director of Lands and Mercedes Dizon did not appeal from the
adverse decision of the Pasig-Rizal CFI. Thus, the order for the issuance
of a decree of registration became final, and Decree No. N-150912 was
issued by the Land Registration Commission (LRC).2 Original Certificate of
Title (OCT) No. 10215 was issued in the name of Fermina Castro by the
Register of Deeds for the Province of Rizal on May 29, 1974.3
The land was then sold to Jesus S. Yujuico, and OCT No. 10215 was
cancelled. On May 31, 1974,4 Transfer Certificate of Title (TCT) No.
445863 was issued in Yujuicos name, who subdivided the land into two
lots. TCT No. 4463865 over Lot 1 was issued in his name, while TCT No.
S-293616 over Lot 2 was issued in the name of petitioner Augusto Y.
Carpio.
PROPERTY 1ST BATCH
Annotations at the back of TCT No. 446386 show that Yujuico had, at one
time or another, mortgaged the lot to the Philippine Investments System
Organization (PISO) and Citibank, N.A. Annotations in the title of petitioner
Carpio reveal the lot was mortgaged in favor of Private Development
Corporation (PDC), Rizal Commercial Banking Corporation (RCBC) and
then Philippine Commercial and Industrial Bank (PCIB) and the
Development Bank of the Philippines (DBP) to secure various loans.
Sometime in 1977, Presidential Decree No. (PD) 1085 entitled Conveying
the Land Reclaimed in the Foreshore and Offshore of the Manila Bay (The
Manila-Cavite Coastal Road Project) as Property of the Public Estates
Authority as well as Rights and Interests with Assumptions of Obligations
in the Reclamation Contract Covering Areas of the Manila Bay between the
Republic of the Philippines and the Construction and Development
Corporation of the Philippines (1977) was issued. Land reclaimed in the
foreshore and offshore areas of Manila Bay became the properties of the
Public Estates Authority (PEA), a government corporation that undertook
the reclamation of lands or the acquisition of reclaimed lands. On January
13, 1989, OCT No. SP 02 was issued in favor of PEA. The PEA also
acquired ownership of other parcels of land along the Manila Bay coast,
some of which were subsequently sold to the Manila Bay Development
Corporation (MBDC), which in turn leased portions to Uniwide Holdings,
Inc.7
The PEA undertook the construction of the Manila Coastal Road. As this
was being planned, Yujuico and Carpio discovered that a verification
survey they commissioned showed that the road directly overlapped their
property, and that they owned a portion of the land sold by the PEA to the
MBDC.
On July 24, 1996, Yujuico and Carpio filed before the Paraaque City
Regional Trial Court (RTC), a complaint for the Removal of Cloud and
Annulment of Title with Damages docketed as Civil Case No. 96-0317
against the PEA. On May 15, 1998 the parties entered into a compromise
agreement approved by the trial court in a Resolution dated May 18, 1998.
On June 17, 1998, the parties executed a Deed of Exchange of Real
Property, pursuant to the compromise agreement, where the PEA property
with an area of 1.4007 hectares would be conveyed to Jesus Yujuico and
petitioner Carpio in exchange for their property with a combined area of
1.7343 hectares.
On July 31, 1998, the incumbent PEA General Manager, Carlos P. Doble,
informed the OSG that the new PEA board and management had reviewed
the compromise agreement and had decided to defer its implementation
and hold it in abeyance following the view of the former PEA General
Manager, Atty. Arsenio Yulo, Jr., that the compromise agreement did not
reflect a condition of the previous PEA Board, requiring the approval of the
Office of the President. The new PEA management then filed a petition for
relief from the resolution approving the compromise agreement on the
ground of mistake and excusable negligence.
The petition was dismissed by the trial court on the ground that it was filed
out of time and that the allegation of mistake and excusable negligence
lacked basis.
The PEA fared no better in the Court of Appeals (CA), as the petition was
dismissed for failure to pay the required docket fees and for lack of merit.
The matter was raised to the Supreme Court in Public Estates Authority v.
Yujuico8 but PEAs petition was denied, upholding the trial courts dismissal
of the petition for relief for having been filed out of time. The allegation of
fraud in the titling of the subject property in the name of Fermina Castro
was not taken up by the Court.
On June 8, 2001, in a Complaint for Annulment and Cancellation of Decree
No. N-150912 and its Derivative Titles, entitled Republic of the Philippines
v. Fermina Castro, Jesus S. Yujuico, August Y. Carpio and the Registry of
Deeds of Paraaque City docketed as Civil Case No. 01-0222, filed with
the Paraaque City RTC, respondent Republic of the Philippines, through
the OSG, alleged that when the land registered to Castro was surveyed by
Engr. H. Obreto on August 3, 1972 and subsequently approved by the LRC
on April 23, 1973, the land was still a portion of Manila Bay as evidenced
by Namria Hydrographic Map No. 4243, Surveys to 1980; 1st Ed/. January
9/61: Revised 80-11-2; that Roman Mataverde, the then OIC of the
Surveys Division, Bureau of Lands, informed the OIC of the Legal Division
that "[w]hen projected on Cadastral Maps CM 14 deg. 13 N-120 deg, 59E,
Sec.2-A of Paraaque Cadastre (Cad. 299), (LRC) Psu-964 falls inside
Manila Bay, outside Cad. 299"; that then Acting Regional Lands Director
Narciso V. Villapando issued a Report dated November 15, 1973 stating
that plan (LRC) Psu-964 is a portion of Manila Bay; that then Officer-in-
Charge, Assistant Director of Lands, Ernesto C. Mendiola, submitted his
Comment and Recommendation re: Application for Registration of Title of
PROPERTY 1ST BATCH
FERMINA CASTRO, LRC Case No. N-8239, dated Dec. 1, 1977, praying
that the instant registration case be dismissed; and that Fermina Castro
had no registrable rights over the property.
More significantly, respondent Republic argued that, first, since the subject
land was still underwater, it could not be registered in the name of Fermina
Castro. Second, the land registration court did not have jurisdiction to
adjudicate inalienable lands, thus the decision adjudicating the subject
parcel of land to Fermina Castro was void. And third, the titles of Yujuico
and Carpio, being derived from a void title, were likewise void.9
On September 13, 2001, Yujuico and Carpio filed a Motion to Dismiss
(With Cancellation of Notice of Lis Pendens),10 on the grounds that: (1) the
cause of action was barred by prior judgment; (2) the claim had been
waived, abandoned, or otherwise extinguished; (3) a condition precedent
for the filing of the complaint was not complied with; and (4) the complaint
was not verified and the certification against forum shopping was not duly
executed by the plaintiff or principal party.
On November 27, 2001, respondent Republic filed an Opposition11 to the
motion to dismiss to which defendants filed a Reply12 on January 14, 2002,
reiterating the grounds for the motion to dismiss.
In the August 7, 2002 Order of the RTC,13 Civil Case No. 01-0222 was
dismissed. The trial court stated that the matter had already been decided
in LRC Case No. N-8239, and that after 28 years without being contested,
the case had already become final and executory. The trial court also
1wphi1
found that the OSG had participated in the LRC case, and could have
questioned the validity of the decision but did not. Civil Case No. 01-0222
was thus found barred by prior judgment.
On appeal to the CA, in CA-G.R. CV No. 76212, respondent Republic
alleged that the trial court erred in disregarding that appellant had evidence
to prove that the subject parcel of land used to be foreshore land of the
Manila Bay and that the trial court erred in dismissing Civil Case No. 01-
0222 on the ground of res judicata.14
The CA observed that shores are properties of the public domain intended
for public use and, therefore, not registrable and their inclusion in a
certificate of title does not convert the same into properties of private
ownership or confer title upon the registrant.
Further, according to the appellate court res judicata does not apply to
lands of public domain, nor does possession of the land automatically
divest the land of its public character.
The appellate court explained that rulings of the Supreme Court have
made exceptions in cases where the findings of the Director of Lands and
the Department of Environment and Natural Resources (DENR) were
conflicting as to the true nature of the land in as much as reversion efforts
pertaining foreshore lands are embued with public interest.
The dispositive portion of the CA decision reads,
WHEREFORE, premises considered, the present appeal is hereby
GRANTED. The appealed Order dated August 7, 2002 of the trial court in
Civil Case No. 01-0222 is hereby REVERSED and SET ASIDE. The case
is hereby REMANDED to said court for further proceedings and a full-
blown trial on the merits with utmost dispatch.15
Hence, this petition.
The Issues
Petitioners now raise the following issues before this Court:
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND
DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF THE
HONORABLE COURT AND HAS DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS NECESSITATING
THE HONORABLE COURTS EXERCISE OF ITS POWER OF
SUPERVISION CONSIDERING THAT:
I. THE REVERSAL BY THE COURT OF APPEALS OF THE TRIAL
COURTS APPLICATION OF THE PRINCIPLE OF RES JUDICATA IN
THE INSTANT CASE IS BASED ON ITS ERRONEOUS ASSUMPTION
THAT THE SUBJECT LAND IS OF PUBLIC DOMAIN, ALLEGEDLY PART
OF MANILA BAY.
A. IN THE FIRESTONE CASE, THE HONORABLE
COURT APPLIED THE PRINCIPLE OF RES JUDICATA
NOTWITHSTANDING ALLEGATIONS OF LACK OF
PROPERTY 1ST BATCH
JURISDICTION OF A LAND REGISTRATION COURT,
FORECLOSING ANY FURTHER ATTEMPT BY
RESPONDENT THEREIN, AS IN THE INSTANT CASE,
TO RESURRECT A LONG-SETTLED JUDICIAL
DETERMINATION OF REGISTRABILITY OF A PARCEL
OF LAND BASED ON THE SHEER ALLEGATION THAT
THE SAME IS PART OF THE PUBLIC DOMAIN.
B. THE LAND REGISTRATION COURT HAD
JURISDICTION TO DETERMINE WHETHER THE
SUBJECT LAND WAS PART OF THE PUBLIC DOMAIN.
C. RESPONDENTS REVERSION CASE SEEKS TO
RETRY THE VERY SAME FACTUAL ISSUES THAT
HAVE ALREADY BEEN JUDICIALLY DETERMINED
OVER THIRTY (30) YEARS AGO.
D. THE JURISPRUDENTIAL BASES APPLIED BY THE
COURT OF APPEALS IN ITS QUESTIONED DECISION
ARE MISPLACED, CONSIDERING THAT THEY ARE ALL
PREDICATED ON THE ERRONEOUS PREMISE THAT IT
IS UNDISPUTED THAT THE SUBJECT LAND IS PART
OF THE PUBLIC DOMAIN.
II. RESPONDENT IS BARRED BY JURISDICTIONAL ESTOPPEL AND
LACHES FROM QUESTIONING THE JURISDICTION OF THE LAND
REGISTRATION COURT.
III. RELIANCE BY THE COURT OF APPEALS ON THE ISOLATED
PRONOUNCEMENT OF THE HONORABLE COURT IN THE PEA CASE
IS UNWARRANTED AND MISLEADING CONSIDERING THAT THE
MATTER OF WHETHER RES JUDICATA APPLIES WITH RESPECT TO
THE LAND REGISTRATION COURTS DECISION IN 1974 WAS NOT IN
ISSUE IN SAID CASE.
A. THE INSTANT REVERSION CASE IS NOT THE
PROPER RECOURSE.
B. THE VALIDITY OF THE COURT-APPROVED
COMPROMISE AGREEMENT 15 MAY 1998 HAS
 ALREADY BEEN AFFIRMED BY THE HONORABLE
COURT IN THE PEA CASE.
IV. EQUITABLE CONSIDERATIONS MANDATE THE APPLICATION OF
THE RULE ON ORDINARY ESTOPPEL AND LACHES IN THE INSTANT
CASE AGAINST RESPONDENT.
V. RESPONDENT CANNOT BE GIVEN SPECIAL CONSIDERATION AND
EXCUSED FOR TRANSGRESSING RULES OF PROCEDURE.16
Essentially, the issues boil down to three: (1) Is a reversion suit proper in
this case? (2) Is the present petition estopped by laches? (3) Did the CA
erroneously apply the principle of res judicata?
An action for reversion seeks to restore public land fraudulently awarded
and disposed of to private individuals or corporations to the mass of public
domain.17 This remedy is provided under Commonwealth Act (CA) No. 141
(Public Land Act) which became effective on December 1, 1936. Said law
recognized the power of the state to recover lands of public domain.
Section 124 of CA No. 141 reads:
SEC. 124. Any acquisition, conveyance, alienation, transfer, or other
contract made or executed in violation of any of the provisions of Sections
one hundred and eighteen, one hundred and twenty, one hundred and
twenty one, one hundred and twenty-two, and one hundred twenty-three of
this Act shall be unlawful and null and void from its execution and shall
produce the effect of annulling and cancelling the grant, title, patent, or
permit originally issued, recognized or confirmed, actually or
presumptively, and cause the reversion of the property and its
improvements to the State. (Emphasis supplied.)
Pursuant to Section 124 of the Public Land Act, reversion suits are proper
in the following instances, to wit:
1. Alienations of land acquired under free patent or homestead
provisions in violation of Section 118, CA No. 141;
2. Conveyances made by non-Christians in violation of Section
120, CA No. 141; and
PROPERTY 1ST BATCH
3. Alienations of lands acquired under CA No. 141 in favor of
persons not qualified under Sections 121, 122, and 123 of CA No.
141.
From the foregoing, an action for reversion to cancel titles derived from
homestead patents or free patents based on transfers and conveyances in
violation of CA No. 141 is filed by the OSG pursuant to its authority under
the Administrative Code with the RTC. It is clear therefore that reversion
suits were originally utilized to annul titles or patents administratively
issued by the Director of the Land Management Bureau or the Secretary of
the DENR.
While CA No. 141 did not specify whether judicial confirmation of titles by a
land registration court can be subject of a reversion suit, the government
availed of such remedy by filing actions with the RTC to cancel titles and
decrees granted in land registration applications.
The situation changed on August 14, 1981 upon effectivity of Batas
Pambansa (BP) Blg. 129 which gave the Intermediate Appellate Court the
exclusive original jurisdiction over actions for annulment of judgments of
RTCs.
When the 1997 Rules of Civil Procedure became effective on July 1, 1997,
it incorporated Rule 47 on annulment of judgments or final orders and
resolutions of the RTCs. The two grounds for annulment under Sec. 2,
Rule 47 are extrinsic fraud and lack of jurisdiction. If based on extrinsic
fraud, the action must be filed within four (4) years from its discovery, and if
based on lack of jurisdiction, before it is barred by laches or estoppel as
provided by Section 3, Rule 47. Thus, effective July 1, 1997, any action for
reversion of public land instituted by the Government was already covered
by Rule 47.
The instant Civil Case No. 01-0222 for annulment and cancellation of
Decree No. N-150912 and its derivative titles was filed on June 8, 2001
with the Paraaque City RTC. It is clear therefore that the reversion suit
was erroneously instituted in the Paraaque RTC and should have been
dismissed for lack of jurisdiction. The proper court is the CA which is the
body mandated by BP Blg. 129 and prescribed by Rule 47 to handle
annulment of judgments of RTCs.
In Collado v. Court of Appeals,18 the government, represented by the
Solicitor General pursuant to Section 9(2) of BP Blg. 129, filed a petition for
annulment of judgment with the CA. Similarly in the case of Republic v.
Court of Appeals,19 the Solicitor General correctly filed the annulment of
judgment with the said appellate court.
This was not done in this case. The Republic misfiled the reversion suit
with the Paraaque RTC. It should have been filed with the CA as required
by Rule 47. Evidently, the Paraaque RTC had no jurisdiction over the
instant reversion case.
Assuming that the Paraaque RTC has jurisdiction over the reversion
case, still the lapse of almost three decades in filing the instant case, the
inexplicable lack of action of the Republic and the injury this would cause
constrain us to rule for petitioners. While it may be true that estoppel does
not operate against the state or its agents,20 deviations have been allowed.
In Manila Lodge No. 761 v. Court of Appeals, we said:
Estoppels against the public are little favored. They should not be invoked
except in rare and unusual circumstances, and may not be invoked where
they would operate to defeat the effective operation of a policy adopted to
protect the public. They must be applied with circumspection and should
be applied only in those special cases where the interests of justice clearly
require it. Nevertheless, the government must not be allowed to deal
dishonorably or capriciously with its citizens, and must not play an ignoble
part or do a shabby thing; and subject to limitations x x x, the doctrine of
equitable estoppel may be invoked against public authorities as well as
against private individuals.21 (Emphasis supplied.)
Equitable estoppel may be invoked against public authorities when as in
this case, the lot was already alienated to innocent buyers for value and
the government did not undertake any act to contest the title for an
unreasonable length of time.
In Republic v. Court of Appeals, where the title of an innocent purchaser
for value who relied on the clean certificates of the title was sought to be
cancelled and the excess land to be reverted to the Government, we ruled
that "[i]t is only fair and reasonable to apply the equitable principle of
estoppel by laches against the government to avoid an injustice to innocent
purchasers for value (emphasis supplied)."22 We explained:
PROPERTY 1ST BATCH
Likewise time-settled is the doctrine that where innocent third persons,
relying on the correctness of the certificate of title, acquire rights over the
property, courts cannot disregard such rights and order the cancellation of
the certificate. Such cancellation would impair public confidence in the
certificate of title, for everyone dealing with property registered under the
Torrens system would have to inquire in every instance whether the title
has been regularly issued or not. This would be contrary to the very
purpose of the law, which is to stabilize land titles. Verily, all persons
dealing with registered land may safely rely on the correctness of the
certificate of title issued therefore, and the law or the courts do not oblige
them to go behind the certificate in order to investigate again the true
condition of the property. They are only charged with notice of the liens
and encumbrances on the property that are noted on the certificate.23
xxxx
But in the interest of justice and equity, neither may the titleholder be made
to bear the unfavorable effect of the mistake or negligence of the States
agents, in the absence of proof of his complicity in a fraud or of manifest
damage to third persons. First, the real purpose of the Torrens system is to
quiet title to land to put a stop forever to any question as to the legality of
the title, except claims that were noted in the certificate at the time of the
registration or that may arise subsequent thereto. Second, as we
discussed earlier, estoppel by laches now bars petitioner from questioning
private respondents titles to the subdivision lots. Third, it was never proven
that Private Respondent St. Jude was a party to the fraud that led to the
increase in the area of the property after its subdivision. Finally, because
petitioner even failed to give sufficient proof of any error that might have
been committed by its agents who had surveyed the property, the
presumption of regularity in the performance of their functions must be
respected. Otherwise, the integrity of the Torrens system, which petitioner
purportedly aims to protect by filing this case, shall forever be sullied by the
ineptitude and inefficiency of land registration officials, who are ordinarily
presumed to have regularly performed their duties.24
Republic v. Court of Appeals is reinforced by our ruling in Republic v.
Umali,25 where, in a reversion case, we held that even if the original
grantee of a patent and title has obtained the same through fraud,
reversion will no longer prosper as the land had become private land and
the fraudulent acquisition cannot affect the titles of innocent purchasers for
value.
Considering that innocent purchaser for value Yujuico bought the lot in
1974, and more than 27 years had elapsed before the action for reversion
was filed, then said action is now barred by laches.
While the general rule is that an action to recover lands of public domain is
imprescriptible, said right can be barred by laches or estoppel. Section 32
of PD 1592 recognized the rights of an innocent purchaser for value over
and above the interests of the government. Section 32 provides:
SEC. 32. Review of decree of registration; Innocent purchaser for value.
The decree of registration shall not be reopened or revised by reason of
absence, minority, or other disability of any person adversely affected
thereby, nor by any proceeding in any court for reversing judgments,
subject, however, to the right of any person, including the government and
the branches thereof, deprived of land or of any estate or interest therein
by such adjudication or confirmation of title obtained by actual fraud, to file
in the proper Court of First Instance a petition for reopening and review of
the decree of registration not later than one year from and after the date of
the entry of such decree of registration, but in no case shall such petition
be entertained by the court where an innocent purchaser for value has
acquired the land or an interest therein, whose rights may be prejudiced.
Whenever the phrase "innocent purchaser for value" or an equivalent
phrase occurs in this Decree, it shall be deemed to include an innocent
lessee, mortgagee, or other encumbrances for value. (Emphasis supplied.)
In this petition, the LRC (now LRA), on May 30, 1974, issued Decree No.
N-150912 in favor of Fermina Castro and OCT No. 10215 was issued by
the Rizal Registrar of Deeds on May 29, 1974. OCT No. 10215 does not
show any annotation, lien, or encumbrance on its face. Relying on the
clean title, Yujuico bought the same in good faith and for value from her.
He was issued TCT No. 445863 on May 31, 1974. There is no allegation
that Yujuico was a buyer in bad faith, nor did he acquire the land
fraudulently. He thus had the protection of the Torrens System that every
subsequent purchaser of registered land taking a certificate of title for
value and in good faith shall hold the same free from all encumbrances
except those noted on the certificate and any of the x x x encumbrances
which may be subsisting.26 The same legal shield redounds to his
successors-in-interest, the Yujuicos and Carpio, more particularly the latter
since Carpio bought the lot from Jesus Y. Yujuico for value and in good
faith.
PROPERTY 1ST BATCH
Likewise protected are the rights of innocent mortgagees for value, the
PISO, Citibank, N.A., PDC, RCBC, PCIB, and DBP. Even if the
mortgagors title was proved fraudulent and the title declared null and void,
such declaration cannot nullify the mortgage rights of a mortgagee in good
faith.27
All told, a reversion suit will no longer be allowed at this stage.
More on the issue of laches. Laches is the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by
exercising due diligence could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled thereto has either
abandoned or declined to assert it.28
When respondent government filed the reversion case in 2001, 27 years
had already elapsed from the time the late Jesus Yujuico purchased the
land from the original owner Castro. After the issuance of OCT No. 10215
to Castro, no further action was taken by the government to question the
issuance of the title to Castro until the case of Public Estates Authority,
brought up in the oral argument before this Court on September 6,
2000.29 We then held that allegation of fraud in the issuance of the title was
not proper for consideration and determination at that stage of the case.
From the undisputed facts of the case, it is easily revealed that respondent
Republic took its sweet time to nullify Castros title, notwithstanding the
easy access to ample remedies which were readily available after OCT No.
10215 was registered in the name of Castro. First, it could have appealed
to the CA when the Pasig-Rizal CFI rendered a decision ordering the
registration of title in the name of applicant Castro on April 26, 1974. Had it
done so, it could have elevated the matter to this Court if the appellate
court affirms the decision of the land registration court. Second, when the
entry of Decree No. N-150912 was made on May 29, 1974 by the Rizal
Register of Deeds, the Republic had one (1) year from said date or up to
May 28, 1975 to file a petition for the reopening and review of Decree No.
N-150912 with the Rizal CFI (now RTC) on the ground of actual fraud
under section 32 of PD 1592. Again, respondent Republic did not avail of
such remedy. Third, when Jesus Yujuico filed a complaint for Removal of
Cloud and Annulment of Title with Damages against PEA before the
Paraaque RTC in Civil Case No. 96-0317, respondent could have
persevered to question and nullify Castros title. Instead, PEA undertook a
compromise agreement on which the May 18, 1998 Resolution30 was
issued. PEA in effect admitted that the disputed land was owned by the
predecessors-in-interest of petitioners and their title legal and valid; and
impliedly waived its right to contest the validity of said title; respondent
Republic even filed the petition for relief from judgment beyond the time
frames allowed by the rules, a fact even acknowledged by this Court in
Public Estates Authority. Lastly, respondent only filed the reversion suit on
June 8, 2001 after the passage of 27 years from the date the decree of
registration was issued to Fermina Castro.
Such a Rip Van Winkle, coupled with the signing of the settlement with
PEA, understandably misled petitioners to believe that the government no
longer had any right or interest in the disputed lot to the extent that the two
lots were even mortgaged to several banks including a government
financing institution. Any nullification of title at this stage would unsettle and
prejudice the rights and obligations of innocent parties. All told, we are
constrained to conclude that laches had set in.
Even granting arguendo that respondent Republic is not precluded by
laches from challenging the title of petitioners in the case at bar, still we
find that the instant action for reversion is already barred by res judicata.
Petitioners relying on Firestone Ceramics, Inc. v. Court of Appeals31 as a
precedent to the case at bar contend that the instant reversion suit is now
barred by res judicata.
We agree with petitioners.
The doctrine on precedents is expressed in the latin maximStare decisis
et non quieta movere. Follow past precedents and do not disturb what has
been settled.32 In order however that a case can be considered as a
precedent to another case which is pending consideration, the facts of the
first case should be similar or analogous to the second case.
A perusal of the facts of the Firestone case and those of the case at bar
reveals that the facts in the two (2) cases are parallel. First, in Firestone
and in this case, the claimants filed land registration applications with the
CFI; both claimants obtained decrees for registration of lots applied for and
were issued OCTs. Second, in Firestone, the Republic filed a reversion
case alleging that the land covered by the OCT was still inalienable forest
land at the time of the application and hence the Land Registration Court
PROPERTY 1ST BATCH
did not acquire jurisdiction to adjudicate the property to the claimant. In the
instant case, respondent Republic contend that the land applied for by
Yujuico was within Manila Bay at the time of application and therefore the
CFI had no jurisdiction over the subject matter of the complaint. Third, in
Firestone, the validity of the title of the claimant was favorably ruled upon
by this Court in G.R. No. 109490 entitled Patrocinio E. Margolles v. CA. In
the case at bar, the validity of the compromise agreement involving the
disputed lot was in effect upheld when this Court in Public Estates
Authority v. Yujuico dismissed the petition of PEA seeking to reinstate the
petition for relief from the May 18, 1998 Resolution approving said
compromise agreement. With the dismissal of the petition, the May 18,
1998 Resolution became final and executory and herein respondent
Republic through PEA was deemed to have recognized Castros title over
the disputed land as legal and valid. In Romero v. Tan,33 we ruled that "a
judicial compromise has the effect of res judicata." We also made clear
that a judgment based on a compromise agreement is a judgment on the
merits, wherein the parties have validly entered into stipulations and the
evidence was duly considered by the trial court that approved the
agreement. In the instant case, the May 18, 1998 Resolution approving the
compromise agreement confirmed the favorable decision directing the
registration of the lot to Castros name in LRC Case No. N-8239. Similarly,
in Firestone, the Margolles case confirmed the decision rendered in favor
of Gana in Land Registration Case No. 672 ordering the issuance of the
decree to said applicant. Fourth, in Firestone, the Supreme Court relied on
the letter of then Solicitor General Francisco Chavez that the evidence of
the Bureau of Lands and the LRC was not sufficient to support an action
for cancellation of OCT No. 4216. In the instant case, both the Solicitor
General and the Government Corporate Counsel opined that the Yujuico
land was not under water and that "there appears to be no sufficient basis
for the Government to institute the action for annulment." Fifth, in
Firestone, we ruled that "the Margolles case had long become final, thus
the validity of OCT No. 4216 should no longer be disturbed and should be
applied in the instant case (reversion suit) based on the principle of res
judicata or, otherwise, the rule on conclusiveness of judgment."34
Clearly from the above, Firestone is a precedent case. The Public Estates
Authority had become final and thus the validity of OCT No. 10215 issued
to Castro could no longer be questioned.
While we said in Public Estates Authority that the court does not foreclose
the right of the Republic from pursuing the proper recourse in a separate
proceedings as it may deem warranted, the statement was obiter dictum
since the inquiry on whether or not the disputed land was still under water
at the time of its registration was a non-issue in the said case.
Even granting for the sake of argument that Firestone is not squarely
applicable, still we find the reversion suit already barred by res judicata.
For res judicata to serve as an absolute bar to a subsequent action, the
following requisites must concur: (1) there must be a final judgment or
order; (2) the court rendering it must have jurisdiction over the subject
matter and the parties; (3) it must be a judgment or order on the merits;
and (4) there must be between the two cases, identity of parties, subject
matter and causes of action.35
There is no question as to the first, third and last requisites. The threshold
question pertains to the second requisite, whether or not the then Pasig-
Rizal CFI, Branch 22 had jurisdiction over the subject matter in LRC Case
No. N-8239. In Civil Case No. 01-0222, the Paraaque City RTC, Branch
257 held that the CFI had jurisdiction. The CA reversed the decision of the
Paraaque City RTC based on the assertion of respondent Republic that
the Pasig-Rizal CFI had no jurisdiction over the subject matter, and that
there was a need to determine the character of the land in question.
The Paraaque City RTC Order dismissing the case for res judicata must
be upheld.
The CA, in rejecting the dismissal of the reversion case by the Paraaque
RTC, relied on two cases, namely: Municipality of Antipolo v.
Zapanta36 and Republic v. Vda. De Castillo.37
In Municipality of Antipolo, we held that the land registration court had no
jurisdiction to entertain any land registration application if the land was
public property, thus:
Since the Land Registration Court had no jurisdiction to entertain the
application for registration of public property of ANTIPOLO, its Decision
adjudicating the DISPUTED PROPERTY as of private ownership is null
and void. It never attained finality, and can be attacked at any time. It was
not a bar to the action brought by ANTIPOLO for its annulment by reason
of res judicata.
PROPERTY 1ST BATCH
"[x x x] the want of jurisdiction by a court over the subject matter renders
the judgment void and a mere nullity, and considering that a void judgment
is in legal effect no judgment, by which no rights are divested, from which
no rights can be obtained, which neither binds nor bars any one, and under
which all acts performed and all claims flowing out of are void, and
considering, further, that the decision, for want of jurisdiction of the court, is
not a decision in contemplation of law, and hence, can never become
executory, it follows that such a void judgment cannot constitute a bar to
another case by reason of res judicata."
xxxx
"It follows that if a person obtains a title under the Public Land Act which
includes, by oversight, lands which cannot be registered under the Torrens
System, or when the Director of Lands did not have jurisdiction over the
same because it is a public forest, the grantee does not, by virtue of the
said certificate of title alone, become the owner of the land illegally
included (Republic vs. Animas, 56 SCRA 499, 503; Ledesma vs.
Municipality of Iloilo, 49 Phil. 769)."
[x x x x]
"Under these circumstances, the certificate of title may be ordered
cancelled (Republic vs. Animas, et al., supra), and the cancellation maybe
pursued through an ordinary action therefore. This action cannot be barred
by the prior judgment of the land registration court, since the said court had
no jurisdiction over the subject matter. And if there was no such
jurisdiction, then the principle of res judicata does not apply. [x x x]
Certainly, one of the essential requisites, i.e., jurisdiction over the subject
matter, is absent in this case." (Italics supplied).38
The plain import of Municipality of Antipolo is that a land registration court,
the RTC at present, has no jurisdiction over the subject matter of the
application which respondent Republic claims is public land. This ruling
needs elucidation.
Firmly entrenched is the principle that jurisdiction over the subject matter is
conferred by law.39 Consequently, the proper CFI (now the RTC) under
Section 14 of PD 152940 (Property Registration Decree) has jurisdiction
over applications for registration of title to land.
Section 14 of PD 1592 provides:
SEC. 14. Who may apply.The following persons may file in the proper
Court of First Instance an application for registration of title to land,
whether personally or through their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest
have 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 ownership since June 12, 1945, or earlier. (Emphasis
supplied.)
Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the
subject matter of the land registration case filed by Fermina Castro,
petitioners predecessor-in-interest, since jurisdiction over the subject
matter is determined by the allegations of the initiatory pleadingthe
application.41 Settled is the rule that "the authority to decide a case and not
the decision rendered therein is what makes up jurisdiction. When there is
jurisdiction, the decision of all questions arising in the case is but an
exercise of jurisdiction."42
In our view, it was imprecise to state in Municipality of Antipolo that the
"Land Registration Court [has] no jurisdiction to entertain the application for
registration of public property x x x" for such court precisely has the
jurisdiction to entertain land registration applications since that is conferred
by PD 1529. The applicant in a land registration case usually claims the
land subject matter of the application as his/her private property, as in the
case of the application of Castro. Thus, the conclusion of the CA that the
Pasig-Rizal CFI has no jurisdiction over the subject matter of the
application of Castro has no legal mooring. The land registration court
initially has jurisdiction over the land applied for at the time of the filing of
the application. After trial, the court, in the exercise of its jurisdiction, can
determine whether the title to the land applied for is registrable and can be
confirmed. In the event that the subject matter of the application turns out
to be inalienable public land, then it has no jurisdiction to order the
registration of the land and perforce must dismiss the application.
Based on our ruling in Antipolo, the threshold question is whether the land
covered by the titles of petitioners is under water and forms part of Manila
Bay at the time of the land registration application in 1974. If the land was
PROPERTY 1ST BATCH
within Manila Bay, then res judicata does not apply. Otherwise, the
decision of the land registration court is a bar to the instant reversion suit.
After a scrutiny of the case records and pleadings of the parties in LRC
Case No. N-8239 and in the instant petition, we rule that the land of
Fermina Castro is registrable and not part of Manila Bay at the time of the
filing of the land registration application.
The trial courts Decision in 1974 easily reveals the basis for its conclusion
that the subject matter was a dry land, thus:
On February 1, 1974, the applicant presented her evidence before the
Deputy Clerk of this Court and among the evidence presented by her were
certain documents which were marked as Exhibits D to J, inclusive. The
applicant testified in her behalf and substantially declared that: she was 62
years old, single, housekeeper and residing at 1550 J. Escoda, Ermita,
Manila; that she was born on June 3, 1911; that she first came to know of
the land applied for which is situated in the Municipality of Paraaque,
province of Rizal, with an area of 17,343 square meters and covered by
plan (LRC) Psu-964 while she was still ten (10) years old or sometime in
1921; that when she first came to know of the land applied for, the person
who was in possession and owner of said land was her father, Catalino
Castro; that during that time her father used to plant on said land various
crops like pechay, mustard, eggplant, etc.; that during that time, her father
built a house on said land which was used by her father and the other
members of the family, including the applicant, as their residential house;
that the land applied for was inherited by her father from her grandfather
Sergio Castro; that Catalino Castro continuously possessed and owned the
land in question from 1921 up to the time of his death in 1952; and that
during that period of time nobody ever disturbed the possession and
ownership of her father over the said parcel of land; that after the death of
her father in 1952 she left the place and transferred her place of residence
but she had also occasions to visit said land twice or thrice a week and
sometimes once a week; that after she left the land in question in 1952,
she still continued possessing said land, through her caretaker Eliseo
Salonga; that her possession over the land in question from the time she
inherited it up to the time of the filing of the application has been
continuous, public, adverse against the whole world and in the concept of
an owner; that it was never encumbered, mortgaged, or disposed of by her
father during his lifetime and neither did she ever encumber or sell the
same; that it was declared for taxation purposes by her father when he was
still alive and her father also paid the real estate taxes due to the
government although the receipt evidencing the payment of said real
estate taxes for the property applied for have been lost and could no longer
be found inspite of diligent effort exerted to locate the same.
The other witness presented by the applicant was Emiliano de Leon, who
declared that he was 70 years old, married, farmer and residing at San
Jose, Baliwag, Bulacan; that he knew Catalino Castro, the father of the
applicant because said Catalino Castro was his neighbor in Tambo,
Paraaque, Rizal, he had a house erected on the land of Catalino Castro;
that he was born in 1903 and he first came to know of the land in question
when in 1918 when he was about 18 years old; that the area of the land
owned and possessed by Catalino Castro where he constructed a
residential house has an area of more than one and one-half (1 )
hectares; that the possession of Catalino Castro over the land in question
was peaceful, continuous, notorious, adverse against the whole world and
in the concept of an owner; that during the time that Catalino Castro was in
possession of the land applied for he planted on said parcel of land mango,
coconut and banana, etc.; that Catalino Castro continuously possessed
and owned said parcel of land up to the year 1952 when he died; that
during the time that Catalino Castro was in possession of said land,
nobody ever laid claim over the said property; that said land is not within
any military or naval reservation; that upon the death of Catalino Castro,
the applicant took possession of the land applied for and that up to the
present the applicant is in possession of said land; that he resided in the
land in question from 1918 up to the time he transferred his place of
residence in Baliwag, Bulacan in the year 1958.
On February 11, 1974, the Court, pursuant to the provision of Presidential
Decree No. 230 issued by his Excellency, Ferdinand E. Marcos dated July
9, 1973 held in abeyance the rendition of a decision in this case and
directed the applicant to submit a white print copy of plan (LRC) Psu-964 to
the Director of lands who was directed by the Court to submit his comment
and recommendation thereon.
The property in question is declared for taxation purposes under Tax
Declaration No. 51842 (Exhibit G) and real estate taxes due thereon have
been paid up to the year 1973 (Exhibit H).
In compliance with the Order of this Court February 11, 1974, the Director
of Lands, thru Special Attorney Saturnino A. Pacubas, submitted a report
to this Court dated April 25, 1974, stating among other things, that upon
PROPERTY 1ST BATCH
ocular inspection conducted by Land Inspector Adelino G. Gorospe and
the subsequent joint ocular inspection conducted by Geodetic Engineer
Manuel A. Cervantes and Administrative Assistant Lazaro G. Berania, it
was established that the parcel of land covered by plan (LRC) Psu-964 no
longer forms part of the Manila Bay but is definitely solid and dry land.
In this connection, it should be noted that Administrative Assistant Lazaro
G. Berania and Geodetic Engineer Manuel A. Cervantes, in their report
dated March 22, 1974 have also stated that the land applied for cannot be
reached by water even in the highest tide and that the said land is
occupied by squatter families who have erected makeshift shanties and a
basketball court which only prove that the same is dry and solid land away
from the shores of Manila Bay.
Furthermore, Land Inspector Adelino G. Gorospe in his letter-report dated
November 28, 1973 has also stated that there is a house of pre-war
vintage owned by the applicant on the land in question which in effect
corroborates the testimony of the applicant and her witness that they have
lived on the land in question even prior to the outbreak of the second world
war and that the applicant has been in possession of the land in question
long time ago.43
To counter the evidence of applicant Castro, and bolster its claim that she
has no valid title, respondent Republic relies on the July 18, 1973 Office
Memorandum44 of Roman Mataverde, OIC, Surveys Division, to the OIC,
Legal Division, of the Bureau of Lands, stating that "when projected on
cadastral maps CM 14 13N - 120 59 E., Sec. 3-D and CM 14 30N -
120 59E., Sec. 2-A of Paranaque [sic] Cadastre (Cad-299), (LRC) Psu-
964 falls inside Manila Bay, outside Cad-299."45
The same conclusion was adopted in a November 15, 1973 letter of
Narciso Villapando, Acting Regional Lands Director to the Chief, Legal
Division, Bureau of Lands and in the Comment and Recommendation of
Ernesto C. Mendiola, Assistant Director, also of the Bureau of Lands.
Respondent likewise cites Namria Hydrographic Map No. 4243 Revised
80-11-2 to support its position that Castros lot is a portion of Manila Bay.
The burden of proving these averments falls to the shoulders of
respondent Republic. The difficulty is locating the witnesses of the
government. Roman Mataverde, then OIC of the Surveys Division retired
from the government service in 1982. He should by this time be in his 90s.
Moreover, Asst. Regional Director Narciso Villapando and Asst. Director
Ernesto C. Mendiola are no longer connected with the Bureau of Lands
since 1986.
Assuming that OIC Roman Mataverde, Asst. Regional Director Narciso
Villapando and Assistant Director Ernesto C. Mendiola are still available as
witnesses, the projections made on the cadastral maps of the then Bureau
of Lands cannot prevail over the results of the two ocular inspections by
several Bureau of Lands officials that the disputed lot is definitely "dry and
solid land" and not part of Manila Bay. Special Attorney Saturnino A.
Pacubas, Land Inspector Adelino G. Gorospe, Geodetic Engineer Manuel
A. Cervantes and Administrative Asst. Lazaro A. Berana, all officials of the
Bureau of Lands, were positive that the disputed land is solid and dry land
and no longer forms part of Manila Bay. Evidence gathered from the ocular
inspection is considered direct and firsthand information entitled to great
weight and credit while the Mataverde and Villapando reports are evidence
weak in probative value, being merely based on theoretical projections "in
the cadastral map or table surveys."46 Said projections must be confirmed
by the actual inspection and verification survey by the land inspectors and
geodetic engineers of the Bureau of Lands. Unfortunately for respondent
Republic, the bureau land inspectors attested and affirmed that the
disputed land is already dry land and not within Manila Bay.
On the other hand, the Namria Hydrographic Map No. 4243 does not
reveal what portion of Manila Bay was Castros lot located in 1974.
Moreover, a hydrographic map is not the best evidence to show the nature
and location of the lot subject of a land registration application. It is derived
from a hydrographic survey which is mainly used for navigation purposes,
thus:
Surveys whose principal purpose is the determination of data relating to
bodies of water. A hydrographic survey may consist of the determination of
one or several of the following classes of data: depth water; configuration
and nature of the bottom; directions and force of currents; heights and
times of tides and water stages; and location of fixed objects for survey
and navigation purposes.47
Juxtaposed with finding of the ocular inspection by Bureau of Lands
Special Attorney Pacubas and others that Castros lot is dry land in 1974,
PROPERTY 1ST BATCH
Namria Hydrographic Map No. 4243 is therefore inferior evidence and
lacking in probative force.
Moreover, the reliability and veracity of the July 18, 1973 report of Roman
Mataverde based on the alleged projection on cadastral maps and the
Villapando report dated November 15, 1973 are put to serious doubt in the
face of the opinion dated October 13, 1997 of the Government Corporate
Counsel, the lawyer of the PEA, which upheld the validity of the titles of
petitioners, thus:
We maintain to agree with the findings of the court that the property of
Fermina Castro was registrable land, as based on the two (2) ocular
inspections conducted on March 22, 1974 by Lands Administrative
Assistant Lazaro G. Berania and Lands Geodetic Engr. Manuel Cervantes,
finding the same no longer forms part of Manila Bay but is definitely
solid land which cannot be reached by water even in the highest of tides.
This Berania-Cervantes report based on ocular inspections literally
overturned the findings and recommendations of Land Director Narciso V.
Villapando dated November 15, 1973, and that of Director Ernesto C.
Mendiola dated December 1, 1977, and the fact that the Villapando-
Mendiola reports were merely based on projections in the cadastral map or
table surveys.
xxxx
A. The Legal prognosis of the case is not promising in favor of PEA.
4.1 LRC Case No. N-8239 has already become final and executory
and OCT No. 10215 was already issued in favor of Fermina
Castro. Any and all attempts to question its validity can only be
entertained in a quo warranto proceedings (sic), assuming that
there are legal grounds (not factual grounds) to support its
nullification. Subjecting it to a collateral attack is not allowed under
the Torrens Title System. In Calalang vs. Register of Deeds of
Quezon City, 208 SCRA 215, the Supreme Court held that the
present petition is not the proper remedy in challenging the validity
of certificates of titles since the judicial action required is a direct
and not a collateral attack (refer also to: Toyota Motor Philippine
Corporation vs. CA, 216 SCRA 236).
 4.2 OCT No. 10215 in favor of Fermina Castro was issued
pursuant to a cadastral proceeding, hence is a rem
proceedings which is translated as a constructive notice to the
whole world, as held in Adez Realty Incorporated vs. CA, 212
SCRA 623.
4.3 From the cursory and intent reading of the decision of Judge
Sison in LRC Case No. N-8239, we cannot find any iota of fraud
having been committed by the court and the parties. In fact, due
process was observed when the Office of the Solicitor General
represented ably the Bureau of Lands. In Balangcad vs. Justices of
the Court of Appeals, 206 SCRA 169, the Supreme Court held that
title to registered property becomes indefeasible after one-year
from date of registration except where there is actual fraud in which
case it may be challenged in a direct proceeding within that period.
This is also the ruling in Bishop vs. CA, 208 SCRA 636, that to
sustain an action for annulment of a torrens certificate for
being void ab initio, it must be shown that the registration court had
not acquired jurisdiction over the case and there was actual fraud
in securing the title.
4.4 As to priority of torrens title, PEA has no defense, assuming
that both PEA and Yujuico titles are valid, as held in Metropolitan
Waterworks and Sewerage System vs. CA, 215 SCRA 783, where
two (2) certificates purport to include the same land, the earlier in
date prevails.
4.5 The documents so far submitted by the parties to the court
indicate that the mother title of the Yujuico land when registered in
1974 was not underwater. This was shown in the two (2) ocular
inspections conducted by the officials of the Land Bureau.
4.6 The provision of P.D. 239 that no decree of registration may be
issued by the court unless upon approval and recommendation of
the Bureau of Lands was substantially complied with in the Report
of Lands Special Attorney Saturnino Pacubas, submitted to the
court.48
Even the counsel of respondent Republic, the OSG, arrived at the
conclusion that there is no sufficient legal basis for said respondent to
institute action to annul the titles of petitioners, thus:
PROPERTY 1ST BATCH
It may be stated at the outset that a petition for annulment of certificate of
title or reconveyance of land may be based on fraud which attended the
issuance of the decree of registration and the corresponding certificate of
title.
Based on the decision in the LRC Case No. N-8239 involving the petition
for registration and confirmation of title filed by Fermina Castro, there is no
showing that fraud attended the issuance of OCT No. 10215. it appears
that the evidence presented by Fermina Castro was sufficient for the trial
court to grant her petition.
The testimony of Fermina Castro, which was corroborated by Emiliano de
Leon, that she and her predecessors-in-interest had been in possession of
the land for more than thirty (30) years sufficiently established her vested
right over the property initially covered by OCT No. 10215. The report
dated April 25, 1974 which was submitted to the trial court by the Director
of Lands through Special Attorney Saturnino Pacubas showed that the
parcel of land was solid and dry land when Fermina Castros application for
registration of title was filed. It was based on the ocular inspection
conducted by Land Inspector Adelino Gorospe and the joint circular
inspection conducted by Geodetic Engineer Manuel A. Cervantes and
Administrative Assistant Lazaro Berania on November 28, 1973 and March
22, 1974 respectively.
The aforesaid report must be requested unless there is a concrete proof
that there was an irregularity in the issuance thereof. In the absence of
evidence to the contrary, the ocular inspection of the parcel of land, which
was made the basis of said report, is presumed to be in order.
Based on the available records, there appears to be no sufficient basis for
the Government to institute an action for the annulment of OCT No. 10215
and its derivative titles. It is opined that a petition for
cancellation/annulment of Decree No. N-150912 and OCT No. 10215 and
all its derivative titles will not prosper unless there is convincing evidence
to negate the report of the then Land Management Bureau through Special
Attorney Pacubas. Should the Government pursue the filing of such an
action, the possibility of winning the case is remote.49
More so, respondent Government, through its counsel, admits that the land
applied by Fermina Castro in 1973 was solid and dry land, negating the
nebulous allegation that said land is underwater. The only conclusion that
can be derived from the admissions of the Solicitor General and
Government Corporate Counsel is that the land subject of the titles of
petitioners is alienable land beyond the reach of the reversion suit of the
state.
Notably, the land in question has been the subject of a compromise
agreement upheld by this Court in Public Estates Authority.50 In that
compromise agreement, among other provisions, it was held that the
property covered by TCT Nos. 446386 and S-29361, the land subject of
the instant case, would be exchanged for PEA property. The fact that PEA
signed the May 15, 1998 Compromise Agreement is already a clear
admission that it recognized petitioners as true and legal owners of the
land subject of this controversy.
Moreover, PEA has waived its right to contest the legality and validity of
Castros title. Such waiver is clearly within the powers of PEA since it was
created by PD 1084 as a body corporate "which shall have the attribute of
perpetual succession and possessed of the powers of the corporations, to
be exercised in conformity with the provisions of this Charter [PD
1084]."51 It has the power "to enter into, make, perform and carry out
contracts of every class and description, including loan agreements,
mortgages and other types of security arrangements, necessary or
incidental to the realization of its purposes with any person, firm or
corporation, private or public, and with any foreign government or
entity."52 It also has the power to sue and be sued in its corporate
name.53 Thus, the Compromise Agreement and the Deed of Exchange of
Real Property signed by PEA with the petitioners are legal, valid and
binding on PEA. In the Compromise Agreement, it is provided that it
"settles in full all the claims/counterclaims of the parties against each
other."54 The waiver by PEA of its right to question petitioners title is
fortified by the manifestation by PEA in the Joint Motion for Judgment
based on Compromise Agreement that
4. The parties herein hereto waive and abandon any and all other claims
and counterclaims which they may have against each other arising from
this case or related thereto.55
Thus, there was a valid waiver of the right of respondent Republic through
PEA to challenge petitioners titles.
PROPERTY 1ST BATCH
The recognition of petitioners legal ownership of the land is further
bolstered by the categorical and unequivocal acknowledgment made by
PEA in its September 30, 2003 letter where it stated that: "Your ownership
thereof was acknowledged by PEA when it did not object to your
membership in the CBP-IA Association, in which an owner of a piece of
land in CBP-IA automatically becomes a member thereof."56 Section 26,
Rule 130 provides that "the act, declaration or omission of a party as to a
relevant fact may be given in evidence against him." The admissions of
PEA which is the real party-in-interest in this case on the nature of the land
of Fermina Castro are valid and binding on respondent Republic.
Respondents claim that the disputed land is underwater falls flat in the
face of the admissions of PEA against its interests. Hence, res judicata
now effectively precludes the relitigation of the issue of registrability of
petitioners lot.
In sum, the Court finds that the reversion case should be dismissed for
lack of jurisdiction on the part of the Paraaque RTC. Even if we treat said
case as a petition for annulment of judgment under Rule 47 of the 1997
Rules of Civil Procedure, the dismissal of the case nevertheless has to be
upheld because it is already barred by laches. Even if laches is
disregarded, still the suit is already precluded by res judicata in view of the
peculiar facts and circumstances obtaining therein.
WHEREFORE, premises considered, the petition is GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No. 76212 is REVERSED
and SET ASIDE, and the August 7, 2002 Order of the Paraaque City
RTC, Branch 257 in Civil Case No. 01-0222 entitled Republic of the
Philippines v. Fermina Castro, et al. dismissing the complaint is
AFFIRMED.
No costs.
SO ORDERED.
G.R. No. 150824 February 4, 2008
LAND BANK OF THE PHILIPPINES, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, represented by the Director of
Lands, respondent.
 DECISION
REYES, R.T., J.:
FOREST lands are outside the commerce of man and unsusceptible of
private appropriation in any form.1
It is well settled that a certificate of title is void when it covers property of
public domain classified as forest, timber or mineral lands. Any title issued
covering non-disposable lots even in the hands of an alleged innocent
purchaser for value shall be cancelled.2 The rule must stand no matter how
harsh it may seem. Dura lex sed lex.3 Ang batas ay maaaring mahigpit
subalit ito ang mananaig.
Before Us is a petition for review on certiorari under Rule 45 filed by
petitioner Land Bank of the Philippines (LBP) appealing the: (1)
Decision4 of the Court of Appeals (CA), dated August 23, 2001, in CA-G.R.
CV No. 64121 entitled "Republic of the Philippines, represented by the
Director of Lands v. Angelito Bugayong, et al."; and (2) Resolution5of the
same Court, dated November 12, 2001, denying LBP's motion for
reconsideration.
The CA affirmed the Decision6 of the Regional Trial Court (RTC), dated
July 9, 1996, declaring null and void Original Certificate of Title (OCT) No.
P-2823, as well as other titles originating from it, on the ground that at the
time it was issued, the land covered was still within the forest zone.7
The Facts
OCT No. P-2823 was issued on September 26, 1969 in favor of one
Angelito C. Bugayong. Said mother title emanated from Sales Patent No.
4576 issued in Bugayong's name on September 22, 1969.8 It covered a
parcel of land located in Bocana, Kabacan, Davao City, with an area of
41,276 square meters. It was originally identified and surveyed as Lot No.
4159 under Plan SI-(VIII-1), 328-D. Marshy and under water during high
tide, it used to be a portion of a dry river bed near the mouth of Davao
River.9
The land was initially subdivided into four lots, viz.: Lot Nos. 4159-A, 4159-
B, 4159-C and 4159-D under Subdivision Plan (LRC) Psd-139511
approved by the Commissioner of Land Registration on April 23,
PROPERTY 1ST BATCH
1971.10 Consequently, OCT No. P-2823 was cancelled and new Transfer
Certificates of Title (TCTs) replaced it, all in the name of Bugayong.
Bugayong sold all of the four lots to different persons. Lot No. 4159-A,
which was then under TCT No. T-32769, was sold to spouses Lourdes and
Candido Du. Accordingly, said TCT was cancelled and replaced by TCT
No. T-42166 in the name of spouses Du.11
Afterwards, the spouses Du further caused the subdivision of the land
covered by their TCT No. T-42166 into two (2) lots. They sold one of said
lots to spouses Felix and Guadalupe Dayola, who were issued TCT No. T-
45586. The other remaining lot, registered under TCT No. T-45587, was
retained by and registered in the names of spouses Du.12
Subsequently, Du spouses' TCT No. T-45587 was cancelled and was
replaced by TCT No. T-57348 registered in the name of Lourdes Farms,
Inc. subject of this case.13 Lourdes Farms, Inc. mortgaged this property to
petitioner LBP on April 14, 1980.14
The validity of OCT No. P-2823, as well as its derivative TCTs, remained
undisturbed until some residents of the land it covered, particularly those
along Bolton Diversion Road, filed a formal petition before the Bureau of
Lands on July 15, 1981.15
Investigation and ocular inspection were conducted by the Bureau of
Lands to check the legitimacy of OCT No. P-2823. They found out that: (1)
at the time Sales Patent No. 4576 was issued to Bugayong, the land it
covered was still within the forest zone, classified under Project No. 1, LC-
47 dated August 6, 1923; it was released as alienable and disposable land
only on March 25, 1981, pursuant to BFD Administrative Order No. 4-1585
and to the provisions of Section 13, Presidential Decree (P.D.) No.
705;16 (2) the land was marshy and covered by sea water during high tide;
and (3) Bugayong was never in actual possession of the land.17
In view of the foregoing findings, the Bureau of Lands resolved that the
sales patent in favor of Bugayong was improperly and illegally issued and
that the Director of Lands had no jurisdiction to dispose of the subject
land.18
Upon recommendation of the Bureau of Lands, the Republic of the
Philippines represented by the Director of Lands, through the Office of the
Solicitor General (OSG), instituted a complaint19 before the RTC in Davao,
Branch 15, for the cancellation of title/patent and reversion of the land
covered by OCT No. P-2823 into the mass of public domain. The
complaint, as amended,20 was filed against Bugayong and other present
owners and mortgagees of the land, such as Lourdes Farms, Inc. and the
latter's mortgagee, petitioner LBP.
In its answer with cross-claim,21 LBP claimed that it is a mortgagee in good
faith and for value. It prayed that should TCT No. T-57348 of Lourdes
Farms, Inc. be annulled by the court, Lourdes Farms, Inc. should be
ordered to pay its outstanding obligations to LBP or to provide a new
collateral security.22
RTC Judgment
Eventually, the RTC rendered its judgment23 on July 9, 1996 determining
that:
x x x The mistakes and the flaws in the granting of the title were
made by the Bureau of Lands personnel more particularly the
Director of Lands who is the Officer charged with the following the
provisions of the Public Land Law. x x x.
It is clear that the mother Title, OCTP-2823 in the name of
defendant Bugayong was issued at a time when the area was not
yet released by the Bureau of Forestry to the Bureau of Lands.
The area covered by OCT No. P. 2823 was not yet declared by the
Bureau of Lands alienable and disposable when the said OCT was
issued. The subdivision of the lot covered by OCT P-2823 into 4
lots covered by TCT Nos. T-32768, 32769, 32756 and 32771 did
not cure the defect. x x x.24
The RTC explained that titles issued to private parties by the Bureau of
Lands are void ab initio if the land covered by it is a forest land.25 It went
further by stating that if the mother title is void, all titles arising from the
mother title are also void.26 It thus ruled in favor of the Republic with
a fallo reading:
IN VIEW WHEREOF, judgment is hereby rendered declaring
Original Certificate of Title No. P-2823 issued in the name of
PROPERTY 1ST BATCH
defendant Angelito Bugayong null and void. The following Transfer
Certificate of Titles which were originally part of the lot covered by
O.C.T. No. P-2823 are likewise declared void:
1.A. TCT No. 57348 in the name of defendant Lourdes
Farms mortgaged to defendant Land Bank.
B. TCT No. 84749 in the name of defendants Johnny and
Catherine Du mortgaged to defendant Development Bank
of the Philippines.
C. TCT No. 37386 in the name of defendants spouses
Pahamotang mortgaged to defendant Lourdes Du
mortgaged with defendant Allied Bank.
E. TCT Nos. 68154 and 32768 in the names of
defendants/spouses Maglana Santamaria.
2. All private defendants shall give to the Davao City
Register of Deeds their titles, who shall cancel the Transfer
Certificate of Titles mentioned in paragraph number one.
3. Lot No. 4159, Plan SI (VIII-1) 328-D covered by O.C.T.
P-2823 is hereby REVERTED to the mass of public
domain.
SO ORDERED.27 (Underscoring supplied)
Disagreeing with the RTC judgment, LBP appealed to the CA on October
31, 1996. It asserted in its appellant's brief28 that it validly acquired
mortgage interest or lien over the subject property because it was an
innocent mortgagee for value and in good faith.29 It also emphasized that it
is a government financial institution.
CA Disposition
In a Decision30 dated August 23, 2001, the CA ruled against the
appellants,31 disposing thus:
 WHEREFORE, premises considered, the present appeals are
hereby DISMISSED and the Decision of the trial court in Civil Case
No. 17516 is hereby AFFIRMED.32
The CA confirmed that the "evidence for the plaintiff clearly established
that the land covered by OCT No. P-2823 issued pursuant to a sales
patent granted to defendant Angelito C. Bugayong was still within the
forestal zone at the time of the grant of the said patent."33 It explained:
Forest lands or forest reserves, are incapable of private
appropriation and possession thereof, however long, cannot
convert them into private properties. This is premised on
the Regalian Doctrine enshrined not only in
the 1935 and 1973 Constitutions but also in the 1987 Constitution.
Our Supreme Court has upheld this rule consistently even in earlier
cases. It has also been held that whatever possession of the
land prior to the date of release of forested land as alienable and
disposable cannot be credited to the 30-year requirement (now,
since June 12, 1945) under Section 48(b) of the Public Land Act. It
is only from that date that the period of occupancy for purposes of
confirmation of imperfect or incomplete title may be counted. Since
the subject land was declared as alienable and disposable only on
March 25, 1981, appellants and their predecessors-in-interest
could not claim any vested right thereon prior to its release from
public forest zone.
The inclusion of forest land in a title, "whether title be issued during
the Spanish regime or under the Torrens system, nullifies the title."
It is, of course, a well-recognized principle that the Director of
Lands (now Land Management Bureau) is bereft of any jurisdiction
over public forest or any lands not capable of registration. It is the
Bureau of Forestry that has jurisdiction and authority over the
demarcation, protection, management, reproduction, occupancy
and use of all public forests and forest reservations and over the
granting of licenses for the taking of products therefrom. And where
the land applied for is part of the public forest, the land registration
court acquires no jurisdiction over the land, which is not yet
alienable and disposable.
Thus, notwithstanding the issuance of a sales patent over the
subject parcel of land, the State may still take action to have the
PROPERTY 1ST BATCH
same land reverted to the mass of public domain and the certificate
of title covering said forest land declared null and void for having
been improperly and illegally issued. Titles issued over non-
alienable public lands have been held as void ab initio. The
defense of indefeasibility of title issued pursuant to such patent
does not lie against the State. Public land fraudulently included in
patents or certificates of title may be recovered or reverted to the
State in accordance with Section 101 of the Public Land Act. In
such cases, prescription does not lie against the State. Likewise,
the government is not estopped by such fraudulent or wrongful
issuance of a patent over public forest land inasmuch as the
principle of estoppel does not operate against the Government for
the acts of its agents. x x x.34 (Citations omitted)
With respect to LBP's contention35 that it was a mortgagee in good faith
and for value, the CA declared, citing Republic v. Reyes36 that:
"mortgagees of non-disposable lands where titles thereto were erroneously
issued acquire no protection under the land registration law. Appellants-
mortgagees' proper recourse therefore is to pursue their claims against
their respective mortgagors and debtors."37
When LBP's motion for reconsideration was denied, it resorted to the
petition at bar.
Issues
LBP seeks the reversal of the CA disposition on the following grounds
A.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE
PETITIONER LAND BANK OF THE PHILIPPINES' MORTGAGE
RIGHT AND INTEREST AS AN INNOCENT
PURCHASER (MORTGAGEE) FOR VALUE AND IN GOOD
FAITH OVER THE SUBJECT LAND COVERED BY TCT NO. T-
57348 IS VALID AND SUBSISTING IN ACCORDANCE WITH THE
LAW AND EXISTING JURISPRUDENCE IN OUR COUNTRY.
B.
 THE COURT OF APPEALS ERRED IN NOT FINDING
PETITIONER LAND BANK OF THE PHILIPPINES' MORTGAGE
RIGHT AND INTEREST OVER THE SUBJECT LAND AS VALID
AND SUBSISTING UNDER THE CONSTITUTIONAL
GUARANTEE OF NON-IMPAIRMENT OF OBLIGATION OF
CONTRACTS.
C.
THE COURT OF APPEALS ERRED IN NOT AWARDING TO
PETITIONER LAND BANK OF THE PHILIPPINES THE RELIEF
PRAYED FOR UNDER ITS CROSS-CLAIM AGAINST CO-
DEFENDANT LOURDES FARMS, INC., THAT IS, ORDERING
SAID CO-DEFENDANT LOURDES FARMS, INC. TO PAY ITS
OUTSTANDING OBLIGATION TO THE LAND BANK COVERED
BY THE SUPPOSED NULL AND VOID TCT NO. T-57348, OR TO
PROVIDE A SUBSTITUTE COLLATERAL IN LIEU OF SAID TCT
NO. T-57348.38(Underscoring supplied)
Our Ruling
LBP has no valid and subsisting mortgagee's
interest over the land covered by TCT No. T-57348.
It has been established and admitted by LBP that: (1) the subject land
mortgaged to it by Lourdes Farms, Inc. is covered by TCT No. T-57348;
and (2) the said TCT is derived from OCT No. P-2823 issued to
Bugayong.39
It was further ascertained by the courts below that at the time OCT No. P-
2823 was issued to Bugayong on September 26, 1969, the land it covered
was still within the forest zone. It was declared as alienable and disposable
only on March 25, 1981.40
Despite these established facts, LBP argues that its alleged interest as
mortgagee of the subject land covered by TCT No. T-57348 must be
respected. It avers that TCT No. T-57348 is a Torrens title which has no
written indications of defect or vice affecting the ownership of Lourdes
Farms, Inc. Hence, it posits that it was not and could not have been
required to explore or go beyond what the title indicates or to search for
defects not indicated in it.
PROPERTY 1ST BATCH
LBP cites cases where the Court ruled that a party is not required to
explore further than what the Torrens title upon its face indicates in quest
of any hidden defect of an inchoate right that may subsequently defeat his
right to it; and that a bank is not required before accepting a mortgage to
make an investigation of the title of the property being given as security.
LBP submits that its right as a mortgagee is binding against the whole
world and may not be disregarded. 41
It further argues that review or reopening of registration is proscribed, as
the title has become incontrovertible pursuant to Section 32 of P.D. No.
1529; and that its mortgage rights and interest over the subject land is
protected by the constitutional guarantee of non-impairment of contracts.42
The contention that LBP has an interest over the subject land as a
mortgagee has no merit. The mortgagor, Lourdes Farms, Inc. from which
LBP supposedly obtained its alleged interest has never been the owner of
the mortgaged land. Acquisition of the subject land by Lourdes Farms, Inc.
is legally impossible as the land was released as alienable and disposable
only on March 25, 1981. Even at present, no one could have possessed
the same under a claim of ownership for the period of thirty (30) years
required under Section 48(b) of Commonwealth Act No. 141, as
amended.43 Hence, LBP acquired no rights over the land.
Under Article 2085 of the Civil Code, it is essential that the mortgagor be
the absolute owner of the thing mortgaged, to wit:
ARTICLE 2085. The following requisites are essential to the
contracts of pledge and mortgage:
(1) That they be constituted to secure the fulfillment of a principal
obligation;
(2) That the pledgor or mortgagor be the absolute owner of the
thing pledged or mortgaged;
(3) That the persons constituting the pledge or mortgage have the
free disposal of their property, and in the absence thereof, that they
be legally authorized for the purpose. (Emphasis ours)
Since Lourdes Farms, Inc. is not the owner of the land, it does not have the
capacity to mortgage it to LBP. In De la Cruz v. Court of Appeals,44 the
Court declared:
While it is true that the mortgagees, having entered into a contract
with petitioner as mortgagor, are estopped from questioning the
latter's ownership of the mortgaged property and his concomitant
capacity to alienate or encumber the same, it must be considered
that, in the first place, petitioner did not possess such capacity to
encumber the land at the time for the stark reason that it had been
classified as a forest land and remained a part of the patrimonial
property of the State. Assuming, without admitting, that the
mortgagees cannot subsequently question the fact of ownership of
petitioner after having dealt with him in that capacity, still, petitioner
was never vested with the proprietary power to encumber the
property. In fact, even if the mortgagees continued to acknowledge
petitioner as the owner of the disputed land, in the eyes of the law,
the latter can never be presumed to be owner.
As correctly pointed out by the OSG, mortgagees of non-disposable lands,
titles to which were erroneously issued, acquire no protection under the
Land Registration Law.45
Even assuming that LBP was able to obtain its own TCT over the property
by means of its mortgage contract with Lourdes Farms, Inc., the title must
also be cancelled as it was derived from OCT No. P-2823 which was not
validly issued to Bugayong. Forest lands cannot be owned by private
persons. It is not registerable whether the title is a Spanish title or a
Torrens title.46 It is well settled that a certificate of title is void when it
covers property of public domain classified as forest or timber or mineral
land. Any title issued covering non-disposable lots even in the hands of an
alleged innocent purchaser for value shall be cancelled.47
Moreover, the Court has already addressed the same issue in its
Resolution of November 14, 2001 on the petition filed by the Philippine
National Bank (PNB) in G. R. No. 149568 entitled "Philippine National
Bank v. Republic of the Philippines represented by the Director of Lands,"
which also appealed the subject CA decision. PNB, like LBP, is also a
mortgagee of another derivative TCT of the same OCT No. 2823. Said
resolution reads:
PROPERTY 1ST BATCH
On September 22, 1969, Angelito C. Bugayong was issued a sales
patent covering a 41,276 square meter parcel of land in Bocana,
Barrio Kabacan, Davao City by the Bureau of Lands. On the basis
of the sales patent, the Register of Deeds of Davao City issued
OCT No. P-2823 to Bugayong. Bugayong later subdivided the land
into four lots, one of which (Lot No. 4159-B covered by TCT No. T-
32770) was sold by him to the spouses Reynaldo Rogacion and
Corazon Pahamotang. After obtaining TCT No. T-37786 in their
names, the spouses mortgaged the lot to the Philippine National
Bank (PNB). As they defaulted in the payment of their loan, the
PNB foreclosed the property and purchased it at the foreclosure
sale as the highest bidder. Eventually, the PNB consolidated its
title.
Sometime in 1981, upon the petition of the residents of the land,
the Bureau of Lands conducted an investigation into the sales
patent issued in favor of Angelito C. Bugayong and found the sales
patent to have been illegally issued because (1) the land was
released as alienable and disposable only on March 25, 1981;
previous to that, the land was within the forest zone; (2) the land is
covered by sea water during high tide; and (3) the patentee,
Angelito C. Bugayong, had never been in actual possession of the
land.
Based on this investigation, the government instituted the present
suit in 1987 for cancellation of title/patent and reversion of the
parcel of land against Angelito C. Bugayong, the Rogacion
spouses, and the PNB, among others.
On July 6, 1996, the trial court rendered a decision declaring OCT
No. P-2823 and all titles derived therefrom null and void and
ordering reversion of the subject property to the mass of the public
domain. On appeal, the Court of Appeals affirmed the trial court's
decision. Hence, this petition.
First. Petitioner contends that it had a right to rely on TCT No. T-
37786 showing the mortgagors Reynaldo Rogacion and Corazon
Pahamotang's ownership of the property.
The contention is without merit. It is well settled that a certificate of
title is void when it covers property of public domain classified as
 forest or timber or mineral lands. Any title issued covering non-
disposable lots even in the hands of an alleged innocent purchaser
for value shall be cancelled (Republic v. Reyes, 155 SCRA 313
(1987)).
(Republic v. Court of Appeals, 148 SCRA 480 (1987)). In this case,
petitioner does not dispute that its predecessor-in-interest, Angelito
C. Bugayong, had the subject property registered in his name
when it was forest land. Indeed, even if the subject property had
been eventually segregated from the forest zone, neither petitioner
nor its predecessors-in-interest could have possessed the same
under claim of ownership for the requisite period of thirty (30) years
because it was released as alienable and disposable only on
March 25, 1981.
Second. Petitioner's contention that respondent's action for
reversion is barred by prescription for having been filed nearly two
decades after the issuance of Bugayong's sales patent is likewise
without merit. Prescription does not lie against the State for
reversion of property which is part of the public forest or of a forest
reservation registered in favor of any party. Public land registered
under the Land Registration Act may be recovered by the State at
any time (Republic v. Court of Appeals, 258 SCRA 223 (1996)).48
Contrary to the argument of LBP, since the title is void, it could not have
become incontrovertible. Even prescription may not be used as a defense
against the Republic. On this aspect, the Court in Reyes v. Court of
Appeals,49 citing Republic v. Court of Appeals,50 held:
Petitioners' contention that the government is now estopped from
questioning the validity of OCT No. 727 issued to them,
considering that it took the government 45 years to assail the
same, is erroneous. We have ruled in a host of cases that
prescription does not run against the government. In point is the
case of Republic v. Court of Appeals, wherein we declared:
And in so far as the timeliness of the action of the
Government is concerned, it is basic that prescription does
not run against the State x x x. The case law has also
been:
PROPERTY 1ST BATCH
When the government is the real party in interest,
and is proceeding mainly to assert its own rights
and recover its own property, there can be no
defense on the ground of laches or limitation x x x.
Public land fraudulently included in patents or
certificates of title may be recovered or reverted to
the State in accordance with Section 101 of the
Public Land Act. Prescription does not lie against
the State in such cases for the Statute of
Limitations does not run against the State. The right
of reversion or reconveyance to the State is not
barred by prescription. (Emphasis ours)
There is no impairment of contract but a valid
exercise of police power of the State.
The constitutional guarantee of non-impairment of contracts may not
likewise be used by LBP to validate its interest over the land as mortgagee.
The State's restraint upon the right to have an interest or ownership over
forest lands does not violate the constitutional guarantee of non-
impairment of contracts. Said restraint is a valid exercise of the police
power of the State. As explained by the Court in Director of Forestry v.
Muoz:51
The view this Court takes of the cases at bar is but in adherence to
public policy that should be followed with respect to forest lands.
Many have written much, and many more have spoken, and quite
often, about the pressing need for forest preservation,
conservation, protection, development and reforestation. Not
without justification. For, forests constitute a vital segment of any
country's natural resources. It is of common knowledge by now that
absence of the necessary green cover on our lands produces a
number of adverse or ill effects of serious proportions. Without the
trees, watersheds dry up; rivers and lakes which they supply are
emptied of their contents. The fish disappear. Denuded areas
become dust bowls. As waterfalls cease to function, so will
hydroelectric plants. With the rains, the fertile topsoil is washed
away; geological erosion results. With erosion come the dreaded
floods that wreak havoc and destruction to property crops,
livestock, houses and highways not to mention precious human
 lives. Indeed, the foregoing observations should be written down in
a lumberman's decalogue.
Because of the importance of forests to the nation, the State's
police power has been wielded to regulate the use and occupancy
of forest and forest reserves.
To be sure, the validity of the exercise of police power in the name
of the general welfare cannot be seriously attacked. Our
government had definite instructions from the Constitution's
preamble to "promote the general welfare." Jurisprudence has time
and again upheld the police power over individual rights, because
of the general welfare. Five decades ago, Mr. Justice Malcolm
made it clear that the "right of the individual is necessarily subject
to reasonable restraint by general law for the common good" and
that the "liberty of the citizen may be restrained in the interest of
public health, or of the public order and safety, or otherwise within
the proper scope of the police power." Mr. Justice Laurel, about
twenty years later, affirmed the precept when he declared that "the
state in order to promote the general welfare may interfere with
personal liberty, with property, and with business and occupations"
and that "[p]ersons and property may be subjected to all kinds of
restraints and burdens, in order to secure the general comfort,
health, and prosperity of the state." Recently, we quoted from
leading American case, which pronounced that "neither property
rights nor contract rights are absolute; for government cannot exist
if the citizen may at will use his property to the detriment of his
fellows, or exercise his freedom of contract to work them harm,"
and that, therefore, "[e]qually fundamental with the private right is
that of the public to regulate it in the common interest." (Emphasis
ours and citations omitted)
In Edu v. Ericta,52 the Court defined police power as the authority of the
state to enact legislation that may interfere with personal liberty or property
in order to promote the general welfare. It is the power to prescribe
regulations to promote the health, morals, peace, education, good order or
safety, and general welfare of the people. It is that inherent and plenary
power of the State which enables it to prohibit all things hurtful to the
comfort, safety and welfare of society.53 It extends to all the great public
needs and is described as the most pervasive, the least limitable and the
most demanding of the three inherent powers of the State, far outpacing
taxation and eminent domain.54 It is a ubiquitous and often unwelcome
PROPERTY 1ST BATCH
intrusion. Even so, as long as the activity or the property has some
relevance to the public welfare, its regulation under the police power is not
only proper but necessary.55
Preservation of our forest lands could entail intrusion upon contractual
rights as in this case but it is justified by the Latin maxims Salus populi est
suprema lex and Sic utere tuo ut alienum non laedas, which call for the
subordination of individual interests to the benefit of the greater number.56
While We sympathize with petitioner, We nonetheless cannot, in this
instance, yield to compassion and equity. The rule must stand no matter
how harsh it may seem.57
We cannot resolve the cross-claim for lack of
factual basis. The cross-claim must be remanded
to the RTC for further proceedings.
LBP filed a cross-claim against Lourdes Farms, Inc. before the RTC.58 The
cross-claim is for the payment of cross-defendant Lourdes Farms, Inc.'s
alleged obligation to LBP or its submission of a substitute collateral
security in lieu of the property covered by TCT No. T-57348.
However, the records do not show that Lourdes Farms, Inc. was required
by the RTC to file an answer to the cross-claim. Likewise, Lourdes Farms,
Inc. was not notified of the proceedings before the CA. It was not also
made a party to this petition.
LPB now contends that the CA erred in not granting its cross-claim against
Lourdes Farms, Inc. We are thus confronted with the question: Should We
now order Lourdes Farms, Inc. to comply with the demand of LBP?
We rule in the negative. It may be true that Lourdes Farms, Inc. still has an
obligation to LBP but We cannot make a ruling regarding the same for lack
of factual basis. There is no evidence-taking on the cross-claim. No
evidence was adduced before the RTC or the CA regarding it. No factual
finding or ruling was made by the RTC or the CA about it.
It bears stressing that in a petition for review on certiorari, the scope of this
Court's judicial review of decisions of the CA is generally confined only to
errors of law. Questions of fact are not entertained.59
Moreover, the failure to make a ruling on the cross-claim by the RTC was
not assigned as an error in LBP's appellant's brief60 before the CA. Hence,
the CA cannot be faulted for not making a ruling on it.
As held in De Liano v. Court of Appeals,61 appellant has to specify in what
aspect of the law or the facts the trial court erred. The conclusion,
therefore, is that appellant must carefully formulate his assignment of
errors. Its importance cannot be underestimated, as Section 8, Rule 51 of
the Rules of Court will attest:
Questions that may be decided. No error which does not affect
the jurisdiction over the subject matter or the validity of the
judgment appealed from or the proceedings therein will be
considered unless stated in the assignment of errors, or closely
related to or dependent on an assigned error and properly argued
in the brief, save as the court may pass upon plain errors and
clerical errors.
Apparently, the cross-claim was taken for granted not only by the RTC but
also by LBP. The cross-claim was not included as a subject or issue in the
pre-trial order and instead of asking that the same be heard, LBP filed a
motion62 to submit the main case for resolution. The main case was thus
resolved by the RTC without touching on the merits of the cross-claim.
On the other hand, while the CA did not make a categorical ruling on LBP's
cross-claim, it pointed out that: (1) as found by the RTC, there is a
mortgage contract between LBP and Lourdes Farms, Inc., with LBP as
mortgagee and Lourdes Farms, Inc. as mortgagor; and (2) LBP's proper
recourse is to pursue its claim against Lourdes Farms, Inc.63
The CA thus impliedly ruled that LBP's cross-claim should not be included
in this case. Instead of making a ruling on the same, it recommended that
LBP pursue its claim against Lourdes Farms, Inc.
All told, although the relationship between LBP and Lourdes Farms, Inc. as
mortgagee and mortgagor was established, the cross-claim of LBP against
Lourdes Farms, Inc. was left unresolved.
The Court is not in a position to resolve the cross-claim based on the
records. In order for the cross-claim to be equitably decided, the Court, not
being a trier of facts, is constrained to remand the case to the RTC for
PROPERTY 1ST BATCH
further proceedings. Remand of the case for further proceedings is proper
due to absence of a definitive factual determination regarding the cross-
claim.64
WHEREFORE, the appealed Decision of the Court of Appeals is
hereby AFFIRMED with the MODIFICATION that the cross-claim of
petitioner Land Bank of the Philippines against Lourdes Farms, Inc.
is REMANDED to the Regional Trial Court, Branch 15, Davao City, for
further proceedings.
SO ORDERED.
G.R. No. 179987 September 3, 2013
HEIRS OF MARIO MALABANAN, (Represented by Sally A.
Malabanan), Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
RESOLUTION
BERSAMIN, J.:
For our consideration and resolution are the motions for reconsideration of
the parties who both assail the decision promulgated on April 29, 2009,
whereby we upheld the ruling of the Court of Appeals (CA) denying the
application of the petitioners for the registration of a parcel of land situated
in Barangay Tibig, Silang, Cavite on the ground that they had not
established by sufficient evidence their right to the registration in
accordance with either Section 14(1) or Section 14(2) of Presidential
Decree No. 1529 (Property Registration Decree).
Antecedents
The property subject of the application for registration is a parcel of land
situated in Barangay Tibig, Silang Cavite, more particularly identified as Lot
9864-A, Cad-452-D, with an area of 71,324-square meters. On February
20, 1998, applicant Mario Malabanan, who had purchased the property
from Eduardo Velazco, filed an application for land registration covering
the property in the Regional Trial Court (RTC) in Tagaytay City, Cavite,
claiming that the property formed part of the alienable and disposable land
of the public domain, and that he and his predecessors-in-interest had
been in open, continuous, uninterrupted, public and adverse possession
and occupation of the land for more than 30 years, thereby entitling him to
the judicial confirmation of his title.1
To prove that the property was an alienable and disposable land of the
public domain, Malabanan presented during trial a certification dated June
11, 2001 issued by the Community Environment and Natural Resources
Office (CENRO) of the Department of Environment and Natural Resources
(DENR), which reads:
This is to certify that the parcel of land designated as Lot No. 9864 Cad
452-D, Silang Cadastre as surveyed for Mr. Virgilio Velasco located at
Barangay Tibig, Silang, Cavite containing an area of 249,734 sq. meters as
shown and described on the Plan Ap-04-00952 is verified to be within the
Alienable or Disposable land per Land Classification Map No. 3013
established under Project No. 20-A and approved as such under FAO 4-
1656 on March 15, 1982.2
After trial, on December 3, 2002, the RTC rendered judgment granting
Malabanans application for land registration, disposing thusly:
WHEREFORE, this Court hereby approves this application for registration
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
Csd-04-0173123-D, Lot 9864-A and containing an area of Seventy One
Thousand Three Hundred Twenty Four (71,324) Square Meters, as
supported 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, who is of legal age, Filipino, widower, and with residence at
Munting Ilog, Silang, Cavite.
Once this Decision becomes final and executory, the corresponding decree
of registration shall forthwith issue.
SO ORDERED.3
The Office of the Solicitor General (OSG) appealed the judgment to the
CA, arguing that Malabanan had failed to prove that the property belonged
to the alienable and disposable land of the public domain, and that the
RTC erred in finding that he had been in possession of the property in the
PROPERTY 1ST BATCH
manner and for the length of time required by law for confirmation of
imperfect title.
On February 23, 2007, the CA promulgated its decision reversing the RTC
and dismissing the application for registration of Malabanan. Citing the
ruling in Republic v. Herbieto (Herbieto),4 the CA declared that under
Section 14(1) of the Property Registration Decree, any period of
possession prior to the classification of the land as alienable and
disposable was inconsequential and should be excluded from the
computation of the period of possession. Noting that the CENRO-DENR
certification stated that the property had been declared alienable and
disposable only on March 15, 1982, Velazcos possession prior to March
15, 1982 could not be tacked for purposes of computing Malabanans
period of possession.
Due to Malabanans intervening demise during the appeal in the CA, his
heirs elevated the CAs decision of February 23, 2007 to this Court through
a petition for review on certiorari.
The petitioners assert that the ruling in Republic v. Court of Appeals and
Corazon Naguit5 (Naguit) remains the controlling doctrine especially if the
property involved is agricultural land. In this regard, Naguit ruled that any
possession of agricultural land prior to its declaration as alienable and
disposable could be counted in the reckoning of the period of possession
to perfect title under the Public Land Act (Commonwealth Act No. 141) and
the Property Registration Decree. They point out that the ruling in Herbieto,
to the effect that the declaration of the land subject of the application for
registration as alienable and disposable should also date back to June 12,
1945 or earlier, was a mere obiter dictum considering that the land
registration proceedings therein were in fact found and declared void ab
initio for lack of publication of the notice of initial hearing.
The petitioners also rely on the ruling in Republic v. T.A.N. Properties,
Inc.6 to support their argument that the property had been ipso jure
converted into private property by reason of the open, continuous,
exclusive and notorious possession by their predecessors-in-interest of an
alienable land of the public domain for more than 30 years. According to
them, what was essential was that the property had been "converted" into
private property through prescription at the time of the application without
regard to whether the property sought to be registered was previously
classified as agricultural land of the public domain.
As earlier stated, we denied the petition for review on certiorari because
Malabanan failed to establish by sufficient evidence possession and
occupation of the property on his part and on the part of his predecessors-
in interest since June 12, 1945, or earlier.
Petitioners Motion for Reconsideration
In their motion for reconsideration, the petitioners submit that the mere
classification of the land as alienable or disposable should be deemed
sufficient to convert it into patrimonial property of the State. Relying on the
rulings in Spouses De Ocampo v. Arlos,7 Menguito v. Republic8 and
Republic v. T.A.N. Properties, Inc.,9 they argue that the reclassification of
the land as alienable or disposable opened it to acquisitive prescription
under the Civil Code; that Malabanan had purchased the property from
Eduardo Velazco believing in good faith that Velazco and his
predecessors-in-interest had been the real owners of the land with the right
to validly transmit title and ownership thereof; that consequently, the ten-
year period prescribed by Article 1134 of the Civil Code, in relation to
Section 14(2) of the Property Registration Decree, applied in their favor;
and that when Malabanan filed the application for registration on February
20, 1998, he had already been in possession of the land for almost 16
years reckoned from 1982, the time when the land was declared alienable
and disposable by the State.
The Republics Motion for Partial Reconsideration
The Republic seeks the partial reconsideration in order to obtain a
clarification with reference to the application of the rulings in Naguit and
Herbieto.
Chiefly citing the dissents, the Republic contends that the decision has
enlarged, by implication, the interpretation of Section 14(1) of the Property
Registration Decree through judicial legislation. It reiterates its view that an
applicant is entitled to registration only when the land subject of the
application had been declared alienable and disposable since June 12,
1945 or earlier.
Ruling
We deny the motions for reconsideration.
PROPERTY 1ST BATCH
In reviewing the assailed decision, we consider to be imperative to discuss
the different classifications of land in relation to the existing applicable land
registration laws of the Philippines.
Classifications of land according to ownership
Land, which is an immovable property,10 may be classified as either of
public dominion or of private ownership.11Land is considered of public
dominion if it either: (a) is intended for public use; or (b) belongs to the
State, without being for public use, and is intended for some public service
or for the development of the national wealth.12 Land belonging to the State
that is not of such character, or although of such character but no longer
intended for public use or for public service forms part of the patrimonial
property of the State.13 Land that is other than part of the patrimonial
property of the State, provinces, cities and municipalities is of private
ownership if it belongs to a private individual.
Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept first
introduced into the country from the West by Spain through the Laws of the
Indies and the Royal Cedulas,14 all lands of the public domain belong to the
State.15This means that the State is the source of any asserted right to
ownership of land, and is charged with the conservation of such
patrimony.16
All lands not appearing to be clearly under private ownership are presumed
to belong to the State. Also, public lands remain part of the inalienable land
of the public domain unless the State is shown to have reclassified or
alienated them to private persons.17
Classifications of public lands
according to alienability
Whether or not land of the public domain is alienable and disposable
primarily rests on the classification of public lands made under the
Constitution. Under the 1935 Constitution,18 lands of the public domain
were classified into three, namely, agricultural, timber and
mineral.19 Section 10, Article XIV of the 1973 Constitution classified lands
of the public domain into seven, specifically, agricultural, industrial or
commercial, residential, resettlement, mineral, timber or forest, and grazing
land, with the reservation that the law might provide other classifications.
The 1987 Constitution adopted the classification under the 1935
Constitution into agricultural, forest or timber, and mineral, but added
national parks.20 Agricultural lands may be further classified by law
according to the uses to which they may be devoted.21 The identification of
lands according to their legal classification is done exclusively by and
through a positive act of the Executive Department.22
Based on the foregoing, the Constitution places a limit on the type of public
land that may be alienated. Under Section 2, Article XII of the 1987
Constitution, only agricultural lands of the public domain may be alienated;
all other natural resources may not be.
Alienable and disposable lands of the State fall into two categories, to wit:
(a) patrimonial lands of the State, or those classified as lands of private
ownership under Article 425 of the Civil Code,23 without limitation; and (b)
lands of the public domain, or the public lands as provided by the
Constitution, but with the limitation that the lands must only be agricultural.
Consequently, lands classified as forest or timber, mineral, or national
parks are not susceptible of alienation or disposition unless they are
reclassified as agricultural.24 A positive act of the Government is necessary
to enable such reclassification,25 and the exclusive prerogative to classify
public lands under existing laws is vested in the Executive Department, not
in the courts.26 If, however, public land will be classified as neither
agricultural, forest or timber, mineral or national park, or when public land
is no longer intended for public service or for the development of the
national wealth, thereby effectively removing the land from the ambit of
public dominion, a declaration of such conversion must be made in the
form of a law duly enacted by Congress or by a Presidential proclamation
in cases where the President is duly authorized by law to that
effect.27 Thus, until the Executive Department exercises its prerogative to
classify or reclassify lands, or until Congress or the President declares that
the State no longer intends the land to be used for public service or for the
development of national wealth, the Regalian Doctrine is applicable.
Disposition of alienable public lands
Section 11 of the Public Land Act (CA No. 141) provides the manner by
which alienable and disposable lands of the public domain, i.e., agricultural
lands, can be disposed of, to wit:
Section 11. Public lands suitable for agricultural purposes can be disposed
of only as follows, and not otherwise:
PROPERTY 1ST BATCH
(1) For homestead settlement;
(2) By sale;
(3) By lease; and
(4) By confirmation of imperfect or incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free patent).
The core of the controversy herein lies in the proper interpretation of
Section 11(4), in relation to Section 48(b) of the Public Land Act, which
expressly requires possession by a Filipino citizen of the land since June
12, 1945, or earlier, viz:
Section 48. The following-described citizens of the Philippines, occupying
lands of the public domain or claiming to own any such lands or an interest
therein, but whose titles have not been perfected or completed, may apply
to the Court of First Instance of the province where the land is located for
confirmation of their claims and the issuance of a certificate of title
thereafter, under the Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest
have 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, or earlier,
immediately preceding the filing of the applications 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 entitled to a certificate of title under the
provisions of this chapter. (Bold emphasis supplied)
Note that Section 48(b) of the Public Land Act used the words "lands of the
public domain" or "alienable and disposable lands of the public domain" to
clearly signify that lands otherwise classified, i.e., mineral, forest or timber,
or national parks, and lands of patrimonial or private ownership, are
outside the coverage of the Public Land Act. What the law does not
include, it excludes. The use of the descriptive phrase "alienable and
disposable" further limits the coverage of Section 48(b) to only the
agricultural lands of the public domain as set forth in Article XII, Section 2
of the 1987 Constitution. Bearing in mind such limitations under the Public
Land Act, the applicant must satisfy the following requirements in order for
his application to come under Section 14(1) of the Property Registration
Decree,28 to wit:
1. The applicant, by himself or through his predecessor-in-interest,
has been in possession and occupation of the property subject of
the application;
2. The possession and occupation must be open, continuous,
exclusive, and notorious;
3. The possession and occupation must be under a bona fide claim
of acquisition of ownership;
4. The possession and occupation must have taken place since
June 12, 1945, or earlier; and
5. The property subject of the application must be an agricultural
land of the public domain.
Taking into consideration that the Executive Department is vested with the
authority to classify lands of the public domain, Section 48(b) of the Public
Land Act, in relation to Section 14(1) of the Property Registration Decree,
presupposes that the land subject of the application for registration must
have been already classified as agricultural land of the public domain in
order for the provision to apply. Thus, absent proof that the land is already
classified as agricultural land of the public domain, the Regalian Doctrine
applies, and overcomes the presumption that the land is alienable and
disposable as laid down in Section 48(b) of the Public Land Act. However,
emphasis is placed on the requirement that the classification required by
Section 48(b) of the Public Land Act is classification or reclassification of a
public land as agricultural.
The dissent stresses that the classification or reclassification of the land as
alienable and disposable agricultural land should likewise have been made
on June 12, 1945 or earlier, because any possession of the land prior to
PROPERTY 1ST BATCH
such classification or reclassification produced no legal effects. It observes
that the fixed date of June 12, 1945 could not be minimized or glossed
over by mere judicial interpretation or by judicial social policy concerns,
and insisted that the full legislative intent be respected.
We find, however, that the choice of June 12, 1945 as the reckoning point
of the requisite possession and occupation was the sole prerogative of
Congress, the determination of which should best be left to the wisdom of
the lawmakers. Except that said date qualified the period of possession
and occupation, no other legislative intent appears to be associated with
the fixing of the date of June 12, 1945. Accordingly, the Court should
interpret only the plain and literal meaning of the law as written by the
legislators.
Moreover, an examination of Section 48(b) of the Public Land Act indicates
that Congress prescribed no requirement that the land subject of the
registration should have been classified as agricultural since June 12,
1945, or earlier. As such, the applicants imperfect or incomplete title is
derived only from possession and occupation since June 12, 1945, or
earlier. This means that the character of the property subject of the
application as alienable and disposable agricultural land of the public
domain determines its eligibility for land registration, not the ownership or
title over it.
Alienable public land held by a possessor, either personally or through his
predecessors-in-interest, openly, continuously and exclusively during the
prescribed statutory period is converted to private property by the mere
lapse or completion of the period.29 In fact, by virtue of this doctrine,
corporations may now acquire lands of the public domain for as long as the
lands were already converted to private ownership, by operation of law, as
a result of satisfying the requisite period of possession prescribed by the
Public Land Act.30 It is for this reason that the property subject of the
application of Malabanan need not be classified as alienable and
disposable agricultural land of the public domain for the entire duration of
the requisite period of possession.
To be clear, then, the requirement that the land should have been
classified as alienable and disposable agricultural land at the time of the
application for registration is necessary only to dispute the presumption
that the land is inalienable.
The declaration that land is alienable and disposable also serves to
determine the point at which prescription may run against the State. The
imperfect or incomplete title being confirmed under Section 48(b) of the
Public Land Act is title that is acquired by reason of the applicants
possession and occupation of the alienable and disposable agricultural
land of the public domain. Where all the necessary requirements for a
grant by the Government are complied with through actual physical, open,
continuous, exclusive and public possession of an alienable and
disposable land of the public domain, the possessor is deemed to have
acquired by operation of law not only a right to a grant, but a grant by the
Government, because it is not necessary that a certificate of title be issued
in order that such a grant be sanctioned by the courts.31
If one follows the dissent, the clear objective of the Public Land Act to
adjudicate and quiet titles to unregistered lands in favor of qualified Filipino
citizens by reason of their occupation and cultivation thereof for the
number of years prescribed by law32 will be defeated. Indeed, we should
always bear in mind that such objective still prevails, as a fairly recent
legislative development bears out, when Congress enacted legislation
(Republic Act No. 10023)33in order to liberalize stringent requirements and
procedures in the adjudication of alienable public land to qualified
applicants, particularly residential lands, subject to area limitations.34
On the other hand, if a public land is classified as no longer intended for
public use or for the development of national wealth by declaration of
Congress or the President, thereby converting such land into patrimonial or
private land of the State, the applicable provision concerning disposition
and registration is no longer Section 48(b) of the Public Land Act but the
Civil Code, in conjunction with Section 14(2) of the Property Registration
Decree.35 As such, prescription can now run against the State.
To sum up, we now observe the following rules relative to the disposition of
public land or lands of the public domain, namely:
(1) As a general rule and pursuant to the Regalian Doctrine, all
lands of the public domain belong to the State and are inalienable.
Lands that are not clearly under private ownership are also
presumed to belong to the State and, therefore, may not be
alienated or disposed;
(2) The following are excepted from the general rule, to wit:
PROPERTY 1ST BATCH
(a) Agricultural lands of the public domain are rendered
alienable and disposable through any of the exclusive
modes enumerated under Section 11 of the Public Land
Act. If the mode is judicial confirmation of imperfect title
under Section 48(b) of the Public Land Act, the agricultural
land subject of the application needs only to be classified
as alienable and disposable as of the time of the
application, provided the applicants possession and
occupation of the land dated back to June 12, 1945, or
earlier. Thereby, a conclusive presumption that the
applicant has performed all the conditions essential to a
government grant arises,36 and the applicant becomes the
owner of the land by virtue of an imperfect or incomplete
title. By legal fiction, the land has already ceased to be part
of the public domain and has become private property.37
(b) Lands of the public domain subsequently classified or
declared as no longer intended for public use or for the
development of national wealth are removed from the
sphere of public dominion and are considered converted
into patrimonial lands or lands of private ownership that
may be alienated or disposed through any of the modes of
acquiring ownership under the Civil Code. If the mode of
acquisition is prescription, whether ordinary or
extraordinary, proof that the land has been already
converted to private ownership prior to the requisite
acquisitive prescriptive period is a condition sine qua non in
observance of the law (Article 1113, Civil Code) that
property of the State not patrimonial in character shall not
be the object of prescription.
To reiterate, then, the petitioners failed to present sufficient evidence to
establish that they and their predecessors-in-interest had been in
possession of the land since June 12, 1945. Without satisfying the
requisite character and period of possession - possession and occupation
that is open, continuous, exclusive, and notorious since June 12, 1945, or
earlier - the land cannot be considered ipso jure converted to private
property even upon the subsequent declaration of it as alienable and
disposable. Prescription never began to run against the State, such that
the land has remained ineligible for registration under Section 14(1) of the
Property Registration Decree. Likewise, the land continues to be ineligible
for land registration under Section 14(2) of the Property Registration
Decree unless Congress enacts a law or the President issues a
proclamation declaring the land as no longer intended for public service or
for the development of the national wealth.1wphi1
WHEREFORE, the Court DENIES the petitioners' Motion for
Reconsideration and the respondent's Partial Motion for Reconsideration
for their lack of merit.
SO ORDERED.
G.R. No. 167707 October 8, 2008
THE SECRETARY OF THE DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES, THE REGIONAL EXECUTIVE DIRECTOR,
DENR-REGION VI, REGIONAL TECHNICAL DIRECTOR FOR LANDS,
LANDS MANAGEMENT BUREAU, REGION VI PROVINCIAL
ENVIRONMENT AND NATURAL RESOURCES OFFICER OF KALIBO,
AKLAN, REGISTER OF DEEDS, DIRECTOR OF LAND REGISTRATION
AUTHORITY, DEPARTMENT OF TOURISM SECRETARY, DIRECTOR
OF PHILIPPINE TOURISM AUTHORITY, petitioners,
vs.
MAYOR JOSE S. YAP, LIBERTAD TALAPIAN, MILA Y. SUMNDAD, and
ANICETO YAP, in their behalf and in behalf of all those similarly
situated, respondents.
x--------------------------------------------------x
G.R. No. G.R. No. 173775 October 8, 2008
DR. ORLANDO SACAY and WILFREDO GELITO, joined by THE
LANDOWNERS OF BORACAY SIMILARLY SITUATED NAMED IN A
LIST, ANNEX "A" OF THIS PETITION, petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES, THE REGIONAL TECHNICAL DIRECTOR
FOR LANDS, LANDS MANAGEMENT BUREAU, REGION VI,
PROVINCIAL ENVIRONMENT AND NATURAL RESOURCES OFFICER,
KALIBO, AKLAN, respondents.
PROPERTY 1ST BATCH
DECISION
REYES, R.T., J.:
AT stake in these consolidated cases is the right of the present occupants
of Boracay Island to secure titles over their occupied lands.
There are two consolidated petitions. The first is G.R. No. 167707, a
petition for review on certiorari of the Decision1of the Court of Appeals (CA)
affirming that2 of the Regional Trial Court (RTC) in Kalibo, Aklan, which
granted the petition for declaratory relief filed by respondents-claimants
Mayor Jose Yap, et al. and ordered the survey of Boracay for titling
purposes. The second is G.R. No. 173775, a petition for prohibition,
mandamus, and nullification of Proclamation No. 10645">[3] issued by
President Gloria Macapagal-Arroyo classifying Boracay into reserved
forest and agricultural land.
The Antecedents
G.R. No. 167707
Boracay Island in the Municipality of Malay, Aklan, with its powdery white
sand beaches and warm crystalline waters, is reputedly a premier
Philippine tourist destination. The island is also home to 12,003
inhabitants4 who live in the bone-shaped islands three barangays.5
On April 14, 1976, the Department of Environment and Natural Resources
(DENR) approved the National Reservation Survey of Boracay
Island,6 which identified several lots as being occupied or claimed by
named persons.7
On November 10, 1978, then President Ferdinand Marcos issued
Proclamation No. 18018 declaring Boracay Island, among other islands,
caves and peninsulas in the Philippines, as tourist zones and marine
reserves under the administration of the Philippine Tourism Authority
(PTA). President Marcos later approved the issuance of PTA Circular 3-
829 dated September 3, 1982, to implement Proclamation No. 1801.
Claiming that Proclamation No. 1801 and PTA Circular No 3-82 precluded less fifty (50) years ago; and (4) respondents-claimants declared the land
them from filing an application for judicial confirmation of imperfect title or they were occupying for tax purposes.12
survey of land for titling purposes, respondents-claimants
Mayor Jose S. Yap, Jr., Libertad Talapian, Mila Y. Sumndad, and Aniceto The parties also agreed that the principal issue for resolution was purely
Yap filed a petition for declaratory relief with the RTC in Kalibo, Aklan. legal: whether Proclamation No. 1801 posed any legal hindrance or
impediment to the titling of the lands in Boracay. They decided to forego
In their petition, respondents-claimants alleged that Proclamation No. 1801 with the trial and to submit the case for resolution upon submission of their
and PTA Circular No. 3-82 raised doubts on their right to secure titles over respective memoranda.13
their occupied lands. They declared that they themselves, or through their
predecessors-in-interest, had been in open, continuous, exclusive, and The RTC took judicial notice14 that certain parcels of land in Boracay
notorious possession and occupation in Boracay since June 12, 1945, or Island, more particularly Lots 1 and 30, Plan PSU-5344, were covered by
earlier since time immemorial. They declared their lands for tax purposes Original Certificate of Title No. 19502 (RO 2222) in the name of the Heirs
and paid realty taxes on them.10 of Ciriaco S. Tirol. These lots were involved in Civil Case Nos. 5222 and
5262 filed before the RTC of Kalibo, Aklan.15 The titles were issued on
Respondents-claimants posited that Proclamation No. 1801 and its
implementing Circular did not place Boracay beyond the commerce of August 7, 1933.16
man. Since the Island was classified as a tourist zone, it was susceptible of
private ownership. Under Section 48(b) of Commonwealth Act (CA) No. RTC and CA Dispositions
141, otherwise known as the Public Land Act, they had the right to have
the lots registered in their names through judicial confirmation of imperfect
On July 14, 1999, the RTC rendered a decision in favor of respondents-
titles.
claimants, with a fallo reading:
The Republic, through the Office of the Solicitor General (OSG), opposed
WHEREFORE, in view of the foregoing, the Court declares that
the petition for declaratory relief. The OSG countered that Boracay Island
Proclamation No. 1801 and PTA Circular No. 3-82 pose no legal obstacle
was an unclassified land of the public domain. It formed part of the mass
to the petitioners and those similarly situated to acquire title to their lands
of lands classified as "public forest," which was not available for disposition
in Boracay, in accordance with the applicable laws and in the manner
pursuant to Section 3(a) of Presidential Decree (PD) No. 705 or the
prescribed therein; and to have their lands surveyed and approved by
Revised Forestry Code,11 as amended.
respondent Regional Technical Director of Lands as the approved survey
does not in itself constitute a title to the land.
The OSG maintained that respondents-claimants reliance on PD No. 1801
and PTA Circular No. 3-82 was misplaced. Their right to judicial
SO ORDERED.17
confirmation of title was governed by CA No. 141 and PD No. 705. Since
Boracay Island had not been classified as alienable and disposable,
whatever possession they had cannot ripen into ownership. The RTC upheld respondents-claimants right to have their occupied lands
titled in their name. It ruled that neither Proclamation No. 1801 nor PTA
Circular No. 3-82 mentioned that lands in Boracay were inalienable or
During pre-trial, respondents-claimants and the OSG stipulated on the
could not be the subject of disposition.18 The Circular itself recognized
following facts: (1) respondents-claimants were presently in possession of
private ownership of lands.19 The trial court cited Sections 8720 and 5321 of
parcels of land in Boracay Island; (2) these parcels of land were planted
the Public Land Act as basis for acknowledging private ownership of lands
with coconut trees and other natural growing trees; (3) the coconut trees
in Boracay and that only those forested areas in public lands were
had heights of more or less twenty (20) meters and were planted more or
declared as part of the forest reserve.22

PROPERTY 1ST BATCH

The OSG moved for reconsideration but its motion was denied.23 The
Republic then appealed to the CA.
On December 9, 2004, the appellate court affirmed in toto the RTC
decision, disposing as follows:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by us DENYING the appeal filed in this case and AFFIRMING the
decision of the lower court.24
The CA held that respondents-claimants could not be prejudiced by a
declaration that the lands they occupied since time immemorial were part
of a forest reserve.
Again, the OSG sought reconsideration but it was similarly
denied.25 Hence, the present petition under Rule 45.
G.R. No. 173775
On May 22, 2006, during the pendency of G.R. No. 167707, President
Gloria Macapagal-Arroyo issued Proclamation No. 106426 classifying
Boracay Island into four hundred (400) hectares of reserved forest land
(protection purposes) and six hundred twenty-eight and 96/100 (628.96)
hectares of agricultural land (alienable and disposable). The Proclamation
likewise provided for a fifteen-meter buffer zone on each side of the
centerline of roads and trails, reserved for right-of-way and which shall
form part of the area reserved for forest land protection purposes.
On August 10, 2006, petitioners-claimants Dr. Orlando Sacay,27 Wilfredo
Gelito,28 and other landowners29 in Boracay filed with this Court an original
petition for prohibition, mandamus, and nullification of Proclamation No.
1064.30 They allege that the Proclamation infringed on their "prior vested
rights" over portions of Boracay. They have been in continued possession
of their respective lots in Boracay since time immemorial. They have also
invested billions of pesos in developing their lands and building
internationally renowned first class resorts on their lots.31
Petitioners-claimants contended that there is no need for a proclamation
reclassifying Boracay into agricultural land. Being classified as neither
mineral nor timber land, the island is deemed agricultural pursuant to the
Philippine Bill of 1902 and Act No. 926, known as the first Public Land
PROPERTY 1ST BATCH
Act.32 Thus, their possession in the concept of owner for the required
period entitled them to judicial confirmation of imperfect title.
Opposing the petition, the OSG argued that petitioners-claimants do not
have a vested right over their occupied portions in the island. Boracay is an
unclassified public forest land pursuant to Section 3(a) of PD No. 705.
Being public forest, the claimed portions of the island are inalienable and
cannot be the subject of judicial confirmation of imperfect title. It is only the
executive department, not the courts, which has authority to reclassify
lands of the public domain into alienable and disposable lands. There is a
need for a positive government act in order to release the lots for
disposition.
On November 21, 2006, this Court ordered the consolidation of the two
petitions as they principally involve the same issues on the land
classification of Boracay Island.33
Issues
G.R. No. 167707
The OSG raises the lone issue of whether Proclamation No. 1801 and PTA
Circular No. 3-82 pose any legal obstacle for respondents, and all those
similarly situated, to acquire title to their occupied lands in Boracay
Island.34
G.R. No. 173775
Petitioners-claimants hoist five (5) issues, namely:
I.
AT THE TIME OF THE ESTABLISHED POSSESSION OF PETITIONERS
IN CONCEPT OF OWNER OVER THEIR RESPECTIVE AREAS IN
BORACAY, SINCE TIME IMMEMORIAL OR AT THE LATEST SINCE 30
YRS. PRIOR TO THE FILING OF THE PETITION FOR DECLARATORY
RELIEF ON NOV. 19, 1997, WERE THE AREAS OCCUPIED BY THEM
PUBLIC AGRICULTURAL LANDS AS DEFINED BY LAWS THEN ON
JUDICIAL CONFIRMATION OF IMPERFECT TITLES OR PUBLIC
FOREST AS DEFINED BY SEC. 3a, PD 705?
 II.
HAVE PETITIONERS OCCUPANTS ACQUIRED PRIOR VESTED RIGHT
OF PRIVATE OWNERSHIP OVER THEIR OCCUPIED PORTIONS OF
BORACAY LAND, DESPITE THE FACT THAT THEY HAVE NOT
APPLIED YET FOR JUDICIAL CONFIRMATION OF IMPERFECT TITLE?
III.
IS THE EXECUTIVE DECLARATION OF THEIR AREAS AS ALIENABLE
AND DISPOSABLE UNDER SEC 6, CA 141 [AN] INDISPENSABLE PRE-
REQUISITE FOR PETITIONERS TO OBTAIN TITLE UNDER THE
TORRENS SYSTEM?
IV.
IS THE ISSUANCE OF PROCLAMATION 1064 ON MAY 22, 2006,
VIOLATIVE OF THE PRIOR VESTED RIGHTS TO PRIVATE
OWNERSHIP OF PETITIONERS OVER THEIR LANDS IN BORACAY,
PROTECTED BY THE DUE PROCESS CLAUSE OF THE
CONSTITUTION OR IS PROCLAMATION 1064 CONTRARY TO SEC. 8,
CA 141, OR SEC. 4(a) OF RA 6657.
V.
CAN RESPONDENTS BE COMPELLED BY MANDAMUS TO ALLOW
THE SURVEY AND TO APPROVE THE SURVEY PLANS FOR
PURPOSES OF THE APPLICATION FOR TITLING OF THE LANDS OF
PETITIONERS IN BORACAY?35 (Underscoring supplied)
In capsule, the main issue is whether private claimants (respondents-
claimants in G.R. No. 167707 and petitioners-claimants in G.R. No.
173775) have a right to secure titles over their occupied portions in
Boracay. The twin petitions pertain to their right, if any, to judicial
confirmation of imperfect title under CA No. 141, as amended. They do not
involve their right to secure title under other pertinent laws.
Our Ruling
Regalian Doctrine and power of the executive
PROPERTY 1ST BATCH
to reclassify lands of the public domain
Private claimants rely on three (3) laws and executive acts in their bid for
judicial confirmation of imperfect title, namely: (a) Philippine Bill of 190236 in
relation to Act No. 926, later amended and/or superseded by Act No. 2874
and CA No. 141;37 (b) Proclamation No. 180138 issued by then President
Marcos; and (c) Proclamation No. 106439issued by President Gloria
Macapagal-Arroyo. We shall proceed to determine their rights to apply for
judicial confirmation of imperfect title under these laws and executive acts.
But first, a peek at the Regalian principle and the power of the executive to
reclassify lands of the public domain.
The 1935 Constitution classified lands of the public domain into
agricultural, forest or timber.40 Meanwhile, the 1973 Constitution provided
the following divisions: agricultural, industrial or commercial, residential,
resettlement, mineral, timber or forest and grazing lands, and such other
classes as may be provided by law,41 giving the government great leeway
for classification.42 Then the 1987 Constitution reverted to the 1935
Constitution classification with one addition: national parks.43 Of
these, only agricultural lands may be alienated.44 Prior to Proclamation No.
1064 of May 22, 2006, Boracay Island had never been expressly and
administratively classified under any of these grand divisions. Boracay was
an unclassified land of the public domain.
The Regalian Doctrine dictates that all lands of the public domain belong to
the State, that the State is the source of any asserted right to ownership of
land and charged with the conservation of such patrimony.45 The doctrine
has been consistently adopted under the 1935, 1973, and 1987
Constitutions.46
All lands not otherwise appearing to be clearly within private ownership are
presumed to belong to the State.47Thus, all lands that have not been
acquired from the government, either by purchase or by grant, belong to
the State as part of the inalienable public domain.48 Necessarily, it is up to
the State to determine if lands of the public domain will be disposed of for
private ownership. The government, as the agent of the state, is
possessed of the plenary power as the persona in law to determine who
shall be the favored recipients of public lands, as well as under what terms
they may be granted such privilege, not excluding the placing of obstacles
in the way of their exercise of what otherwise would be ordinary acts of
ownership.49
Our present land law traces its roots to the Regalian Doctrine. Upon the
Spanish conquest of the Philippines, ownership of all lands, territories and
possessions in the Philippines passed to the Spanish Crown.50 The
Regalian doctrine was first introduced in the Philippines through the Laws
of the Indies and the Royal Cedulas, which laid the foundation that "all
lands that were not acquired from the Government, either by purchase or
by grant, belong to the public domain."51
The Laws of the Indies was followed by the Ley Hipotecaria or the
Mortgage Law of 1893. The Spanish Mortgage Law provided for the
systematic registration of titles and deeds as well as possessory claims.52
The Royal Decree of 1894 or the Maura Law53 partly amended the Spanish
Mortgage Law and the Laws of the Indies. It established possessory
information as the method of legalizing possession of vacant Crown land,
under certain conditions which were set forth in said decree.54 Under
Section 393 of the Maura Law, an informacion posesoria or possessory
information title,55 when duly inscribed in the Registry of Property, is
converted into a title of ownership only after the lapse of twenty (20) years
of uninterrupted possession which must be actual, public, and
adverse,56 from the date of its inscription.57 However, possessory
information title had to be perfected one year after the promulgation of the
Maura Law, or until April 17, 1895. Otherwise, the lands would revert to the
State.58
In sum, private ownership of land under the Spanish regime could only be
founded on royal concessions which took various forms, namely: (1) titulo
real or royal grant; (2) concesion especial or special grant; (3) composicion
con el estado or adjustment title; (4) titulo de compra or title by purchase;
and (5) informacion posesoria or possessory information title.59>
The first law governing the disposition of public lands in the Philippines
under American rule was embodied in the Philippine Bill of 1902.60 By this
law, lands of the public domain in the Philippine Islands were classified into
three (3) grand divisions, to wit: agricultural, mineral, and timber or forest
lands.61 The act provided for, among others, the disposal of mineral lands
by means of absolute grant (freehold system) and by lease (leasehold
system).62 It also provided the definition by exclusion of "agricultural public
PROPERTY 1ST BATCH
lands."63 Interpreting the meaning of "agricultural lands" under the
Philippine Bill of 1902, the Court declared in Mapa v. Insular Government:64
x x x In other words, that the phrase "agricultural land" as used in Act
No. 926 means those public lands acquired from Spain which are not
timber or mineral lands. x x x65 (Emphasis Ours)
On February 1, 1903, the Philippine Legislature passed Act
No. 496, otherwise known as the Land Registration Act. The act
established a system of registration by which recorded title becomes
absolute, indefeasible, and imprescriptible. This is known as the Torrens
system.66
Concurrently, on October 7, 1903, the Philippine Commission passed Act
No. 926, which was the first Public Land Act. The Act introduced the
homestead system and made provisions for judicial and administrative
confirmation of imperfect titles and for the sale or lease of public lands. It
permitted corporations regardless of the nationality of persons owning the
controlling stock to lease or purchase lands of the public domain.67 Under
the Act, open, continuous, exclusive, and notorious possession and
occupation of agricultural lands for the next ten (10) years preceding July
26, 1904 was sufficient for judicial confirmation of imperfect title.68
On November 29, 1919, Act No. 926 was superseded by Act
No. 2874, otherwise known as the second Public Land Act. This new, more
comprehensive law limited the exploitation of agricultural lands to Filipinos
and Americans and citizens of other countries which gave Filipinos the
same privileges. For judicial confirmation of title, possession and
occupation en concepto dueo since time immemorial, or since July 26,
1894, was required.69
After the passage of the 1935 Constitution, CA No. 141 amended Act No.
2874 on December 1, 1936. To this day, CA No. 141, as
amended, remains as the existing general law governing the classification
and disposition of lands of the public domain other than timber and mineral
lands,70 and privately owned lands which reverted to the State.71
Section 48(b) of CA No. 141 retained the requirement under Act No. 2874
of possession and occupation of lands of the public domain since time
immemorial or since July 26, 1894. However, this provision was
superseded by Republic Act (RA) No. 1942,72 which provided for a simple
thirty-year prescriptive period for judicial confirmation of imperfect title. The
provision was last amended by PD No. 1073,73 which now provides for
possession and occupation of the land applied for since June 12, 1945, or
earlier.74
The issuance of PD No. 89275 on February 16, 1976 discontinued the use
of Spanish titles as evidence in land registration proceedings.76 Under the
decree, all holders of Spanish titles or grants should apply for registration
of their lands under Act No. 496 within six (6) months from the effectivity of
the decree on February 16, 1976. Thereafter, the recording of
all unregistered lands77 shall be governed by Section 194 of the Revised
Administrative Code, as amended by Act No. 3344.
On June 11, 1978, Act No. 496 was amended and updated by PD No.
1529, known as the Property Registration Decree. It was enacted to codify
the various laws relative to registration of property.78 It governs registration
of lands under the Torrens system as well as unregistered lands, including
chattel mortgages.79
A positive act declaring land as alienable and disposable is
required. In keeping with the presumption of State ownership, the Court
has time and again emphasized that there must be a positive act of the
government, such as an official proclamation,80 declassifying inalienable
public land into disposable land for agricultural or other purposes.81 In fact,
Section 8 of CA No. 141 limits alienable or disposable lands only to those
lands which have been "officially delimited and classified."82
The burden of proof in overcoming the presumption of State ownership of
the lands of the public domain is on the person applying for registration (or
claiming ownership), who must prove that the land subject of the
application is alienable or disposable.83 To overcome this presumption,
incontrovertible evidence must be established that the land subject of the
application (or claim) is alienable or disposable.84 There must still be a
positive act declaring land of the public domain as alienable and
disposable. To prove that the land subject of an application for registration
is alienable, the applicant must establish the existence of a positive act of
the government such as a presidential proclamation or an executive order;
an administrative action; investigation reports of Bureau of Lands
investigators; and a legislative act or a statute.85 The applicant may also
secure a certification from the government that the land claimed to have
PROPERTY 1ST BATCH
been possessed for the required number of years is alienable and
disposable.86
In the case at bar, no such proclamation, executive order, administrative
action, report, statute, or certification was presented to the Court. The
records are bereft of evidence showing that, prior to 2006, the portions of
Boracay occupied by private claimants were subject of a government
proclamation that the land is alienable and disposable. Absent such well-
nigh incontrovertible evidence, the Court cannot accept the submission
that lands occupied by private claimants were already open to disposition
before 2006. Matters of land classification or reclassification cannot be
assumed. They call for proof.87
Ankron and De Aldecoa did not make the whole of Boracay Island, or
portions of it, agricultural lands. Private claimants posit that Boracay
was already an agricultural land pursuant to the old cases Ankron v.
Government of the Philippine Islands (1919)88 and De Aldecoa v. The
Insular Government (1909).89 These cases were decided under the
provisions of the Philippine Bill of 1902 and Act No. 926. There is a
statement in these old cases that "in the absence of evidence to the
contrary, that in each case the lands are agricultural lands until the
contrary is shown."90
Private claimants reliance on Ankron and De Aldecoa is misplaced. These
cases did not have the effect of converting the whole of Boracay Island or
portions of it into agricultural lands. It should be stressed that the Philippine
Bill of 1902 and Act No. 926 merely provided the manner through which
land registration courts would classify lands of the public domain. Whether
the land would be classified as timber, mineral, or agricultural depended on
proof presented in each case.
Ankron and De Aldecoa were decided at a time when the President of the
Philippines had no power to classify lands of the public domain into
mineral, timber, and agricultural. At that time, the courts were free to make
corresponding classifications in justiciable cases, or were vested with
implicit power to do so, depending upon the preponderance of the
evidence.91 This was the Courts ruling in Heirs of the Late Spouses Pedro
S. Palanca and Soterranea Rafols Vda. De Palanca v. Republic,92 in which
it stated, through Justice Adolfo Azcuna, viz.:
x x x Petitioners furthermore insist that a particular land need not be
formally released by an act of the Executive before it can be deemed open
to private ownership, citing the cases of Ramos v. Director of Lands and
Ankron v. Government of the Philippine Islands.
xxxx
Petitioners reliance upon Ramos v. Director of Lands and Ankron v.
Government is misplaced. These cases were decided under the Philippine
Bill of 1902 and the first Public Land Act No. 926 enacted by the Philippine
Commission on October 7, 1926, under which there was no legal provision
vesting in the Chief Executive or President of the Philippines the power to
classify lands of the public domain into mineral, timber and agricultural so
that the courts then were free to make corresponding classifications in
justiciable cases, or were vested with implicit power to do so, depending
upon the preponderance of the evidence.93
To aid the courts in resolving land registration cases under Act No. 926, it
was then necessary to devise a presumption on land classification. Thus
evolved the dictum in Ankron that "the courts have a right to presume, in
the absence of evidence to the contrary, that in each case the lands are
agricultural lands until the contrary is shown."94
But We cannot unduly expand the presumption in Ankron and De
Aldecoa to an argument that all lands of the public domain had been
automatically reclassified as disposable and alienable agricultural lands.
By no stretch of imagination did the presumption convert all lands of the
public domain into agricultural lands.
If We accept the position of private claimants, the Philippine Bill of 1902
and Act No. 926 would have automatically made all lands in the
Philippines, except those already classified as timber or mineral land,
alienable and disposable lands. That would take these lands out of State
ownership and worse, would be utterly inconsistent with and totally
repugnant to the long-entrenched Regalian doctrine.
The presumption in Ankron and De Aldecoa attaches only to land
registration cases brought under the provisions of Act No. 926, or more
specifically those cases dealing with judicial and administrative
confirmation of imperfect titles. The presumption applies to an applicant for
judicial or administrative conformation of imperfect title under Act No. 926.
PROPERTY 1ST BATCH
It certainly cannot apply to landowners, such as private claimants or their
predecessors-in-interest, who failed to avail themselves of the benefits of
Act No. 926. As to them, their land remained unclassified and, by virtue of
the Regalian doctrine, continued to be owned by the State.
In any case, the assumption in Ankron and De Aldecoa was not absolute.
Land classification was, in the end, dependent on proof. If there was proof
that the land was better suited for non-agricultural uses, the courts could
adjudge it as a mineral or timber land despite the presumption.
In Ankron, this Court stated:
In the case of Jocson vs. Director of Forestry (supra), the Attorney-General
admitted in effect that whether the particular land in question belongs to
one class or another is a question of fact. The mere fact that a tract of land
has trees upon it or has mineral within it is not of itself sufficient to declare
that one is forestry land and the other, mineral land. There must be some
proof of the extent and present or future value of the forestry and of the
minerals. While, as we have just said, many definitions have been given for
"agriculture," "forestry," and "mineral" lands, and that in each case it is a
question of fact, we think it is safe to say that in order to be forestry or
mineral land the proof must show that it is more valuable for the forestry or
the mineral which it contains than it is for agricultural purposes. (Sec. 7,
Act No. 1148.) It is not sufficient to show that there exists some trees upon
the land or that it bears some mineral. Land may be classified as forestry
or mineral today, and, by reason of the exhaustion of the timber or mineral,
be classified as agricultural land tomorrow. And vice-versa, by reason of
the rapid growth of timber or the discovery of valuable minerals, lands
classified as agricultural today may be differently classified
tomorrow. Each case must be decided upon the proof in that particular
case, having regard for its present or future value for one or the other
purposes. We believe, however, considering the fact that it is a matter of
public knowledge that a majority of the lands in the Philippine Islands are
agricultural lands that the courts have a right to presume, in the absence of
evidence to the contrary, that in each case the lands are agricultural lands
until the contrary is shown. Whatever the land involved in a particular
land registration case is forestry or mineral land must, therefore, be a
matter of proof. Its superior value for one purpose or the other is a
question of fact to be settled by the proof in each particular case. The
fact that the land is a manglar [mangrove swamp] is not sufficient for the
courts to decide whether it is agricultural, forestry, or mineral land. It may
perchance belong to one or the other of said classes of land. The
Government, in the first instance, under the provisions of Act No. 1148,
may, by reservation, decide for itself what portions of public land shall be
considered forestry land, unless private interests have intervened before
such reservation is made. In the latter case, whether the land is
agricultural, forestry, or mineral, is a question of proof. Until private
interests have intervened, the Government, by virtue of the terms of said
Act (No. 1148), may decide for itself what portions of the "public domain"
shall be set aside and reserved as forestry or mineral land. (Ramos vs.
Director of Lands, 39 Phil. 175; Jocson vs. Director of
Forestry, supra)95(Emphasis ours)
Since 1919, courts were no longer free to determine the classification of
lands from the facts of each case, except those that have already became
private lands.96 Act No. 2874, promulgated in 1919 and reproduced in
Section 6 of CA No. 141, gave the Executive Department, through the
President, the exclusive prerogative to classify or reclassify public lands
into alienable or disposable, mineral or forest.96-a Since then, courts no
longer had the authority, whether express or implied, to determine the
classification of lands of the public domain.97
Here, private claimants, unlike the Heirs of Ciriaco Tirol who were issued
their title in 1933,98 did not present a justiciable case for determination by
the land registration court of the propertys land classification. Simply put,
there was no opportunity for the courts then to resolve if the land the
Boracay occupants are now claiming were agricultural lands. When Act
No. 926 was supplanted by Act No. 2874 in 1919, without an application
for judicial confirmation having been filed by private claimants or their
predecessors-in-interest, the courts were no longer authorized to
determine the propertys land classification. Hence, private claimants
cannot bank on Act No. 926.
We note that the RTC decision99 in G.R. No. 167707 mentioned Krivenko
v. Register of Deeds of Manila,100 which was decided in 1947 when CA No.
141, vesting the Executive with the sole power to classify lands of the
public domain was already in effect. Krivenko cited the old cases Mapa v.
Insular Government,101 De Aldecoa v. The Insular
Government,102 and Ankron v. Government of the Philippine Islands.103
Krivenko, however, is not controlling here because it involved a totally
different issue. The pertinent issue in Krivenko was whether residential lots
were included in the general classification of agricultural lands; and if so,
whether an alien could acquire a residential lot. This Court ruled that as an
PROPERTY 1ST BATCH
alien, Krivenko was prohibited by the 1935 Constitution104 from acquiring
agricultural land, which included residential lots. Here, the issue is whether
unclassified lands of the public domain are automatically deemed
agricultural.
Notably, the definition of "agricultural public lands" mentioned
in Krivenko relied on the old cases decided prior to the enactment of Act
No. 2874, including Ankron and De Aldecoa.105 As We have already stated,
those cases cannot apply here, since they were decided when the
Executive did not have the authority to classify lands as agricultural,
timber, or mineral.
Private claimants continued possession under Act No. 926 does not
create a presumption that the land is alienable. Private claimants also
contend that their continued possession of portions of Boracay Island for
the requisite period of ten (10) years under Act No. 926106 ipso
facto converted the island into private ownership. Hence, they may apply
for a title in their name.
A similar argument was squarely rejected by the Court in Collado v. Court
of Appeals.107 Collado, citing the separate opinion of now Chief Justice
Reynato S. Puno in Cruz v. Secretary of Environment and Natural
Resources,107-a ruled:
"Act No. 926, the first Public Land Act, was passed in pursuance of the
provisions of the Philippine Bill of 1902. The law governed the disposition
of lands of the public domain. It prescribed rules and regulations for the
homesteading, selling and leasing of portions of the public domain of the
Philippine Islands, and prescribed the terms and conditions to enable
persons to perfect their titles to public lands in the Islands. It also provided
for the "issuance of patents to certain native settlers upon public lands," for
the establishment of town sites and sale of lots therein, for the completion
of imperfect titles, and for the cancellation or confirmation of Spanish
concessions and grants in the Islands." In short, the Public Land Act
operated on the assumption that title to public lands in the Philippine
Islands remained in the government; and that the governments title to
public land sprung from the Treaty of Paris and other subsequent treaties
between Spain and the United States. The term "public land" referred to all
lands of the public domain whose title still remained in the government and
are thrown open to private appropriation and settlement, and excluded the
patrimonial property of the government and the friar lands."
Thus, it is plain error for petitioners to argue that under the Philippine
Bill of 1902 and Public Land Act No. 926, mere possession by private
individuals of lands creates the legal presumption that the lands are
alienable and disposable.108 (Emphasis Ours)
Except for lands already covered by existing titles, Boracay was an
unclassified land of the public domain prior to Proclamation No. 1064.
Such unclassified lands are considered public forest under PD No.
705. The DENR109 and the National Mapping and Resource Information
Authority110 certify that Boracay Island is an unclassified land of the public
domain.
PD No. 705 issued by President Marcos categorized all unclassified lands
of the public domain as public forest. Section 3(a) of PD No. 705 defines a
public forest as "a mass of lands of the public domain which has not been
the subject of the present system of classification for the determination of
which lands are needed for forest purpose and which are not." Applying
PD No. 705, all unclassified lands, including those in Boracay Island,
are ipso facto considered public forests. PD No. 705, however, respects
titles already existing prior to its effectivity.
The Court notes that the classification of Boracay as a forest land under
PD No. 705 may seem to be out of touch with the present realities in the
island. Boracay, no doubt, has been partly stripped of its forest cover to
pave the way for commercial developments. As a premier tourist
destination for local and foreign tourists, Boracay appears more of a
commercial island resort, rather than a forest land.
Nevertheless, that the occupants of Boracay have built multi-million peso
beach resorts on the island;111 that the island has already been stripped of
its forest cover; or that the implementation of Proclamation No. 1064 will
destroy the islands tourism industry, do not negate its character as public
forest.
Forests, in the context of both the Public Land Act and the
Constitution112 classifying lands of the public domain into "agricultural,
forest or timber, mineral lands, and national parks," do not necessarily
refer to large tracts of wooded land or expanses covered by dense growths
of trees and underbrushes.113 The discussion in Heirs of Amunategui v.
Director of Forestry114 is particularly instructive:
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A forested area classified as forest land of the public domain does not lose
such classification simply because loggers or settlers may have stripped it
of its forest cover. Parcels of land classified as forest land may actually be
covered with grass or planted to crops by kaingin cultivators or other
farmers. "Forest lands" do not have to be on mountains or in out of the way
places. Swampy areas covered by mangrove trees, nipa palms, and other
trees growing in brackish or sea water may also be classified as forest
land. The classification is descriptive of its legal nature or status and
does not have to be descriptive of what the land actually looks
like. Unless and until the land classified as "forest" is released in an official
proclamation to that effect so that it may form part of the disposable
agricultural lands of the public domain, the rules on confirmation of
imperfect title do not apply.115 (Emphasis supplied)
There is a big difference between "forest" as defined in a dictionary and
"forest or timber land" as a classification of lands of the public domain as
appearing in our statutes. One is descriptive of what appears on the land
while the other is a legal status, a classification for legal purposes.116 At
any rate, the Court is tasked to determine the legal status of Boracay
Island, and not look into its physical layout. Hence, even if its forest cover
has been replaced by beach resorts, restaurants and other commercial
establishments, it has not been automatically converted from public forest
to alienable agricultural land.
Private claimants cannot rely on Proclamation No. 1801 as basis for
judicial confirmation of imperfect title. The proclamation did not
convert Boracay into an agricultural land. However, private claimants
argue that Proclamation No. 1801 issued by then President Marcos in
1978 entitles them to judicial confirmation of imperfect title. The
Proclamation classified Boracay, among other islands, as a tourist zone.
Private claimants assert that, as a tourist spot, the island is susceptible of
private ownership.
Proclamation No. 1801 or PTA Circular No. 3-82 did not convert the whole
of Boracay into an agricultural land. There is nothing in the law or the
Circular which made Boracay Island an agricultural land. The reference in
Circular No. 3-82 to "private lands"117 and "areas declared as alienable and
disposable"118 does not by itself classify the entire island as agricultural.
Notably, Circular No. 3-82 makes reference not only to private lands and
areas but also to public forested lands. Rule VIII, Section 3 provides:
No trees in forested private lands may be cut without prior authority from
the PTA. All forested areas in public lands are declared forest reserves.
(Emphasis supplied)
Clearly, the reference in the Circular to both private and public lands
merely recognizes that the island can be classified by the Executive
department pursuant to its powers under CA No. 141. In fact, Section 5 of
the Circular recognizes the then Bureau of Forest Developments authority
to declare areas in the island as alienable and disposable when it provides:
Subsistence farming, in areas declared as alienable and disposable by the
Bureau of Forest Development.
Therefore, Proclamation No. 1801 cannot be deemed the positive act
needed to classify Boracay Island as alienable and disposable land. If
President Marcos intended to classify the island as alienable and
disposable or forest, or both, he would have identified the specific limits of
each, as President Arroyo did in Proclamation No. 1064. This was not
done in Proclamation No. 1801.
The Whereas clauses of Proclamation No. 1801 also explain the rationale
behind the declaration of Boracay Island, together with other islands, caves
and peninsulas in the Philippines, as a tourist zone and marine reserve to
be administered by the PTA to ensure the concentrated efforts of the
public and private sectors in the development of the areas tourism
potential with due regard for ecological balance in the marine environment.
Simply put, the proclamation is aimed at administering the islands
for tourism and ecological purposes. It does not address the areas
alienability.119
More importantly, Proclamation No. 1801 covers not only Boracay Island,
but sixty-four (64) other islands, coves, and peninsulas in the Philippines,
such as Fortune and Verde Islands in Batangas, Port Galera in Oriental
Mindoro, Panglao and Balicasag Islands in Bohol, Coron Island, Puerto
Princesa and surrounding areas in Palawan, Camiguin Island in Cagayan
de Oro, and Misamis Oriental, to name a few. If the designation of Boracay
Island as tourist zone makes it alienable and disposable by virtue of
Proclamation No. 1801, all the other areas mentioned would likewise be
declared wide open for private disposition. That could not have been, and
is clearly beyond, the intent of the proclamation.
PROPERTY 1ST BATCH
It was Proclamation No. 1064 of 2006 which positively declared part
of Boracay as alienable and opened the same to private
ownership. Sections 6 and 7 of CA No. 141120 provide that it is only the
President, upon the recommendation of the proper department head, who
has the authority to classify the lands of the public domain into alienable or
disposable, timber and mineral lands.121
In issuing Proclamation No. 1064, President Gloria Macapagal-Arroyo
merely exercised the authority granted to her to classify lands of the public
domain, presumably subject to existing vested rights. Classification of
public lands is the exclusive prerogative of the Executive Department,
through the Office of the President. Courts have no authority to do
so.122 Absent such classification, the land remains unclassified until
released and rendered open to disposition.123
Proclamation No. 1064 classifies Boracay into 400 hectares of reserved
forest land and 628.96 hectares of agricultural land. The Proclamation
likewise provides for a 15-meter buffer zone on each side of the center line
of roads and trails, which are reserved for right of way and which shall form
part of the area reserved for forest land protection purposes.
Contrary to private claimants argument, there was nothing invalid or
irregular, much less unconstitutional, about the classification of Boracay
Island made by the President through Proclamation No. 1064. It was within
her authority to make such classification, subject to existing vested rights.
Proclamation No. 1064 does not violate the Comprehensive Agrarian
Reform Law. Private claimants further assert that Proclamation No. 1064
violates the provision of the Comprehensive Agrarian Reform Law (CARL)
or RA No. 6657 barring conversion of public forests into agricultural lands.
They claim that since Boracay is a public forest under PD No. 705,
President Arroyo can no longer convert it into an agricultural land without
running afoul of Section 4(a) of RA No. 6657, thus:
SEC. 4. Scope. The Comprehensive Agrarian Reform Law of 1988 shall
cover, regardless of tenurial arrangement and commodity produced, all
public and private agricultural lands as provided in Proclamation No. 131
and Executive Order No. 229, including other lands of the public domain
suitable for agriculture.
More specifically, the following lands are covered by the Comprehensive
Agrarian Reform Program:
(a) All alienable and disposable lands of the public domain devoted to or
suitable for agriculture. No reclassification of forest or mineral lands to
agricultural lands shall be undertaken after the approval of this Act until
Congress, taking into account ecological, developmental and equity
considerations, shall have determined by law, the specific limits of the
public domain.
That Boracay Island was classified as a public forest under PD No. 705 did
not bar the Executive from later converting it into agricultural land. Boracay
Island still remained an unclassified land of the public domain despite PD
No. 705.
In Heirs of the Late Spouses Pedro S. Palanca and Soterranea Rafols v.
Republic,124 the Court stated that unclassified lands are public forests.
While it is true that the land classification map does not categorically
state that the islands are public forests, the fact that they were
unclassified lands leads to the same result. In the absence of the
classification as mineral or timber land, the land remains unclassified land
until released and rendered open to disposition.125 (Emphasis supplied)
Moreover, the prohibition under the CARL applies only to a
"reclassification" of land. If the land had never been previously classified,
as in the case of Boracay, there can be no prohibited reclassification under
the agrarian law. We agree with the opinion of the Department of
Justice126 on this point:
Indeed, the key word to the correct application of the prohibition in Section
4(a) is the word "reclassification." Where there has been no previous
classification of public forest [referring, we repeat, to the mass of the public
domain which has not been the subject of the present system of
classification for purposes of determining which are needed for forest
purposes and which are not] into permanent forest or forest reserves or
some other forest uses under the Revised Forestry Code, there can be no
"reclassification of forest lands" to speak of within the meaning of Section
4(a).
PROPERTY 1ST BATCH
Thus, obviously, the prohibition in Section 4(a) of the CARL against the
reclassification of forest lands to agricultural lands without a prior law
delimiting the limits of the public domain, does not, and cannot, apply to
those lands of the public domain, denominated as "public forest" under the
Revised Forestry Code, which have not been previously determined, or
classified, as needed for forest purposes in accordance with the provisions
of the Revised Forestry Code.127
Private claimants are not entitled to apply for judicial confirmation of
imperfect title under CA No. 141. Neither do they have vested rights
over the occupied lands under the said law. There are two requisites for
judicial confirmation of imperfect or incomplete title under CA No. 141,
namely: (1) open, continuous, exclusive, and notorious possession and
occupation of the subject land by himself or through his predecessors-in-
interest under a bona fide claim of ownership since time immemorial or
from June 12, 1945; and (2) the classification of the land as alienable and
disposable land of the public domain.128
As discussed, the Philippine Bill of 1902, Act No. 926, and Proclamation
No. 1801 did not convert portions of Boracay Island into an agricultural
land. The island remained an unclassified land of the public domain and,
applying the Regalian doctrine, is considered State property.
Private claimants bid for judicial confirmation of imperfect title, relying on
the Philippine Bill of 1902, Act No. 926, and Proclamation No. 1801, must
fail because of the absence of the second element of alienable and
disposable land. Their entitlement to a government grant under our present
Public Land Act presupposes that the land possessed and applied for is
already alienable and disposable. This is clear from the wording of the law
itself.129Where the land is not alienable and disposable, possession of the
land, no matter how long, cannot confer ownership or possessory rights.130
Neither may private claimants apply for judicial confirmation of imperfect
title under Proclamation No. 1064, with respect to those lands which were
classified as agricultural lands. Private claimants failed to prove the first
element of open, continuous, exclusive, and notorious possession of their
lands in Boracay since June 12, 1945.
We cannot sustain the CA and RTC conclusion in the petition for
declaratory relief that private claimants complied with the requisite period
of possession.
The tax declarations in the name of private claimants are insufficient to
prove the first element of possession. We note that the earliest of the tax
declarations in the name of private claimants were issued in 1993. Being of
recent dates, the tax declarations are not sufficient to convince this Court
that the period of possession and occupation commenced on June 12,
1945.
Private claimants insist that they have a vested right in Boracay, having
been in possession of the island for a long time. They have invested
millions of pesos in developing the island into a tourist spot. They say their
continued possession and investments give them a vested right which
cannot be unilaterally rescinded by Proclamation No. 1064.
The continued possession and considerable investment of private
claimants do not automatically give them a vested right in Boracay. Nor do
these give them a right to apply for a title to the land they are presently
occupying. This Court is constitutionally bound to decide cases based on
the evidence presented and the laws applicable. As the law and
jurisprudence stand, private claimants are ineligible to apply for a judicial
confirmation of title over their occupied portions in Boracay even with their
continued possession and considerable investment in the island.
One Last Note
The Court is aware that millions of pesos have been invested for the
development of Boracay Island, making it a by-word in the local and
international tourism industry. The Court also notes that for a number of
years, thousands of people have called the island their home. While the
Court commiserates with private claimants plight, We are bound to apply
the law strictly and judiciously. This is the law and it should prevail. Ito ang
batas at ito ang dapat umiral.
All is not lost, however, for private claimants. While they may not be
eligible to apply for judicial confirmation of imperfect title under Section
48(b) of CA No. 141, as amended, this does not denote their automatic
ouster from the residential, commercial, and other areas they possess now
classified as agricultural. Neither will this mean the loss of their substantial
investments on their occupied alienable lands. Lack of title does not
necessarily mean lack of right to possess.
PROPERTY 1ST BATCH
For one thing, those with lawful possession may claim good faith as
builders of improvements. They can take steps to preserve or protect their
possession. For another, they may look into other modes of applying for
original registration of title, such as by homestead131 or sales
patent,132 subject to the conditions imposed by law.
More realistically, Congress may enact a law to entitle private claimants to
acquire title to their occupied lots or to exempt them from certain
requirements under the present land laws. There is one such bill133 now
pending in the House of Representatives. Whether that bill or a similar bill
will become a law is for Congress to decide.
In issuing Proclamation No. 1064, the government has taken the step
necessary to open up the island to private ownership. This gesture may not
be sufficient to appease some sectors which view the classification of the
island partially into a forest reserve as absurd. That the island is no longer
overrun by trees, however, does not becloud the vision to protect its
remaining forest cover and to strike a healthy balance between progress
and ecology. Ecological conservation is as important as economic
progress.
To be sure, forest lands are fundamental to our nations survival. Their
promotion and protection are not just fancy rhetoric for politicians and
activists. These are needs that become more urgent as destruction of our
environment gets prevalent and difficult to control. As aptly observed by
Justice Conrado Sanchez in 1968 in Director of Forestry v. Munoz:134
The view this Court takes of the cases at bar is but in adherence to public
policy that should be followed with respect to forest lands. Many have
written much, and many more have spoken, and quite often, about the
pressing need for forest preservation, conservation, protection,
development and reforestation. Not without justification. For, forests
constitute a vital segment of any country's natural resources. It is of
common knowledge by now that absence of the necessary green cover on
our lands produces a number of adverse or ill effects of serious
proportions. Without the trees, watersheds dry up; rivers and lakes which
they supply are emptied of their contents. The fish disappear. Denuded
areas become dust bowls. As waterfalls cease to function, so will
hydroelectric plants. With the rains, the fertile topsoil is washed away;
geological erosion results. With erosion come the dreaded floods that
wreak havoc and destruction to property crops, livestock, houses, and
highways not to mention precious human lives. Indeed, the foregoing
observations should be written down in a lumbermans decalogue.135
WHEREFORE, judgment is rendered as follows:
1. The petition for certiorari in G.R. No. 167707 is GRANTED and the
Court of Appeals Decision in CA-G.R. CV No. 71118 REVERSED AND
SET ASIDE.
2. The petition for certiorari in G.R. No. 173775 is DISMISSED for lack of
merit.
SO ORDERED.
G.R. No. 186639 February 5, 2014
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
EMMANUEL C. CORTEZ, Respondent.
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari1 under Rule 45 of the
Rules of Court seeking to annul and set aside the Decision2 dated
February 17, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 87505.
The CA affirmed the Decision3 dated February 7, 2006 of the Regional Trial
Court (RTC) of Pasig City, Branch 68, in LRC Case No. N-11496.
The Facts
On February 28, 2003, respondent Emmanuel C. Cortez (Cortez) filed with
the RTC an application4 for judicial confirmation of title over a parcel of land
located at Barangay (Poblacion) Aguho, P. Herrera Street, Pateros, Metro
Manila. The said parcel of land has an area of 110 square meters and
more particularly described as Lot No. 2697-B of the Pateros Cadastre. In
support of his application, Cortez submitted, inter alia, the following
documents: (1) tax declarations for various years from 1966 until 2005; (2)
survey plan of the property, with the annotation that the property is
PROPERTY 1ST BATCH
classified as alienable and disposable; (3) technical description of the
property, with a certification issued by a geodetic engineer; (4) tax
clearance certificate; (5) extrajudicial settlement of estate dated March 21,
1998, conveying the subject property to Cortez; and (6) escritura de
particion extrajudicial dated July 19, 1946, allocating the subject property
to Felicisima Cotas Cortez mother.
As there was no opposition, the RTC issued an Order of General Default
and Cortez was allowed to present his evidence ex-parte.
Cortez claimed that the subject parcel of land is a portion of Lot No. 2697,
which was declared for taxation purposes in the name of his mother. He
alleged that Lot No. 2697 was inherited by his mother from her parents in
1946; that, on March 21, 1998, after his parents died, he and his siblings
executed an Extra-Judicial Settlement of Estate over the properties of their
deceased parents and one of the properties allocated to him was the
subject property. He alleged that the subject property had been in the
possession of his family since time immemorial; that the subject parcel of
land is not part of the reservation of the Department of Environment and
Natural Resources (DENR) and is, in fact, classified as alienable and
disposable by the Bureau of Forest Development (BFD).
Cortez likewise adduced in evidence the testimony of Ernesto Santos, who
testified that he has known the family of Cortez for over sixty (60) years
and that Cortez and his predecessors-in-interest have been in possession
of the subject property since he came to know them.
On February 7, 2006, the RTC rendered a Decision,5 which granted Cortez
application for registration, viz:
WHEREFORE, finding the application meritorious, the Court DECLARES,
CONFIRMS, and ORDERS the registration of the applicants title thereto.
As soon as this Decision shall have become final and after payment of the
required fees, let the corresponding Decrees be issued in the name of the
applicant, Emmanuel C. Cortez.
Let copies of this Decision be furnished the Office of the Solicitor General,
Land Registration Authority, Land Management Bureau, and the Registry
of Deeds of Rizal.
SO ORDERED.6
In granting Cortez application for registration of title to the subject
property, the RTC made the following ratiocinations:
From the foregoing, the Court finds that there is sufficient basis to grant the
relief prayed for. It having been established by competent evidence that
the possession of the land being applied for by the applicant and his
predecessor-in-interest have been in open, actual, uninterrupted, and
adverse possession, under claim of title and in the concept of owners, all
within the time prescribed by law, the title of the applicant should be and
must be AFFIRMED and CONFIRMED.7
The Republic of the Philippines (petitioner), represented by the Office of
the Solicitor General, appealed to the CA, alleging that the RTC erred in
granting the application for registration despite the failure of Cortez to
comply with the requirements for original registration of title. The petitioner
pointed out that, although Cortez declared that he and his predecessors-in-
interest were in possession of the subject parcel of land since time
immemorial, no document was ever presented that would establish his
predecessors-in-interests possession of the same during the period
required by law. That petitioner claimed that Cortez assertion that he and
his predecessors-in-interest had been in open, adverse, and continuous
possession of the subject property for more than thirty (30) years does not
constitute well-neigh incontrovertible evidence required in land registration
cases; that it is a mere claim, which should not have been given weight by
the RTC.
Further, the petitioner alleged that there was no certification from any
government agency that the subject property had already been declared
alienable and disposable. As such, the petitioner claims, Cortez
possession of the subject property, no matter how long, cannot confer
ownership or possessory rights.
On February 17, 2009, the CA, by way of the assailed Decision,8 dismissed
the petitioners appeal and affirmed the RTC Decision dated February 7,
2006. The CA ruled that Cortez was able to prove that the subject property
was indeed alienable and disposable, as evidenced by the
declaration/notation from the BFD.
PROPERTY 1ST BATCH
Further, the CA found that Cortez and his predecessors-in-interest had
been in open, continuous, and exclusive possession of the subject property
for more than 30 years, which, under Section 14(2) of Presidential Decree
(P.D.) No. 15299, sufficed to convert it to private property. Thus:
It has been settled that properties classified as alienable and disposable
land may be converted into private property by reason of open, continuous
and exclusive possession of at least 30 years. Such property now falls
within the contemplation of "private lands" under Section 14(2) of PD 1529,
over which title by prescription can be acquired. Thus, under the second
paragraph of Section 14 of PD 1529, those who are in possession of
alienable and disposable land, and whose possession has been
characterized as open, continuous and exclusive for 30 years or more,
may have the right to register their title to such land despite the fact that
their possession of the land commenced only after 12 June 1945. x x x
xxxx
While it is significant to note that applicant-appellees possession of the
subject property can be traced from his mothers possession of the same,
the records, indeed, show that his possession of the subject property,
following Section 14(2) [of PD 1529], is to be reckoned from January 3,
1968, when the subject property was declared alienable and disposable
and not way back in 1946, the year when he inherited the same from his
mother. At any rate, at the time the application for registration was filed in
2003, there was already sufficient compliance with the requirement of
possession. His possession of the subject property has been characterized
as open, continuous, exclusive and notorious possession and occupation
in the concept of an owner.10 (Citations omitted)
Hence, the instant petition.
The Issue
The sole issue to be resolved by the Court is whether the CA erred in
affirming the RTC Decision dated February 7, 2006, which granted the
application for registration filed by Cortez.
The Courts Ruling
The petition is meritorious.
At the outset, the Court notes that the RTC did not cite any specific
provision of law under which authority Cortez application for registration of
title to the subject property was granted. In granting the application for
registration, the RTC merely stated that "the possession of the land being
applied for by [Cortez] and his predecessor-in-interest have been in open,
actual, uninterrupted, and adverse possession, under claim of title and in
the concept of owners, all within the time prescribed by law[.]"11 On the
other hand, the CA assumed that Cortez application for registration was
based on Section 14(2) of P.D. No. 1529. Nevertheless, Cortez, in the
application for registration he filed with the RTC, proffered that should the
subject property not be registrable under Section 14(2) of P.D. No. 1529, it
could still be registered under Section 48(b) of Commonwealth Act No. 141
(C.A. No. 141), or the Public Land Act, as amended by P.D. No. 107312 in
relation to Section 14(1) of P.D. No. 1529. Thus, the Court deems it proper
to discuss Cortez application for registration of title to the subject property
vis--vis the provisions of Section 14(1) and (2) of P.D. No. 1529.
Applicants for original registration of title to land must establish compliance
with the provisions of Section 14 of P.D. No. 1529, which pertinently
provides that:
Sec. 14. Who may apply. The following persons may file in the proper
Court of First Instance an application for registration of title to land,
whether personally or through their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in
interest have 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 ownership since June
12, 1945, or earlier.
(2) Those who have acquired ownership of private lands by
prescription under the provision of existing laws.
xxxx
After a careful scrutiny of the records of this case, the Court finds that
Cortez failed to comply with the legal requirements for the registration of
the subject property under Section 14(1) and (2) of P.D. No. 1529.
PROPERTY 1ST BATCH
Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of
imperfect or incomplete titles to public land acquired under Section 48(b) of
C.A. No. 141, as amended by P.D. No. 1073. "Under Section 14(1) [of P.D.
No. 1529], applicants for registration of title must sufficiently establish first,
that the subject land forms part of the disposable and alienable lands of the
public domain; second, that the applicant and his predecessors-in-interest
have been in open, continuous, exclusive, and notorious possession and
occupation of the same; and third, that it is under a bona fide claim of
ownership since June 12, 1945, or earlier."13
The first requirement was not satisfied in this case. To prove that the
subject property forms part of the alienable and disposable lands of the
public domain, Cortez adduced in evidence a survey plan Csd-00-
00063314 (conversion-subdivision plan of Lot 2697, MCadm 594-D, Pateros
Cadastral Mapping) prepared by Geodetic Engineer Oscar B. Fernandez
and certified by the Lands Management Bureau of the DENR. The said
survey plan contained the following annotation:
This survey is inside L.C. Map No. 2623, Project No. 29, classified as
alienable & disposable by the Bureau of Forest Development on Jan. 3,
1968.
However, Cortez reliance on the foregoing annotation in the survey plan is
amiss; it does not constitute incontrovertible evidence to overcome the
presumption that the subject property remains part of the inalienable public
domain. In Republic of the Philippines v. Tri-Plus Corporation,15 the Court
clarified that, the applicant must at the very least submit a certification from
the proper government agency stating that the parcel of land subject of the
application for registration is indeed alienable and disposable, viz:
It must be stressed that incontrovertible evidence must be presented to
establish that the land subject of the application is alienable or disposable.
In the present case, the only evidence to prove the character of the subject
lands as required by law is the notation appearing in the Advance Plan
stating in effect that the said properties are alienable and disposable.
However, this is hardly the kind of proof required by law. 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 as a
presidential 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 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 the DENR, the certification refers only
to the technical correctness of the survey plotted in the said plan and has
nothing to do whatsoever with the nature and character of the property
surveyed. Respondents failed to submit a certification from the proper
government agency to prove that the lands subject for registration are
indeed alienable and disposable.16 (Citations omitted and emphasis ours)
Similarly, in Republic v. Roche,17 the Court declared that:
Respecting the third requirement, the applicant bears the burden of proving
the status of the land. In this connection, the Court has held that he must
present a certificate of land classification status issued by the Community
Environment and Natural Resources Office (CENRO) or the Provincial
Environment and Natural Resources Office (PENRO) of the DENR. He
must also prove that the DENR Secretary had approved the land
classification and released the land as alienable and disposable, and that it
is within the approved area per verification through survey by the CENRO
or PENRO. Further, the applicant must present a copy of the original
classification approved by the DENR Secretary and certified as true copy
by the legal custodian of the official records. These facts must be
established by the applicant to prove that the land is alienable and
disposable.
Here, Roche did not present evidence that the land she applied for has
been classified as alienable or disposable land of the public domain. She
submitted only the survey map and technical description of the land which
bears no information regarding the lands classification. She did not bother
to establish the status of the land by any certification from the appropriate
government agency. Thus, it cannot be said that she complied with all
requisites for registration of title under Section 14(1) of P.D.
1529.18 (Citations omitted and emphasis ours)
The annotation in the survey plan presented by Cortez is not the kind of
evidence required by law as proof that the subject property forms part of
the alienable and disposable land of the public domain. Cortez failed to
present a certification from the proper government agency as to the
classification of the subject property. Cortez likewise failed to present any
evidence showing that the DENR Secretary had indeed classified the
PROPERTY 1ST BATCH
subject property as alienable and disposable. Having failed to present any
incontrovertible evidence, Cortez claim that the subject property forms part
of the alienable and disposable lands of the public domain must fail.
Anent the second and third requirements, the Court finds that Cortez
likewise failed to establish the same. Cortez failed to present any
1wphi 1
evidence to prove that he and his predecessors-in-interest have been in
open, continuous, exclusive, and notorious possession and occupation of
the subject property since June 12, 1945, or earlier. Cortez was only able
to present oral and documentary evidence of his and his mothers
ownership and possession of the subject property since 1946, the year in
which his mother supposedly inherited the same.
Other than his bare claim that his family possessed the subject property
since time immemorial, Cortez failed to present any evidence to show that
he and his predecessors-in-interest indeed possessed the subject property
prior to 1946; it is a mere claim and not factual proof of possession. "It is a
rule that general statements that are mere conclusions of law and not
factual proof of possession are unavailing and cannot suffice. An applicant
in a land registration case cannot just harp on mere conclusions of law to
embellish the application but must impress thereto the facts and
circumstances evidencing the alleged ownership and possession of the
land."19
Further, the earliest tax declaration presented by Cortez was only in 1966.
Cortez failed to explain why, despite his claim that he and his
predecessors-in-interest have been in possession of the subject property
since time immemorial, it was only in 1966 that his predecessors-in-interest
started to declare the same for purposes of taxation.
That Cortez and his predecessors-in-interest have been in possession of
the subject property for fifty-seven (57) years at the time he filed his
application for registration in 2003 would likewise not entitle him to
registration thereof under Section 14(2) of P.D. No. 1529.
Section 14(2) of P.D. No. 1529 sanctions the original registration of lands
acquired by prescription under the provisions of existing laws. "As Section
14(2) [of P.D. No. 1529] categorically provides, only private properties may
be acquired thru prescription and under Articles 420 and 421 of the Civil
Code, only those properties, which are not for public use, public service or
intended for the development of national wealth, are considered private."20
In Heirs of Mario Malabanan v. Republic,21 the Court however clarified that
lands of the public domain that are patrimonial in character are susceptible
to acquisitive prescription and, accordingly, eligible for registration under
Section 14(2) of P.D. No. 1529, viz:
The Civil Code makes it clear that patrimonial property of the State may be
acquired by private persons through prescription. This is brought about by
Article 1113, which states that "[a]ll things which are within the commerce
of man are susceptible to prescription," and that property of the State or
any of its subdivisions not patrimonial in character shall not be the object of
prescription."
There are two modes of prescription through which immovables may be
acquired under the Civil Code. The first is ordinary acquisitive
1wphi1
prescription, which, under Article 1117, requires possession in good faith
and with just title; and, under Article 1134, is completed through
possession of ten (10) years. There is nothing in the Civil Code that bars a
person from acquiring patrimonial property of the State through ordinary
acquisitive prescription, nor is there any apparent reason to impose such a
rule. At the same time, there are indispensable requisitesgood faith and
just title. The ascertainment of good faith involves the application of
Articles 526, 527, and 528, as well as Article 1127 of the Civil Code,
provisions that more or less speak for themselves.22 (Citation omitted and
emphasis ours)
The Court nevertheless emphasized that there must be an official
declaration by the State that the public dominion property is no longer
intended for public use, public service, or for the development of national
wealth before it can be acquired by prescription; that a mere declaration by
government officials that a land of the public domain is already alienable
and disposable would not suffice for purposes of registration under Section
14(2) of P.D. No. 1529. The Court further stressed that the period of
acquisitive prescription would only begin to run from the time that the State
officially declares that the public dominion property is no longer intended
for public use, public service, or for the development of national wealth.
Thus:
Let us now explore the effects under the Civil Code of a declaration by the
President or any duly authorized government officer of alienability and
disposability of lands of the public domain. Would such lands so declared
alienable and disposable be converted, under the Civil Code, from property
PROPERTY 1ST BATCH
of the public dominion into patrimonial property? After all, by connotative
definition, alienable and disposable lands may be the object of the
commerce 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.
Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public
dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State." It is this provision
that 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 public use, and are intended for some public service or
for the development of the national wealth" are public dominion property.
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 is "intended for some public service or for the
development of the national wealth."
Accordingly, there must be an express declaration by the State that the
public dominion property is no longer intended for public service or the
development 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 420(2), and thus incapable of acquisition by
prescription. It is only when such alienable and disposable lands are
expressly declared by the State to be no longer intended for public service
or for the development of the national wealth that the period of acquisitive
prescription can begin to run. Such declaration shall be in the form of a law
duly enacted by Congress or a Presidential Proclamation in cases where
the President is duly authorized by law.23 (Emphasis supplied)
In Republic v. Rizalvo,24 the Court deemed it appropriate to reiterate the
ruling in Malabanan, viz:
On this basis, respondent would have been eligible for application for
registration because his claim of ownership and possession over the
subject property even exceeds thirty (30) years. However, it is
jurisprudentially clear that the thirty (30)-year period of prescription for
purposes of acquiring ownership and registration of public land under
Section 14 (2) of P.D. No. 1529 only begins from the moment the State
expressly declares that the public dominion property is no longer intended
for public service or the development of the national wealth or that the
property has been converted into patrimonial. x x x.25 (Citation omitted and
emphasis ours)
Accordingly, although lands of the public domain that are considered
patrimonial may be acquired by prescription under Section 14(2) of P.D.
No. 1529, before acquisitive prescription could commence, the property
sought to be registered must not only be classified as alienable and
disposable; it must also be declared by the State that it is no longer
intended for public use, public service or the development of the national
wealth. Thus, absent an express declaration by the State, the land remains
to be property of public dominion.26
The Court finds no evidence of any official declaration from the state
attesting to the patrimonial character of the subject property. Cortez failed
to prove that acquisitive prescription has begun to run against the State,
much less that he has acquired title to the subject property by virtue
thereof. It is of no moment that Cortez and his predecessors-in-interest
have been in possession of the subject property for 57 years at the time he
applied for the registration of title thereto. "[l]t is not the notorious,
exclusive and uninterrupted possession and occupation of an alienable
and disposable public land for the mandated periods that converts it to
patrimonial. The indispensability of an official declaration that the property
is now held by the State in its private capacity or placed within the
commerce of man for prescription to have any effect against the State
cannot be overemphasized. "27
WHEREFORE, in consideration of the foregoing disquisitions, the instant
petition is GRANTED. The Decision dated February 17, 2009 of the Court
of Appeals in CA-G.R. CV No. 87505, which affirmed the Decision dated
February 7, 2006 of the Regional Trial Court of Pasig City, Branch 68, in
LRC Case No. N-11496, is hereby REVERSED and SET ASIDE. The
Application for Registration of Emmanuel C. Cortez in LRC Case No. N-
11496 is DENIED for lack of merit.
SO ORDERED.
G.R. No. 163767 March 10, 2014
PROPERTY 1ST BATCH
REPUBLIC OF THE PHILIPPINES, represented by THE DIRECTOR OF
LANDS, Petitioner,
vs.
ROSARIO DE GUZMAN VDA. DE JOSON, Respondent.
DECISION
BERSAMIN, J.:
This case concerns the discharge of the burden of proof by the applicant in
proceedings for the registration of land under Section 14 (1) and (2) of
Presidential Decree No. 1529 (Property Registration Decree).
The Republic appeals the adverse decision promulgated on January 30,
2004,1 whereby the Court of Appeals (CA) affirmed the judgment rendered
on August 10, 1981 by the erstwhile Court of First Instance (CFI) of
Bulacan (now the Regional Trial Court) in Registration Case No. 3446-M
granting the application of the respondent for the registration of her title
covering a parcel of land situated in San Isidro, Paombong, Bulacan.2
The respondent filed her application for land registration in the CFI in
Bulacan.3 The jurisdictional requirements were met when the notice of
initial hearing was published in the Official Gazette for two successive
weeks,4 as evidenced by a certification of publication.5 The notice of initial
hearing was also posted by the Provincial Sheriff of Bulacan in a
conspicuous place in the municipal building of Paombong, Bulacan as well
as on the property itself.6 On June 2, 1977, at the initial hearing of the
application, Fiscal Liberato L. Reyes interposed an opposition in behalf of
the Director of Lands and the Bureau of Public Works. Upon motion by the
respondent and without objection from Fiscal Reyes, the CFI
commissioned the Acting Deputy Clerk of Court to receive evidence in the
presence of Fiscal Reyes.7
The records show that the land subject of the application was a riceland
with an area of 12,342 square meters known as Lot 2633, Cad-297,
Paombong, Bulacan, and covered by plan Ap-03-001603;8 that the riceland
had been originally owned and possessed by one Mamerto Dionisio since
1907;9 that on May 13, 1926, Dionisio, by way of a deed of sale,10 had sold
the land to Romualda Jacinto; that upon the death of Romualda Jacinto,
her sister Maria Jacinto (mother of the respondent) had inherited the land;
that upon the death of Maria Jacinto in 1963, the respondent had herself
inherited the land, owning and possessing it openly, publicly,
uninterruptedly, adversely against the whole world, and in the concept of
owner since then; that the land had been declared in her name for taxation
purposes; and that the taxes due thereon had been paid, as shown in
Official Receipt No. H-7100234.11
In their opposition filed by Fiscal Reyes,12 the Director of Lands and the
Director of Forest Development averred that whatever legal and
possessory rights the respondent had acquired by reason of any Spanish
government grants had been lost, abandoned or forfeited for failure to
occupy and possess the land for at least 30 years immediately preceding
the filing of the application;13 and that the land applied for, being actually a
portion of the Labangan Channel operated by the Pampanga River Control
System, could not be subject of appropriation or land registration.14
The Office of the Solicitor General (OSG) also filed in behalf of the
Government an opposition to the application,15insisting that the land was
within the unclassified region of Paombong, Bulacan, as indicated in BF
Map LC No. 637 dated March 1, 1927; that areas within the unclassified
region were denominated as forest lands and thus fell under the exclusive
jurisdiction, control and authority of the Bureau of Forest Development
(BFD);16 and that the CFI did not acquire jurisdiction over the application
considering that: (1) the land was beyond the commerce of man; (2) the
payment of taxes vested no title or ownership in the declarant or taxpayer.17
Ruling ofthe CFI
On August 10, 1981, the CFI rendered its decision,18 ordering the
registration of the land in favor of the respondent on the ground that she
had sufficiently established her open, public, continuous, and adverse
possession in the concept of an owner for more than 30 years, to wit:
Since it has been established that the applicants and her predecessors-in-
interest have been in the open, public, continuous, and adverse
possession of the said parcel of land in the concept of an owner for more
than thirty (30) years, that it, since 1926 up to the present time, applicant
therefore is entitled to the registration thereof under the provisions od Act
No. 496, in relation to Commonwealth Act No. 141 as amended by
Republic Act No. 6236 and other existing laws.
PROPERTY 1ST BATCH
WHEREFORE, confirming the order of general default issued in this case,
the Court hereby orders the registration of this parcel of land Lot 2633, Cad
297. Case 5, Paombong Cadastre[)] described in plan Ap-03-001603
(Exhibit D, page 7 of records) and in the technical description (Exhibit F,
page 5 of records) in favor of Rosario de Guzman Vda de Joson, of legal
age, Filipino, widow and resident of Malolos, Bulacan.
After the decision shall have become final, let the corresponding decree be
issued,
SO ORDERED19.
The Republic, through the OSG, appealed to the CA, contending that the
trial court had erred in granting the application for registration despite the
land not being the subject of land registration due to its being part of the
unclassified region denominated as forest land of Paombong, Bulacan.20
Judgment of the CA
On January 30, 2004, the CA promulgated its assailed
judgment,21 affirming the decision of the trial court upon the following
ratiocination:
The foregoing documentary and testimonial evidence stood unrebutted and
uncontroverted by the oppositor-appellant and they should serve as proof
of the paucity of the claim of the applicant-appellee over the subject
property.
Upon the other hand, oppositor-appellant, in a lackluster fashion, advanced
pro forma theories and arguments in its Opposition which naturally failed to
merit any consideration from the court a quo and also from this Court. The
indorsement from the Bureau of Forest Development, San Fernando,
Pampanga to the effect that the subject area is within the unclassified
region of Paombong, Bulacan does not warrant any evidentiary weight
since the same had never been formally offered as evidence by the
oppositor-appellant. All the other allegations in the Opposition field (sic) by
the oppositor-appellant failed to persuade this Court as to the veracity
thereof considering that no evidence was ever presented to prove the said
allegations.
Such being the case, this Court is not inclined to have the positive proofs
of her registrable rights over the subject property adduced by the applicant-
appellee be defeated by the bare and unsubstantiated allegations of the
oppositor-appellant.
WHEREFORE, PREMISES CONSIDERED, the assailed Decision is
hereby AFFIRMED IN TOTO.
SO ORDERED.22
Hence, the Republic appeals by petition for review on certiorari.
Issue
(1) WHETHER OR NOT THE LAND SUBJECT OF THE
APPLICATION FOR REGISTRATION IS SUSCEPTIBLE OF
PRIVATE ACQUISITION; and
(2) WHETHER OR NOT THE TRIAL COURT, AS WELL AS THE
COURT OF APPEALS, ERRED IN GRANTING THE
APPLICATION FOR REGISTRATION.23
Ruling
The appeal is impressed with merit.
Section 14 (1) and (2) of the Property Registration Decree state:
Section 14. Who may apply. The following persons may file in the
proper [Regional Trial Court] an application for registration of title to land,
whether personally or through their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-
interest have 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 ownership since June
12, 1945, or earlier.
(2) Those who have acquired ownership of private lands by
prescription under the provision of existing laws.
PROPERTY 1ST BATCH
xxxx
Section 14(1) deals with possession and occupation in the concept of an
owner while Section 14(2) involves prescription as a mode of acquiring
ownership. In Heirs of Mario Malabanan v. Republic,24 the Court set the
guidelines concerning land registration proceedings brought under these
provisions of the Property Registration Decree in order provide clarity to
the application and scope of said provisions.
The respondent sought to have the land registered in her name by alleging
that she and her predecessors-in-interest had been in open, peaceful,
continuous, uninterrupted and adverse possession of the land in the
concept of owner since time immemorial. However, the Republic counters
that the land was public land; and that it could not be acquired by
prescription. The determination of the issue hinges on whether or not the
land was public; if so, whether the respondent satisfactorily proved that the
land had already been declared as alienable and disposable land of the
public domain; and that she and her predecessors-in-interest had been in
open, peaceful, continuous, uninterrupted and adverse possession of the
land in the concept of owner since June 12, 1945, or earlier.
In Republic vs. Tsai,25 the Court summarizes the amendments that have
shaped the current phraseology of Section 14(1), to wit:
Through the years, Section 48(b) of the CA 141 has been amended
several times. The Court of Appeals failed to consider the amendment
introduced by PD 1073. In Republic v. Doldol, the Court provided a
summary of these amendments:
The original Section 48(b) of C.A. No.141 provided for possession and
occupation of lands of the public domain since July 26, 1894. This was
superseded by R.A. No. 1942, which provided for a simple thirty-year
prescriptive period of occupation by an applicant for judicial confirmation of
imperfect title. The same, however, has already been amended by
Presidential Decree No. 1073, approved on January 25, 1977. As
amended, Section 48(b) now reads:
(b) Those who by themselves or through their predecessors in interest
have been in open, continuous, exclusive, and notorious possession and
occupation of agricultural lands of the public domain, under a bona fide
claim of acquisition of ownership, since June 12, 1945, or earlier,
immediately preceding the 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 entitled to a certificate of title under the
provisions of this chapter. (Emphasis supplied)
As the law now stands, a mere showing of possession and occupation for
30 years or more is not sufficient. Therefore, since the effectivity of PD
1073 on 25 January 1977, it must now be shown that possession and
occupation of the piece of land by the applicant, by himself or through his
predecessors-in-interest, started on 12 June 1945 or earlier. This provision
is in total conformity with Section 14(1) of PD 1529.26
Under Section 14(1), therefore, the respondent had to prove that: (1) the
land formed part of the alienable and disposable land of the public domain;
and (2) she, by herself or through her predecessors-in-interest, had been
in open, continuous, exclusive, and notorious possession and occupation
of the subject land under a bona fide claim of ownership from June 12,
1945, or earlier.27 It is the applicant who carries the burden of proving that
the two requisites have been met. Failure to do so warrants the dismissal
of the application.
The respondent unquestionably complied with the second requisite by
virtue of her having been in open, continuous, exclusive and notorious
possession and occupation of the land since June 12, 1945, or earlier. She
testified on how the land had been passed on to her from her
predecessors-in-interest; and tendered documentary evidence like: (1) the
Deed of Sale evidencing the transfer of the property from Mamerto Dionisio
to Romualda Jacinto in 1926;28 (2) Tax Declaration No. 4547 showing that
she had declared the property for taxation purposes in 1976;29 and (3)
Official Receipt No. H-7100234 indicating that she had been paying taxes
on the land since 1977.30 The CFI found her possession of the land and
that of her predecessors-in-interest to have been open, public, continuous,
and adverse in the concept of an owner since 1926 until the present time,
or for more than 30 years, entitling her to the registration under the
provisions of Act No. 496, in relation to Commonwealth Act No. 141, as
amended by Republic Act No. 6236 and other existing laws.31 On its part,
the CA ruled that the documentary and testimonial evidence stood
unrebutted and uncontroverted by the Republic.32
PROPERTY 1ST BATCH
Nonetheless, what is left wanting is the fact that the respondent did not
discharge her burden to prove the classification of the land as demanded
by the first requisite. She did not present evidence of the land, albeit public,
having been declared alienable and disposable by the State. During trial,
she testified that the land was not within any military or naval reservation,
and Frisco Domingo, her other witness, corroborated her. Although the
Republic countered that the verification made by the Bureau of Forest
Development showed that the land was within the unclassified region of
Paombong, Bulacan as per BF Map LC No. 637 dated March 1,
1927,33 such showing was based on the 1st Indorsement dated July 22,
1977 issued by the Bureau of Forest Development,34 which the CA did not
accord any evidentiary weight to for failure of the Republic to formally offer
it in evidence. Still, Fiscal Reyes, in the opposition he filed in behalf of the
Government, argued that the land was a portion of the Labangan Channel
operated by the Pampanga River Control System, and could not be the
subject of appropriation or land registration. Thus, the respondent as the
applicant remained burdened with proving her compliance with the first
requisite.
Belatedly realizing her failure to prove the alienable and disposable
classification of the land, the petitioner attached as Annex A to her
appellees brief35 the certification dated March 8, 2000 issued by the
Department of Environment and Natural ResourcesCommunity
Environment and Natural Resources Office (DENR-CENRO),36 viz:
THIS IS TO CERTIFY that the parcel of land described on lot 2633 located
at San Isidro, Paombong, Bulacan as shown in the sketch plan surveyed
by Geodetic Engineer Carlos G. Reyes falls within the Alienable or
Disposable Land Project No. 19 of Paombong, Bulacan per Land
Classification Map No. 2934 certified on October 15, 1980.
However, in its resolution of July 31, 2000,37 the CA denied her motion to
admit the appellees brief, and expunged the appellees brief from the
records. Seeing another opportunity to make the certification a part of the
records, she attached it as Annex A of her comment here.38 Yet, that
attempt to insert would not do her any good because only evidence that
was offered at the trial could be considered by the Court.
Even had the respondents effort to insert the certification been successful,
the same would nonetheless be vain and ineffectual. In Menguito v.
Republic,39 the Court pronounced that a survey conducted by a geodetic
engineer that included a certification on the classification of the land as
alienable and disposable was not sufficient to overcome the presumption
that the land still formed part of the inalienable public domain, to wit:
To prove that the land in question formed part of the alienable and
disposable lands of the public domain, petitioners relied on the printed
words which read: "This survey plan is inside Alienable and Disposable
Land Area, Project No. 27-B as per L.C. Map No. 2623, certified by the
Bureau of Forestry on January 3, 1968," appearing on Exhibit "E" (Survey
Plan No. Swo-13-000227).
This proof is not sufficient. Section 2, Article XII of the 1987 Constitution,
provides: "All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. x x x." (Emphasis supplied.)
For the original registration of title, the applicant (petitioners in this case)
must overcome the presumption that the land sought to be registered
forms part of the public domain. Unless public land is shown to have been
reclassified or alienated to a private person by the State, it remains part of
the inalienable public domain. Indeed, "occupation thereof in the concept
of owner, no matter how long, cannot ripen into ownership and be
registered as a title." To overcome such presumption, incontrovertible
evidence must be shown by the applicant. Absent such evidence, the land
sought to be registered remains inalienable.
In the present case, petitioners cite a surveyor-geodetic engineers
notation in Exhibit "E" indicating that the survey was inside alienable and
disposable land. Such notation does not constitute a positive government
act validly changing the classification of the land in question. Verily, a mere
surveyor has no authority to reclassify lands of the public domain. By
relying solely on the said surveyors assertion, petitioners have not
sufficiently proven that the land in question has been declared alienable.40
We reiterate the standing doctrine that land of the public domain, to be the
subject of appropriation, must be declared alienable and disposable either
by the President or the Secretary of the DENR. In Republic v. T.A.N.
Properties, Inc.,41 we explicitly ruled:
PROPERTY 1ST BATCH
The applicant for land registration must prove that the DENR Secretary
had approved the land classification and released the land of the public
domain as alienable and disposable, and that the land subject of the
application for registration falls within the approved area per verification
through survey by the PENRO or CENRO. In addition, the applicant for
land registration must present a copy of the original classification approved
by the DENR Secretary and certified as a true copy by the legal custodian
of the official records. These facts must be established to prove that the
land is alienable and disposable.42
This doctrine unavoidably means that the mere certification issued by the
CENRO or PENRO did not suffice to support the application for
registration, because the applicant must also submit a copy of the original
classification of the land as alienable and disposable as approved by the
DENR Secretary and certified as a true copy by the legal custodian of the
official records. As the Court said in Republic v. Bantigue Point
Development Corporation:43
The Regalian doctrine dictates that all lands of the public domain belong to
the State. The applicant for land registration has the burden of overcoming
the presumption of State ownership by establishing through
incontrovertible evidence that the land sought to be registered is alienable
or disposable based on a positive act of the government. We held in
Republic v. T.A.N. Properties, Inc. that a CENRO certification is insufficient
to prove the alienable and disposable character of the land sought to be
registered. The applicant must also show sufficient proof that the DENR
Secretary has approved the land classification and released the land in
question as alienable and disposable.
Thus, the present rule is that an application for original registration must be
accompanied by (1) a CENRO or PENRO Certification; and (2) a copy of
the original classification approved by the DENR Secretary and certified as
a true copy by the legal custodian of the official records.
Here, respondent Corporation only presented a CENRO certification in
support of its application. Clearly, this falls short of the requirements for
original registration.44
Yet, even assuming that the DENR-CENRO certification alone would have
sufficed, the respondents application would still be denied considering that
the reclassification of the land as alienable or disposable came only after
the filing of the application in court in 1976. The certification itself indicated
that the land was reclassified as alienable or disposable only on October
15, 1980. The consequence of this is fittingly discussed in Heirs of Mario
Malabanan v. Republic, to wit:
We noted in Naguit that it should be distinguished from Bracewell v. Court
of Appeals since in the latter, the application for registration had been filed
before the land was declared alienable or disposable. The dissent though
pronounces Bracewell as the better rule between the two. Yet two years
after Bracewell, its ponente, the esteemed Justice Consuelo Ynares-
Santiago, penned the ruling in Republic v. Ceniza, which involved a claim
of possession that extended back to 1927 over a public domain land that
was declared alienable and disposable only in 1980. Ceniza cited
Bracewell, quoted extensively from it, and following the mindset of the
dissent, the attempt at registration in Ceniza should have failed. Not so.
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 as a presidential proclamation or an executive order; an
administrative action; investigation reports of Bureau of Lands
investigators; and a legislative act or a statute.
In this case, private respondents presented a certification dated November
25, 1994, issued by Eduardo M. Inting, the Community Environment and
Natural Resources Officer in the Department of Environment and Natural
Resources Office in Cebu City, stating that the lots involved were "found to
be within the alienable and disposable (sic) Block-I, Land Classification
Project No. 32-A, per map 2962 4-I555 dated December 9, 1980." This is
sufficient evidence to show the real character of the land subject of private
respondents application. Further, the certification enjoys a presumption of
regularity in the absence of contradictory evidence, which is true in this
case. Worth noting also was the observation of the Court of Appeals
stating that:
[n]o opposition was filed by the Bureaus of Lands and Forestry to contest
the 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 land...."
Thus, while the Court of Appeals erred in ruling that mere possession of
public land for the period required by law would entitle its occupant to a
PROPERTY 1ST BATCH
confirmation of imperfect title, it did not err in ruling in favor of private
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.
As correctly found by the Court of Appeals, private respondents were able
to 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 not show that this is one of them."
Why did the Court in Ceniza, through the same eminent member who
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
application for registration was filed nearly six (6) years after the land had
been declared alienable or disposable, while in Bracewell, the application
was filed nine (9) years before the land was declared alienable or
disposable. That crucial difference was also stressed in Naguit to
contradistinguish it from Bracewell, a difference which the dissent seeks to
belittle.45 (citations omitted)
On the other hand, under Section 14(2), ownership of private lands
acquired through prescription may be registered in the owners name. Did
the respondent then acquire the land through prescription considering that
her possession and occupation of the land by her and her predecessors-in-
interest could be traced back to as early as in 1926, and that the nature of
their possession and occupation was that of a bona fide claim of ownership
for over 30 years?
Clearly, the respondent did not. Again, Heirs of Mario Malabanan v.
Republic is enlightening, to wit:
It is clear that property of public dominion, which generally includes
property belonging to the State, cannot be the object of prescription or,
indeed, be subject of the commerce of man. Lands of the public domain,
whether declared alienable and disposable or not, are property of public
dominion and thus insusceptible to acquisition by prescription.
Let us now explore the effects under the Civil Code of a declaration by the
President or any duly authorized government officer of alienability and
disposability of lands of the public domain. Would such lands so declared
alienable and disposable be converted, under the Civil Code, from property
of the public dominion into patrimonial property? After all, by connotative
definition, alienable and disposable lands may be the object of the
commerce 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.
Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public
dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State." It is this provision
that 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 public use, and are intended for some public service or
for the development of the national wealth" are public dominion property.
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 is "intended for some public service or for the
development of the national wealth". 1w phi 1
Accordingly, there must be an express declaration by the State that the
public dominion property is no longer intended for public service or the
development 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 420(2), and thus incapable of acquisition by
prescription. It is only when such alienable and disposable lands are
expressly declared by the State to be no longer intended for public service
or for the development of the national wealth that the period of acquisitive
prescription can begin to run. Such declaration shall be in the form of a law
duly enacted by Congress or a Presidential Proclamation in cases where
the President is duly authorized by law.
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 registrability even of lands already declared alienable and disposable
to the detriment of the bona fide possessors or occupants claiming title to
the lands. Yet this interpretation is in accord with the Regalian doctrine and
its concomitant assumption that all lands owned by the State, although
PROPERTY 1ST BATCH
declared alienable or disposable, remain as such and ought to be used
only by the Government.
Recourse does not lie with this Court in the matter. The duty of the Court
1wphi1
is to apply the Constitution and the laws in accordance with their language
and intent. The remedy is to change the law, which is the province of the
legislative branch. Congress can very well be entreated to amend Section
14(2) of the Property Registration Decree and pertinent provisions of the
Civil Code to liberalize the requirements for judicial confirmation of
imperfect or incomplete titles.46
The period of possession prior to the reclassification of the land as
alienable and disposable land of the public domain is not considered in
reckoning the prescriptive period in favor of the possessor. As pointedly
clarified also in Heirs of Mario Malabanan v. Republic:47
Should public domain lands become patrimonial because they are
declared as such in a duly enacted law or duly promulgated proclamation
that they are no longer intended for public service or for the development
of the national wealth, would the period of possession prior to the
conversion of such public dominion into patrimonial be reckoned in
counting the prescriptive period in favor of the possessors? We rule in the
negative.
The limitation imposed by Article 1113 dissuades us from ruling that the
period of possession before the public domain land becomes patrimonial
may 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 registration under Section 14(2) falls wholly within the
framework of prescription under the Civil Code, there is no way that
possession during the time that the land was still classified as public
dominion property can be counted to meet the requisites of acquisitive
prescription and justify registration.48
In other words, the period of possession prior to the reclassification of the
land, no matter how long, was irrelevant because prescription did not
operate against the State before then.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of
the Court of Appeals promulgated on January 30, 2004; DISMISSES the
application for land registration of respondent Rosario de Guzman Vda. De
Joson respecting Lot 2633, Cad-297 with a total area of 12,342 square
meters, more or less, situated in San Isidro, Paombong, Bulacan; and
DIRECTS the respondent to pay the costs of suit.
SO ORDERED.
G.R. No. L-24950 March 25, 1926
VIUDA DE TAN TOCO, plaintiff-appellant,
vs.
THE MUNICIPAL COUNCIL OF ILOILO, defendant-appellee.
Arroyo & Evangelista for appellant.
Provincial Fiscal Borromeo Veloso for appelle.
VILLAMOR, J.:
It appears from the record that the widow of Tan Toco had sued the
municipal council of Iloilo for the amount of P42,966.40, being the
purchase price of two strips of land, one on Calle J. M. Basa consisting of
592 square meters, and the other on Calle Aldiguer consisting of 59 square
meters, which the municipality of Iloilo had appropriated for widening said
street. The Court of First Instance of Iloilo sentenced the said municipality
to pay the plaintiff the amount so claimed, plus the interest, and the said
judgment was on appeal affirmed by this court.1
On account of lack of funds the municipality of Iloilo was unable to pay the
said judgment, wherefore plaintiff had a writ of execution issue against the
property of the said municipality, by virtue of which the sheriff attached two
auto trucks used for street sprinkling, one police patrol automobile, the
police stations on Mabini street, and in Molo and Mandurriao and the
concrete structures, with the corresponding lots, used as markets by Iloilo,
Molo, and Mandurriao.
After notice of the sale of said property had been made, and a few days
before the sale, the provincial fiscal of Iloilo filed a motion which the Court
of First Instance praying that the attachment on the said property be
dissolved, that the said attachment be declared null and void as being
illegal and violative of the rights of the defendant municipality.
PROPERTY 1ST BATCH
Plaintiffs counsel objected o the fiscal's motion but the court, by order of
August 12, 1925, declared the attachment levied upon the aforementioned
property of the defendant municipality null and void, thereby dissolving the
said attachment.
From this order the plaintiff has appealed by bill of exceptions. The
fundamental question raised by appellant in her four assignments of error
is whether or not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides that:
Municipalities are political bodies corporate, and as such are
endowed with the faculties of municipal corporations, to be
exercised by and through their respective municipal government in
conformity with law.
It shall be competent for them, in their proper corporate name, to
sue and be sued, to contract and be contracted with, to acquire
and hold real and personal property for municipal purposes, and
generally to exercise the powers hereinafter specified or otherwise
conferred upon them by law.
For the purposes of the matter here in question, the Administrative Code
does not specify the kind of property that a municipality may acquire.
However, article 343 of the Civil Code divides the property of provinces
and towns (municipalities) into property for public use and patrimonial
property. According to article 344 of the same Code, provincial roads and
foot-path, squares, streets, fountains and public waters, drives and public
improvements of general benefit built at the expense of the said towns or
provinces, are property for public use.
All other property possessed by the said towns and provinces is
patrimonial and shall be subject to the provisions of the Civil Code except
as provided by special laws.
Commenting upon article 344, Mr. Manresa says that "In accordance with
administrative legislation" (Spanish) we must distinguish, as to the
patrimonial property of the towns, "between that a common benefit and
that which is private property of the town. The first differs from property for
public use in that generally its enjoyment is less, as it is limited to
neighbors or to a group or class thereof; and, furthermore, such use, more
or less general, is not intrinsic with this kind of property, for by its very
nature it may be enjoyed as though it were private property. The third
group, that is, private property, is used in the name of the town or province
by the entities representing it and, like and private property, giving a source
of revenue."
Such distinction, however, is of little practical importance in this jurisdiction
in view of the different principles underlying the functions of a municipality
under the American rule. Notwithstanding this, we believe that the principle
governing property of the public domain of the State is applicable to
property for public use of the municipalities as said municipal is similar in
character. The principle is that the property for public use of the State is
not within the commerce of man and, consequently, is inalienable and not
subject to prescription. Likewise, property for public of the municipality is
not within the commerce of man so long as it is used by the public and,
consequently, said property is also inalienable.
The American Law is more explicit about this matter as expounded by
Mcquilin in Municipal Corporations, volume 3, paragraph 1160, where he
says that:
States statutes often provide the court houses, jails and other
buildings owned by municipalities and the lots on which they stand
shall be exempt from attachment and execution. But independent
of express statutory exemption, as a general proposition, property,
real and personal, held by municipal corporations, in trust for the
benefit of their inhabitants, and used for public purposes, is
exempt.
For example, public buildings, school houses, streets, squares,
parks, wharves, engines and engine houses, and the like, are not
subject to execution. So city waterworks, and a stock of liquors
carried in a town dispensary, are exempt. The reason for the
exemption is obvious. Municipal corporations are created for public
purposes and for the good of the citizens in their aggregate or
public capacity. That they may properly discharge such public
functions corporate property and revenues are essential, and to
deny them these means the very purpose of their creation would
be materially impeded, and in some instances practically destroy it.
Respecting this subject the Supreme Court of Louisiana remarked:
"On the first view of this question there is something very
PROPERTY 1ST BATCH
repugnant to the moral sense in the idea that a municipal
corporation should contract debts, and that, having no resources
but the taxes which are due to it, these should not be subjected by
legal process to the satisfaction of its creditors. This consideration,
deduced from the principles of moral equity has only given way to
the more enlarged contemplation of the great and paramount
interests of public order and the principles of government."
It is generally held that property owned by a municipality, where not
used for a public purpose but for quasi private purposes, is subject
to execution on a judgment against the municipality, and may be
sold. This rule applies to shares of stock owned by a municipal
corporation, and the like. But the mere fact that corporate property
held for public uses is being temporarily used for private purposes
does not make it subject execution.
If municipal property exempt from execution is destroyed, the
insurance money stands in lieu thereof and is also exempt.
The members or inhabitants of a municipal corporation proper are
not personally liable for the debts of the municipality, except that in
the New England States the individual liability of the inhabitant is
generally maintained.
In Corpus Juris, vol 23, page 355, the following is found:
Where property of a municipal or other public corporation is sough
to be subjected to execution to satisfy judgments recovered against
such corporation, the question as to whether such property is
leviable or not is to be determined by the usage and purposes for
which it is held. The rule is that property held for public uses, such
as public buildings, streets, squares parks, promenades, wharves,
landing places fire engines, hose and hose carriages, engine
houses, public markets, hospitals, cemeteries, and generally
everything held for governmental purposes, is not subject to levy
and sale under execution against such corporation. The rule also
applies to funds in the hands of a public officer. Likewise it has
been held that taxes due to a municipal corporation or country
cannot be seized under execution by a creditor of such corporation.
But where a municipal corporation or country owns in its
proprietary, as distinguished from its public or governmental
 capacity, property not useful or used for a public purpose but
for quasi private purposes, the general rule is that such property
may be seized and sold under execution against the corporation,
precisely as similar property of individuals is seized and sold. But
property held for public purposes is not subject to execution merely
because it is temporarily used for private purposes, although if the
public use is wholly abandoned it becomes subject to execution.
Whether or not property held as public property is necessary for
the public use is a political, rather than a judicial question.
In the case of City of New Orleans vs. Louisiana Construction Co.,
Ltd. (140 U. S., 654; 35 Law. ed., 556), it was held that a wharf for
unloading sugar and molasses, open to the public, was property for the
public use of the City of New Orleans and was not subject to attachment
for the payment of the debts of the said city.
In that case it was proven that the said wharf was a parcel of land adjacent
to the Mississippi River where all shipments of sugar and molasses taken
to New Orleans were unloaded.
That city leased the said wharf to the Louisiana Construction Company,
Ltd., in order that it might erect warehouses so that the merchandise upon
discharge might not be spoiled by the elements. The said company was
given the privilege of charging certain fees for storing merchandise in the
said warehouses and the public in general had the right to unload sugar
and molasses there by paying the required fees, 10 per cent of which was
turned over to the city treasury.
The United States Supreme Court on an appeal held that the wharf was
public property, that it never ceased to be such in order to become private
property of the city; wherefore the company could not levy execution upon
the wharf in order to collect the amount of the judgment rendered in favor
thereof.
In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed.,
430), the Supreme Court of the United States that a public wharf on the
banks of the Mississippi River was public property and not subject to
execution for the payment of a debt of the City of New Orleans where said
wharf was located.
PROPERTY 1ST BATCH
In this case a parcel of land adjacent to the Mississippi River, which
formerly was the shore of the river and which later enlarged itself by
accession, was converted into a wharf by the city for public use, who
charged a certain fee for its use.
It was held that the land was public property as necessary as a public
street and was not subject to execution on account of the debts of the city.
It was further held that the fees collected where also exempt from
execution because they were a part of the income of the city.
In the case of Tufexis vs. Olaguera and Municipal Council of
Guinobatan (32 Phil., 654), the question raised was whether for the
payment of a debt to a third person by the concessionaire of a public
market, the said public market could be attached and sold at public
auction. The Supreme Court held that:
Even though a creditor is unquestionably entitled to recover out of
his debtor's property, yet when among such property there is
included the special right granted by the Government of usufruct in
a building intended for a public service, and when this privilege is
closely related to a service of a public character, such right of the
creditor to the collection of a debt owed him by the debtor who
enjoys the said special privilege of usufruct in a public market is not
absolute and may be exercised only through the action of court of
justice with respect to the profits or revenue obtained under the
special right of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a public market
cannot be attached like any ordinary right, because that would be
to permit a person who has contracted with the state or with the
administrative officials thereof to conduct and manage a service of
a public character, to be substituted, without the knowledge and
consent of the administrative authorities, by one who took no part
in the contract, thus giving rise to the possibility of the regular
course of a public service being disturbed by the more or less legal
action of a grantee, to the prejudice of the state and the public
interests.
The privilege or franchise granted to a private person to enjoy the
usufruct of a public market cannot lawfully be attached and sold,
and a creditor of such person can recover his debt only out of the
 income or revenue obtained by the debtor from the enjoyment or
usufruct of the said privilege, in the same manner that the rights of
such creditors of a railroad company can be exercised and their
credit collected only out of the gross receipts remaining after
deduction has been made therefrom of the operating expenses of
the road. (Law of November 12, 1896, extended to the overseas
provinces by the royal order of August 3, 1886.)
For the reasons contained in the authorities above quoted we believe that
this court would have reached the same conclusion if the debtor had been
municipality of Guinobatan and the public market had been levied upon by
virtue of the execution.
It is evident that the movable and immovable property of a municipality,
necessary for governmental purpose, may not be attached and sold for the
payment of a judgment against the municipality. The supreme reason for
this rule is the character of the public use to which such kind of property is
devoted. The necessity for government service justifies that the property of
public of the municipality be exempt from execution just as it is necessary
to exempt certain property of private individuals in accordance with section
452 of the Code of Civil Procedure.
Even the municipal income, according to the above quoted authorities, is
exempt from levy and execution. In volume 1, page 467, Municipal
Corporations by Dillon we find that:
Municipal corporations are instituted by the supreme authority of a
state for the public good. They exercise, by delegation from the
legislature, a portion of the sovereign power. The main object of
their creation is to act as administrative agencies for the state, and
to provide for the police and local government of certain designated
civil divisions of its territory. To this end they are invested with
certain governmental powers and charged with civil, political, and
municipal duties. To enable them beneficially to exercise these
powers and discharge these duties, they are clothed with the
authority to raise revenues, chiefly by taxation, and subordinately
by other modes as by licenses, fines, and penalties. The revenue
of the public corporation is the essential means by which it is
enabled to perform its appointed work. Deprived of its regular and
adequate supply of revenue, such a corporation is practically
destroyed and the ends of its erection thwarted. Based upon
PROPERTY 1ST BATCH
considerations of this character, it is the settled doctrine of the law
that only the public property but also the taxes and public revenues
of such corporations cannot be seized under execution against
them, either in the treasury or when in transit to it. Judgments
rendered for taxes, and the proceeds of such judgments in the
hands of officers of the law, are not subject to execution unless so
declared by statute. The doctrine of the inviolability of the public
revenues by the creditor is maintained, although the corporation is
in debt, and has no means of payment but the taxes which it is
authorized to collect.
Another error assigned by counsel for appellant is the holding of the
court a quo that the proper remedy for collecting the judgment in favor of
the plaintiff was by way or mandamus.
While this question is not necessarily included in the one which is the
subject of this appeal, yet we believe that the holding of the court, assigned
as error by appellant's counsel, is true when, after a judgment is rendered
against a municipality, it has no property subject to execution. This doctrine
is maintained by Dillon (Municipal Corporations, vol. 4, par. 1507, 5th ed.)
based upon the decisions of several States of the Union upholding the
same principle and which are cited on page 2679 of the aforesaid work. In
this sense this assignment of error, we believe, is groundless.
By virtue of all the foregoing, the judgment appealed from should be and is
hereby affirmed with costs against the appellant. So ordered.
G.R. No. L-32162 September 28, 1984
THE PASAY CITY GOVERNMENT, THE CITY MAYOR OF DEFENDANT
PASAY CITY GOVERNMENT, THE MEMBERS OF THE MUNICIPAL
BOARD OF PASAY ClTY and THE CITY TREASURER OF PASAY CITY
GOVERNMENT, petitioners-appellants,
vs.
THE HONORABLE COURT OF FIRST INSTANCE OF MANILA,
BRANCH X and VICENTE DAVID ISIP (doing business under the firm
name V.D. ISIP SONS & ASSOCIATES), respondents-appellees.
Enrico R Castro for petitioners-appellants.
Lorenzo D. Fuggan and F. V. Castillo for respondents-appellees.

MAKASIAR, J., Chairman:
This is a petition for review on certiorari of the order rendered by the Court
of First Instance of Manila, Branch X, presided by Honorable Judge Jose L.
Moya on July 23, 1969, the dispositive portion of which is as follows:
WHEREFORE, the motions for reconsideration, dated July
21 and July 22, 1969, are denied and it is ordered once
more that the writ of execution as well as of garnishment
already issued be enforced by taking possession of the
amount of P613,096.00 from the deposits of the Pasay City
government in the branch of the Philippine National Bank in
Pasay City and delivering them to the plaintiff.
SO ORDERED (p. 78, rec.).
on the ground, among others, that:
xxx xxx xxx
It is further argued that under the compromise, the plaintiff
is required to submit a performance bond upon the
approval thereof and that he has not yet done so. At the
hearing of the motion of June 21, it was in the amount of
P60,000.00 which was thereafter increased to P100,000.00
to make it equal to 20% of the cost of the next stage of the
construction to be undertaken by the plaintiff. This is a
sufficient compliance. Since the work is to be undertaken
by stages, it would be unreasonable to compel the plaintiff
to submit a performance bond equal to the cost of the
entire project, it not being known when the City of Pasay
shall have the funds for the completion thereof and it claim
it does not even have money to pay for the phase of the
work finished years ago. Besides, there is nothing in the
compromise which makes the submission of the bond a
condition precedent to the payment of P613,096.00 to the
plaintiff (p. 76, rec.).
PROPERTY 1ST BATCH
On August 12, 1964, respondent-appellee V.D. Isip, Sons & Associates
represented by Vicente David Isip entered into a contract with the City of
Pasay represented by the then Mayor Pablo Cuneta. The contract entitled
"Contract and Agreement" was for the construction of a new Pasay City
Hall at F.B. Harrison St., Pasay City. Pertinent provision of the said
contract is as follows:
xxx xxx xxx
Whereas one of the conditions set forth in the proposal is
that the Contractor shag start the construction of the Pasay
City Hall Building as per plans and specifications by stages
advancing the necessary amount needed for each stage of
work and the Party of the First Part (Pasay City) to
reimburse the amount spent on the work accomplished by
the Contractor before proceeding on the next stage ... ...
xxx xxx xxx
2. That the work shall be done in stages to be determined
by the City Engineer considering structural and functional
criteria and consistent with funds immediately available for
the purpose;
3. That the Contractor shall advance the necessary amount
needed for each stage of work; Provided that the
Contractor, shall before starting each stage of work, inform
the First Party in writing as to the amount necessary to be
advanced by the former; ... ...
4. That the Party of the First Part shall reimburse the
Contractor the cost of the work completed as estimated by
the City Engineer for back stage of work before the
Contractor proceed to the next stage; ... ... (pp. 33-34,
rec.).
Pursuant to the aforesaid contract, the respondent-appellee proceeded
with the construction of the new Pasay City Hall building as per duly
approved plans and specifications. The respondent-appellee accomplished
under various stages of construction the amount of work (including
supplies and materials) equivalent to an estimated value of ONE MILLION
SEVEN HUNDRED THIRTEEN THOUSAND NINETY-SIX PESOS
(P1,713,096.00) of the total contract price of FOUR MILLION NINE
HUNDRED FOURTEEN THOUSAND FIVE HUNDRED 80/100 PESOS
(P4,914,500.80).
The appellants paid only the total amount of ONE MILLION ONE
HUNDRED THOUSAND PESOS (P1,100,000.00) to the respondent-
appellee leaving an amount of SIX HUNDRED THIRTEEN THOUSAND
NINETY SIX PESOS (P613,096.00) immediately due from the petitioner-
appellants to the respondent-appellee.
Notwithstanding demands for payment thereof, the petitioner-appellants
failed to remit the aforesaid amount of P613,096.00 to the respondent-
appellee.
On May 16, 1968, respondent appellee filed an action for specific
performance with damages against herein petitioners-appellants before the
respondent Court.
On May 23, 1968, the appellants filed a motion for the amendment of the
complaint and for bin of particulars (p. 9, Appellant's Brief; p. 159, rec.).
This was denied by the respondent Court. The appellants later filed a
motion for reconsideration. This was likewise denied. On August 10, 1968,
the appellants filed their answer.
The parties arrived at a draft of amicable agreement which was submitted
to the Municipal Board of Pasay City for its consideration. Protracted pre-
trial hearings and conferences were held where the respondent Court
suggested and advised that "under the principle of quantum meruit, the
plaintiff is forthwith entitled to at least that which is due to him for
defendants under the contract and that public interest must perforce
require the continuity of construction of a public work project, instead of
delaying its immediate completion by litigating upon technical grounds
which would undoubtedly redound to public detriment (p. 40, rec.).
On February 25, 1969, the Municipal Board of Pasay enacted Ordinance
No. 1012 which approved the Compromise Agreement and also authorized
and empowered the incumbent City Mayor Jovito Claudio to represent the
appellant Pasay City Government, subject to the final approval of the
respondent Court herein.
PROPERTY 1ST BATCH
On March 12, 1969, the respondent Court approved the said Compromise
Agreement including a Manifestation and Addendum thereto. Relevant
provisions of the said compromise agreement are as follows:
1. That the contract and agreement, Annex "A" here of
dated August 12, 1964 ... is hereby formally confirmed and
officially approved by the parties hereto, subject to the
following changes and/or modification only:
xxx xxx xxx
B. That immediately upon final approval
hereof by this Honorable Court, the plaintiff
contractor will submit and file in favor of
Pasay City Government a new performance
bond in the amount required by pertinent
law, rules and regulations, in proportion to
the remaining value or cost of the
unfinished work of the construction as per
approved plans and specification
xxx xxx xxx
D. That if and when warranted by the
finances and income of the Pasay City
Government and subject to the pertinent
and applicable government auditing and
accounting rules and procedure, the plaintiff
contractor shall without delay finish and
complete the construction as per attached
plans and specifications ... within a period
of one (1) year from the date of final
approval of this compromise agreement by
this Honorable Court, provided, however
that in any case or event the construction
herein contemplated shall not extend
beyond one and a half (1 1/2) years from
the date of the final approval hereof by this
Honorable Court;
xxx xxx xxx
 2. That within a reasonable period of time, at least ninety
(90) days from the final approval of this Compromise
Agreement by this Honorable Court, the defendant Pasay
City Government shall pay and remit the amount of SIX
HUNDRED THIRTEEN THOUSAND NINETY-SIX PESOS
(P613,096.00) ... to the plaintiff contractor, who, in turn,
immediately upon receipt thereof, shall be bound and
obliged to commence and start the construction work
corresponding to the next stage thereof;
3. That within a similar period, the defendant Pasay City
Government shall pay and remit to plaintiff contractor an
amount equivalent to three (3%) per cent of the above
mentioned amount of SIX HUNDRED THIRTEEN
THOUSAND NINETY-SIX PESOS (P613,096.00), for and
as adverse attorney's fees in this case;
4. That any and all other of plaintiff contractor in its
complaint relative to and arising out of the contract, Annex
"A" hereof, are hereby waived and relinquished and the
case against the defendants City Mayor, Jovito 0. Claudio,
City Treasurer and Members of the Municipal Board of
Pasay City, either in their official or personal capacities, are
hereby likewise waived, relinquished and dismissed with
prejudice;
5. That any willful, gross, deliberate and wanton violation
and/or avoidance of the terms and conditions of this
Compromise Agreement by either of the parties herein
shall, with due notice, forthwith entitle the aggrieved party
to an immediate execution hereof and to the necessary and
corresponding reliefs and remedies therefor (pp. 43-46,
rec.).
On April 10, 1969, the appellants filed an urgent motion seeking a
declaration of legality of the original contract and agreement dated August
4, 1964 from the respondent Court. On May 10, 1969, the respondent
Court issued an order declaring that the original contract is legal and valid
(p. 59, rec.).
PROPERTY 1ST BATCH
On June 21, 1969, at the instance of the appellee, the respondent Court
granted an order of execution pursuant to which a writ of execution dated
June 25, 1969 was issued.
On July 9, 1969, an application for and notice of garnishment were made
and effected upon the funds of appellant Pasay City Government with the
Philippine National Bank (p. 61, rec.).
On July 11, 1969, the appellant filed an urgent motion to set aside the
respondent Court's order of June 21, 1969 and to quash the writ of
execution issued pursuant thereto upon the following grounds: 1) that the
execution sought was then still premature, the period of 90 days stipulated
not having elapsed as yet; 2) that the obligations of the parties under the
Compromise Agreement were reciprocal and the appellee not having put
up a new performance bond in the sufficient amount equivalent to 20% of
the remaining cost of construction as per agreement, the appellants cannot
be obliged to pay the sum due appellee as yet; 3) that the Sheriff has no
power or authority to levy or garnish on execution the general funds,
especially more so, the trust funds of the defendant Pasay City (pp. 6366,
rec.).
On July 19, 1969, the respondent Court issued an order stating that
inasmuch as the defendant has not yet paid the plaintiff as of this date then
"the writ of execution and of garnishment are declared to be again in full
force and effect ..." (p. 67, rec.).
On July 22, 1969, the appellants filed a motion for reconsideration on three
grounds, to wit:
1. That the same is not supported by the facts and
pertinent law, rule and regulation on the matter;
2. That the funds of the defendant Pasay City Government
which were garnished by the City Sheriff are by law exempt
from execution and/or garnishment; and
3. That plaintiff's claim may not as yet be enforceable by
ex- execution" (pp. 68-71, rec.).
On July 22, 1969, the respondent Court denied and rejected the
appellants' motion for reconsideration. The respondent Court ordered the
enforcement of the garnishment already issued to the City Sheriff for
Pasay by taking possession of the amount of P613,096.00 from the
deposits of appellant Pasay City Government with the Philippine National
Bank, Pasay City Branch and delivering the same to the plaintiff.
On July 23, 1969, the respondent Court issued an order, the pertinent
provision of which is now being questioned by the appellants in this petition
for review on certiorari, to wit:
It is further argued that under the compromise, the plaintiff
is required to submit a performance bond upon the
approval thereof and that he has not yet done so. At the
hearing of the motion of June 21, it was shown that the
plaintiff has submitted a performance bond in the amount of
P60,000.00 which was thereafter increased to P100,000.00
to make it equal to 20% of the cost of the next stage of the
construction to be undertaken by the plaintiff. This is a
sufficient compliance. Since the work is to be undertaken
by stages, it would be unreasonable to compel the plaintiff
to submit a performance bond equal to the cost of the
entire project, it not being known when the City of Pasay
shall have the funds for the completion thereof and it claims
it does not even have money to pay for the phase of the
work finished years ago. Besides, there is nothing in the
compromise which makes the submission of the bond a
condition precedent to the payment of P613,096.00 to the
plaintiff (p. 76, rec.).
On July 23, 1969, the appellants Med their notice of appeal from the orders
of the respondent Court dated June 21, July 19 and July 23, 1969 (p. 2,
rec.).
On July 24, 1969, the appellants filed their manifestation and petition to
suspend the writ of execution and garnishment (pp. 80-82, rec.).
On July 25, 1969, the appellants filed their manifestation and withdrawal of
notice of appeal On July 28, 1969, the respondent Court approved said
withdrawal (p. 85, rec.).
On August 22, 1969, the appellants filed an amended notice of appeal (pp.
86-87, rec.) and a record on appeal which were duly approved as per order
PROPERTY 1ST BATCH
of the respondent Court dated January 7, 1970 and a notice of transmittal
dated May 29, 1970 (p. 89, rec.).
On October 23, 1969, the plaintiff, Vicente David Isip, in the original
complaint for specific performance filed an urgent motion for permit to
serve a supplemental complaint seeking rescission of the original contract
titled Contract and Agreement and of the Compromise Agreement and
claiming damages in the sum of P672,653.91 alleging the violations of the
defendants specially the Pasay City Government in complying with its
obligations incumbent upon it in the compromise agreement and in view of
the rights granted to the plaintiff in paragraph 5 of the resolutory clause of
the compromise agreement.
On June 5, 1970, the Supreme Court resolved to require the petitioner-
appellants to file a petition for review on certiorari (p. 6, rec.).
On June 29, 1970, the defendants filed their cautionary answer to the
supplemental complaint alleging that the Court has no jurisdiction over the
subject of the present supplemental complaint; that the cause of action is
already barred by prior judgment; that the principle of res judicata applies;
that plaintiff's supplemental complaint states no cause of action and that
the present claim of plaintiff has been paid, waived, abandoned and
extinguished.
On July 14, 1970, the appellants filed their petition for review on certiorari
(pp. 11-24, rec.). This was denied for lack of merit by the Supreme Court.
On August 14, 1970, the respondent Court set for pre-trial the
supplemental complaint.
On October 16, 1970, the Supreme Court granted the petitioner's motion
for reconsideration and their petition for review on certiorari was given due
course (p. 102, rec.).
On July 21, 1971, the appellees filed their brief praying that the petition for
review on certiorari be dismissed since the issues involved in the
supplemental complaint are prejudicial to the present petition for review (p.
179, rec.). On December 6, 1971, the appellants filed their manifestation
and petition alleging that the supplemental complaint is not prejudicial to
the present petition for review (p. 199-201, rec.).
The two purposes of a compromise agreement are enunciated in Article
2028 of the New Civil Code, to wit:
A. 2028. A compromise is a contract where by the
parties,by making reciprocal concessions, avoid a litigation
or put an end to one already commenced.
The first purpose "to avoid a litigation" occurs when there is a threat
of an impending litigation. At this point, no case has yet reached the courts.
The moment a case has been filed in court then the second purpose "to
put an end to one already commenced" applies.
In the herein case, We are concerned with the second purpose. The latter
purpose is given effect in Article 2037 of the New Civil Code which reads:
Article 2037. A compromise has upon the parties the effect
and authority of res judicata; but there shall be no
execution except in compliance with a judicial compromise.
A compromise agreement not contrary to law, public order, public policy,
morals or good customs is a valid contract which is the law between the
parties themselves (Municipal Board of Cabanatuan City vs. Samahang
Magsasaka, Inc., 62 SCRA 435). A judgment on a compromise is a final
and executory (Samonte vs. Samonte, 64 SCRA 524). It is immediately
executory (Pamintuan vs. Muos et al., L-26331, 22 SCRA 1109 [March
15, 1968]) in the absence of a motion to set the same aside on the ground
of fraud, mistake or duress (Cadano vs. Cadano L-34998, 49 SCRA 33
[January 11, 1973]).
In fact in the herein case before Us, execution has already been issued.
Considering this in the light of Article 2041 of the New Civil Code, to wit:
Art. 2041. If one of the parties fails or refuses to abide by
the compromise, the other party may either enforce the
compromise or regard it as rescinded and insist upon his
original demand.,
it is obvious that the respondent-appellee did not only succeed in enforcing
the compromise but said plaintiff-appellee likewise wants to rescind the
said compromise. It is clear from the language of the law, specifically
Article 2041 of the New Civil Code that one of the parties to a compromise
PROPERTY 1ST BATCH
has two options: 1) to enforce the compromise; or 2) to rescind the same
and insist upon his original demand. The respondent-appellee in the case
herein before Us wants to avail of both of these options. This can not be
done. The respondent-appellee cannot ask for rescission of the
compromise agreement after it has already enjoyed the first option of
enforcing the compromise by asking for a writ of execution resulting
thereby in the garnishment of the Pasay City funds deposited with the
Philippine National Bank which eventually was delivered to the respondent-
appellee.
Upon the issuance of the writ of execution, the petitioner-appellants moved
for its quashal alleging among other things the exemption of the
government from execution. This move on the part of the petitioner-
appellant is at first glance laudable for "all government funds deposited
with the Philippine National Bank by any agency or instrumentality of the
government, whether by way of general or special deposit, remain
government funds and may not be subject to garnishment or levy
(Commissioner of Public Highways vs. San Diego, L-30098, 31 SCRA 616
[Feb. 18, 1970]). But, inasmuch as an ordinance has already been enacted
expressly appropriating the amount of P613,096.00 of payment to the
respondent-appellee, then the herein case is covered by the exception to
the general nile stated in the case of Republic vs. Palacio (L-20322, 23
SCRA 899 [May 29,1968]), to wit:
Judgments against a State in cases where it has consented
to be sued, generally operate merely to liquidate and
establish plaintiff's claim in the absence of express
provision; otherwise they cannot be enforced by processes
of the law; and it is for the legislature to provide for the
payment in such manner as it sees fit.
Hence, the respondent Court was correct in refusing to quash the writ of
execution it has issued.
Having established that the compromise agreement was final and
immediately executory, and in fact was already enforced, the respondent
Court was in error when it still entertained the supplemental complaint filed
by the respondent-appellee for by then the respondent Court had no more
jurisdiction over the subject matter. When a decision has become final and
executory, the court no longer has the power and jurisdiction to alter,
amend or revoke, and its only power thereof is to order its execution
(Ocampo vs. Caluag, L-21113, 19 SCRA 791 [April 27, 1967]).
After the perfection of an appeal, the trial court loses jurisdiction over its
judgment and cannot vacate the same Alama vs. Abbas, L-19616, 18
SCRA 679 [Nov. 29, 1966]; Commissioner of Immigration vs. Romero, L-
19782, 10 SCRA 216 [Jan. 31, 1964]; Valdez vs. CFI, etc., L-3366 [April
27, 1951] cited in Cabungcal vs. Fernandez, L-16520, 10 SCRA 731 [April
30, 1964]; Government vs. Mendoza, 51 Phil. 403; Ayllon vs. Siojo, 26 Phil.
195).
Moreover, supplemental pleadings are meant to supply deficiencies in aid
of original pleading, not to entirely substitute the latter (British Traders'
Insurance Co., Ltd. vs. Commissioner of Internal Revenue, L-20501, 13
SCRA 719, 728 [April 30, 1965]). Here, the respondent-appellee originally
asked for specific performance which was later settled through a
compromise agreement. After this, the respondent-appellee asked for
rescission of both the contract and agreement and the compromise
agreement using a supplemental complaint. It is clear that the
supplemental complaint We have before Us is not only to "supply
deficiencies in aid of original pleading but is also meant as an entirely new
"substitute" to the latter. A supplemental complaint must be consistent with
and in aid of, the cause of action set forth in the original complaint and a
new and independent cause of action cannot be set up by such complaint
(Bishop vs. Taylor, 210 App. Div. 1, 205 NVS 653), especially where
judgment has already been obtained by him in the original action
(Anadarko First National Bank vs. Anadarko First National Bank, 39 0kl.
225, 134 Phil. 866).
WE find no error in the order of the respondent Court dated July 23, 1969.
From the reading of the premises and provisions of the contract and
agreement which was "formally confirmed and officially approved by the
parties" in the compromise agreement later entered into by the same
parties, subject only to the enumerated changes and/or modifications, it is
obvious that the contracting parties envisioned a stage by stage
construction (on the part of the respondent-appellee) and payment (on the
part of the defendant-appellant). This is manifested in the contract and
agreement, to quote:
xxx xxx xxx
PROPERTY 1ST BATCH
WHEREAS, one of the conditions set forth in the proposal
is that the Contractor shag start the construction of the
Pasay City Hall building as per plans and specifications by
stages advancing the necessary amount needed for each
stage of work and the Party of the First Part to reimburse
the amount spent on the work accomplished by the
Contractor before proceeding on the next stage; Provided,
the First Party shall supply the cement needed;
xxx xxx xxx
2. That the work shall be done in stages to be determined
by the City Engineer considering structural and functional
criteria and consistent with funds immediately available for
the purpose;
3. That the Contractor shall advance the necessary amount
needed for each stage of work; Provided that the
Contractor shalt before starting each stage of work, inform
the First Party in writing as to the amount necessary to be
advanced by the former; ...
4. That the Party of the First Part shall reimburse the
Contractor the cost of the work completed as estimated by
the City Engineer for each stage of work before the
Contractor proceed to the next stage; (pp. 33-34, rec.).
And sub-paragraph H of paragraph 1 and paragraph 2 of the compromise
agreement also reiterated the stage by stage construction and payment as
follows:
H. That detailed, separate reports on the progress of the
construction work during each stage shall regularly be
submitted to the City Enginer and the City Mayor;
xxx xxx xxx
2. That within a reasonable period ,at least ninety(90) days
from the final approval of this Compromise Agreement by
this Honorable Court, the defendant Pasay City
Government shall pay and remit the amount of SIX
 HUNDRED THIRTEEN THOUSAND NINETY-SIX PESOS
(P 613,096.00) ... ... to the plaintiff contractor, who, in turn,
immediately upon receipt thereof, shall be bound and
obliged to commence and start the construction work
corresponding to the next stage thereof; ... ... (p. 45, rec.).
Sub-paragraph B of paragraph 1 of the Compromise Agreement, to wit:
B. That immediately upon final approval hereof by this
Honorable Court, the plaintiff contractor will submit and file
in favor of Pasay City Government a new performance
bond in the amount required by pertinent law, rules and
regulations, in proportion to the regular value or cost of the
unfinished work of the construction as per approved plans
and specifications ... (p. 4, rec.),
read together with the stage-by-stage construction and payment approach,
would inevitably lead to the conclusion that the parties to the compromise
contemplated a divisible obligation necessitating therefore a performance
bond "in proportion to" the uncompleted work.
What is crucial in sub-paragraph B of paragraph 1 of the compromise
agreement are the words "in proportion." If the parties really intended the
legal rate of 20% performance bond to refer to the whole unfinished work,
then the provision should have required the plaintiff contractor to submit
and file a new performance bond to cover the remaining value cost of the
unfinished work of the construction. Using the words in proportion then
significantly changed the meaning of the paragraph to ultimately mean a
performance bond equal to 20% of the next stage of work to be done.
And, We note that in the Contract and Agreement, the respondent-appellee
was allowed to file a performance bond of P222,250.00 which is but 5% of
the total bid of P4,914,500.80. A security bond was likewise filed with an
amount of P97,290.00. The sum total of bond then filed was P320,540.00
which is just 6.5% of the total Ibid. It is rather curious why all of a sudden
the petitioners-appellants are insisting on a 20% performance bond of the
entire unfinished work when they were quite content with a bond just 5% of
the entire work. For Us to allow the petitioners-appellants to adamantly
stick to the 20% performance bond would be tantamount to allowing them
to evade their obligation in the compromise agreement. This cannot be
allowed. The bond of a contractor for a public work should not be extended
PROPERTY 1ST BATCH
beyond the reasonable intent as gathered from the purpose and language
of the instrument construed in connection with the proposals, plans and
specifications, and contract (John L. Roper Lumber Co. vs. Lawson, 195
NC 840, 143 SE 847,67 ALR 984).
The premium of the bond will be sizeable and will eat up the profit of the
contractor, who is faced with the fluctuation of prices of materials due to
inflation and devaluation. Right now, many contractors cannot proceed with
the implementation of their contracts because of the extraordinary rise in
cost of materials and labor. No contractor would be willing to bid for public
works contracts under the oppressive interpretation by petitioners-
appellants.
Again, the respondent Court was correct in ruling that the submission of
the bond was not a condition precedent to the payment of P613,096.00 to
the plaintiff. Nowhere in the Contract and Agreement nor in the
Compromise Agreement could be found the fact that payment by the
petitioners- appellants of the amount of P613,096.00 was dependent upon
the submission by the respondent-appellee of the performance bond. It
cannot be argued that reciprocal obligation was created in the Compromise
Agreement, for the obligation to pay on the part of the petitioners-
appellants was established several years ago when the respondent-
appellee finished some of the stages of construction. And, this argument is
already moot and academic, for the amount of P613,096.00 has already
been collected through execution and garnishment upon the funds of
Pasay City with the Philippine National Bank.
Inasmuch as the parties in the herein case have agreed in the
Compromise Agreement, to wit:
3. That within a similar period the defendant Pasay City
Government shall pay and remit to plaintiff contractor an
amount equivalent to three (3%) percent of the above
mentioned amount of SIX HUNDRED THIRTEEN NINETY
SIX PESOS (P613,096.00), for and as adverse attorney's
fees in this case; ... (p. 45, rec.).
WE hereby grant the amount of P 18,392.78 which is 3% of P613,096.00
as attorney's fees in favor of the respondent-appellee.
WHEREFORE, THE ORDER OF THE RESPONDENT COURT DATED
JULY 23, 1969 IS HEREBY AFFIRMED AND THE PETITIONERS-
APPELLANTS ARE HEREBY DIRECTED TO PAY ATTORNEY'S FEES IN
THE AMOUNT OF EIGHTEEN THOUSAND THREE HUNDRED NINETY-
TWO AND 78/100 (P18,392.78) PESOS. COSTS AGAINST
PETITIONERS-APPELLANTS.
SO ORDERED.
G.R. No. L-11014 January 21, 1958
VICTORIANA ESPIRITU, JORGE ROBLES, JOSEFINA DE VERA,
FAUSTINO QINTIVES, LEONOR BRIONES, EVANGELINA PATACSIL,
TEOFILO ANCHETA and BRIGIDA MANGONON, petitioners-appellants,
vs.
THE MUNICIPAL COUNCIL, MUNICIPAL MAYOR and THE CHIEF OF
POLICE OF POZORRUBIO, PANGASINAN, respondents-appellees.
Teodulfo L. Reyes and Romulo M. Abarcar for appellants.
MONTEMAYOR, J.:
This is an appeal from the decision of the Court of First Instance of
Pangasinan of April 28, 1956, dismissing the petition for prohibition filed by
appellants, lifting the preliminary injunction against the appellees and
ordering the removal of appellants' stalls from the public plaza of appellee
municipality, within ten days from notice. Pending appeal, counsel for the
appellees filed a Manifestation on September 16, 1957, copy of which was
duly served on appellants, that several months after the oral argument held
before this Tribunal on January 25, 1957, appellants had voluntarily
vacated the public plaza of Pozorrubio by transferring and removing their
buildings and therefrom to private lots fronting the plaza; and that the
municipality had already begun the construction of concrete fences in the
premises, formerly occupied by appellants, without any complaint
whatsover from them or their counsel; and that consequently, the present
case has become moot and academic, and asking that the present appeal
be dismissed. By resolution of this Court of October 21, 1957, appellants
were required to comment on this Manifestation and petition for dismissal,
within ten days from notice. Despite notice of his resolution, appellants
failed to file their required comment. For this reason, we could well
summarily dismiss this appeal by resolution. However, for the satisfaction
PROPERTY 1ST BATCH
of the parties and for possible guidance of town officials and residents, we
havre deemed it convenient and necessary to decide the case by formal
decision.
The facts are not disputed. In fact, no evidence was submitted at the
hearing before the trial court, the parties having petitioned that the case be
decided on the pleadings. During the last world war, the market building of
the town of Pozorrubio was destroyed, and after Liberation, the market
vendors began constructing temporary and make-shifts stalls,, even small
residences, on a portion of the town plaza. The Municipal Treasurer
collected from these stall owners fees at the rate of P.25 per square meter
a month. In time, the whole municipal market was rehabilitated, but the
owners of the structures on the plaza failed and refused to transfer to said
market place.
The Municipal Council of Pozorrubio received petitions from civic
organizations like the Women's Club and the Puericulture Center, for the
removal of the market stalls on the plaza, which were being used not only
as stalls, but also for residence purposes, said organization desiring to
convert said portion of the plaza into a children's park. The Provincial
Board of Pangasinan had also presented to the Council the petition of
another civic organization of Pozorrubio, asking for the removal of the
stalls from the plaza, and the attention of the COuncil was also called to
the latter-circular of the Secretary of the Interior about the existence of
these stalls on the public plaza, said to be illegal.
As a result, the Municipal Council of Pozorrubio No. 20, Series of 1951,
stating that the public market had already been rehabilitated, and ordering
the occupants and owners of the structures on the plaza to remove their
buildings within sixty days from receipt of the resolution. In answer to this
resolution, eight of the market stall building owners filed a petition for
prohibition in the Cour of First Instance of Pangasinan against the
Municipal Council, the Municipal Mayor, and the Chief of Police of
Pozorrubio. Pending hearing, the trial court issued a writ of preliminary
injunction.
The trial court found that the fee of P.25 per square meter collected by the
Municipal Tresurer, was not for the rent of the portion of the public plaza
occupied by the market stalls, as claimed by appellants, but rather the
market stall fees charges on all market vendors in a public market; and that
there was absolutely no contract or agreement between the appellants on
one side and the municipality on the other, about renting of the Plaza to the
former. There is reason to believe that the occupation of the plaza and the
construction of temporary buildings thereon by appellants mostly for
market, even residence purposes, was merley tolerated by the
municipality, because of the destruction of the public market during thewar,
but the trouble is that appellants, even after the rehabilitationof the old
market, refused to transfer to said market place, perhaps to save the
trouble and expense of transferring their buildings, or possibly to continue
enjoying the benefits from the strategic position of their stalls at the plaza.
There is absolutelyno question that the town plaza cannot be used for the
construction of market stalls, specially of residences, and that such
structures constitute a nuisance subject to abatement according to law.
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 disposed of or even leased by the
municipality to private parties.1While in case of war or during an
emergency, town plazas may be occupied temporarily by private
individuals, as was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said temporary occupation
or use must also 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.
Appellants must have realized the absolute lack of merit in their stand and
the futility of their appeal because they voluntarily removed their buildings
on the plaza. As a matter f fact, after the filing of the prohibition with the
trial court, two out of the eight petitioners informed the trial court that they
were included as petitioners without their consent, and so asked that they
be excluded from the case.
In view of the foregoing, the decision appealed from is hereby affirmed.
With costs against appellants.
G.R. No. L-24440 March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and
COMMISSIONER OF INTERNAL REVENUE, defendants-appellants.
PROPERTY 1ST BATCH
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-
appellee.
Office of the Solicitor General for defendants-appellants.
BENGZON, J.P., J.:
Prior to its incorporation as a chartered city, the Municipality of
Zamboanga used to be the provincial capital of the then Zamboanga
Province. On October 12, 1936, Commonwealth Act 39 was approved
converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of
the Act also provided that
Buildings and properties which the province shall abandon
upon the transfer of the capital to another place will be acquired
and paid for by the City of Zamboanga at a price to be fixed by the
Auditor General.
The properties and buildings referred to consisted of 50 lots and
some buildings constructed thereon, located in the City of Zamboanga and
covered individually by Torrens certificates of title in the name of
Zamboanga Province. As far as can be gleaned from the records, 1 said
properties were being utilized as follows
No. of
Use
Lots
1 ................................................ Capitol Site
3 ................................................ School Site
3 ................................................ Hospital Site
3 ................................................ Leprosarium
1 ................................................ Curuan School
1 ................................................ Trade School
2 ................................................ Burleigh School
2 ................................................ High School Playground
9 ................................................ Burleighs
................................................ Hydro-Electric Site
1
(Magay)
1 ................................................ San Roque
23 ................................................ vacant
 It appears that in 1945, the capital of Zamboanga Province was
transferred to Dipolog. 2 Subsequently, or on June 16, 1948, Republic Act
286 was approved creating the municipality of Molave and making it the
capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the Auditor
General, pursuant to Commonwealth Act 39, fixed the value of the
properties and buildings in question left by Zamboanga Province in
Zamboanga City at P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the
province of Zamboanga into two (2): Zamboanga del Norte and
Zamboanga del Sur. As to how the assets and obligations of the old
province were to be divided between the two new ones, Sec. 6 of that law
provided:
Upon the approval of this Act, the funds, assets and other
properties and the obligations of the province of Zamboanga shall
be divided equitably between the Province of Zamboanga del Norte
and the Province of Zamboanga del Sur by the President of the
Philippines, upon the recommendation of the Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955,
apportioned the assets and obligations of the defunct Province of
Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for
Zamboanga del Sur. Zamboanga del Norte therefore became entitled to
54.39% of P1,294,244.00, the total value of the lots and buildings in
question, or P704,220.05 payable by Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the
President, issued a ruling 4 holding that Zamboanga del Norte had a vested
right as owner (should be co-owner pro-indiviso) of the properties
mentioned in Sec. 50 of Commonwealth Act 39, and is entitled to the price
thereof, payable by Zamboanga City. This ruling revoked the previous
Cabinet Resolution of July 13, 1951 conveying all the said 50 lots and
buildings thereon to Zamboanga City for P1.00, effective as of 1945, when
the provincial capital of the then Zamboanga Province was transferred to
Dipolog.
The Secretary of Finance then authorized the Commissioner of
Internal Revenue to deduct an amount equal to 25% of the regular internal
PROPERTY 1ST BATCH
revenue allotment for the City of Zamboanga for the quarter ending March
31, 1960, then for the quarter ending June 30, 1960, and again for the first
quarter of the fiscal year 1960-1961. The deductions, all aggregating
P57,373.46, was credited to the province of Zamboanga del Norte, in
partial payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved
amending Sec. 50 of Commonwealth Act 39 by providing that
All buildings, properties and assets belonging to the former
province of Zamboanga and located within the City of Zamboanga
are hereby transferred, free of charge, in favor of the said City of
Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered
the Commissioner of Internal Revenue to stop from effecting further
payments to Zamboanga del Norte and to return to Zamboanga City the
sum of P57,373.46 taken from it out of the internal revenue allotment of
Zamboanga del Norte. Zamboanga City admits that since the enactment of
Republic Act 3039, P43,030.11 of the P57,373.46 has already been
returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on
March 5, 1962, a complaint entitled "Declaratory Relief with Preliminary
Mandatory Injunction" in the Court of First Instance of Zamboanga del
Norte against defendants-appellants Zamboanga City, the Secretary of
Finance and the Commissioner of Internal Revenue. It was prayed that: (a)
Republic Act 3039 be declared unconstitutional for depriving plaintiff
province of property without due process and just compensation; (b)
Plaintiff's rights and obligations under said law be declared; (c) The
Secretary of Finance and the Internal Revenue Commissioner be enjoined
from reimbursing the sum of P57,373.46 to defendant City; and (d) The
latter be ordered to continue paying the balance of P704,220.05 in
quarterly installments of 25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary
injunction as prayed for. After defendants filed their respective answers,
trial was held. On August 12, 1963, judgment was rendered, the dispositive
portion of which reads:
 WHEREFORE, judgment is hereby rendered declaring
Republic Act No. 3039 unconstitutional insofar as it deprives
plaintiff Zamboanga del Norte of its private properties, consisting of
50 parcels of land and the improvements thereon under certificates
of title (Exhibits "A" to "A-49") in the name of the defunct province
of Zamboanga; ordering defendant City of Zamboanga to pay to
the plaintiff the sum of P704,220.05 payment thereof to be
deducted from its regular quarterly internal revenue allotment
equivalent to 25% thereof every quarter until said amount shall
have been fully paid; ordering defendant Secretary of Finance to
direct defendant Commissioner of Internal Revenue to deduct 25%
from the regular quarterly internal revenue allotment for defendant
City of Zamboanga and to remit the same to plaintiff Zamboanga
del Norte until said sum of P704,220.05 shall have been fully paid;
ordering plaintiff Zamboanga del Norte to execute through its
proper officials the corresponding public instrument deeding to
defendant City of Zamboanga the 50 parcels of land and the
improvements thereon under the certificates of title (Exhibits "A" to
"A-49") upon payment by the latter of the aforesaid sum of
P704,220.05 in full; dismissing the counterclaim of defendant City
of Zamboanga; and declaring permanent the preliminary
mandatory injunction issued on June 8, 1962, pursuant to the order
of the Court dated June 4, 1962. No costs are assessed against
the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal,
plaintiff province filed a motion to reconsider praying that Zamboanga City
be ordered instead to pay the P704,220.05 in lump sum with 6% interest
per annum. Over defendants' opposition, the lower court granted plaintiff
province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of
declaratory relief filed in the lower court on the assertion that the law had
already been violated and that plaintiff sought to give it coercive effect,
since assuming the same to be true, the Rules anyway authorize the
conversion of the proceedings to an ordinary action, 5 We proceed to the
more important and principal question of the validity of Republic Act 3039.
PROPERTY 1ST BATCH
The validity of the law ultimately depends on the nature of the 50 lots
and buildings thereon in question. For, the matter involved here is the
extent of legislative control over the properties of a municipal corporation,
of which a province is one. The principle itself is simple: If the property is
owned by the municipality (meaning municipal corporation) in its public and
governmental capacity, the property is public and Congress has absolute
control over it. But if the property is owned in its private or proprietary
capacity, then it is patrimonial and Congress has no absolute control. The
municipality cannot be deprived of it without due process and payment of
just compensation. 6
The capacity in which the property is held is, however, dependent on
the use to which it is intended and devoted. Now, which of two norms, i.e.,
that of the Civil Code or that obtaining under the law of Municipal
Corporations, must be used in classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424
which provide: 1wph1.t
ART. 423. The property of provinces, cities, and
municipalities is divided into property for public use and patrimonial
property.
ART. 424. Property for public use, in the provinces, cities,
and municipalities, consists of the provincial roads, city streets,
municipal streets, the squares, fountains, public waters,
promenades, and public works for public service paid for by said
provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and
shall be governed by this Code, without prejudice to the provisions
of special laws. (Stressed for emphasis).
Applying the above cited norm, all the properties in question, except
the two (2) lots used as High School playgrounds, could be considered as
patrimonial properties of the former Zamboanga province. Even the capital
site, the hospital and leprosarium sites, and the school sites will be
considered patrimonial for they are not for public use. They would fall
under the phrase "public works for public service" for it has been held that
under the ejusdem generis rule, such public works must be for free and
indiscriminate use by anyone, just like the preceding enumerated
properties in the first paragraph of Art 424. 7 The playgrounds, however, and leprosarium sites and the high school playground sites a total of 24
would fit into this category. lots since these were held by the former Zamboanga province in its
governmental capacity and therefore are subject to the absolute control of
This was the norm applied by the lower court. And it cannot be said Congress. Said lots considered as public property are the following:
that its actuation was without jurisprudential precedent for in Municipality of
Catbalogan v. Director of Lands, 8 and in Municipality of Tacloban v. TCT
Director of Lands, 9 it was held that the capitol site and the school sites in Numb Lot Number Use
municipalities constitute their patrimonial properties. This result is er
understandable because, unlike in the classification regarding State
................................ ................................ Capitol
properties, properties for public service in the municipalities are not 2200 4-B
...... ...... Site
classified as public. Assuming then the Civil Code classification to be the
chosen norm, the lower court must be affirmed except with regard to the ................................ ................................ School
2816 149
two (2) lots used as playgrounds. ...... ...... Site
................................ ................................ Hospital
3281 1224
On the other hand, applying the norm obtaining under the principles ...... ...... Site
constituting the law of Municipal Corporations, all those of the 50 ................................ ................................ Hospital
3282 1226
properties in question which are devoted to public service are deemed ...... ...... Site
public; the rest remain patrimonial. Under this norm, to be considered ................................ ................................ Hospital
public, it is enough that the property be held and, devoted for governmental 3283 1225
...... ...... Site
purposes like local administration, public education, public health, etc. 10
................................ 434-A- ................................ School
3748
...... 1 ...... Site
Supporting jurisprudence are found in the following cases: (1)
HINUNANGAN V. DIRECTOR OF LANDS, 11where it was stated that "... ................................ ................................ School
5406 171
where the municipality has occupied lands distinctly for public purposes, ...... ...... Site
such as for the municipal court house, the public school, the public market, High
or other necessary municipal building, we will, in the absence of proof to ................................ ................................ School
5564 168
the contrary, presume a grant from the States in favor of the municipality; ...... ...... Play-
but, as indicated by the wording, that rule may be invoked only as to ground
property which is used distinctly for public purposes...." (2) VIUDA DE ................................ 157 & ................................ Trade
TANTOCO V. MUNICIPAL COUNCIL OF ILOILO 12 held that municipal 5567
...... 158 ...... School
properties necessary for governmental purposes are public in nature. High
Thus, the auto trucks used by the municipality for street sprinkling, the ................................ ................................ School
police patrol automobile, police stations and concrete structures with the 5583 167
...... ...... Play-
corresponding lots used as markets were declared exempt from execution ground
and attachment since they were not patrimonial properties. (3)
MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely that a ................................ (O.C.T ................................ Curuan
6181
municipal lot which had always been devoted to school purposes is one ...... .) ...... School
dedicated to public use and is not patrimonial property of a municipality. ................................ ................................ Leprosari
11942 926
...... ...... um
Following this classification, Republic Act 3039 is valid insofar as it ................................ ................................ Leprosari
11943 927
affects the lots used as capitol site, school sites and its grounds, hospital ...... ...... um

PROPERTY 1ST BATCH

 ................................ ................................ Leprosari funds. Hence, Congress could very well dispose of said buildings in the
11944 925 same manner that it did with the lots in question.
...... ...... um
................................ ................................ Burleigh
5557 170 But even assuming that provincial funds were used, still the buildings
...... ...... School
constitute mere accessories to the lands, which are public in nature, and
................................ ................................ Burleigh
5562 180 so, they follow the nature of said lands, i.e., public. Moreover, said
...... ...... School
buildings, though located in the city, will not be for the exclusive use and
................................ ................................ benefit of city residents for they could be availed of also by the provincial
5565 172-B Burleigh
...... ...... residents. The province then and its successors-in-interest are not
................................ ................................ really deprived of the benefits thereof.
5570 171-A Burleigh
...... ......
................................ ................................ But Republic Act 3039 cannot be applied to deprive Zamboanga del
5571 172-C Burleigh
...... ...... Norte of its share in the value of the rest of the 26 remaining lots which are
................................ ................................ patrimonial properties since they are not being utilized for distinctly,
5572 174 Burleigh governmental purposes. Said lots are:
...... ......
................................ ................................
5573 178 Burleigh TCT Number Lot Number Use
...... ......
................................ ................................ ................................... ................................... Mydro,
5585 171-B Burleigh 5577 177
...... ...... ... ... Magay
................................ ................................ 1319 ................................... 127- ................................... San
5586 173 Burleigh 8 ... 0 ... Roque
...... ......
................................ ................................ ................................... ................................... Burleigh
5587 172-A Burleigh 5569 169
...... ...... ... ... 15

................................... ...................................
5558 175 Vacant
We noticed that the eight Burleigh lots above described are adjoining ... ...
each other and in turn are between the two lots wherein the Burleigh ................................... ...................................
5559 188 "
schools are built, as per records appearing herein and in the Bureau of ... ...
Lands. Hence, there is sufficient basis for holding that said eight lots ................................... ...................................
constitute the appurtenant grounds of the Burleigh schools, and partake of 5560 183 "
... ...
the nature of the same.
................................... ...................................
5561 186 "
... ...
Regarding the several buildings existing on the lots above-
................................... ...................................
mentioned, the records do not disclose whether they were constructed at 5563 191 "
... ...
the expense of the former Province of Zamboanga. Considering however
the fact that said buildings must have been erected even before 1936 ................................... ...................................
5566 176 "
when Commonwealth Act 39 was enacted and the further fact that ... ...
provinces then had no power to authorize construction of buildings such as ................................... ...................................
5568 179 "
those in the case at bar at their own expense, 14 it can be assumed that ... ...
said buildings were erected by the National Government, using national 5574 ................................... 196 ................................... "

PROPERTY 1ST BATCH

 ... ... We are more inclined to uphold this latter view. The controversy here
................................... 181- ................................... is more along the domains of the Law of Municipal Corporations State
5575
... A ...
" vs. Province than along that of Civil Law. Moreover, this Court is not
inclined to hold that municipal property held and devoted to public service
................................... 181- ................................... is in the same category as ordinary private property. The consequences
5576 "
... B ... are dire. As ordinary private properties, they can be levied upon and
5578
...................................
182
...................................
" attached. They can even be acquired thru adverse possession all these
... ... to the detriment of the local community. Lastly, the classification of
................................... ................................... properties other than those for public use in the municipalities as
5579 197 " patrimonial under Art. 424 of the Civil Code is "... without prejudice to
... ...
................................... ................................... the provisions of special laws." For purpose of this article, the principles,
5580 195 " obtaining under the Law of Municipal Corporations can be considered as
... ...
"special laws". Hence, the classification of municipal property devoted for
................................... 159- ................................... distinctly governmental purposes as public should prevail over the Civil
5581 "
... B ... Code classification in this particular case.
................................... ...................................
5582 194 "
... ... Defendants' claim that plaintiff and its predecessor-in-interest are
................................... ................................... "guilty of laches is without merit. Under Commonwealth Act 39, Sec. 50,
5584 190 "
... ... the cause of action in favor of the defunct Zamboanga Province arose only
................................... ................................... in 1949 after the Auditor General fixed the value of the properties in
5588 184 " question. While in 1951, the Cabinet resolved transfer said properties
... ...
practically for free to Zamboanga City, a reconsideration thereof was
................................... ...................................
5589 187 " seasonably sought. In 1952, the old province was dissolved. As successor-
... ...
in-interest to more than half of the properties involved, Zamboanga del
................................... ................................... Norte was able to get a reconsideration of the Cabinet Resolution in 1959.
5590 189 "
... ... In fact, partial payments were effected subsequently and it was only after
................................... ................................... the passage of Republic Act 3039 in 1961 that the present controversy
5591 192 "
... ... arose. Plaintiff brought suit in 1962. All the foregoing, negative laches.
................................... ...................................
5592 193 "
... ... It results then that Zamboanga del Norte is still entitled to collect
................................... ................................... from the City of Zamboanga the former's 54.39% share in the 26 properties
5593 185 " which are patrimonial in nature, said share to computed on the basis of the
... ...
valuation of said 26 properties as contained in Resolution No. 7, dated
................................... 414 ...................................
7379 " March 26, 1949, of the Appraisal Committee formed by the Auditor
... 7 ...
General.

Moreover, the fact that these 26 lots are registered strengthens the
proposition that they are truly private in nature. On the other hand, that the
24 lots used for governmental purposes are also registered is of no
significance since registration cannot convert public property to private. 16
Plaintiff's share, however, cannot be paid in lump sum, except as to
the P43,030.11 already returned to defendant City. The return of said
amount to defendant was without legal basis. Republic Act 3039 took effect
only on June 17, 1961 after a partial payment of P57,373.46 had already
been made. Since the law did not provide for retroactivity, it could not have
validly affected a completed act. Hence, the amount of P43,030.11 should

PROPERTY 1ST BATCH

be immediately returned by defendant City to plaintiff province. The capacity as Mayor of the City of Manila; and the CITY OF
remaining balance, if any, in the amount of plaintiff's 54.39% share in the MANILA, respondents-appellees.
26 lots should then be paid by defendant City in the same manner
originally adopted by the Secretary of Finance and the Commissioner of Office of the Solicitor General Felix V. Makasiar, Assistant Solicitor-
Internal Revenue, and not in lump sum. Plaintiff's prayer, particularly pars. General Antonio A. Torres, Solicitor Raul I. Goco and Magno B. Pablo &
5 and 6, read together with pars. 10 and 11 of the first cause of action Cipriano A. Tan, Legal Staff, Land Authority for petitioners-appellants.
recited in the complaint 17clearly shows that the relief sought was merely
the continuance of the quarterly payments from the internal revenue Gregorio A. Ejercito and Felix C. Chavez for respondents-appellees.
allotments of defendant City. Art. 1169 of the Civil Code on reciprocal
obligations invoked by plaintiff to justify lump sum payment is inapplicable
since there has been so far in legal contemplation no complete delivery of
the lots in question. The titles to the registered lots are not yet in the name
of defendant Zamboanga City. ESGUERRA, J.:p

WHEREFORE, the decision appealed from is hereby set aside and This is a petition for review of the decision of the Court of First Instance of
another judgment is hereby entered as follows:. Manila, Branch XXIII, in Civil Case No. 67946, dated September 23, 1968,
the dispositive portion of which is as follows:
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff
Zamboanga del Norte in lump sum the amount of P43,030.11 which the WHEREFORE, the Court renders judgment declaring
former took back from the latter out of the sum of P57,373.46 previously Republic Act No. 4118 unconstitutional and invalid in that it
paid to the latter; and deprived the City of Manila of its property without due
process and payment of just compensation. Respondent
Executive Secretary and Governor of the Land Authority
(2) Defendants are hereby ordered to effect payments in favor of
are hereby restrained and enjoined from implementing the
plaintiff of whatever balance remains of plaintiff's 54.39% share in the 26
provisions of said law. Respondent Register of Deeds of
patrimonial properties, after deducting therefrom the sum of P57,373.46,
the City of Manila is ordered to cancel Transfer Certificate
on the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal
of Title No. 80876 which he had issued in the name of the
Committee formed by the Auditor General, by way of quarterly payments
Land Tenure Administration and reinstate Transfer
from the allotments of defendant City, in the manner originally adopted by
Certificate of Title No. 22547 in the name of the City of
the Secretary of Finance and the Commissioner of Internal Revenue. No
Manila which he cancelled, if that is feasible, or issue a
costs. So ordered.
new certificate of title for the same parcel of land in the
name of the City of Manila. 1
G.R. No. L-29788 August 30, 1972
The facts necessary for a clear understanding of this case are as follows:
RAFAEL S. SALAS, in his capacity as Executive Secretary;
CONRADO F. ESTRELLA, in his capacity as Governor of the Land
On February 24, 1919, the 4th Branch of the Court of First Instance of
Authority; and LORENZO GELLA, in his capacity as Register of
Manila, acting as a land registration court, rendered judgment in Case No.
Deeds of Manila, petitioners-appellants,
18, G.L.R.O. Record No. 111, declaring the City of Manila the owner in fee
vs.
simple of a parcel of land known as Lot No. 1, Block 557 of the Cadastral
HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII,
Survey of the City of Mani1a, containing an area of 9,689.8 square meters,
Court of First Instance of Manila; ANTONIO J. VILLEGAS, in his
more or less. Pursuant to said judgment the Register of Deeds of Manila
on August 21, 1920, issued in favor of the City of Manila, Original

PROPERTY 1ST BATCH

Certificate of Title No. 4329 covering the aforementioned parcel of land. On
various dates in 1924, the City of Manila sold portions of the
aforementioned parcel of land in favor of Pura Villanueva. As a
consequence of the transactions Original Certificate of Title No. 4329 was
cancelled and transfer certificates of title were issued in favor of Pura
Villanueva for the portions purchased by her. When the last sale to Pura
Villanueva was effected on August 22, 1924, Transfer Certificate of Title
No. 21974 in the name of the City of Manila was cancelled and in lieu
thereof Transfer Certificate of Title (TCT) No. 22547 covering the residue
thereof known as Lot 1-B-2-B of Block 557, with an area of 7,490.10
square meters, was issued in the name of the City of Manila.
On September 21, 1960, the Municipal Board of Manila, presided by then
Vice-Mayor Antono J. Villegas, adopted a resolution requesting His
Excellency, the President of the Philippines to consider the feasibility of
declaring the City property bounded by Florida, San Andres, and Nebraska
Streets, under Transfer Certificate of Title Nos. 25545 and 22547,
containing a total area of 7,450 square meters as a patrimonial property of
the City of Manila for the purpose of reselling these lots to the actual
occupants thereof. 2
The said resolution of the Municipil Board of the City of Manila was
officially transmitted to the President of the Philippines by then Vice-Mayor
Antonio J. Villegas on September 21, 1960, with the information that the
same resolution was, on the same date, transmitted to the Senate and
House of Representatives of the Congress of the Philippines. 3
During the First Session of the Fifth Congress of the Philippines, House Bill
No. 191 was filed in the House of Representatives by then Congressman
Bartolome Cabangbang seeking to declare the property in question as
patrimonial property of the City of Manila, and for other purposes. The
explanatory note of the Bill gave the grounds for its enactment, to wit:
In the particular case of the property subject of this bill, the
City of Manila does not seem to have use thereof as a
public communal property. As a matter of fact, a resolution
was adopted by the Municipal Board of Manila at its regular
session held on September 21, 1960, to request the
feasibility of declaring the city property bounded by Florida,
San Andres and Nebraska Streets as a patrimonial
property of the City of Manila for the purpose of reselling
PROPERTY 1ST BATCH
these lots to the actual occupants thereof. Therefore, it will
be to the best interest of society that the said property be
used in one way or another. Since this property has been
occupied for a long time by the present occupants thereof
and since said occupants have expressed their willingness
to buy the said property, it is but proper that the same be
sold to them. 4
Subsequently, a revised version of the Bill was introduced in the House of
Representatives by Congressmen Manuel Cases, Antonio Raquiza and
Nicanor Yiguez as House Bill No. 1453, with the following explanatory
note:
The accompanying bill seeks to convert one (1) parcel of
land in the district of Malate, which is reserved as
communal property into a disposable or alienable property
of the State and to provide its subdivision and sale to bona
fide occupants or tenants.
This parcel of land in question was originally an aggregate
part of a piece of land with an area of 9,689.8 square
meters, more or less. ... On September 21, 1960, the
Municipal Board of Manila in its regular session
unanimously adopted a resolution requesting the President
of the Philippines and Congress of the Philippines the
feasibility of declaring this property into disposable or
alienable property of the State. There is therefore a
precedent that this parcel of land could be subdivided and
sold to bona fide occupants. This parcel of land will not
serve any useful public project because it is bounded on all
sides by private properties which were formerly parts of this
lot in question.
Approval of this bill will implement the policy of the
Administration of land for the landless and the Fifth
Declaration of Principles of the Constitution, which states
that the promotion of Social Justice to insure the well-being
and economic security of all people should be the concern
of the State. We are ready and willing to enact legislation
promoting the social and economic well-being of the people
 whenever an opportunity for enacting such kind of
legislation arises.
In view of the foregoing consideration and to insure fairness and justice to
the present bona fide occupants thereof, approval of this Bill is strongly
urged. 5
The Bill having been passed by the House of Representatives, the same
was thereafter sent to the Senate where it was thoroughly discussed, as
evidenced by the Congressional Records for May 20, 1964, pertinent
portion of which is as follows:
SENATOR FERNANDEZ: Mr. President, it will be re called
that when the late Mayor Lacson was still alive, we
approved a similar bill. But afterwards, the late Mayor
Lacson came here and protested against the approval, and
the approval was reconsidered. May I know whether the
defect in the bill which we approved, has already been
eliminated in this present bill?
SENATOR TOLENTINO: I understand Mr. President, that
that has already been eliminated and that is why the City of
Manila has no more objection to this bill.
SENATOR FERNANDEZ: Mr. President, in view of that
manifestation and considering that Mayor Villegas and
Congressman Albert of the Fourth District of Manila are in
favor of the bill. I would not want to pretend to know more
what is good for the City of Manila.
SENATOR TOLENTINO: Mr. President, there being no
objection, I move that we approve this bill on second
reading.
PRESIDENT PRO-TEMPORE: The biII is approved on
second reading after several Senetors said aye and
nobody said nay.
The bill was passed by the Senate, approved by the President on June 20,
1964, and became Republic Act No. 4118. It reads as follows:
PROPERTY 1ST BATCH
Lot I-B-2-B of Block 557 of the cadastral survey of the City
of Manila, situated in the District of Malate, City of Manila,
which is reserved as communal property, is hereby
converted into disposal or alienable land of the State, to be
placed under the disposal of the Land Tenure
Administration. The Land Tenure Administration
shall subdivide the property into small lots, none of which
shall exceed one hundred and twenty square meters in
area and sell the same on installment basis to the tenants
or bona fide occupants thereof and to individuals, in the
order mentioned: Provided, That no down payment shall be
required of tenants or bona fide occupants who cannot
afford to pay such down payment: Provided, further, That
no person can purchase more than one lot: Provided,
furthermore, That if the tenant or bona fide occupant of any
given lot is not able to purchase the same, he shall be
given a lease from month to month until such time that he
is able to purchase the lot: Provided, still further, That in the
event of lease the rentals which may be charged shall not
exceed eight per cent per annum of the assessed value of
the property leased: And provided, finally, That in fixing the
price of each lot, which shall not exceed twenty pesos per
square meter, the cost of subdivision and survey shall not
be included.
Sec. 2. Upon approval of this Act no ejectment proceedings
against any tenant or bona fide occupant of the above lots
shall be instituted and any ejectment proceedings pending
in court against any such tenant or bona fide occupant shall
be dismissed upon motion of the defendant: Provided, That
any demolition order directed against any tenant or bona
fide occupant shall be lifted.
Sec. 3. Upon approval of this Act, if the tenant or bona
fide occupant is in arrears in the payment of any rentals,
the amount legally due shall be liquidated and shall be
payable in twenty-four equal monthly installments from the
date of liquidation.
Sec. 4. No property acquired by virtue of this Act shall be
transferred, sold, mortgaged, or otherwise disposed of
within a period of five years from the date full ownership
 thereof has been vested in the purchaser without the
consent of the Land Tenure Administration.
Sec. 5. In the event of the death of the purchaser prior to
the complete payment of the price of the lot purchased by
him, his widow and children shall succeed in all his rights
and obligations with respect to his lot.
Sec. 6. The Chairman of the Land Tenure Administration
shall implement and issue such rules and regulations as
may be necessary to carry out the provisions of this Act.
Sec. 7. The sum of one hundred fifty thousand pesos is
appropriated out of any funds in the National Treasury not
otherwise appropriated, to carry out the purposes of this
Act.
Sec. 8. All laws or parts of laws inconsistent with this Act
are repealed or modified accordingly.
Sec. 9. This Act shall take effect upon its approval.
Approved, June 20, 1964.
To implement the provisions of Republic Act No. 4118, and pursuant to the
request of the occupants of the property involved, then Deputy Governor
Jose V. Yap of the Land Authority (which succeeded the Land Tenure
Administration) addressed a letter, dated February 18, 1965, to Mayor
Antonio Villegas, furnishing him with a copy of the proposed subdivision
plan of said lot as prepared for the Republic of the Philippines for resale of
the subdivision lots by the Land Authority to bona fide applicants. 6
On March 2, 1965, the City Mayor of Manila, through his Executive and
Technical Adviser, acknowledged receipt of the proposed subdivision plan
of the property in question and informed the Land Authority that his office
would interpose no objection to the implementation of said law, provided
that its provisions be strictly complied with. 7
With the above-mentioned written conformity of the City of Manila for the
implementation of Republic Act No. 4118, the Land Authority, thru then
Deputy Governor Jose V. Yap, requested the City Treasurer of Manila, thru
PROPERTY 1ST BATCH
the City Mayor, for the surrender and delivery to the former of the owner's
duplicate of Transfer Certificate of Title No. 22547 in order to obtain title
thereto in the name of the Land Authority. The request was duly granted
with the knowledge and consent of the Office of the City Mayor. 8
With the presentation of Transfer Certificate of Title No. 22547, which had
been yielded as above stated by the, City authorities to the Land Authority,
Transfer Certificate of Title (T.C.T. No. 22547) was cancelled by the
Register of Deeds of Manila and in lieu thereof Transfer Certificate of Title
No. 80876 was issued in the name of the Land Tenure Administration (now
Land Authority) pursuant to the provisions of Republic Act No.
4118. 9
But due to reasons which do not appear in the record, the City of Manila
made a complete turn-about, for on December 20, 1966, Antonio J.
Villegas, in his capacity as the City Mayor of Manila and the City of Manila
as a duly organized public corporation, brought an action for injunction
and/or prohibition with preliminary injunction to restrain, prohibit and enjoin
the herein appellants, particularly the Governor of the Land Authority and
the Register of Deeds of Manila, from further implementing Republic Act
No. 4118, and praying for the declaration of Republic Act No. 4118 as
unconstitutional.
With the foregoing antecedent facts, which are all contained in the partial
stipulation of facts submitted to the trial court and approved by respondent
Judge, the parties waived the presentation of further evidence and
submitted the case for decision. On September 23, 1968, judgment was
rendered by the trial court declaring Republic Act No. 4118 unconstitutional
and invalid on the ground that it deprived the City of Manila of its property
without due process of law and payment of just compensation. The
respondents were ordered to undo all that had been done to carry out the
provisions of said Act and were restrained from further implementing the
same.
Two issues are presented for determination, on the resolution of which the
decision in this case hinges, to wit:
I. Is the property involved private or patrimonial property of
the City of Manila?
 II. Is Republic Act No. 4118 valid and not repugnant to the
Constitution?
I.
As regards the first issue, appellants maintain that the land involved is a
communal land or "legua comunal" which is a portion of the public domain
owned by the State; that it came into existence as such when the City of
Manila, or any pueblo or town in the Philippines for that matter, was
founded under the laws of Spain, the former sovereign; that upon the
establishment of a pueblo, the administrative authority was required to allot
and set aside portions of the public domain for a public plaza, a church
site, a site for public buildings, lands to serve as common pastures and for
streets and roads; that in assigning these lands some lots were earmarked
for strictly public purposes, and ownership of these lots (for public
purposes) immediately passed to the new municipality; that in the case of
common lands or "legua comunal", there was no such immediate
acquisition of ownership by the pueblo, and the land though administered
thereby, did not automatically become its property in the absence of an
express grant from the Central Government, and that the reason for this
arrangement is that this class of land was not absolutely needed for the
discharge of the municipality's governmental functions.
It is argued that the parcel of land involved herein has not been used by
the City of Manila for any public purpose and had not been officially
earmarked as a site for the erection of some public buildings; that this
circumstance confirms the fact that it was originally "communal" land
alloted to the City of Manila by the Central Government not because it was
needed in connection with its organization as a municipality but simply for
the common use of its inhabitants; that the present City of Manila as
successor of the Ayuntamiento de Manila under the former Spanish
sovereign merely enjoys the usufruct over said land, and its exercise of
acts of ownership by selling parts thereof did not necessarily convert the
land into a patrimonial property of the City of Manila nor divest the State of
its paramount title.
Appellants further argue that a municipal corporation, like a city is a
governmental agent of the State with authority to govern a limited portion
of its territory or to administer purely local affairs in a given political
subdivision, and the extent of its authority is strictly delimited by the grant
of power conferred by the State; that Congress has the exclusive power to
PROPERTY 1ST BATCH
create, change or destroy municipal corporations; that even if We admit
that legislative control over municipal corporations is not absolute and even
if it is true that the City of Manila has a registered title over the property in
question, the mere transfer of such land by an act of the legislature from
one class of public land to another, without compensation, does not invade
the vested rights of the City.
Appellants finally argue that Republic Act No. 4118 has treated the land
involved as one reserved for communal use, and this classification is
conclusive upon the courts; that if the City of Manila feels that this is wrong
and its interests have been thereby prejudiced, the matter should be
brought to the attention of Congress for correction; and that since
Congress, in the exercise of its wide discretionary powers has seen fit to
classify the land in question as communal, the Courts certainly owe it to a
coordinate branch of the Government to respect such determination and
should not interfere with the enforcement of the law.
Upon the other hand, appellees argue by simply quoting portions of the
appealed decision of the trial court, which read thus:
The respondents (petitioners-appellants herein) contend,
among other defenses, that the property in question is
communal property. This contention is, however, disproved
by Original Certificate of Title No. 4329 issued on August
21, 1920 in favor of the City of Manila after the land in
question was registered in the City's favor. The Torrens
Title expressly states that the City of Manila was the owner
in 'fee simple' of the said land. Under Sec. 38 of the Land
Registration Act, as amended, the decree of confirmation
and registration in favor of the City of Manila ... shall be
conclusive upon and against all persons including the
Insular Government and all the branches there ... There is
nothing in the said certificate of title indicating that the land
was 'communal' land as contended by the respondents.
The erroneous assumption by the Municipal Board of
Manila that the land in question was communal land did not
make it so. The Municipal Board had no authority to do
that.
The respondents, however, contend that Congress had the
power and authority to declare that the land in question
 was 'communal' land and the courts have no power or
authority to make a contrary finding. This contention is not
entirely correct or accurate. Congress has the power to
classify 'land of the public domain', transfer them from one
classification to another and declare them disposable or
not. Such power does not, however, extend to properties
which are owned by cities, provinces and municipalities in
their 'patrimonial' capacity.
Art. 324 of the Civil Code provides that properties of
provinces, cities and municipalities are divided into
properties for public use and patrimonial property. Art. 424
of the same code provides that properties for public use
consist of provincial roads, city streets, municipal streets,
the squares, fountains, public waters, promenades and
public works for public service paid for by said province,
cities or municipalities. All other property possessed by any
of them is patrimonial. Tested by this criterion the Court
finds and holds that the land in question is patrimonial
property of the City of Manila.
Respondents contend that Congress has declared the land
in question to be 'communal' and, therefore, such
designation is conclusive upon the courts. The Courts
holds otherwise. When a statute is assailed as
unconstitutional the Courts have the power and authority to
inquire into the question and pass upon it. This has long
ago been settled in Marbury vs. Madison, 2 L. ed. 60, when
the United States Supreme Court speaking thru Chief
Justice Marshall held:
... If an act of the legislature, repugnant to
the constitution, is void, does it,
notwithstanding its validity, bind the courts,
and oblige them to give effect? It is
emphatically the province and duty of the
judicial department to say what the law is ...
So if a law be in opposition to the
constitution; if both the law and the
constitution apply to a particular case, so
that the court must either decide that case
conformable to the constitution,
PROPERTY 1ST BATCH
disregarding the law, the court must
determine which of these conflicting rules
governs the case. This is of the very
essence of unconstitutional judicial duty.
Appellees finally concluded that when the courts declare a law
unconstitutional it does not mean that the judicial power is superior to the
legislative power. It simply means that the power of the people is superior
to both and that when the will of the legislature, declared in statutes,
stands in opposition to that of the people, declared in the Constitution, the
judges ought to be governed by the Constitution rather than by the
statutes.
There is one outstanding factor that should be borne in mind in resolving
the character of the land involved, and it is that the City of Manila, although
declared by the Cadastral Court as owner in fee simple, has not shown by
any shred of evidence in what manner it acquired said land as its private or
patrimonial property. It is true that the City of Manila as well as its
predecessor, the Ayuntamiento de Manila, could validly acquire property in
its corporate or private capacity, following the accepted doctrine on the
dual character public and private of a municipal corporation. And
when it acquires property in its private capacity, it acts like an ordinary
person capable of entering into contracts or making transactions for the
transmission of title or other real rights. When it comes to acquisition of
land, it must have done so under any of the modes established by law for
the acquisition of ownership and other real rights. In the absence of a title
deed to any land claimed by the City of Manila as its own, showing that it
was acquired with its private or corporate funds, the presumption is that
such land came from the State upon the creation of the municipality
(Unson vs. Lacson, et al., 100 Phil. 695). Originally the municipality owned
no patrimonial property except those that were granted by the State not for
its public but for private use. Other properties it owns are acquired in the
course of the exercise of its corporate powers as a juridical entity to which
category a municipal corporation pertains.
Communal lands or "legua comunal" came into existence when a town or
pueblo was established in this country under the laws of Spain (Law VII,
Title III, Book VI, Recopilacion de las Leyes de Indios). The municipalities
of the Philippines were not entitled, as a matter of right, to any part of the
public domain for use as communal lands. The Spanish law provided that
the usufruct of a portion of the public domain adjoining municipal territory
might be granted by the Government for communal purposes, upon proper
petition, but, until granted, no rights therein passed to the municipalities,
and, in any event, the ultimate title remained in the sovereign (City of
Manila vs. Insular Government, 10 Phil. 327).
For the establishment, then, of new pueblos the
administrative authority of the province, in representation of
the Governor General, designated the territory for their
location and extension and the metes and bounds of the
same; and before alloting the lands among the new
settlers, a special demarcation was made of the places
which were to serve as the public square of the pueblo, for
the erection of the church, and as sites for the public
buildings, among others, the municipal building or the casa
real, as well as of the lands whick were to constitute the
common pastures, and propios of the municipality and the
streets and roads which were to intersect the new town
were laid out, ... . (Municipality of Catbalogan vs. Director
of Lands, 17 Phil. 216, 220) (Emphasis supplied)
It may, therefore, be laid down as a general rule that regardless of the
source or classification of land in the possession of a municipality,
excepting those acquired with its own funds in its private or corporate
capacity, such property is held in trust for the State for the benefit of its
inhabitants, whether it be for governmental or proprietary purposes. It
holds such lands subject to the paramount power of the legislature to
dispose of the same, for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being but a
subdivision or instrumentality thereof for purposes of local administration.
Accordingly, the legal situation is the same as if the State itself holds the
property and puts it to a different use (2 McQuilin,Municipal Corporations,
3rd Ed., p. 197, citing Monagham vs. Armatage, 218 Minn. 27, 15 N. W.
2nd 241).
True it is that the legislative control over a municipal corporation is not
absolute even when it comes to its property devoted to public use, for such
control must not be exercised to the extent of depriving persons of their
property or rights without due process of law, or in a manner impairing the
obligations of contracts. Nevertheless, when it comes to property of the
municipality which it did not acquire in its private or corporate capacity with
its own funds, the legislature can transfer its administration and disposition
to an agency of the National Government to be disposed of according to its
discretion. Here it did so in obedience to the constitutional mandate of
PROPERTY 1ST BATCH
promoting social justice to insure the well-being and economic security of
the people.
It has been held that a statute authorizing the transfer of a Municipal airport
to an Airport Commission created by the legislature, even without
compensation to the city, was not violative of the due process clause of the
American Federal Constitution. The Supreme Court of Minnessota
in Monagham vs. Armatage, supra, said:
... The case is controlled by the further rule that the
legislature, having plenary control of the local municipality,
of its creation and of all its affairs, has the right to authorize
or direct the expenditures of money in its treasury, though
raised, for a particular purpose, for any legitimate municipal
purpose, or to order and direct a distribution thereof upon a
division of the territory into separate municipalities ... . The
local municipality has no such vested right in or to its public
funds, like that which the Constitution protects in the
individual as precludes legislative interferences. People vs.
Power, 25 Ill. 187; State Board (of Education) vs. City, 56
Miss. 518. As remarked by the supreme court of Maryland
in Mayor vs. Sehner, 37 Md. 180: "It is of the essence of
such a corporation, that the government has the sole right
as trustee of the public interest, at its own good will and
pleasure, to inspect, regulate, control, and direct the
corporation, its funds, and franchises."
We therefore hold that c.500, in authorizing the transfer of
the use and possession of the municipal airport to the
commission without compensation to the city or to the park
board, does not violate the Fourteenth Amendment to the
Constitution of the United States.
The Congress has dealt with the land involved as one reserved for
communal use (terreno comunal). The act of classifying State property
calls for the exercise of wide discretionary legislative power and it should
not be interfered with by the courts.
This brings Us to the second question as regards the validity of Republic
Act No. 4118, viewed in the light of Article III, Sections 1, subsection (1)
and (2) of the Constitution which ordain that no person shall be deprived of
his property without due process of law and that no private property shall
be taken for public use without just compensation.
II .
The trial court declared Republic Act No. 4118 unconstitutional for
allegedly depriving the City of Manila of its property without due process of
law and without payment of just compensation. It is now well established
that the presumption is always in favor of the constitutionality of a law (U S.
vs. Ten Yu, 24 Phil. 1; Go Ching, et al. vs. Dinglasan, et al., 45 O.G. No. 2,
pp. 703, 705). To declare a law unconstitutional, the repugnancy of that
law to the Constitution must be clear and unequivocal, for even if a law is
aimed at the attainment of some public good, no infringement of
constitutional rights is allowed. To strike down a law there must be a clear
showing that what the fundamental law condemns or prohibits, the statute
allows it to be done (Morfe vs. Mutuc, et al., G.R. No. L-20387, Jan. 31,
1968; 22 SCRA 424). That situation does not obtain in this case as the law
assailed does not in any manner trench upon the constitution as will
hereafter be shown. Republic Act No. 4118 was intended to implement the
social justice policy of the Constitution and the Government program of
"Land for the Landless". The explanatory note of House Bill No. 1453
which became Republic Act No. 4118, reads in part as follows:
Approval of this bill will implement the policy of the
administration of "land for the landless" and the Fifth
Declaration of Principles of the Constitution which states
that "the promotion of social justice to insure the well-being
and economic security of all people should be the concern
of the State." We are ready and willing to enact legislation
promoting the social and economic well-being of the people
whenever an opportunity for enacting such kind of
legislation arises.
The respondent Court held that Republic Act No. 4118, "by converting the
land in question which is the patrimonial property of the City of Manila
into disposable alienable land of the State and placing it under the disposal
of the Land Tenure Administration violates the provisions of Article III
(Secs. 1 and 2) of the Constitution which ordain that "private property shall
not be taken for public use without just compensation, and that no person
shall be deprived of life, liberty or property without due process of law". In
support thereof reliance is placed on the ruling in Province of Zamboanga
PROPERTY 1ST BATCH
del Norte vs. City of Zamboanga, G.R. No. 2440, March 28, 1968; 22
SCRA 1334, which holds that Congress cannot deprive a municipality of its
private or patrimonial property without due process of law and without
payment of just compensation since it has no absolute control thereof.
There is no quarrel over this rule if it is undisputed that the property sought
to be taken is in reality a private or patrimonial property of the municipality
or city. But it would be simply begging the question to classify the land in
question as such. The property, as has been previously shown, was not
acquired by the City of Manila with its own funds in its private or proprietary
capacity. That it has in its name a registered title is not questioned, but this
title should be deemed to be held in trust for the State as the land covered
thereby was part of the territory of the City of Manila granted by the
sovereign upon its creation. That the National Government, through the
Director of Lands, represented by the Solicitor General, in the cadastral
proceedings did not contest the claim of the City of Manila that the land is
its property, does not detract from its character as State property and in no
way divests the legislature of its power to deal with it as such, the state not
being bound by the mistakes and/or negligence of its officers.
One decisive fact that should be noted is that the City of Manila expressly
recognized the paramount title of the State over said land when by its
resolution of September 20, 1960, the Municipal Board, presided by then
Vice-Mayor Antonio Villegas, requested "His Excellency the President of
the Philippines to consider the feasibility of declaring the city property
bounded by Florida, San Andres and Nebraska Streets, under Transfer
Certificate of Title Nos. 25545 and 25547, containing an area of 7,450
square meters, as patrimonial property of the City of Manila for the purpose
of reselling these lots to the actual occupants thereof." (See Annex E,
Partial Stipulation of Facts, Civil Case No. 67945, CFI, Manila, p. 121,
Record of the Case) [Emphasis Supplied]
The alleged patrimonial character of the land under the ownership of the
City of Manila is totally belied by the City's own official act, which is fatal to
its claim since the Congress did not do as bidden. If it were its patrimonial
property why should the City of Manila be requesting the President to
make representation to the legislature to declare it as such so it can be
disposed of in favor of the actual occupants? There could be no more
blatant recognition of the fact that said land belongs to the State and was
simply granted in usufruct to the City of Manila for municipal purposes. But
since the City did not actually use said land for any recognized public
purpose and allowed it to remain idle and unoccupied for a long time until it
was overrun by squatters, no presumption of State grant of ownership in
favor of the City of Manila may be acquiesced in to justify the claim that it is
its own private or patrimonial property (Municipality of Tigbauan vs.
Director of Lands, 35 Phil. 798; City of Manila vs. Insular Government, 10
Phil. 327; Municipality of Luzuriaga vs. Director of Lands, 24 Phil. 193).
The conclusion of the respondent court that Republic Act No. 4118
converted a patrimonial property of the City of Manila into a parcel of
disposable land of the State and took it away from the City without
compensation is, therefore, unfounded. In the last analysis the land in
question pertains to the State and the City of Manila merely acted as
trustee for the benefit of the people therein for whom the State can
legislate in the exercise of its legitimate powers.
Republic Act No. 4118 was never intended to expropriate the property
involved but merely to confirm its character as communal land of the State
and to make it available for disposition by the National Government: And
this was done at the instance or upon the request of the City of Manila
itself. The subdivision of the land and conveyance of the resulting
subdivision lots to the occupants by Congressional authorization does not
operate as an exercise of the power of eminent domain without just
compensation in violation of Section 1, subsection (2), Article III of the
Constitution, but simply as a manifestation of its right and power to deal
with state property.
It should be emphasized that the law assailed was enacted upon formal
written petition of the Municipal Board of Manila in the form of a legally
approved resolution. The certificate of title over the property in the name of
the City of Manila was accordingly cancelled and another issued to the
Land Tenure Administration after the voluntary surrender of the City's
duplicate certificate of title by the City Treasurer with the knowledge and
consent of the City Mayor. To implement the provisions of Republic Act No.
4118, the then Deputy Governor of the Land Authority sent a letter, dated
February 18, 1965, to the City Mayor furnishing him with a copy of the
"proposed subdivision plan of the said lot as prepared for the Republic of
the Philippines for subdivision and resale by the Land Authority to bona
fide applicants." On March 2, 1965, the Mayor of Manila, through his
Executive and Technical Adviser, acknowledged receipt of the subdivision
plan and informed the Land Authority that his Office "will interpose no
objection to the implementation of said law provided that its provisions are
strictly complied with." The foregoing sequence of events, clearly indicate a
pattern of regularity and observance of due process in the reversion of the
property to the National Government. All such acts were done in
PROPERTY 1ST BATCH
recognition by the City of Manila of the right and power of the Congress to
dispose of the land involved.
Consequently, the City of Manila was not deprived of anything it owns,
either under the due process clause or under the eminent domain
provisions of the Constitution. If it failed to get from the Congress the
concession it sought of having the land involved given to it as its
patrimonial property, the Courts possess no power to grant that relief.
Republic Act No. 4118 does not, therefore, suffer from any constitutional
infirmity.
WHEREFORE, the appealed decision is hereby reversed, and petitioners
shall proceed with the free and untrammeled implementation of Republic
Act No. 4118 without any obstacle from the respondents. Without costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee and
Antonio, JJ., concur.
G. R. No. L-41001 September 30, 1976
MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER
OF THE ELKS, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CITY OF MANILA, and
TARLAC DEVELOPMENT CORPORATION, respondents.
No. L-41012 September 30, 1976
TARLAC DEVELOPMENT CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, CITY OF MANILA, LODGE NO.
761, BENEVOLENT AND PROTECTIVE ORDER OF ELKS,
INC., respondents.
CASTRO, C.J.: t.hqw
STATEMENT OF THE CASE AND STATEMENTOF THE FACTS
These two cases are petitions on certiorari to review the decision dated
June 30, 1975 of the Court of Appeals in CA-G.R. No. 51590-R entitled
"Tarlac Development Corporation vs. City of Manila, and Manila Lodge No.
761, Benevolent and Protective Order of Elks, Inc.," affirming the trial
court's finding in Civil Case No. 83009 that the property subject of the
decision a quo is a "public park or plaza."
On June 26, 1905 the Philippine Commission enacted Act No. l360 which
authorized the City of Manila to reclaim a portion of Manila Bay. The
reclaimed area was to form part of the Luneta extension. The Act provided
that the reclaimed area "Shall be the property of the City of Manila" and
that "the City of Manila is hereby authorized to set aside a tract of the
reclaimed land formed by the Luneta extension x x x at the north end not to
exceed five hundred feet by six hundred feet in size, for aHOTEL SITE ,
and to lease the same, with the approval of the Governor General, to a
responsible person or corporation for a term not exceed ninety-nine years."
Subsequently, the Philippine Commission passed on May 18, 1907 Act No.
1657, amending Act No. 1360, so as to authorize the City of' Manila either
to lease or to sell the portion set aside as aHOTEL SITE .
The total area reclaimed was a little over 25 hectares. The City of Manila
applied for the registration of the reclaimed area, and on January 20, 1911,
O.C.T. No. 1909 was issued in the name of the City of Manila. The title
described the registered land as "un terreno conocido con el nombre de
Luneta Extension, situato en el distrito de la Ermita x x x." The registration
was "subject, however to such of the incumbrances mentioned in Article 39
of said law (Land Registration Act) as may be subsisting" and "sujeto a las
disposiciones y condiciones impuestas en la Ley No. 1360; y sujeto
tambein a los contratos de venta, celebrados y otorgados por la Ciudad de
Manila a favor del Army and Navy Club y la Manila Lodge No. 761,
Benevolent and Protective Order of Elks, fechados respectivamente, en 29
de Diciembre de 1908 y 16 de Enero de 1909." 1
On July 13, 1911 the City of Manila, affirming a prior sale dated January
16, 1909 cancelled 5,543.07 square meters of the reclaimed area to the
Manila Lodge No. 761, Benevolent and Protective Order of Elks of the
U.S.A. (BPOE, for short) on the basis of which TCT No. 2195 2 was issued
to the latter over the Marcela de terreno que es parte de la Luneta Extension,
Situada en el Distrito le la Ermita ... ." At the back of this title vas annotated
document 4608/T-1635, which in part reads as follows: "que la citada Ciusdad
de Manila tendra derecho a su opcion, de recomparar la expresada propiedad
PROPERTY 1ST BATCH
para fines publicos solamete in cualquier tiempo despues de cincuenta anos
desde el 13 le Julio le 1911, precio de la misma propiedad, mas el valor que
entonces tengan las mejoras."
For the remainder of the Luneta Extension, that is, after segregating
therefrom the portion sold to the Manila Lodge No. 761, PBOE, a new
Certificate of Title No. 2196 3 was issued on July 17, 1911 to the City of
Manila.
Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square
meters to the Elks Club, Inc., to which was issued TCT No. 67488. 4 The
registered owner, "The Elks Club, Inc.," was later changed by court oder to
"Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc."
In January 1963 the BPOE. petitioned the Court of First Instance of Manila,
Branch IV, for the cancellation of the right of the City of Manila to
repurchase the property This petition was granted on February 15, 1963.
On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land
together with all the improvements thereon to the Tarlac Development
Corporation (TDC, for short) which paid P1,700.000 as down payment and
mortgaged to the vendor the same realty to secure the payment of the
balance to be paid in quarterly installments.5 At the time of the sale,, there was no
annotation of any subsisting lien on the title to the property. On December 12, 1963 TCT No. 73444 was
issued to TDC over the subject land still described as "UNA PARCELA DE TERRENO, que es parte de
la Luneta Extension, situada en el Distrito de Ermita ... ."
In June 1964 the City of Manila filed with the Court of First Instance of
Manila a petition for the reannotation of its right to repurchase; the court,
after haering, issued an order, dated November 19, 1964, directing the
Register of Deeds of the City of Manila to reannotate in toto the entry
regarind the right of the City of Manila to repurchase the property after fifty
years. From this order TDC and BPOE appealed to this Court which on
July 31, 1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's
order of reannotation, but reserved to TDC the right to bring another action
for the clarification of its rights.
As a consequence of such reservation, TDC filed on April 28, 1971 against
the City of Manila and the Manila Lodge No. 761, BPOE, a complaint,
docketed as Civil Case No. 83009 of the Court of First Instance of Manila,
containing three causes of action and praying -
a) On the first cause of action, that the plaintiff TDC be declared to have
purchased the parcel of land now in question with the buildings and
improvements thereon from the defendant BPOE for value and in good
faith, and accordingly ordering the cancellation of Entry No. 4608/T-1635
on Transfer Certificate of Title No. 73444 in the name of the Plaintiff;
b) On the second cause of action, ordering the defendant City of Manila to
pay the plaintiff TDC damages in the sum of note less than one hundred
thousand pesos (P100,000.00);
c) On the third cause of action, reserving to the plaintiff TDC the right to
recover from the defendant BPOE the amounts mentioned in par. XVI of
the complaint in accordance with Art. 1555 of the Civil Code, in the remote
event that the final judgment in this case should be that the parcel of land
now in question is a public park; and
d) For costs, and for such other and further relief as the Court may deem
just and equitable. 6
Therein defendant City of Manila, in its answer dated May 19, 1971,
admitted all the facts alleged in the first cause of action except the
allegation that TDC purchased said property "for value and in good faith,"
but denied for lack of knowledge or information the allegations in the
second and third causes of action. As, special and affirmative defense, the
City of Manila claimed that TDC was not a purchaser in good faith for it had
actual notice of the City's right to repurchase which was annotated at the
back of the title prior to its cancellation, and that, assuming arguendo that
TDC had no notice of the right to repurchase, it was, nevertheless, under
obligation to investigate inasmuch as its title recites that the property is a
part of the Luneta extension. 7
The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971,
admitted having sold the land together with the improvements thereon for
value to therein plaintiff which was in good faith, but denied for lack of
knowledge as to their veracity the allegations under the second cause of
action. It furthermore admitted that TDC had paid the quarterly installments
until October l5, 1964 but claimed that the latter failed without justifiable
cause to pay the subsequent installments. It also asserted that it was a
seller for value in good faith without having misrepresented or concealed
tacts relative to the title on the property. As counterclaim, Manila Lodge
PROPERTY 1ST BATCH
No. 761 (BPOE) sought to recover the balance of the purchase price plus
interest and costs. 8
On June 15, 1971 TDC answered the aforesaid counterclaim, alleging that
its refusal to make further payments was fully justified. 9
After due trial the court a quo rendered on July 14, 1972 its decision finding
the subject land to be part of the "public park or plaza" and, therefore, part
of the public domain. The court consequently declared that the sale of the
subject land by the City of Manila to Manila Lodge No. 761, BPOE, was
null and void; that plaintiff TDC was a purchaser thereof in g faith and for
value from BPOE and can enforce its rights against the latter; and that
BPOE is entitled to recover from the City of Manila whatever consideration
it had 'paid the latter. 'The dispositive part of the decision reads:
+.w ph!1
WHEREFORE, the Court hereby declares that the parcel of
land formerly covered by Transfer Certificate of Title Nos
2195 and 67488 in the name of BPOE and now by Transfer
Certificate of Title No. 73444 in the name of Tarlac
Development Corporation is a public' park or plaza, and,
consequently, instant complaint is dimissed, without
pronouncement as to costs.
In view of the reservation made by plaintiff Tarlac
Development Corporation to recover from defendant BPOE
the amounts mentioned in paragraph XVI of the complaint
in accordance with Article 1555 of the Civil Code, the Court
makes no pronouncement on this point. 10
From said decision the therein plaintiff TDC as well as the defendant
Manila Lodge No. 761, BPOE, appealed to the Court of Appeals.
In its appeal docketed as CA-G.R. No. 51590-R, the Manila Lodge No.
761, BPOE, avers that the trial court committed the following errors,
namely:
1. In holding that the property subject of the action is not patrimonial
property of the City of Manila; and
2. In holding that the Tarlac Development Corporation may recover and
enforce its right against the defendant BPOE. 11
The Tarlac Development Corporation, on the other hand, asserts that the
trial court erred:
(1) In finding that the property in question is or was a public park and in
consequently nullifying the sale thereof by the City of Manila to BPOE;
(2) In applying the cases of Municipality of Cavite vs. Rojas, 30 Phil. 602,
and Government vs. Cabangis, 53 Phil. 112, to the case at bar; and
(3) In not holding that the plaintiff-appellant is entitled to ,recover damages
from the defendant City of Manila. 12
Furthermore, TDC as appellee regarding the second assignment of error
raised by BPOE, maintained that it can recover and enforce its rigth
against BPOE in the event that the land in question is declared a public
park or part thereof. 13
In its decision promulgated on June 30, 1975, the Court of Appeals concur
ed in the findings and conclusions of the lower court upon the ground that
they are supported by he evidence and are in accordance with law, and
accordingly affirmed the lower court's judgment.
Hence, the present petitions for review on certiorari.
G.R. No. L-41001
The Manila Lodge No. 761, BPOE, contends, in its petition for review on
certiorari docketed as G.R. No. L-41001, that the Court of Appeals erred in
(1) disregarding the very enabling acts and/or statutes according to which
the subject property was, and still is, patrimonial property of the City of
Manila and could therefore be sold and/or disposed of like any other
private property; and (2) in departing from the accepted and usual course
of judicial proceedings when it simply made a general affirmance of the
court a quo's findings and conclusions without bothering to discuss or
resolve several vital points stressed by the BPOE in its assigned errrors. 14
G.R. No. L-41012
PROPERTY 1ST BATCH
The Tarlac Development Corporation, in its petition for review on certiorari
docketed as G.R. No. L-41012, relies on the following grounds for the
allowance of its petition:
1. that the Court of Appeals did not correctly interpret Act No. 1360, as
amended by Act No. 1657, of the Philippine Commission; and
2. that the Court of Appeals has departed from the accepted and usual
course of judicial proceedings in that it did not make its own findings but
simply recited those of the lower court. 15
ISSUES AND ARGUMENTS
FIRST ISSUE
Upon the first issue, both petitioners claim that the property subject of the
action, pursuant to the provisions of Act No. 1360, as amended by Act No.
1657, was patrimonial property of the City of Manila and not a park or
plaza.
Arguments of Petitioners
In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that "there
appears to be some logic in the conclusion" of the Court of Appeals that
"neither Act No. 1360 nor Act No. 1657 could have meant to supply the
City of Manila the authority to sell the subject property which is located at
the south end not the north of the reclaimed area." 16 It argues, however,
that when Act No. 1360, as amended, authorized the City of Manila to
undertake the construction of the Luneta extension by reclaimed land from the
Manila Bay, and declared that the reclaimed land shall be the "property of the
City of Manila," the State expressly granted the ownership thereof to the City
of Manila which. consequently. could enter into transactions involving it; that
upon the issuance of O.C.T. No. 1909, there could he no doubt that the
reclaimed area owned by the City was its patrimonial property;" that the south
end of the reclaimed area could not be for public use for. as argued by TDC a
street, park or promenade can be property for public use pursuant to Article
344 of the Spanish Civil Code only when it has already been so constructed or
laid out, and the subject land, at the time it was sold to the Elk's Club, was
neither actually constructed as a street, park or promenade nor laid out as a
street, park or promenade;" that even assuming that the subject property was
at the beginning property of public dominion, it was subsequently converted
into patrimonial property pursuant to Art. 422 of the Civil Code, inasmuch as it
had never been used, red or utilized since it was reclaimed in 1905 for purpose
other than this of an ordinary real estate for sale or lease; that the subject
property had never been intended for public use, is further shown by the fact
that it was neither included as a part of the Luneta Park under Plan No. 30 of
the National Planning Commission nor considered a part of the Luneta
National Park (now Rizal Park) by Proclamation No. 234 dated December 19,
1955 of President Ramon Magsaysay or by Proclamation Order No. 274 dated
October 4, 1967 of President Ferdinand E. Marcos;" 19 that, such being the
case, there is no reason why the subject property should -not be considered as
having been converted into patrimonial property, pursuant to the ruling
in Municipality vs. Roa 7 Phil. 20, inasmuch as the City of Manila has
considered it as its patrimonial property not only bringing it under the operation
of the Land Registration Act but also by disposing of it; 20 and that to consider
now the subject property as a public plaza or park would not only impair the
obligations of the parties to the contract of sale (rated July 13, 1911, but also
authorize deprivation of property without due process of law. 21
G.R. No. L-410112
In L-41012, the petitioner TDC stresses that the principal issue is the
interpretation of Act No. 1360, as amended by. Act No. 1657 of the
Philippine Commission, 22 and avers that inasmuch as Section 6 of Act No.
1360, as amended by Act 1657, provided that the reclamation of the Luneta
extension was to be paid for out of the funds of the City of Manila which was
authorized to borrow P350,000 "to be expended in the construction of Luneta
Extension," the reclaimed area became "public land" belonging to the City of
Manila that spent for the reclamation, conformably to the holding
in Cabangis, 23 and consequently, said land was subject to sale and other
disposition; that the Insular Government itself considered the reclaimed Luneta
extension as patrimonial property subject to disposition as evidenced by the
fact that See. 3 of Act 1360 declared that "the land hereby reclaimed shall be
the property of the City of Manila;" that this property cannot be property for
public use for according to Article 344 of the Civil Code, the character of
property for public use can only attach to roads and squares that have already
been constructed or at least laid out as such, which conditions did not obtain
regarding the subject land, that Sec. 5 of Act 1360 authorized the City of
Manila to lease the northern part of the reclaimed area for hotel purposes; that
Act No. 1657 furthermore authorized the City of Manila to sell the same; 24 that
the express statutory authority to lease or sell the northern part of the
reclaimed area cannot be interpreted to mean that the remaining area could
not be sold inasmuch as the purpose of the statute was not merely to confer
authority to sell the northern portion but rather to limit the city's power of
disposition thereof, to wit: to prevent disposition of the northern portion for any
PROPERTY 1ST BATCH
purpose other than for a hotel site that the northern and southern ends of the
reclaimed area cannot be considered as extension of the Luneta for they lie
beyond the sides of the original Luneta when extended in the direction of the
sea, and that is the reason why the law authorized the sale of the northern
portion for hotel purposes, and, for the same reason, it is implied that the
southern portion could likewise be disposed of. 26
TDC argues likewise that there are several items of uncontradicted
circumstantial evidence which may serve as aids in construing the
legislative intent and which demonstrate that the subject property is
patrimonial in nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of the
National Planning Commission showing the Luneta and its vicinity, do not
include the subject property as part of the Luneta Park; (2) Exhibit "K",
which is the plan of the subject property covered by TCT No. 67488 of
BPOE, prepared on November 11, 1963, indicates that said property is not
a public park; (3) Exhibit "T", which is a certified copy of Proclamation No.
234 issued on December 15, 1955 is President Magsaysay, and Exhibit
"U" which is Proclamation Order No. 273 issued on October 4, 1967 by
President Marcos, do not include the subject property in the Luneta Park-,
(4) Exhibit "W", which is the location plan of the Luneta National Park
under Proclamations Nos. 234 and 273, further confirms that the subject
property is not a public park; and (5) Exhibit "Y", which is a copy of O.C.T.
No. 7333 in the name of the United States of America covering the land
now occupied by the America covering the land now occupied by the
American Embassy, the boundaries of which were delineated by the
Philippine Legislature, states that the said land is bounded on the
northwest by properties of the Army and Navy Club (Block No. 321) and
the Elks Club (Block No. 321), and this circumstance shows that even the
Philippine Legislature recognized the subject property as private property
of the Elks Club. 27
TDC furthermore contends that the City of Manila is estopped from
questioning the validity of the sale of the subject property that it executed
on July 13, 1911 to the Manila Lodge No. 761, BPOE, for several reasons,
namely: (1) the City's petition for the reannotation of Entry No. 4608/T-
1635 was predicated on the validity of said sale; (2) when the property was
bought by the petitioner TDC it was not a public plaza or park as testified to
by both Pedro Cojuanco, treasurer of TDC, and the surveyor, Manuel
Aoneuvo, according to whom the subject property was from all
appearances private property as it was enclosed by fences; (3) the
property in question was cadastrally surveyed and registered as property
of the Elks Club, according to Manuel Anonuevo; (4) the property was
never used as a public park, for, since the issuance of T.C.T. No. 2165 on
July 17, 1911 in the name of the Manila Lodge NO. 761, the latter used it
as private property, and as early as January 16, 1909 the City of Manila
had already executed a deed of sale over the property in favor of the
Manila Lodge No. 761; and (5) the City of Manila has not presented any
evidence to show that the subject property has ever been proclaimed or
used as a public park. 28
TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot apply
to the subject land, for Com. Act No. 141 took effect on December 1, 1936
and at that time the subject land was no longer part of the part of the public
domain. 29
TDC also stresses that its rights as a purchaser in good faith cannot be
disregarded, for the mere mention in the certificate of title that the lot it
purchased was "part of the Luneta extension" was not a sufficient warning
that tile title to the City of Manila was invalid; and that although the trial
court, in its decision affirmed by the Court of Appeals, found the TDC -to
has been an innocent purchaser for value, the court disregarded the
petitioner's rights as such purchaser that relied on Torrens certificate of
title. 30
The Court, continues the petitioner TDC erred in not holding that the latter
is entitled to recover from the City of Manila damages in the amount of
P100,000 caused by the City's petition for- reannotation of its right to
repurchase.
DISCUSSION AND RESOLUTION OF FIRST ISSUE
It is a cardinal rule of statutory construction that courts must give effect to
the general legislative intent that can be discovered from or is unraveled by
the four corners of the statute, 31 and in order to discover said intent, the
whole statute, and not only a particular provision thereof, should be
considered. 32 It is, therefore, necessary to analyze all the provisions of Act No.
1360, as amended, in order to unravel the legislative intent.
Act No. 1360 which was enacted by the Philippine Commission on June
26, 1905, as amended by Act No. 1657 enacted on May 18, 1907,
authorized the "construction of such rock and timber bulkheads or sea
walls as may be necessary for the making of an extension to the Luneta"
(Sec. 1 [a]), and the placing of the material dredged from the harbor of
PROPERTY 1ST BATCH
Manila "inside the bulkheads constructed to inclose the Luneta extension
above referred to" (Sec. 1 [a]). It likewise provided that the plan of Architect
D. H. Burnham as "a general outline for the extension and improvement of
the Luneta in the City of Manila" be adopted; that "the reclamation from the
Bay of Manila of the land included in said projected Luneta extension... is
hereby authorized and the land thereby reclaimed shall be the property of
the City of Manila" (Sec. 3); that "the City of Manila is hereby authorized to
set aside a tract of the reclaimed land formed by the Luneta extension
authorized by this Act at the worth end of said tract, not to exceed five
hundred feet by six hundred feet in size, for a hotel site, and to lease the
same with the approval of the Governor General, ... for a term not
exceeding ninety-nine years; that "should the Municipal Board ... deem it
advisable it is hereby authorized to advertise for sale to sell said tract of
land ... ;" "that said tract shall be used for hotel purposes as herein
prescribed, and shall not be devoted to any other purpose or object
whatever;" "that should the grantee x x x fail to maintain on said tract a
first-class hotel x x x then the title to said tract of land sold, conveyed, and
transferred, and shall not be devoted to any other purpose or object
whatever;" "that should the grantee x x x fail to maintain on said tract a
first-class hotel x x x then the title to said tract of land sold, conveyed, and
transferred to the grantee shall revert to the City of Manila, and said City of
Manila shall thereupon become entitled to immediate possession of said
tract of land" (Sec. 5); that the construction of the rock and timber
bulkheads or sea wall "shall be paid for out of the funds of the City of
Manila, but the area to be reclaimed by said proposed Luneta extension
shall be filled, without cost to the City of Manila, with material dredged from
Manila Bay at the expense of the Insular Government" (Sec. 6); and that
"the City of Manila is hereby authorized to borrow from the Insular
Government ... the sum of three hundred thousand pesos, to be expended
in the construction of Luneta extension provided for by paragraph (a) of
section one hereof" (Sec.7).
The grant made by Act No. 1360 of the reclaimed land to the City of Manila
is a grant of "public" nature, the same having been made to a local political
subdivision. Such grants have always been strictly construed against the
grantee. 33 One compelling reason given for the strict interpretation of a public
grant is that there is in such grant a gratuitous donation of, public money or
resources which results in an unfair advantage to the grantee and for that
reason, the grant should be narrowly restricted in favor of the public. 34 This
reason for strict interpretation obtains relative to the aforesaid grant, for,
although the City of Manila was to pay for the construction of such work and
timber bulkheads or sea walls as may be necessary for the making of the
Luneta extension, the area to be reclaimed would be filled at the expense of
the Insular Government and without cost to the City of Manila, with material
dredged from Manila Bay. Hence, the letter of the statute should be narrowed
to exclude maters which if included would defeat the policy of the legislation.
The reclaimed area, an extension to the Luneta, is declared to be property
of the City of Manila. Property, however, is either of public ownership or of
private ownership. 35 What kind of property of the City is the reclaimed
land? Is it of public ownership (dominion) or of private ownership?
We hold that it is of public dominion, intended for public use.
Firstly, if the reclaimed area was granted to the City of Manila as its
patrimonial property, the City could, by virtue of its ownership, dispose of
the whole reclaimed area without need of authorization to do so from the
lawmaking body. Thus Article 348 of the Civil Code of Spain provides that
"ownership is the right to enjoy and dispose of a thing without further
limitations than those established by law." 36 The right to dispose (jus
disponendi) of one's property is an attribute of ownership. Act No. 1360, as
amended, however, provides by necessary implication, that the City of Manila
could not dispose of the reclaimed area without being authorized by the
lawmaking body. Thus the statute provides that "the City of Manila is hereby
authorized to set aside a tract ... at the north end, for a hotel site, and to lease
the same ... should the municipal board ... deem it advisable, it is hereby
authorized ...to sell said tract of land ... " (Sec. 5). If the reclaimed area were
patrimonial property of the City, the latter could dispose of it without need of
the authorization provided by the statute, and the authorization to set aside ...
lease ... or sell ... given by the statute would indeed be superfluous. To so
construe the statute s to render the term "authorize," which is repeatedly used
by the statute, superfluous would violate the elementary rule of legal
hermeneutics that effect must be given to every word, clause, and sentence of
the statute and that a statute should be so interpreted that no part thereof
becomes inoperative or superfluous. 37 To authorize means to empower, to
give a right to act. 38 Act No. 1360 furthermore qualifies the verb it authorize"
with the adverb "hereby," which means "by means of this statue or section,"
Hence without the authorization expressly given by Act No. 1360, the City of
Manila could not lease or sell even the northern portion; much less could it
dispose of the whole reclaimed area. Consequently, the reclaimed area was
granted to the City of Manila, not as its patrimonial property. At most, only the
northern portion reserved as a hotel site could be said to be patrimonial
property for, by express statutory provision it could be disposed of, and
the title thereto would revert to the City should the grantee fail to comply with
the terms provided by the statute.
PROPERTY 1ST BATCH
TDC however, contends that the purpose of the authorization provided in
Act No. 1360 to lease or sell was really to limit the City's power of
disposition. To sustain such contention is to beg the question. If the
purpose of the law was to limit the City's power of disposition then it is
necessarily assumed that the City had already the power to dispose, for if
such power did not exist, how could it be limited? It was precisely Act 1360
that gave the City the power to dispose for it was hereby authorized by
lease of sale. Hence, the City of Manila had no power to dispose of the
reclaimed land had such power not been granted by Act No. 1360, and the
purpose of the authorization was to empower the city to sell or lease the
northern part and not, as TDC claims, to limit only the power to dispose.
Moreover, it is presumed that when the lawmaking body enacted the
statute, it had full knowledge of prior and existing laws and legislation on
the subject of the statute and acted in accordance or with respect
thereto. 39 If by another previous law, the City of Manila could already dispose
of the reclaimed area, which it could do if such area were given to it as its
patrimonial property, would it then not be a superfluity for Act No. 1360
to authorize the City to dispose of the reclaimed land? Neither has petitioner
TDC pointed to any other law that authorized the City to do so, nor have we
come across any. What we do know is that if the reclaimed land were
patrimonial property, there would be no need of giving special authorization to
the City to dispose of it. Said authorization was given because the reclaimed
land was not intended to be patrimonial property of the City of Manila, and
without the express authorization to dispose of the northern portion, the City
could not dispose of even that part.
Secondly, the reclaimed area is an "extension to the Luneta in the City of
Manila." 40 If the reclaimed area is an extension of the Luneta, then it is of the
same nature or character as the old Luneta. Anent this matter, it has been said
that a power to extend (or continue an act or business) cannot authorize a
transaction that is totally distinct. 41 It is not disputed that the old Luneta is a
public park or plaza and it is so considered by Section 859 of the Revised
Ordinances of the City of Manila. 42 Hence the "extension to the Luneta" must
be also a public park or plaza and for public use.
TDC, however, contends that the subject property cannot be considered an
extension of the old Luneta because it is outside of the limits of the old
Luneta when extended to the sea. This is a strained interpretation of the
term "extension," for an "extension," it has been held, "signifies
enlargement in any direction in length, breadth, or circumstance." 43
Thirdly, the reclaimed area was formerly a part of the manila Bay. A bay is
nothing more than an inlet of the sea. Pursuant to Article 1 of the Law of
Waters of 1866, bays, roadsteads, coast sea, inlets and shores are parts of
the national domain open to public use. These are also property of public
ownership devoted to public use, according to Article 339 of the Civil Code
of Spain.
When the shore or part of the bay is reclaimed, it does not lose its
character of being property for public use, according to Government of the
Philippine Islands vs. Cabangis. 44 The predecessor of the claimants in this
case was the owner of a big tract of land including the lots in question. From
1896 said land began to wear away due to the action of the waters of Manila
Bay. In 1901 the lots in question became completely submerged in water in
ordinary tides. It remained in such a state until 1912 when the Government
undertook the dredging of the Vitas estuary and dumped the Sand and - silt
from estuary on the low lands completely Submerged in water thereby
gradually forming the lots in question. Tomas Cabangis took possession
thereof as soon as they were reclaimed hence, the claimants, his successors
in interest, claimed that the lots belonged to them. The trial court found for the
claimants and the Government appealed. This Court held that when the lots
became a part of the shore. As they remained in that condition until reclaimed
by the filling done by the Government, they belonged to the public domain. for
public use .4' Hence, a part of the shore, and for that purpose a part of the
bay, did not lose its character of being for public use after it was reclaimed.
Fourthly, Act 1360, as amended, authorized the lease or sale of the
northern portion of the reclaimed area as a hotel sites. The subject
property is not that northern portion authorized to be leased or sold; the
subject property is the southern portion. Hence, applying the rule
of expresio unius est exlusio alterius, the City of Manila was not authorized
to sell the subject property. The application of this principle of statutory
construction becomes the more imperative in the case at bar inasmuch as
not only must the public grant of the reclaimed area to the City of Manila
be, as above stated, strictly construed against the City of Manila, but also
because a grant of power to a municipal corporation, as happens in this
case where the city is author ized to lease or sell the northern portion of
the Luneta extension, is strictly limited to such as are expressly or impliedly
authorized or necessarily incidental to the objectives of the corporation.
Fifthly, Article 344 of the Civil Code of Spain provides that to property of
public use, in provinces and in towns, comprises the provincial and town
roads, the squares streets fountains, and public waters the promenades,
PROPERTY 1ST BATCH
and public works of general service paid for by such towns or provinces." A
park or plaza, such as the extension to the Luneta, is undoubtedly
comprised in said article.
The petitioners, however, argue that, according to said Article 344, in order
that the character of property for public use may be so attached to a plaza,
the latter must be actually constructed or at least laid out as such, and
since the subject property was not yet constructed as a plaza or at least
laid out as a plaza when it was sold by the City, it could not be property for
public use. It should be noted, however, that properties of provinces and
towns for public use are governed by the same principles as properties of
the same character belonging to the public domain. 46 In order to be property
of public domain an intention to devote it to public use is sufficient. 47 The,
petitioners' contention is refuted by Manresa himself who said, in his
comments", on Article 344, that: +. wph!1
Las plazas, calles y paseos publicos correspondent sin
duda aiguna aldominio publico municipal ), porque se
hallan establecidos sobre suelo municipal y estan
destinadas al uso de todos Laurent presenta tratando de
las plazas, una question relativa a si deben conceptuarse
como de dominio publico los lugares vacios libres, que se
encuenttan en los Municipios rurales ... Laurent opina
contra Pioudhon que toda vez que estan al servicio de
todos pesos lugares, deben considerable publicos y de
dominion publico. Realmente, pala decidir el punto, bastara
siempre fijarse en el destino real y efectivo de los citados
lugares, y si este destino entraa un uso comun de todos,
no hay duda que son de dominio publico municipal si no
patrimoniales.
It is not necessary, therefore, that a plaza be already constructed of- laid
out as a plaza in order that it be considered property for public use. It is
sufficient that it be intended to be such In the case at bar, it has been
shown that the intention of the lawmaking body in giving to the City of
Manila the extension to the Luneta was not a grant to it of patrimonial
property but a grant for public use as a plaza.
We have demonstrated ad satietatem that the Luneta extension as
intended to be property of the City of Manila for public use. But, could not
said property-later on be converted, as the petitioners contend, to
patrimonial property? It could be. But this Court has already said,
in Ignacio vs. The Director of Lands, 49 the executive and possibly the
legislation department that has the authority and the power to make the
declaration that said property, is no longer required for public use, and until
such declaration i made the property must continue to form paint of the public
domain. In the case at bar, there has been no such explicit or unequivocal
declaration It should be noted, furthermore, anent this matter, that courts are
undoubted v not. primarily called upon, and are not in a position, to determine
whether any public land is still needed for the purposes specified in Article 4 of
the Law of Waters . 50
Having disposed of the petitioners' principal arguments relative to the main
issue, we now pass to the items of circumstantial evidence which TDC
claims may serve as aids in construing the legislative intent in the
enactment of Act No. 1360, as amended. It is noteworthy that all these
items of alleged circumstantial evidence are acts far removed in time from
the date of the enactment of Act No.1360 such that they cannot be
considered contemporaneous with its enactment. Moreover, it is not
farfetched that this mass of circumstantial evidence might have been
influenced by the antecedent series of invalid acts, to wit: the City's having
obtained over the reclaimed area OCT No. 1909 on January 20,1911; the
sale made by the City of the subject property to Manila Lodge No. 761; and
the issuance to the latter of T.C.T. No. 2195. It cannot gainsaid that if the
subsequent acts constituting the circumstantial evidence have been base
on, or at least influenced, by those antecedent invalid acts and Torrens
titles S they can hardly be indicative of the intent of the lawmaking body in
enacting Act No. 1360 and its amendatory act.
TDC claims that Exhs. "J," "J-l" "K," "T," "U," "W" and "Y" show that the
subject property is not a park.
Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed
development" dated May 14, 1949, were prepared by the National Urban
Planning Commission of the Office of the President. It cannot be
reasonably expected that this plan for development of the Luneta should
show that the subject property occupied by the ElksClub is a public park,
for it was made 38 years after the sale to the Elks, and after T.C.T. No.
2195 had been issued to Elks. It is to be assumed that the Office of the
President was cognizant of the Torrens title of BPOE. That the subject
property was not included as a part of the Luneta only indicated that the
National Urban Planning Commission that made the plan knew that the
subject property was occupied by Elks and that Elks had a Torrens title
thereto. But this in no way proves that the subject property was originally
PROPERTY 1ST BATCH
intended to be patrimonial property of the City of Manila or that the sale to
Elks or that the Torrens-title of the latter is valid.
Exhibit "K" is the "Plan of land covered by T.C.T . No ----, as prepared for
Tarlac Development Company." It was made on November 11, 1963 by
Felipe F. Cruz, private land surveyor. This surveyor is admittedly a
surveyor for TDC. 51 This plan cannot be expected to show that the subject
property is a part of the Luneta Park, for he plan was made to show the lot that
"was to be sold to petitioner." This plan must have also assumed the existence
of a valid title to the land in favor of Elks.
Exhibits "T" and "U" are copies of Presidential Proclamations No. 234
issued on November 15, 1955 and No. 273 issued on October 4, 1967,
respectively. The purpose of the said Proclamations was to reserve certain
parcels of land situated in the District of Ermita, City of Manila, for park site
purposes. Assuming that the subject property is not within the boundaries
of the reservation, this cannot be interpreted to mean that the subject
property was not originally intended to be for public use or that it has
ceased to be such. Conversely, had the subject property been included in
the reservation, it would mean, if it really were private property, that the
rights of the owners thereof would be extinguished, for the reservations
was "subject to private rights, if any there be." That the subject property
was not included in the reservation only indicates that the President knew
of the existence of the Torrens titles mentioned above. The failure of the
Proclamations to include the subject property in the reservation for park
site could not change the character of the subject property as originally for
public use and to form part of the Luneta Park. What has been said here
applies to Exhibits "V", "V-1" to "V-3," and "W" which also refer to the area
and location of the reservation for the Luneta Park.
Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935,
covering the lot where now stands the American Embassy [Chancery]. It
states that the property is "bounded ... on the Northwest by properties of
Army and Navy Club (Block No.321) and Elks Club (Block No. 321)."
Inasmuch as the said bounderies delineated by the Philippine Legislature
in Act No. 4269, the petitioners contend that the Legislature recognized
and conceded the existence of the Elks Club property as a primate
property (the property in question) and not as a public park or plaza. This
argument is non sequitur plain and simple Said Original Certificate of Title
cannot be considered as an incontrovertible declaration that the Elks Club
was in truth and in fact the owner of such boundary lot. Such mention as
boundary owner is not a means of acquiring title nor can it validate a title
that is null and void.
TDC finally claims that the City of Manila is estopped from questioning the
validity of the sale it executed on July 13,'1911 conconveying the subject
property to the Manila Lodge No. 761, BPOE. This contention cannot be
seriously defended in the light of the doctrine repeatedly enunciated by this
Court that the Government is never estopped by mistakes or errors on the
pan of its agents, and estoppel does not apply to a municipal corporation to
validate a contract that is prohibited by law or its against Republic policy,
and the sale of July 13, 1911 executed by the City of Manila to Manila
Lodge was certainly a contract prohibited by law. Moreover, estoppel
cannot be urged even if the City of Manila accepted the benefits of such
contract of sale and the Manila Lodge No. 761 had performed its part of
the agreement, for to apply the doctrine of estoppel against the City of
Manila in this case would be tantamount to enabling it to do indirectly what
it could not do directly. 52
The sale of the subject property executed by the City of Manila to the
Manila Lodge No. 761, BPOE, was void and inexistent for lack of subject
matter. 53 It suffered from an incurable defect that could not be ratified either
by lapse of time or by express ratification. The Manila Lodge No. 761 therefore
acquired no right by virtue of the said sale. Hence to consider now the contract
inexistent as it always has seen, cannot be, as claimed by the Manila Lodge
No. 761, an impairment of the obligations of contracts, for there was it,
contemplation of law, no contract at all.
The inexistence of said sale can be set up against anyone who asserts a
right arising from it, not only against the first vendee, the Manila Lodge No.
761, BPOE, but also against all its suceessors, including the TDC which
are not protected the doctrine of bona fide ii purchaser without notice,
being claimed by the TDC does not apply where there is a total absence of
title in the vendor, and the good faith of the purchaser TDC cannot create
title where none exists. 55
The so-called sale of the subject property having been executed, the
restoration or restitution of what has been given is order 56
SECOND ISSUE
PROPERTY 1ST BATCH
The second ground alleged in support of the instant petitions for review on
certiorari is that the Court of Appeals has departed from the accepted and
usual course of judicial proceedings as to call for an exercise of the power
of supervision. TDC in L-41012, argues that the respondent Court did not
make its own findings but simply recited those of the lower court and made
a general affirmance, contrary to the requirements of the Constitution; that
the respondent Court made glaring and patent mistakes in recounting even
the copied findings, palpably showing lack of deliberate consideration of
the matters involved, as, for example, when said court said that Act No.
1657 authorized the City of Manila to set aside a portion of the reclaimed
land "formed by the Luneta Extension of- to lease or sell the same for park
purposes;" and that respondent Court. further more, did not resolve or
dispose of any of the assigned errors contrary to the mandate of the
Judiciary Act.. 57
The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the
reasons warranting review, that the Court of Appeals departed from the
accepted and usual course of Judicial proceedings by simply making a
general affirmance of the court a quo findings without bothering to resolve
several vital points mentioned by the BPOE in its assigned errors. 58
COMMENTS ON SECOND ISSUE
We have shown in our discussion of the first issue that the decision of the
trial court is fully in accordance with law. To follows that when such
decision was affirmed by the Court of Appeals, the affirmance was likewise
in accordance with law. Hence, no useful purpose will be served in further
discussing the second issue.
CONCLUSION
ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012 are
denied for lack of merit, and the decision of the Court of Appeals of June
30, 1975, is hereby affirmed, at petitioner's cost.
G.R. No. L-30098 February 18, 1970
THE COMMISSIONER OF PUBLIC HIGHWAYS and the AUDITOR
GENERAL, petitioners,
vs.
HON. LOURDES P. SAN DIEGO as Presiding Judge of the Court of
First Instance of Rizal, Branch IX, sitting in Quezon City, TESTATE
ESTATE OF N. T. HASHIM (Special Proceedings No. 71131 of the
Court of First Instance of Manila) represented by its Judicial
Administrator, Tomas N. Hashim, TOMAS N. HASHIM, personally, and
as Judicial Administrator of the Estate of Hashim, Special
Proceedings No. 71131 of the Court of ]First instance of Manila, ALL
THE LEGAL OR TESTAMENTARY HEIRS of the Estate of Hashim,
MANUELA C. FLORENDO, personally as Deputy Clerk, Court of First
Instance of Rizal, Quezon City, Branch IX, BENJAMIN GARCIA as
"Special Sheriff" appointed by respondent Judge Lourdes P. San
Diego, BENJAMIN V. CORUA, personally and as Chief
Documentation Staff, Legal Department, Philippine National Bank,
and the PHILIPPINE NATIONAL BANK, respondents.
Office of the Solicitor General for petitioners.
Paredes, Poblador, Nazareno, Abada and Tomacruz for respondent Judge
Lourdes P. San Diego.
Jesus B. Santos for respondent Testate estate of N. T. Hashim.
Jose A. Buendia for respondent Manuela C. Florendo.
Emata, Magkawas and Associates for respondent legal heir Jose H.
Hashim.
Alberto O. Villaraza for respondents Estate of N.T. Hashim and Tomas N.
Hashim.
Conrado E. Medina for respondent Philippine National Bank.
Benjamin V. Corua for and in his own behalf.
TEEHANKEE, J.:
In this special civil action for certiorari and prohibition, the Court declares
null and void the two questioned orders of respondent Court levying upon
funds of petitioner Bureau of Public Highways on deposit with the
PROPERTY 1ST BATCH
Philippine National Bank, by virtue of the fundamental precept that
government funds are not subject to execution or garnishment.
The background facts follow:
On or about November 20, 1940, the Government of the Philippines filed a
complaint for eminent domain in the Court of First Instance of Rizal1 for the
expropriation of a parcel of land belonging to N. T. Hashim, with an area of
14,934 square meters, needed to construct a public road, now known as
Epifanio de los Santos Avenue. On November 25, 1940, the Government took
possession of the property upon deposit with the City Treasurer of the sum of
P23,413.64 fixed by the Court therein as the provisional value of all the lots
needed to construct the road, including Hashim's property. The records of the
expropriation case were destroyed and lost during the second world war, and
neither party took any step thereafter to reconstitute the proceedings.
In 1958, however, the estate of N.T. Hashim, deceased, through its
Judicial Administrator, Tomas N. Hashim, filed a money claim with the
Quezon City Engineer's Office in the sum of P522,620.00, alleging said
amount to be the fair market value of the property in question, now already
converted and used as a public highway. Nothing having come out of its
claim, respondent estate filed on August 6, 1963, with the Court of First
Instance of Rizal, Quezon City Branch, assigned to Branch IX, presided by
respondent judge,2 a complaint for the recovery of the fair market price of the
said property in the sum of P672,030.00 against the Bureau of Public
Highways, which complaint was amended on August 26, 1963, to include as
additional defendants, the Auditor General and the City Engineer of Quezon
City.3
The issues were joined in the case with the filing by then Solicitor General
Arturo A. Alafriz of the State's answer, stating that the Hashim estate was
entitled only to the sum of P3,203.00 as the fair market value of the
property at the time that the State took possession thereof on November
25, 1940, with legal interest thereon at 6% per annum, and that said
amount had been available and tendered by petitioner Bureau since 1958.
The parties thereafter worked out a compromise agreement, respondent
estate having proposed on April 28, 1966, a payment of P14.00 per sq. m.
for its 14,934 sq.m.-parcel of land or the total amount of P209,076.00,
equivalent to the land's total assessed value,4 which was confirmed, ratified
and approved in November, 1966 by the Commissioner of Public Highways
and the Secretary of Public Works and Communications. On November 7,
1966, the Compromise Agreement subscribed by counsel for respondent
estate and by then Solicitor General Antonio P. Barredo, now a member of this
Court, was submitted to the lower Court and under date of November 8, 1966,
respondent judge, as prayed for, rendered judgment approving the
Compromise Agreement and ordering petitioners, as defendants therein, to
pay respondent estate as plaintiff therein, the total sum of P209,076.00 for the
expropriated lot.
On October 10, 1968, respondent estate filed with the lower Court a motion
for the issuance of a writ of execution, alleging that petitioners had failed to
satisfy the judgment in its favor. It further filed on October 12, 1968, an ex-
parte motion for the appointment of respondent Benjamin Garcia as special
sheriff to serve the writ of execution. No opposition having been filed by the
Solicitor General's office to the motion for execution at the hearing thereof
on October 12, 1968, respondent judge, in an order dated October 14,
1968, granted both motions.
On the same date, October 14, 1968, respondent Garcia, as special
sheriff, forthwith served a Notice of Garnishment, together with the writ of
execution dated October 14, 1968, issued by respondent Manuela C.
Florendo as Deputy Clerk of Court, on respondent Philippine National
Bank, notifying said bank that levy was thereby made upon funds of
petitioners Bureau of Public Highways and the Auditor General on deposit,
with the bank to cover the judgment of P209,076.00 in favor of respondent
estate, and requesting the bank to reply to the garnishment within five
days. On October 16, 1968, three days before the expiration of the five-day
deadline, respondent Benjamin V. Corua in his capacity as Chief,
Documentation Staff, of respondent bank's Legal Department, allegedly
acting in excess of his authority and without the knowledge and consent of
the Board of Directors and other ranking officials of respondent bank,
replied to the notice of garnishment that in compliance therewith, the bank
was holding the amount of P209,076.00 from the account of petitioner
Bureau of Public Highways. Respondent bank alleged that when it was
served with Notice to Deliver Money signed by respondent Garcia, as
special sheriff, on October 17, 1968, it sent a letter to the officials of the
Bureau of Public Highways notifying them of the notice of garnishment.
Under date of October 16, 1968, respondent estate further filed with the
lower Court an ex-parte motion for the issuance of an order ordering
respondent bank to release and deliver to the special sheriff, respondent
Garcia, the garnished amount of P209,076.00 deposited under the account
of petitioner Bureau, which motion was granted by respondent judge in an
order of October 18, 1968. On the same day, October 18, 1968,
PROPERTY 1ST BATCH
respondent Corua allegedly taking advantage of his position, authorized
the issuance of a cashier's check of the bank in the amount of
P209,076.00, taken out of the funds of petitioner Bureau deposited in
current account with the bank and paid the same to respondent estate,
without notice to said petitioner.
Later on December 20, 1968, petitioners, through then Solicitor General
Felix V. Makasiar, wrote respondent bank complaining that the bank acted
precipitately in having delivered such a substantial amount to the special
sheriff without affording petitioner Bureau a reasonable time to contest the
validity of the garnishment, notwithstanding the bank's being charged with
legal knowledge that government funds are exempt from execution or
garnishment, and demanding that the bank credit the said petitioner's
account in the amount of P209,076.00, which the bank had allowed to be
illegally garnished. Respondent bank replied on January 6, 1969 that it was
not liable for the said garnishment of government funds, alleging that it was
not for the bank to decide the question of legality of the garnishment order
and that much as it wanted to wait until it heard from the Bureau of Public
Highways, it was "helpless to refuse delivery under the teeth" of the special
order of October 18, 1968, directing immediate delivery of the garnished
amount.
Petitioners therefore filed on January 28, 1969 the present action against
respondents, in their capacities as above stated in the title of this case,
praying for judgment declaring void the question orders of respondent
Court. Petitioners also sought the issuance of a writ of preliminary
mandatory injunction for the immediate reimbursement of the garnished
sum of P209,076.00, constituting funds of petitioner Bureau on deposit with
the Philippine National Bank as official depository of Philippine
Government funds, to the said petitioner's account with the bank, so as to
forestall the dissipation of said funds, which the government had allocated
to its public highways and infrastructure projects. The Court ordered on
January 31, 1969 the issuance of the writ against the principal respondents
solidarily, including respondent judge therein so that she would take
forthwith all the necessary measures and processes to compel the
immediate return of the said government funds to petitioner Bureau's
account with respondent bank.5
In compliance with the writ, respondent bank restored the garnished sum
of P209,076.00 to petitioner Bureau's account with it.6 The primary
responsibility for the reimbursement of said amount to petitioner Bureau's
account with the respondent bank, however, rested solely on respondent
estate, since it is the judgment creditor that received the amount upon the
questioned execution.
Strangely enough, as appears now from respondent bank's memorandum
in lieu of oral argument,7 what respondent bank did, acting through
respondent Corua as its counsel, was not to ask respondent estate
to reimburse it in turn in the same amount, but to file with the probate court
with jurisdiction over respondent estate,8 a motion for the estate to deposit the
said amount with it, purportedly in compliance with the writ. Respondent estate
thereupon deposited with respondent bank as a savings account the sum of
P125,446.00, on which the bank presumably would pay the usual interest,
besides. As to the balance of P83,630.00, this sum had been in the interval
paid as attorney's fees to Atty. Jesus B. Santos, counsel for the estate, by the
administrator, allegedly without authority of the probate court. 9 Accordingly,
respondent estate has not reimbursed the respondent bank either as to this
last amount, and the bank has complacently not taken any steps in the lower
court to require such reimbursement.
The ancillary questions now belatedly raised by the State may readily be
disposed of. Petitioners may not invoke the State's immunity from suit,
since the case below was but a continuation in effect of the pre-war
expropriation proceedings instituted by the State itself. The expropriation of
the property, which now forms part of Epifanio, de los Santos Avenue, is
a fait accompli and is not questioned by the respondent state. The only
question at issue was the amount of the just compensation due to
respondent estate in payment of the expropriated property, which properly
pertained to the jurisdiction of the lower court. 10 It is elementary that in
expropriation proceedings, the State precisely submits to the Court's
jurisdiction and asks the Court to affirm its lawful right to take the property
sought to be expropriated for the public use or purpose described in its
complaint and to determine the amount of just compensation to be paid
therefor.
Neither may the State impugn the validity of the compromise agreement
executed by the Solicitor General on behalf of the State with the approval
of the proper government officials, on the ground that it was executed only
by the lawyer of respondent estate, without any showing of having been
specially authorized to bind the estate thereby, because such alleged lack
of authority may be questioned only by the principal or client, and
respondent estate as such principal has on the contrary confirmed and
ratified the compromise agreement. 11 As a matter of fact, the Solicitor
General, in representation of the State, makes in the petition no prayer for the
PROPERTY 1ST BATCH
annulment of the compromise agreement or of the respondent court's decision
approving the same.
On the principal issue, the Court holds that respondent Court's two
questioned orders (1) for execution of the judgment, in pursuance whereof
respondent deputy clerk issued the corresponding writ of execution and
respondent special sheriff issued the notice of garnishment, and (2) for
delivery of the garnished amount of P209,076.00 to respondent estate as
judgment creditor through respondent special sheriff, are null and void on
the fundamental ground that government funds are not subject to
execution or garnishment.
1. As early as 1919, the Court has pointed out that although the
Government, as plaintiff in expropriation proceedings, submits itself to the
jurisdiction of the Court and thereby waives its immunity from suit, the
judgment that is thus rendered requiring its payment of the award
determined as just compensation for the condemned property as a
condition precedent to the transfer to the title thereto in its favor, cannot be
realized upon execution. 12The Court there added that it is incumbent upon
the legislature to appropriate any additional amount, over and above the
provisional deposit, that may be necessary to pay the award determined in the
judgment, since the Government cannot keep the land and dishonor the
judgment.
In another early case, where the government by an act of the Philippine
Legislature, expressly consented to be sued by the plaintiff in an action for
damages and waived its immunity from suit, the Court adjudged the
Government as not being legally liable on the complaint, since the State
under our laws would be liable only for torts caused by its special agents,
specially commissioned to carry out the acts complained of outside of such
agents' regular duties. We held that the plaintiff would have to look to the
legislature for another legislative enactment and appropriation of sufficient
funds, if the Government intended itself to be legally liable only for the
damages sustained by plaintiff as a result of the negligent act of one of its
employees. 13
The universal rule that where the State gives its consent to be sued by
private parties either by general or special law, it may limit claimant's
action "only up to the completion of proceedings anterior to the stage of
execution" and that the power of the Courts ends when the judgment is
rendered, since government funds and properties may not be seized under
writs of execution or garnishment to satisfy such judgments, is based on
obvious considerations of public policy. Disbursements of Public funds
must be covered by the corresponding appropriation as required by law.
The functions and public services rendered by the State cannot be allowed
to be paralyzed or disrupted by the diversion of public funds from their
legitimate and specific objects, as appropriated by law.
Thus, as pointed out by the Court in Belleng vs. Republic, 14 while the State
has given its consent to be sued in compensation cases, the pauper-claimant
therein must look specifically to the Compensation Guarantee Fund provided
by the Workmen's Compensation Act for the corresponding disbursement in
satisfaction of his claim, since the State in Act 3083, the general law waiving
its immunity from suit "upon any money claim involving liability arising from
contract express or implied," imposed the limitation in Sec. 7 thereof that "no
execution shall issue upon any judgment rendered by any Court against the
Government of the (Philippines) under the provisions of this Act;" and that
otherwise, the claimant would have to prosecute his money claim against the
State under Commonwealth Act 327.
This doctrine was again stressed by. the Court in Republic vs.
Palacio, 15 setting aside as null and void the order of garnishment issued by
the sheriff pursuant to the lower Court's writ of execution on funds of the Pump
Irrigation Trust Fund in the account of the Government's Irrigation Service Unit
with the Philippine National Bank. The Court emphasized then and re-
emphasizes now that judgments against the State or its agencies and
instrumentalities in cases where the State has consented to be sued, operate
merely to liquidate and establish the plaintiff's claim; such judgments may not
be enforced by writs of execution or garnishment and it is for the legislature to
provide for their payment through the corresponding appropriation, as
indicated in Act 3083.
2. Respondent bank and its Chief, Documentation Staff, respondent
Corua have advanced two specious arguments to justify their wrongful
delivery of the garnished public funds to respondent estate. Their first
contention that the said government funds by reason of their being
deposited by petitioner Bureau under a current account subject to
withdrawal by check, instead of being deposited as special trust funds,
"lost their kind and character as government funds," 16 is untenable. As the
official depositary of the Philippine Government, respondent bank and its
officials should be the first ones to know that all government funds deposited
with it by any agency or instrumentality of the government, whether by way of
general or special deposit, remain government funds, since such government
agencies or instrumentalities do not have any non-public or private funds of
their own.
PROPERTY 1ST BATCH
Their second contention that said government funds lost their character as
such "the moment they were deposited with the respondent bank", 17 since
the relation between a depositor and a depository bank is that of creditor and
debtor, is just as untenable, absolutely. Said respondents shockingly ignore
the fact that said government funds were deposited with respondent bank as
the official depositary of the Philippine Government. Assuming for the nonce
the creation of such relationship of creditor and debtor, petitioner Bureau
thereby held a credit against respondent bank whose obligation as debtor was
to pay upon demand of said petitioner-creditor the public funds thus deposited
with it; even though title to the deposited funds passes to the bank under this
theory since the funds become mingled with other funds which the bank may
employ in its ordinary business, what was garnished was not the bank's own
funds but the credit of petitioner bureau against the bank to receive payment of
its funds, as a consequence of which respondent bank delivered to respondent
estate the garnished amount of P209,076.00 belonging to said petitioner.
Petitioner bureau's credit against respondent bank thereby never lost its
character as a credit representing government funds thus deposited. The
moment the payment is made by respondent bank on such deposit, what it
pays out represents the public funds thus deposited which are not garnishable
and may be expended only for their legitimate objects as authorized by the
corresponding legislative appropriation. Neither respondent bank nor
respondent Corua are the duly authorized disbursing officers and auditors of
the Government to authorize and cause payment of the public funds of
petitioner Bureau for the benefit or private persons, as they wrongfully did in
this case.
3. Respondents bank and Corua next pretend that refusal on their part to
obey respondent judge's order to deliver the garnished amount, "which is
valid and binding unless annulled, would have exposed them for contempt
of court." 18 They make no excuse for not having asked the lower court for time
and opportunity to consult petitioner Bureau or the Solicitor General with
regard to the garnishment and execution of said deposited public funds which
were allocated to specific government projects, or for not having simply replied
to the sheriff that what they held on deposit for petitioner Bureau were non-
garnishable government funds. They have not given any cogent reason or
explanation, charged as they were with knowledge of the nullity of the writ
of execution and notice of garnishment against government funds, for in the
earlier case of Republic vs. Palacio, supra, they had then prudently and timely
notified the proper government officials of the attempted levy on the funds of
the Irrigation Service Unit deposited with it, thus enabling the Solicitor General
to take the corresponding action to annul the garnishment for their failure to
follow the same prudent course in this case. Indeed, the Court is appalled at
the improper haste and lack of circumspection with which respondent Corua
and other responsible officials of respondent bank precipitately allowed the
garnishment and delivery of the large amount involved, all within the period of
just four days, even before the expiration of the five-day reglementary period to
reply to the sheriff's notice of garnishment. Failure on the State's part to
oppose the issuance of the writ of execution, which was patently null and void
as an execution against government funds, could not relieve them of their own
responsibility.
4. Respondents bank and Corua further made common cause with
respondent estate beyond the legal issues that should solely concern
them, by reason of their having wrongfully allowed the garnishment and
delivery of government funds, instead assailing petitioners for not having
come to court with "clean hands" and asserting that in fairness, justice and
equity, petitioners should not impede, obstruct or in any way delay the
payment of just compensation to the land owners for their property that
was occupied way back in 1940. This matter of payment of respondent
estate's judgment credit is of no concern to them as custodian and
depositary of the public funds deposited with them, whereby they are
charged with the obligation of assuring that the funds are not illegally or
wrongfully paid out.
Since they have gone into the records of the expropriation case, then it
should be noted that they should have considered the vital fact that at the
time that the compromise agreement therein was executed in November,
1966, respondent estate was well aware of the fact that the funds for the
payment of the property in the amount of P209,076.00 still had to be
released by the Budget Commissioner and that at the time of the
garnishment, respondent estate was still making the necessary
representations for the corresponding release of such amount, pursuant to
the Budget Commissioner's favorable
recommendation.19 And with regard to the merits of the case, they should
have likewise considered that respondent estate could have no complaint
against the fair attitude of the authorities in not having insisted on their original
stand in their answer that respondent estate was entitled only to the sum of
P3,203.00 as the fair market value of the property at the time the State took
possession thereof on November 25, 1940, with legal interests thereon, but
rather agreed to pay therefor the greatly revised and increased amount of
P209,076.00 at P14.00 per square meter, not to mention the consequential
benefits derived by said respondent from the construction of the public
highway with the resultant enhanced value of its remaining properties in the
area.
PROPERTY 1ST BATCH
5. The manner in which respondent bank's counsel and officials proceeded
to comply with the writ of preliminary mandatory injunction issued by the
Court commanding respondent estate, its judicial administrator and
respondents bank and Corua, in solidum, to reimburse forthwith the
account of petitioner Bureau in the garnished amount of P209,076.00,
does not speak well of their fidelity to the bank's interests. For while
respondent bank had restored with its own funds the said amount of
P209,076.00 to petitioner Bureau's account, it has not required respondent
estate as the party primarily liable therefor as the recipient of the garnished
amount to reimburse it in turn in this same amount. Rather, said bank
officials have allowed respondent estate to keep all this time the whole
amount of P209,076.00 wrongfully garnished by it. For as stated above,
respondent bank allowed respondent estate merely to deposit with it as a
savings account, of respondent estate, the lesser sum of P125,446.00 on
which the bank presumably has paid and continues paying respondent
estate, besides the usual interest rates on such savings accounts, and
neither has it taken any steps to require reimbursement to it from
respondent estate of the remainder of P83,630.00 which respondent estate
of its own doing and responsibility paid by way of attorney's fees.
It thus appears that all this time, respondent bank has not been reimbursed
by respondent estate as the party primarily liable for the whole amount of
P209,076.00 wrongfully and illegally garnished and received by respondent
estate. This grave breach of trust and dereliction of duty on the part of
respondent bank's officials should be brought to the attention of
respondent bank's Board of Directors and management for the appropriate
administrative action and other remedial action for the bank to recover the
damages it has been made to incur thereby.
6. The Solicitor General has likewise questioned the legality of respondent
Court's Order of October 14, 1968, appointing respondent Garcia as
"special sheriff" for the purpose of effecting service of the writ of execution,
simply on respondent estate's representation that it was desirable "for a
speedy enforcement of the writ."
The Court finds this general practice of the lower courts of appointing
"special sheriffs" for the service of writs of execution to be unauthorized by
law. The duty of executing all processes" of the courts in civil cases,
particularly, writs of execution, devolves upon the sheriff or his deputies,
under Section 183 of the Revised Administrative Code and Rule 39,
section 8 of the Rules of Court. Unlike the service of summons which may
be made, aside from the sheriff or other proper court officers, "for special
reasons by any person especially authorized by the judge of the court
issuing the summons" under Rule 14, section 5 of the Rules of Court, the
law requires that the responsibility of serving writs of execution, which
involve the taking delivery of money or property in trust for the judgment
creditor, should be carried out by regularly bonded sheriffs or other proper
court officers. (Sections 183 and 330, Revised Administrative Code). The
bond required by law of the sheriff is conditioned inter alia, "for the delivery
or payment to the Government, or the persons entitled thereto, of all the
property or sums of money that shall officially come into his or their (his
deputies') hands" (Section 330, idem), and thus avoids the risk of
embezzlement of such properties and moneys.
Section 185 of the Revised Administrative Code restrictively authorizes the
judge of the Court issuing the process or writ to deputize some suitable
person only "when the sheriff is party to any action or proceeding or is
otherwise incompetent to serve process therein." The only other
contingency provided by law is when the office of sheriff is vacant, and the
judge is then authorized, "in case of emergency, (to) make a temporary
appointment to the office of sheriff ... pending the appointment and
qualification of the sheriff in due course; and he may appoint the deputy
clerk of the court or other officer in the government service to act in said
capacity." (Section 189, idem).
None of the above contingencies having been shown to be present,
respondent Court's order appointing respondent Garcia as "special sheriff"
to serve the writ of execution was devoid of authority.
7. No civil liability attaches, however, to respondents special sheriff and
deputy clerk, since they acted strictly pursuant to orders issued by
respondent judge in the discharge of her judicial functions as presiding
judge of the lower court, and respondent judge's immunity from civil
responsibility covers them, although the said orders are herein declared
null and void. 20
ACCORDINGLY, the writs of certiorari and prohibition are granted. The
respondent court's questioned Orders of October 14, and 18, 1968, are
declared null and void, and all further proceedings in Civil Case No. Q-
7441 of the Court of First Instance of Rizal, Quezon City, Branch IX are
abated. The writ of preliminary mandatory injunction heretofore issued is
made permanent, except as to respondent judge who is excluded
therefrom, without prejudice to any cause of action that private
PROPERTY 1ST BATCH
respondents may have, inter se. Respondent estate and respondent
Tomas N. Hashim as prayed for by respondent Philippine National Bank in
its Answer, are ordered jointly and severally to reimburse said respondent
bank in the amount of P209,076.00 with legal interest until the date of
actual reimbursement. Respondents Estate of N. T. Hashim, Philippine
National Bank and Benjamin Corua are ordered jointly to pay treble costs.
The Clerk of Court is directed to furnish copies of this decision to the Board
of Directors and to the president of respondent Philippine National Bank for
their information and appropriate action. So ordered.
G.R. No. 155504 June 26, 2009
PROFESSIONAL VIDEO, INC., Petitioner,
vs.
TECHNICAL EDUCATION AND SKILLS DEVELOPMENT
AUTHORITY, Respondent.
DECISION
BRION, J.:
We resolve the petition filed by Professional Video, Inc. (PROVI)1 to annul
and set aside the Decision2 of the Court of Appeals (CA) in CA-G.R. SP
No. 67599, and its subsequent Order denying PROVIs motion for
reconsideration.3The assailed CA decision nullified:
a. the Order4 dated July 16, 2001 of the Regional Trial Court (RTC), Pasig
City, in Civil Case No. 68527, directing the attachment/garnishment of the
properties of respondent Technical Education and Skills Development
Authority (TESDA) amounting to Thirty Five Million Pesos
(P35,000,000.00); and
b. the RTCs August 24, 2001 Order5 denying respondent TESDAs motion
to discharge/quash writ of attachment.
THE FACTUAL BACKGROUND
PROVI is an entity engaged in the sale of high technology equipment, TESDA in turn undertook to pay PROVI thirty percent (30%) of the total
information technology products and broadcast devices, including the cost of the supplies within thirty (30) days after receipt and acceptance of
supply of plastic card printing and security facilities. the contracted supplies, with the balance payable within thirty (30) days
after the initial payment.
TESDA is an instrumentality of the government established under Republic
Act (R.A.) No. 7796 (the TESDA Act of 1994) and attached to the According to PROVI, it delivered the following items to TESDA on the
Department of Labor and Employment (DOLE) to "develop and establish a dates indicated:
national system of skills standardization, testing, and certification in the
country."6 To fulfill this mandate, it sought to issue security-printed
Date Particulars Amount
certification and/or identification polyvinyl (PVC) cards to trainees who
have passed the certification process. 26 April 2000 48,500 pre-printed cards P 2,764,500.00

TESDAs Pre-Qualification Bids Award Committee (PBAC) conducted two 07 June 2000 330,000 pre-printed cards 18,810,000.00
(2) public biddings on June 25, 1999 and July 22, 1999 for the printing and 07 August
encoding of PVC cards. A failure of bidding resulted in both instances 121,500 pre-printed cards 6,925,500.00
2000
since only two (2) bidders PROVI and Sirex Phils. Corp. submitted
proposals. 100,000 scannable answer
26 April 2000 600,000.00
sheets
Due to the failed bidding, the PBAC recommended that TESDA enter into a 06 June 2000 5 Micro-Poise customized die 375,000.00
negotiated contract with PROVI. On December 29, 1999, TESDA and
PROVI signed and executed their "Contract Agreement Project: PVC ID 13 June 2000 35 boxes @ 15,000 imp/box 10,000,000.00
Card Issuance" (the Contract Agreement) for the provision of goods and Custom hologram Foil
services in the printing and encoding of PVC cards.7 Under this Contract
Total P 39,475,000.00
Agreement, PROVI was to provide TESDA with the system and equipment
compliant with the specifications defined in the Technical Proposal. In
return, TESDA would pay PROVI the amount of Thirty-Nine Million Four PROVI further alleged that out of TESDAs liability of P39,475,000.00,
Hundred and Seventy-Five Thousand Pesos (P39,475,000) within fifteen TESDA paid PROVI only P3,739,500.00, leaving an outstanding balance
(15) days after TESDAs acceptance of the contracted goods and services. of P35,735,500.00, as evidenced by PROVIs Statement of
Account.9 Despite the two demand letters dated March 8 and April 27,
On August 24, 2000, TESDA and PROVI executed an "Addendum to the 2001 that PROVI sent TESDA,10 the outstanding balance remained unpaid.
Contract Agreement Project: PVC ID Card Issuance" (Addendum),8 whose
terms bound PROVI to deliver one hundred percent (100%) of the On July 11, 2001, PROVI filed with the RTC a complaint for sum of money
enumerated supplies to TESDA consisting of five hundred thousand with damages against TESDA. PROVI additionally prayed for the issuance
(500,000) pieces of security foil; five (5) pieces of security die with TESDA of a writ of preliminary attachment/garnishment against TESDA. The case
seal; five hundred thousand (500,000) pieces of pre-printed and was docketed as Civil Case No. 68527. In an Order dated July 16, 2001,
customized identification cards; one hundred thousand (100,000) pieces of the RTC granted PROVIs prayer and issued a writ of preliminary
scannable answer sheets; and five hundred thousand (500,000) attachment against the properties of TESDA not exempt from execution in
customized TESDA holographic laminate. In addition, PROVI would install the amount of P35,000,000.00.11
and maintain the following equipment: one (1) unit of Micropoise, two (2)
units of card printer, three (3) units of flatbed scanner, one (1) unit of OMR TESDA responded on July 24, 2001 by filing a Motion to Discharge/Quash
scanner, one (1) unit of Server, and seven (7) units of personal computer. the Writ of Attachment, arguing mainly that public funds cannot be the

PROPERTY 1ST BATCH

subject of garnishment.12 The RTC denied TESDAs motion, and
subsequently ordered the manager of the Land Bank of the Philippines to
produce TESDAs bank statement for the garnishment of the covered
amount.13
Faced with these rulings, TESDA filed a Petition for Certiorari with the CA
to question the RTC orders, imputing grave abuse of discretion amounting
to lack or excess of jurisdiction on the trial court for issuing a writ of
preliminary attachment against TESDAs public funds.14
The CA set aside the RTCs orders after finding that: (a) TESDAs funds
are public in nature and, therefore, exempt from garnishment; and (b)
TESDAs purchase of the PVC cards was a necessary incident of its
governmental function; consequently, it ruled that there was no legal basis
for the issuance of a writ of preliminary attachment/garnishment.15 The CA
subsequently denied PROVIs motion for reconsideration;16 hence, the
present petition.
THE PETITION
The petition submits to this Court the single issue of whether or not the writ
of attachment against TESDA and its funds, to cover PROVIs claim
against TESDA, is valid. The issue involves a pure question of law and
requires us to determine whether the CA was correct in ruling that the RTC
gravely abused its discretion in issuing a writ of attachment against
TESDA.
PROVI argues that the CA should have dismissed TESDAs petition for
certiorari as the RTC did not commit any grave abuse of discretion when it
issued the Orders dated July 16, 2001 and August 24, 2001. According to
PROVI, the RTC correctly found that when TESDA entered into a purely
commercial contract with PROVI, TESDA went to the level of an ordinary
private citizen and could no longer use the defense of state immunity from
suit. PROVI further contends that it has alleged sufficient ultimate facts in
the affidavit it submitted to support its application for a writ of preliminary
attachment. Lastly, PROVI maintains that sufficient basis existed for the
RTCs grant of the writ of preliminary attachment, since TESDA
fraudulently misapplied or embezzled the money earmarked for the
payment of the contracted supplies and services, as evidenced by the
Certification as to Availability of Funds.
PROPERTY 1ST BATCH
TESDA claims that it entered the Contract Agreement and Addendum in
the performance of its governmental function to develop and establish a
national system of skills standardization, testing, and certification; in the
performance of this governmental function, TESDA is immune from suit.
Even assuming that it had impliedly consented to be sued by entering into
a contract with PROVI, TESDA posits that the RTC still did not have the
power to garnish or attach its funds since these are public funds. Lastly,
TESDA points out that PROVI failed to comply with the elements for the
valid issuance of a writ of preliminary attachment, as set forth in Section 1,
Rule 57 of the 1997 Rules of Civil Procedure.
THE COURTS RULING
We find, as the CA did, that the RTCs questioned order involved a gross
misreading of the law and jurisprudence amounting to action in excess of
its jurisdiction. Hence, we resolve to DENY PROVIs petition for lack of
merit.
TESDA is an instrumentality of the government undertaking governmental
functions.
R.A. No. 7796 created the Technical Education and Skills Development
Authority or TESDA under the declared "policy of the State to provide
relevant, accessible, high quality and efficient technical education and
skills development in support of the development of high quality Filipino
middle-level manpower responsive to and in accordance with Philippine
development goals and priorities."17 TESDA replaced and absorbed the
National Manpower and Youth Council, the Bureau of Technical and
Vocational Education and the personnel and functions pertaining to
technical-vocational education in the regional offices of the Department of
Education, Culture and Sports and the apprenticeship program of the
Bureau of Local Employment of the DOLE.18 Thus, TESDA is an
unincorporated instrumentality of the government operating under its own
charter.
Among others, TESDA is empowered to: approve trade skills standards
and trade tests as established and conducted by private industries;
establish and administer a system of accreditation of both public and
private institutions; establish, develop and support the institutions' trainors'
training and/or programs; exact reasonable fees and charges for such tests
and trainings conducted, and retain such earnings for its own use, subject
to guidelines promulgated by the Authority; and perform such other duties
and functions necessary to carry out the provisions of the Act, consistent
with the purposes of the creation of TESDA.19
Within TESDAs structure, as provided by R.A. No. 7769, is a Skills
Standards and Certification Office expressly tasked, among others, to
develop and establish a national system of skills standardization, testing
and certification in the country; and to conduct research and development
on various occupational areas in order to recommend policies, rules and
regulations for effective and efficient skills standardization, testing and
certification system in the country.20 The law likewise mandates that
"[T]here shall be national occupational skills standards to be established by
TESDA-accredited industry committees. The TESDA shall develop and
implement a certification and accreditation program in which private groups
and trade associations are accredited to conduct approved trade tests, and
the local government units to promote such trade testing activities in their
respective areas in accordance with the guidelines to be set by the
TESDA. The Secretary of Labor and Employment shall determine the
occupational trades for mandatory certification. All certificates relating to
the national trade skills testing and certification system shall be issued by
the TESDA through its Secretariat."21
All these measures are undertaken pursuant to the constitutional command
that "[T]he State affirms labor as a primary social economic force," and
shall "protect the rights of workers and promote their welfare";22 that "[T]he
State shall protect and promote the right of all citizens to quality education
at all levels, and shall take appropriate steps to make such education
accessible to all";23 in order "to afford protection to labor" and "promote full
employment and equality of employment opportunities for all."24
Under these terms, both constitutional and statutory, we do not believe that
the role and status of TESDA can seriously be contested: it is an
unincorporated instrumentality of the government, directly attached to the
DOLE through the participation of the Secretary of Labor as its Chairman,
for the performance of governmental functions i.e., the handling of formal
and non-formal education and training, and skills development. As an
unincorporated instrumentality operating under a specific charter, it is
equipped with both express and implied powers,25 and all State immunities
fully apply to it.26
TESDA, as an agency of the State, cannot be sued without its consent.
PROPERTY 1ST BATCH
The rule that a state may not be sued without its consent is embodied in
Section 3, Article XVI of the 1987 Constitution and has been an
established principle that antedates this Constitution.27 It is as well a
universally recognized principle of international law that exempts a state
and its organs from the jurisdiction of another state.28The principle is based
on the very essence of sovereignty, and on the practical ground that there
can be no legal right as against the authority that makes the law on which
the right depends.29 It also rests on reasons of public policy that public
service would be hindered, and the public endangered, if the sovereign
authority could be subjected to law suits at the instance of every citizen
and, consequently, controlled in the uses and dispositions of the means
required for the proper administration of the government.30
The proscribed suit that the state immunity principle covers takes on
various forms, namely: a suit against the Republic by name; a suit against
an unincorporated government agency; a suit against a government
agency covered by a charter with respect to the agencys performance of
governmental functions; and a suit that on its face is against a government
officer, but where the ultimate liability will fall on the government. In the
present case, the writ of attachment was issued against a government
agency covered by its own charter. As discussed above, TESDA performs
governmental functions, and the issuance of certifications is a task within
its function of developing and establishing a system of skills
standardization, testing, and certification in the country. From the
perspective of this function, the core reason for the existence of state
immunity applies i.e., the public policy reason that the performance of
governmental function cannot be hindered or delayed by suits, nor can
these suits control the use and disposition of the means for the
performance of governmental functions. In Providence Washington
Insurance Co. v. Republic of the Philippines,31 we said:
[A] continued adherence to the doctrine of non-suability is not to be
deplored for as against the inconvenience that may be caused private
parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a
fundamental principle were abandoned and the availability of judicial
remedy were not thus restricted. With the well known propensity on the
part of our people to go to court, at the least provocation, the loss of time
and energy required to defend against law suits, in the absence of such a
basic principle that constitutes such an effective obstacle, could very well
be imagined.
PROVI argues that TESDA can be sued because it has effectively waived
its immunity when it entered into a contract with PROVI for a commercial
purpose. According to PROVI, since the purpose of its contract with
TESDA is to provide identification PVC cards with security seal which
TESDA will thereafter sell to TESDA trainees, TESDA thereby engages in
commercial transactions not incidental to its governmental functions.
TESDAs response to this position is to point out that it is not engaged in
business, and there is nothing in the records to show that its purchase of
the PVC cards from PROVI is for a business purpose. While TESDA
admits that it will charge the trainees with a fee for the PVC cards, it claims
that this fee is only to recover their costs and is not intended for profit.
We agree with TESDA. As the appellate court found, the PVC cards
purchased by TESDA from PROVI are meant to properly identify the
trainees who passed TESDAs National Skills Certification Program the
program that immediately serves TESDAs mandated function of
developing and establishing a national system of skills standardization,
testing, and certification in the country.32 Aside from the express mention of
this function in R.A. No. 7796, the details of this function are provided
under DOLE Administrative Order No. 157, S. 1992, as supplemented by
Department Order Nos. 3 thru 3-F, S. 1994 and Department Order No. 13,
S. 1994.33
Admittedly, the certification and classification of trainees may be
undertaken in ways other than the issuance of identification cards, as the
RTC stated in its assailed Order.34 How the mandated certification is to be
done, however, lies within the discretion of TESDA as an incident of its
mandated function, and is a properly delegated authority that this Court
cannot inquire into, unless its exercise is attended by grave abuse of
discretion.
That TESDA sells the PVC cards to its trainees for a fee does not
characterize the transaction as industrial or business; the sale, expressly
authorized by the TESDA Act,35 cannot be considered separately from
TESDAs general governmental functions, as they are undertaken in the
discharge of these functions. Along this line of reasoning, we held in Mobil
Philippines v. Customs Arrastre Services:36
Now, the fact that a non-corporate government entity performs a function
proprietary in nature does not necessarily result in its being suable. If said
PROPERTY 1ST BATCH
non-governmental function is undertaken as an incident to its
governmental function, there is no waiver thereby of the sovereign
immunity from suit extended to such government entity.
TESDAs funds are public in character, hence exempt from attachment or
garnishment.
Even assuming that TESDA entered into a proprietary contract with PROVI
and thereby gave its implied consent to be sued, TESDAs funds are still
public in nature and, thus, cannot be the valid subject of a writ of
garnishment or attachment. Under Section 33 of the TESDA Act, the
TESDA budget for the implementation of the Act shall be included in the
annual General Appropriation Act; hence, TESDA funds, being sourced
from the Treasury, are moneys belonging to the government, or any of its
departments, in the hands of public officials.37 We specifically spoke of the
limits in dealing with this fund in Republic v. Villasor38 when we said:
This fundamental postulate underlying the 1935 Constitution is now made
explicit in the revised charter. It is therein expressly provided, The State
may not be sued without its consent. A corollary, both dictated by logic
and sound sense, from such a basic concept, is that public funds cannot
be the object of garnishment proceedings even if the consent to be sued
had been previously granted and the state liability adjudged. Thus in the
recent case of Commissioner of Public Highways vs. San Diego, such a
well-settled doctrine was restated in the opinion of Justice Teehankee:
The universal rule that where the State gives its consent to be sued by
private parties either by general or special law, it may limit claimant's
action 'only up to the completion of proceedings anterior to the stage of
execution' and that the power of the Courts ends when the judgment is
rendered, since government funds and properties may not be seized under
writs of execution or garnishment to satisfy such judgments, is based on
obvious considerations of public policy. Disbursements of public funds
must be covered by the corresponding appropriation as required by law.
The functions and public services rendered by the State cannot be allowed
to be paralyzed or disrupted by the diversion of public funds from their
legitimate and specific objects, as appropriated by law. [Emphasis
supplied.]
We reiterated this doctrine in Traders Royal Bank v. Intermediate Appellate
Court,39 where we said:
The NMPCs implied consent to be sued notwithstanding, the trial court did
not have the power to garnish NMPC deposits to answer for any eventual
judgment against it. Being public funds, the deposits are not within the
reach of any garnishment or attachment proceedings. [Emphasis supplied.]
As pointed out by TESDA in its Memorandum,40 the garnished funds
constitute TESDAs lifeblood in government parlance, its MOOE41
whose withholding via a writ of attachment, even on a temporary basis,
would paralyze TESDAs functions and services. As well, these funds also
include TESDAs Personal Services funds from which salaries of TESDA
personnel are sourced. Again and for obvious reasons, the release of
these funds cannot be delayed.
PROVI has not shown that it is entitled to the writ of attachment.
Even without the benefit of any immunity from suit, the attachment of
TESDA funds should not have been granted, as PROVI failed to prove that
TESDA "fraudulently misapplied or converted funds allocated under the
Certificate as to Availability of Funds." Section 1, Rule 57 of the Rules of
Court sets forth the grounds for issuance of a writ of preliminary
attachment, as follows:
SECTION 1. Grounds upon which attachment may issue. A plaintiff or
any proper party may, at the commencement of the action or at any time
thereafter, have the property of the adverse party attached as security for
the satisfaction of any judgment that may be recovered in the following
cases:
(a) In an action for recovery of a specified amount of money or
damages, other than moral and exemplary, on a cause of action
arising from law, contract, quasi-contract, delict or quasi-delict
against a party who is about to depart from the Philippines with
intent to defraud his creditors;
(b) In an action for money or property embezzled or fraudulently
misapplied or converted to his use by a public officer, or an officer
of a corporation, or an attorney, factor, broker, agent or clerk, in the
course of his employment as such, or by any other person in a
fiduciary capacity, or for a willful violation of duty;
PROPERTY 1ST BATCH
(c) In an action to recover the possession of property unjustly or
fraudulently taken, detained or converted, when the property or any
part thereof, has been concealed, removed or disposed of to
prevent its being found or taken by the applicant or an authorized
person;
(d) In an action against a party who has been guilty of fraud in
contracting the debt or incurring the obligation upon which the
action is brought, or in concealing or disposing of the property for
the taking, detention or conversion of which the action is brought;
(e) In an action against a party who has removed or disposed of his
property, or is about to do so, with intent to defraud his creditors;
(f) In an action against a party who does not reside and is not
found in the Philippines, or on whom summons may be served by
publication. [Emphasis supplied.]
Jurisprudence teaches us that the rule on the issuance of a writ of
attachment must be construed strictly in favor of the defendant.
Attachment, a harsh remedy, must be issued only on concrete and specific
grounds and not on general averments merely quoting the words of the
pertinent rules.42 Thus, the applicants affidavit must contain statements
clearly showing that the ground relied upon for the attachment exists.
Section 1(b), Rule 57 of the Rules of Court, that PROVI relied upon,
applies only where money or property has been embezzled or converted
by a public officer, an officer of a corporation, or some other person who
took advantage of his fiduciary position or who willfully violated his duty.
PROVI, in this case, never entrusted any money or property to TESDA.
While the Contract Agreement is supported by a Certificate as to
Availability of Funds (Certificate) issued by the Chief of TESDAs
Accounting Division, this Certificate does not automatically confer
ownership over the funds to PROVI. Absent any actual disbursement,
these funds form part of TESDAs public funds, and TESDAs failure to pay
PROVI the amount stated in the Certificate cannot be construed as an act
of fraudulent misapplication or embezzlement. In this regard, Section 86 of
Presidential Decree No. 1445 (The Accounting Code) provides:
Section 86. Certificate showing appropriation to meet contract. Except in grave abuse of discretion in granting the writ of attachment despite want of
a case of a contract for personal service, for supplies for current any valid ground for its issuance.
1avv phi1

consumption or to be carried in stock not exceeding the estimated

consumption for three months, or banking transactions of government-
owned or controlled banks, no contract involving the expenditure of public
funds by any government agency shall be entered into or authorized
unless the proper accounting official or the agency concerned shall have
certified to the officer entering into the obligation that funds have been duly
appropriated for the purpose and that the amount necessary to cover the
proposed contract for the current fiscal year is available for expenditure on
account thereof, subject to verification by the auditor concerned. The
certification signed by the proper accounting official and the auditor who
verified it, shall be attached to and become an integral part of the proposed
contract, and the sum so certified shall not thereafter be available for
expenditure for any other purpose until the obligation of the government
agency concerned under the contract is fully extinguished. [Emphasis
supplied.]
For all these reasons, we support the appellate courts conclusion that no
valid ground exists to support the grant of the writ of attachment against
TESDA. The CAs annulment and setting aside of the Orders of the RTC
were therefore fully in order.
WHEREFORE, premises considered, we hereby DENY the petition filed by
petitioner Professional Video, Inc., and AFFIRM the Court of Appeals
Decision dated July 23, 2002, and Resolution of September 27, 2002, in
CA-G.R. SP No. 67599. Costs against the petitioner.
SO ORDERED.

By law, therefore, the amount stated in the Certification should be intact

and remains devoted to its purpose since its original appropriation. PROVI
can rebut the presumption that necessarily arises from the cited provision
only by evidence to the contrary. No such evidence has been adduced.

Section 1 (d), Rule 57 of the Rules of Court applies where a party is guilty
of fraud in contracting a debt or incurring an obligation, or in concealing or
disposing of the property for the taking, detention or conversion of which
the action is brought. In Wee v. Tankiansee,43 we held that for a writ of
attachment to issue under this Rule, the applicant must sufficiently show
the factual circumstances of the alleged fraud because fraudulent intent
cannot be inferred from the debtors mere non-payment of the debt or
failure to comply with his obligation. The affidavit, being the foundation of
the writ, must contain particulars showing how the imputed fraud was
committed for the court to decide whether or not to issue the writ. To
reiterate, a writ of attachment can only be granted on concrete and specific
grounds and not on general averments merely quoting the words of the
rules.44

The affidavit filed by PROVI through Elmer Ramiro, its President and Chief
Executive Officer, only contained a general allegation that TESDA had
fraudulent misapplied or converted the amount of P10,975,000.00 that was
allotted to it. Clearly, we cannot infer any finding of fraud from PROVIs
vague assertion, and the CA correctly ruled that the lower court acted with

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