G.R. No.

163072 April 2, 2009

MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, vs. CITY OF PASAY, SANGGUNIANG
PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY
ASSESSOR OF PASAY, Respondents.
D E C I S I O N
CARPIO, J .:
This is a petition for review on certiorari
1
of the Decision
2
dated 30 October 2002 and the Resolution dated 19 March
2004 of the Court of Appeals in CA-G.R. SP No. 67416.
The Facts
Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International
Airport (NAIA) Complex under Executive Order No. 903 (EO 903),
3
otherwise known as the Revised Charter of the
Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos.
Under Sections 3
4
and 22
5
of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and
other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City
and Paraaque City.
On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the
taxable years 1992 to 2001. MIAAs real property tax delinquency for its real properties located in NAIA Complex,
Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows:
TAX DECLA-RATION TAXABLE YEAR TAX DUE PENALTY TOTAL
A7-183-08346 1997-2001 243,522,855.00 123,351,728.18 366,874,583.18
A7-183-05224 1992-2001 113,582,466.00 71,159,414.98 184,741,880.98
A7-191-00843 1992-2001 54,454,800.00 34,115,932.20 88,570,732.20
A7-191-00140 1992-2001 1,632,960.00 1,023,049.44 2,656,009.44
A7-191-00139 1992-2001 6,068,448.00 3,801,882.85 9,870,330.85
A7-183-05409 1992-2001 59,129,520.00 37,044,644.28 96,174,164.28
A7-183-05410 1992-2001 20,619,720.00 12,918,254.58 33,537,974.58
A7-183-05413 1992-2001 7,908,240.00 4,954,512.36 12,862,752.36
A7-183-05412 1992-2001 18,441,981.20 11,553,901.13 29,995,882.33
A7-183-05411 1992-2001 109,946,736.00 68,881,630.13 178,828,366.13
A7-183-05245 1992-2001 7,440,000.00 4,661,160.00 12,101,160.00
GRAND TOTAL P642,747,726.20 P373,466,110.13 P1,016,213,836.33
On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the
NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor
of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain
unpaid.
On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for
preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay from imposing real
property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties.
On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and
collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals
denied. Hence, this petition.
The Court of Appeals Ruling
The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which
took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to natural or juridical
persons, including government-owned or controlled corporations, except local water districts, cooperatives duly registered
under Republic Act No. 6938, non-stock and non-profit hospitals and educational institutions. Since MIAA is a
government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon
the effectivity of the Local Government Code.
The Issue
The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax.
The Courts Ruling
The petition is meritorious.
In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the
Local Government Code which read:
SECTION 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or
incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including 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 the effectivity of this Code.
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial
use thereof has been granted, for consideration or otherwise to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious
cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or
educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government
owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of
electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and environment protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed
by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby
withdrawn upon the effectivity of this Code.
The Court of Appeals held that as a government-owned corporation, MIAAs tax exemption under Section 21 of EO 903
has already been withdrawn upon the effectivity of the Local Government Code in 1992.
In Manila International Airport Authority v. Court of Appeals
6
(2006 MIAA case), this Court already resolved the issue of
whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case
originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain
the City of Paraaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands
and buildings located in Paraaque City. The only difference between the 2006 MIAA case and this case is that the 2006
MIAA case involved airport lands and buildings located in Paraaque City while this case involved airport lands and
buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local
government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport
buildings, of MIAA. In the 2006 MIAA case, this Court held:
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:
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.
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.
7
(Emphasis in the original)
The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987
uses the phrase "includes x x x government-owned or controlled corporations" which means that a government
"instrumentality" may or may not be a "government-owned or controlled corporation." Obviously, the term government
"instrumentality" is broader than the term "government-owned or controlled corporation." Section 2(10) provides:
SEC. 2. General Terms Defined. 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. This term includes regulatory agencies, chartered
institutions and government-owned or controlled corporations.
The term "government-owned or controlled corporation" has a separate definition under Section 2(13)
8
of the
Introductory Provisions of the Administrative Code of 1987:
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: Provided, That government-owned or
controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the
Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and
responsibilities with respect to such corporations.
The fact that two terms have separate definitions means that while a government "instrumentality" may include a
"government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify as a
"government-owned or controlled corporation."
A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that MIAA
would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a
"government-owned or controlled corporation." As explained in the 2006 MIAA case:
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. x x x
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.
x x x
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. 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. x x
x
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, police authority and the levying of fees and charges. 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."
9

Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt
from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local government units is
subject to the limitations enumerated in Section 133 of the Local Government Code.
10
Under Section 133(o)
11
of the Local
Government Code, local government units have no power to tax instrumentalities of the national government like the
MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties.
Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as
such are exempt from real property tax under Section 234(a) of the Local Government Code. However, under the same
provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to real
property tax.
12
In this case, only those portions of the NAIA Pasay properties which are leased to taxable persons like
private parties are subject to real property tax by the City of Pasay.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated
19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the
Manila International Airport Authority EXEMPT from real property tax imposed by the City of Pasay. We declare VOID
all the real property tax assessments, including the final notices of real property tax delinquencies, issued by the City of
Pasay on the NAIA Pasay properties of the Manila International Airport Authority, except for the portions that the Manila
International Airport Authority has leased to private parties.
No costs.
G.R. No. 155650 July 20, 2006
MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. COURT OF APPEALS, CITY OF
PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG PANGLUNGSOD NG PARAAQUE,
CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF PARAAQUE, respondents.
D E C I S I O N
CARPIO, J .:
The Antecedents
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. 909
1
and 298
2
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

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:
TAX DECLARATION TAXABLE YEAR TAX DUE PENALTY TOTAL
E-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20
E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49
E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00
E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00
E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24
E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99
E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00
E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00
*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50
*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00
*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00
GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42
1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.00
6

On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants of levy on 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 delinquency. MIAA thus sought a clarification of OGCC
Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that
Section 206 of the Local Government Code requires persons exempt from real estate tax to show 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 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer
for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Paraaque from
imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition
was docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary
period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for reconsideration and supplemental
motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.
7

Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of Barangays
Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La Huerta; and in the main lobby of the
Paraaque City Hall. The City of Paraaque 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 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 Legislative Session Hall
Building of Paraaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte
and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents
the City of Paraaque, City Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque,
and the City Assessor of Paraaque ("respondents") from auctioning the Airport Lands and Buildings.
On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered
respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the
TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours
after the conclusion of the public auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the
hearing, MIAA, respondent City of Paraaque, and the Solicitor General subsequently submitted their respective
Memoranda.
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 I nternational Airport v. Marcos
8
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 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 Charter
9
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 Code
10
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.
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 authority
13
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:
x x x x
(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local
government units.(Emphasis and underscoring supplied)
Section 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, J r.:
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
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:
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 encumber
26
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 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. x x x x
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)
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 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:
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:
x x x x
(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,
31
Laguna Lake
Development Authority,
32
Fisheries Development Authority,
33
Bases Conversion Development Authority,
34
Philippine
Ports Authority,
35
Cagayan de Oro Port Authority,
36
San Fernando Port Authority,
37
Cebu Port Authority,
38
and Philippine
National Railways.
39

The 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:
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. 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:
x x x x
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.
x x x x
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 charter
40
of the Land Bank of the Philippines provides:
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 charter
41
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 Bank
44
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.
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;
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 fees
47
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:
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.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio Morales,
Callejo, Sr., Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., J.J., concur.
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.
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.
x x x x x x x x x
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:
x x x x x x x x x
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.
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),
1
also cited by 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.
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 Manila, cited above, the rise of the waters of
the sea that covered the lands 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.
Johnson, Street, Malcolm, Ostrand, Johns and Romualdez, JJ., concur.

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
(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. L-61744 June 25, 1984
MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner, vs. HONORABLE OSCAR C. FERNANDEZ, in
his capacity as the Presiding Judge, Branch IV, Baliuag, Bulacan, The PROVINCIAL SHERIFF of Bulacan,
MARGARITA D. VDA. DE IMPERIO, ADORACION IMPERIO, RODOLFO IMPERIO, CONRADO
IMPERIO, ERNESTO IMPERIO, ALFREDO IMPERIO, CARLOS IMPERIO, JR., JUAN IMPERIO and
SPOUSES MARCELO PINEDA and LUCILA PONGCO, respondents.
Pascual C. Liatchko for petitioner.
The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J .:
In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of San Miguel,
Bulacan, et al.", the then Court of First Instance of Bulacan, on April 28, 1978, rendered judgment holding herein
petitioner municipality liable to private respondents, as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendant
Municipal Government of San Miguel Bulacan, represented by Mayor Mar Marcelo G. Aure and its Municipal Treasurer:
1. ordering the partial revocation of the Deed of Donation signed by the deceased Carlos Imperio in favor of the
Municipality of San Miguel Bulacan, dated October 27, 1947 insofar as Lots Nos. 1, 2, 3, 4 and 5, Block 11 of
Subdivision Plan Psd-20831 are concerned, with an aggregate total area of 4,646 square meters, which lots are among
those covered and described under TCT No. T-1831 of the Register of Deeds of Bulacan in the name of the Municipal
Government of San Miguel Bulacan,
2. ordering the defendant to execute the corresponding Deed of Reconveyance over the aforementioned five lots in favor
of the plaintiffs in the proportion of the undivided one-half () share in the name of plaintiffs Margarita D. Vda. de
Imperio, Adoracion, Rodolfo, Conrado, Ernesto, Alfredo, Carlos, Jr. and Juan, all surnamed Imperio, and the remaining
undivided one-half () share in favor of plaintiffs uses Marcelo E. Pineda and Lucila Pongco;
3. ordering the defendant municipality to pay to the plaintiffs in the proportion mentioned in the immediately preceding
paragraph the sum of P64,440.00 corresponding to the rentals it has collected from the occupants for their use and
occupation of the premises from 1970 up to and including 1975, plus interest thereon at the legal rate from January 1970
until fully paid;
4. ordering the restoration of ownership and possession over the five lots in question in favor of the plaintiffs in the same
proportion aforementioned;
5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for attomey's fees; and to pay the cost of suit.
The counterclaim of the defendant is hereby ordered dismissed for lack of evidence presented to substantiate the same.
SO ORDERED. (pp. 11-12, Rollo)
The foregoing judgment became final when herein petitioner's appeal was dismissed due to its failure to file the record on
appeal on time. The dismissal was affirmed by the then Court of Appeals in CA-G.R. No. SP-12118 and by this Court in
G.R. No. 59938. Thereafter, herein private respondents moved for issuance of a writ of execution for the satisfaction of
the judgment. Respondent judge, on July 27, 1982, issued an order, to wit:
Considering that an entry of judgment had already been made on June 14, 1982 in G. R. No. L-59938 and;
Considering further that there is no opposition to plaintiffs' motion for execution dated July 23, 1983;
Let a writ of execution be so issued, as prayed for in the aforestated motion. (p. 10, Rollo)
Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground that the municipality's property
or funds are all public funds exempt from execution. The said motion to quash was, however, denied by the respondent
judge in an order dated August 23, 1982 and the alias writ of execution stands in full force and effect.
On September 13, 1982, respondent judge issued an order which in part, states:
It is clear and evident from the foregoing that defendant has more than enough funds to meet its judgment obligation.
Municipal Treasurer Miguel C, Roura of San Miguel, Bulacan and Provincial Treasurer of Bulacan Agustin O. Talavera
are therefor hereby ordered to comply with the money judgment rendered by Judge Agustin C. Bagasao against said
municipality. In like manner, the municipal authorities of San Miguel, Bulacan are likewise ordered to desist from
plaintiffs' legal possession of the property already returned to plaintiffs by virtue of the alias writ of execution.
Finally, defendants are hereby given an inextendible period of ten (10) days from receipt of a copy of this order by the
Office of the Provincial Fiscal of Bulacan within which to submit their written compliance, (p. 24, Rollo)
When the treasurers (provincial and municipal) failed to comply with the order of September 13, 1982, respondent judge
issued an order for their arrest and that they will be release only upon compliance thereof.
Hence, the present petition on the issue whether the funds of the Municipality of San Miguel, Bulacan, in the hands of the
provincial and municipal treasurers of Bulacan and San Miguel, respectively, are public funds which are exempt from
execution for the satisfaction of the money judgment in Civil Case No. 604-B.
Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained in the
case of Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in trust for the people, intended and used for
the accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and
public funds to execution would materially impede, even defeat and in some instances destroy said purpose." And, in
Tantoco vs. Municipal Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the law that not 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." Thus, it is clear that all the
funds of petitioner municipality in the possession of the Municipal Treasurer of San Miguel, as well as those in the
possession of the Provincial Treasurer of Bulacan, are also public funds and as such they are exempt from execution.
Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a), provides:
SEC. 2. Fundamental Principles. Local government financial affairs, transactions, and operations shall be governed by
the fundamental principles set forth hereunder:
(a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other specific statutory
authority.
xxx xxx xxx
Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly passed by the
Sangguniang Bayan before any money of the municipality may be paid out. In the case at bar, it has not been shown that
the Sangguniang Bayan has passed an ordinance to this effect.
Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for the enforcement of money
judgment:
(a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt from execution, or only on
such part of the property as is sufficient to satisfy the judgment and accruing cost, if he has more than sufficient property
for the purpose;
(b) By selling the property levied upon;
(c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and accruing costs; and
(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by judgment or order of the court.
The foregoing has not been followed in the case at bar.
ACCORDINGLY, the petition is granted and the order of respondent judge, dated July 27, 1982, granting issuance of a
writ of execution; the alias writ of execution, dated July 27, 1982; and the order of respondent judge, dated September 13,
1982, directing the Provincial Treasurer of Bulacan and the Municipal Treasurer of San Miguel, Bulacan to comply with
the money judgments, are SET ASIDE; and respondents are hereby enjoined from implementing the writ of execution.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr., and De la Fuente, JJ,. concur.
PIO MODESTO and CIRILA RIVERA-MODESTO,
Petitioners,


- versus -

G.R. No. 189859

Present:

*NACHURA, J.,
**BRION, Acting Chairperson,

CARLOS URBINA, substituted by the heirs of OLYMPIA
MIGUEL VDA. DE URBINA (Surviving Spouse) and
children, namely: ESCOLASTICA M. URBINA, ET AL.,
Respondents.
VILLARAMA, JR.,
***MENDOZA, and
SERENO, JJ.


Promulgated:

October 18, 2010
x----------------------------------------------------------------------------------------x

R E S O L U T I O N


BRION, J .:

We resolve the motion for reconsideration filed by petitioners Pio Modesto and Cirila Rivera Modesto
(Modestos or petitioners) dated March 1, 2010,[1] seeking to reverse our January 11, 2010 Resolution, which denied their
petition for review on certiorari for lack of merit.[2]


FACTUAL ANTECEDENTS

Civil Case No. 53483

This case stems from a complaint for recovery of possession filed by respondent Carlos Urbina (Urbina)
against the petitioners with the Regional Trial Court of Pasig (RTC), docketed as Civil Case No. 53483.

In his complaint, Urbina alleged that he is the owner of a parcel of land situated at Lower Bicutan, Taguig,
designated as Lot 56, PLS 272. According to Urbina, the Modestos, through stealth, scheme, and machination, were able
to occupy a portion of this property, designated as Lot 356, PLS 272. Thereafter, the Modestos negotiated with Urbina for
the sale of this lot. However, before the parties could finalize the sale, the Modestos allegedly cancelled the transaction
and began claiming ownership over the lot. Urbina made several demands on the Modestos to vacate the property, the last
of which was through a demand letter sent on July 22, 1983. When the Modestos still refused to vacate, Urbina filed the
present action against them.

In their answer, the Modestos claimed that Urbina could not be the lawful owner of the property because it was
still government property, being a part of the Fort Bonifacio Military Reservation.

After the resolution of various procedural issues,[3] the RTC of Pasig City rendered a decision in favor of
Urbina on April 24, 2000, ordering the petitioners to immediately vacate and surrender the lot to Urbina and to pay him
P200.00 monthly as compensation for the use of the property from July 22, 1983 until they finally vacate.[4]

The RTC noted that the petitioners recognized Urbinas possessory rights over the property when they entered
into a negotiated contract of sale with him for the property. Thus, the Modestos were estopped from subsequently
assailing or disclaiming Urbinas possessory rights over this lot.

The petitioners appealed this decision with the Court of Appeals (CA).

LMB Conflict No. 110

Urbinas claim of ownership over Lot 56 is based primarily on his Miscellaneous Sales Application No. (III-1) 460
(Miscellaneous Sales Application), which he filed on July 21, 1966.[5]

While Urbinas accion publiciana complaint was pending before the RTC, the Modestos filed a letter-protest
against Urbinas Miscellaneous Sales Application with the Land Management Bureau (LMB) on January 29, 1993,
claiming that: (a) they are the owners of Lot 356, PLS 272;[6] (b) they have been occupying this lot for almost 33 years;
and (c) their house is constructed on this lot.

The Modestos also alleged that they filed an unnumbered sales application for Lot 356 with the LMB, based on
their actual occupancy of the property, pursuant to Proclamations 2476 and 172, on February 10, 1993.

On January 31, 2008, the LMB denied with finality the Modestos unnumbered sales application/protest
against Urbinas application, in turn upholding Urbinas Miscellaneous Sales Application.

Refusing to give up, the Modestos filed a motion for reconsideration. They also filed an Insular Government
Patent Sales Application over Lot 356 on January 27, 2009.[7]

THE COURT OF APPEALS DECISION

The CA affirmed in toto the RTC decision in Civil Case No. 53483 on January 26, 2009.[8] The CA agreed
with the RTCs observation that the Modestos were estopped from challenging Urbinas right to possess the property after
they acknowledged this right when they entered into the negotiated contract of sale. The CA also gave credence to the
January 31, 2008 LMB order in LMB Conflict No. 110, ruling that this LMB order bolstered Urbinas possessory rights
over the subject property.

At the time the CA decision was issued, respondent Carlos Urbina had already passed away and had been
substituted by his surviving heirs, his spouse, Olympia Miguel Vda. de Urbina, and his children, Escolastica, Cecilia,
Efren, Manolito, and Purificacion, all surnamed Urbina (respondents).

THE PETITION

The petitioners subsequently filed a petition for review on certiorari with this Court, asserting that the CA
committed reversible error in finding that Urbina had possessory rights over the property. The Modestos mainly argued
that at the time Urbina filed his MSA and acquired tax declarations over the subject property, the property was
still government property, being part of a military reservation. The property was thus not alienable and disposable,
and could not legally be possessed by a private individual. Accordingly, Urbina could not use the MSA and the tax
declarations as proof of a better right to possess the property as against the Modestos.

The Modestos further claimed that the CA committed grievous error when it held that they were estopped from
challenging Urbinas right to possess the subject property. While they admitted to negotiating with Urbina for the sale of
the property, they alleged that they did so based on Urbinas misrepresentation that he had a legal claim of ownership over
the property. Since their offer to buy the property from Urbina was based on his false assertions, the principle of
estoppel cannot apply.

Additionally, the Modestos alleged that since the property is covered by Proclamation No. 172 and Memorandum
Order No. 119, the lower courts should have given due consideration to the primary and exclusive jurisdiction of the
Director of Lands (of the Bureau of Lands, now Director of the Land Management Bureau) over these parcels of public
lands.

Lastly, the Modestos questioned Urbinas qualifications to possess the property, claiming that Urbina was not in
actual, adverse, public and continuous possession of the property. According to the Modestos, from the time that Urbina
filed his Miscellaneous Sales Application in 1966 until the present, Urbina was a resident of Makati City, and did not
actually occupy the property.

In our Order dated January 11, 2010, we denied the Modestos petition for failing to sufficiently show any
reversible error in the assailed CA decision.



THE MOTION FOR RECONSIDERATION

On March 3, 2010, the Modestos filed their motion for reconsideration, raising essentially the same grounds already
brought up in their petition for review on certiorari.

Notably, the Modestos attached LMB Order dated February 19, 2010 (February 19, 2010 LMB Order), which
resolved their motion for reconsideration of the LMBs January 31, 2008 order in LMB Conflict No. 110. This Order held
that the subject property had indeed been a part of the Fort Bonifacio Military Reservation, and only became alienable and
disposable after October 16, 1987. Thus, Urbinas Miscellaneous Sales Application over the property was improper and
could not be the source of possessory rights over the property.

The order also noted that Urbina failed to comply with the requirements of an applicant for ownership of the
property, as set forth in Memorandum No. 119, the implementing guidelines of Proclamation No. 172.

Responding to this motion, the respondents, in their Comment dated May 31, 2010, reiterated that the petitioners are
estopped from assailing Urbinas possessory rights over the property after they entered into a negotiated sales contract
with him over the subject property. They also accused the Modestos of employing dilatory tactics in filing the present
motion.

THE RULING

We GRANT the motion for reconsideration.



Procedural issue

An accion publiciana is an ordinary civil proceeding to determine the better right of possession of realty
independently of title.[9] Accion publiciana is also used to refer to an ejectment suit where the cause of dispossession is
not among the grounds for forcible entry and unlawful detainer, or when possession has been lost for more than one year
and can no longer be maintained under Rule 70 of the Rules of Court. The objective of a plaintiff in accion publiciana is
to recover possession only, not ownership.[10]

In asking us to determine which of the parties has a better right to possess the property, we are asked to resolve
a factual issue, involving as it does the weighing and evaluation of the evidence presented by the parties in the courts
below. Generally, such an exercise is not appropriate in a petition for review on certiorari under Rule 45 of the Rules of
Court, which seeks to resolve only questions of law. Moreover, the factual findings of the CA, when supported by
substantial evidence, are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls
under any of the following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion;
(4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are conclusions without citation of specific evidence on which they are based;
(9) When the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by
the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.[11]

Since the CA affirmed the factual findings of the RTC, we would normally be precluded from re-examining the
factual circumstances of this case. However, it appears that the RTC and the CA, in concluding that Urbina has the right
to lawfully eject the Modestos from the lot in question, have greatly misapprehended the facts of this case.

In finding for Urbina, both the RTC and the CA mainly relied on the principle of estoppel, and focused on the
Modestos admission that they entered into a negotiated contract of sale with Urbina. In the process, they injudiciously
ignored the other material issues that the Modestos raised regarding the validity of Urbinas possession of the property,
specifically the Modestos allegation that at the time Urbina began staking his claim over the property, it was still
government land.

This error on the part of the lower courts is made more evident when we take into account an intervening event
which significantly affects the resolution of this case the issuance by the LMB of its order dated February 19, 2010,
which expressly stated that Urbina did not acquire any possessory rights over the lot. For these reasons, we find the
review of the evidence on record proper.



J urisdiction of the Court

The authority of the courts to resolve and settle questions relating to the possession of property has long been
settled.[12] This authority continues, even when the land in question is public land. As we explained in Solis v.
Intermediate Appellate Court:[13]
We hold that the power and authority given to the Director of Lands to alienate and
dispose of public lands does not divest the regular courts of their jurisdiction over possessory
actions instituted by occupants or applicants against others to protect their respective
possessions and occupations. While the jurisdiction of the Bureau of Lands [now the Land
Management Bureau] is confined to the determination of the respective rights of rival claimants to
public lands or to cases which involve disposition of public lands, the power to determine who has
the actual, physical possession or occupation or the better right of possession over public lands
remains with the courts.
The rationale is evident. The Bureau of Lands does not have the wherewithal to police
public lands. Neither does it have the means to prevent disorders or breaches of peace among the
occupants. Its power is clearly limited to disposition and alienation and while it may decide disputes
over possession, this is but in aid of making the proper awards. The ultimate power to resolve
conflicts of possession is recognized to be within the legal competence of the civil courts and its
purpose is to extend protection to the actual possessors and occupants with a view to quell
social unrest.

Consequently, while we leave it to the LMB to determine the issue of who among the parties should be
awarded the title to the subject property, there is no question that we have sufficient authority to resolve which of the
parties is entitled to rightful possession.

On the issue of possessory rights

Prefatorily, we observe that the subject property has not yet been titled, nor has it been the subject of a validly
issued patent by the LMB. Therefore, the land remains part of the public domain, and neither Urbina nor the Modestos can
legally claim ownership over it. This does not mean, however, that neither of the parties have the right to possess the
property.

Urbina alleged that he is the rightful possessor of the property since he has a pending Miscellaneous Sales
Application, as well as tax declarations over the property. He also relied, to support his claim of a better right to possess
the property, on the admission on the part of the Modestos that they negotiated with him for the sale of the lot in question.

On the other hand, the Modestos anchored their right to possess the same on their actual possession of the
property. They also questioned the legality of Urbinas Miscellaneous Sales Application, and his tax declarations over the
property, arguing that since these were obtained when the land was still not alienable and disposable, they could not be the
source of any legal rights.

After reviewing the records of this case, we find the reasoning of the Modestos to be more in accord with
applicable laws and jurisprudence.

The February 19, 2010 LMB Order

Factual findings of administrative agencies are generally respected and even accorded finality because of the
special knowledge and expertise gained by these agencies from handling matters falling under their specialized
jurisdiction.[14] Given that the LMB is the administrative agency tasked with assisting the Secretary of the Department of
Environment and Natural Resources (DENR) in the management and disposition of alienable and disposable lands of the
public domain,[15] we defer to its specialized knowledge on these matters. In this regard, we quote with approval the
observations made by the Director of the LMB in the February 19, 2010 LMB Order:

Movants [the Modestos] have anchored their Motion for Reconsideration on three (3)
assigned errors, to wit:

I. THIS OFFICE ERRED IN ITS FINDINGS THAT THE AREA IS NOT COVERED
BY PROCLAMATION NO. 172, AS IMPLEMENTED BY MEMORANDUM ORDER
NO. 119;

II. THIS OFFICE ERRED IN ITS FINDINGS THAT CARLOS T. URBINA WAS IN
ACTUAL, ADVERSE, PUBLIC AND CONTINUOUS POSSESSION OF THE
PROPERTY IN QUESTION;

III. THIS OFFICE ERRED IN NOT HOLDING THAT A NEW SURVEY OF THE AREA
IN QUESTION SHOULD BE DONE AND CONDUCTED TO DETERMINE THE
TRUE BOUNDARIES OF THE PROPERTY IN QUESTION VIS--VIS THE
CLAIMS OF EACH PARTY.

In order to clarify the issues raised in the Motion for Reconsideration, this Office ordered
that another ocular inspection and investigation on the subject premises be conducted by Special
Investigator Danilo Lim. After said investigation, Special Investigator, Danilo Lim, submitted his
Report to the Regional Technical Director, Lands Management Services, thru the Chief, Land
Management Division, DENR-NCR.

In his Report, Special Investigator, Danilo Lim made the following findings:

The Miscellaneous Sales Application filed by Carlos Urbina is
not appropriate because Lot 356 had ceased to be public land as it had
become part of the Fort Bonifacio Military Reservation, and hence, no
one can claim possessory rights over the said property since it is within
said Military Reservation. The subject area which is located in Lower
Bicutan, Taguig, only became alienable and disposable upon the issuance of
Presidential Proclamation No. 172 and its implementing guidelines
Memorandum Order No. 119 on October 16, 1987.

After a judicious evaluation of the arguments raised in the instant motion, and taking into
account the findings and recommendations of Special Investigator Danilo Lim as contained in his
Report, this Office finds the same to be not entirely without merit.

Anent the first assigned error, Special Investigator Danilo Lim has found that the area is
indeed a part of the Fort Bonifacio Military Reservation and is covered by Proclamation No.
172 and Memorandum Order No. 119. Upon a thorough research of the origin of the subject
property, it turned out that the area was originally part of the vast parcel of land known as Hacienda
De Maricaban. Sometime in 1902, the United States of America purchased said vast tract of land
with an area of Seven Hundred and Twenty Nine and Fifteenth Hundred (729.15) Hectares and
spanning the Municipalities of Pasig, Taguig, Paranaque and Pasay, from its original owner, Dona
Dolores Pacual Casal Y Ochoa, for the purpose of establishing a US Military Reservation which
they later named Fort William Mc Kinley. On July 12, 1957, President Carlos P. Garcia issued
Proclamation No. 423, reserving for military purposes, the parcels of land identified as Parcel No.
2, No. 3 and No. 4, Psu-2031, on which parcels of land excluding Parcel No. 2, the present Fort
Bonifacio was established for the Republic of the Philippines. Parcel No. 3, Psu-2031 is covered by
T.C.T. No. 61524 registered in the name of the Republic of the Philippines. On October 16, 1987,
President Corazon C. Aquino issued Proclamation No. 172 in order to exclude from the operation of
Proclamation No. 423 which established Fort Bonifacio, certain portions of land embraced therein
known as Barangays Lower Bicutan, Upper Bicutan, Western Bicutan and Signal Village, all
situated in the Municipality of Taguig, and to declare the same open for disposition to actual
occupants and qualified applicants under the provisions of Republic Act No. 274 and Republic Act
No. 730 in relation to the Public Land Act as amended; and under Memorandum Order No. 119
issued by President Corazon Aquino. In Proclamation No. 172, Lower Bicutan is described as Lot 3
situated in the Municipality of Taguig, M.M., and containing an area of One Million Eighty Four
Thousand Three Hundred Eleven (1,084,311) sqm more or less or 108.43 hectares.

In view of all the above recitals, it appears that the parcel of land subject of this case (Lot
356) which is located in Barangay Lower Bicutan, City of Taguig is covered by Proclamation No.
172 issued by President Corazon C. Aquino, and hence, the same only became alienable and
disposable to qualified applicants after October 16, 1987, the date of its issuance, contrary to
what is believed in the assailed Order of this Office.

With respect to the second assigned error, the issue can be resolved by the application of
the legal provisions covering the subject property, which is Proclamation No. 172 and its
implementing guidelines. Under its implementing guidelines, Memorandum No. 119, the following
are the qualifications for an applicant to be qualified to apply for and acquire a lot under
Proclamation No. 172, among others, to wit:

(1) He/She must be a bona fide resident of the proclaimed areas. To be considered a bona fide
resident, the applicant must have the following qualifications:

a) A Filipino citizen of legal age and/or a head of the family;
b) Must have constructed a house in the area proclaimed for disposition on or before
January 6, 1986 and actually residing therein;
c) Must not own any other residential or commercial lot in Metro Manila;
d) Must not have been a registered awardee of any lot under the administration of the
NHA, MHS, or any other government agency, nor the AFP Officers village;
e) Must not be a professional squatter. A professional squatter, for purposes of this
Order, is one who engages in selling lots in the areas proclaimed for disposition;
and
f) Has filed the proper application to purchase.

Based on the Report of Special Investigator Lim and the other Land Inspectors who
investigated this case, namely: Jose P. Antonio and Jose P. Parayno, it was found that Pio Modesto
and his family are the actual occupants of the area with a residential house and chapel made of
light materials and Pio Modesto and his family are actually residing in the said residential house.
On the other hand, it was established that Carlos Urbina has been a resident of Pasay Road or
4929 Pio Del Pilar, Makati City. Applying the qualifications provided for in Memorandum Order
No. 119, we find that Spouses Modesto are to be qualified to apply for the subject lot as they have
been in occupation thereof and have constructed their residential house thereon. Hence, they satisfy
the requirements in order to be considered a Bonafide Resident as defined in the guidelines. As
per our records, Spouses Pio and Cirila Modesto have also filed an unnumbered I.G.P.S.A.
Application for the subject lot on January 27, 2009. Carlos Urbina, however, never
constructed any house on the subject lot and neither did he actually reside therein. Besides, he
already owns a residential lot in Makati City where he had been residing all this time. Hence,
he cannot be considered a bonafide resident of the subject lot. He likewise failed to file his
I.G.P.S.A application for the lot. Instead, what he had filed on January 20, 1966 was a
Miscellaneous Sales Application. At that time, however, the area of Barangay Lower Bicutan, where
the subject lot is located, was still part of the Fort Bonifacio Military Reservation, and the same had
not yet been segregated and declared to be alienable and disposable. Hence, no possessory rights
could have been acquired by his over the subject lot.[16]


From this LMB order, we consider the following facts established:

First, the lot in question, situated in Barangay Lower Bicutan, was part of the Fort Bonifacio Military
Reservation, and only became alienable and disposable after October 16, 1987, pursuant to Proclamation No. 172. This
factual finding finds further support in the testimony, before the RTC, of Jose Exequiel Vale, Special Investigator and
Assisting Hearing Officer of the DENR.[17]

Second, the Modestos are bona fide residents of the lot in question, being the actual residents of the lot and
having built a house and chapel on the property.

Third, the Modestos have a pending Insular Government Patent Sales Application over the lot in question, filed
after the property became alienable and disposable.

Taking these facts into account, we now make a distinction, based on the corresponding legal effects, between: (a)
possession of the property before October 16, 1987, when the land was still considered inalienable government land, and
(b) possession of the property after October 16, 1987, when the land had already been declared alienable and disposable.

Possession prior to October 16, 1987

Unless a public land is shown to have been reclassified as alienable or actually alienated by the State to a
private person, that piece of land remains part of the public domain,[18] and its occupation in the concept of owner, no
matter how long, cannot confer ownership or possessory rights.[19] It is only after the property has been declared
alienable and disposable that private persons can legally claim possessory rights over it.

Accordingly, even if we recognize that Urbina had been in possession of the property as early as July 21, 1966,
when he filed his Miscellaneous Sales Application, his occupation was unlawful and could not be the basis of possessory
rights, in keeping with Section 88 of the Public Land Act, that states:
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.

The same holds true for Urbinas tax declarations. Absent any proof that the property in question had already
been declared alienable at the time that Urbina declared it for tax purposes, his tax declarations over the subject property
cannot be used to support his claim of possession.

Similarly, while the Modestos claim to have been in possession of Lot 356 for almost 33 years,[20] this
occupation could not give rise to possessory rights while the property being occupied remain government land that had
not yet been declared alienable and disposable.

Possession after October 16, 1987

The different land investigators[21] sent by the LMB to survey the subject property have consistently held that
the Modestos are the actual occupants of the lot in question. This actual occupation is not denied by Urbina. As a matter
of fact, we know from Urbinas final demand letter that the Modestos have been in open and continuous possession of the
property since July 22, 1983.[22] We also consider established that the Modestos built a house on the subject property, a
fact that Urbina affirmed in his testimony before the RTC.[23] From these circumstances, we consider as settled the fact
that the Modestos were the actual possessors of the property when it was declared alienable and disposable on
October 16, 1987, and continued to possess the property until the present time.



Furthermore, the Modestos have a valid Insular Government Patent Sales Application over the property
pending with the LMB, which they filed on January 27, 2009.[24] In contrast, Urbina has a Miscellaneous Sales
Application filed in 1966, which the LMB considered invalid since it was filed when the property still formed part of a
military reservation.

As for the Certification from the City Treasurer of Taguig that the respondents presented,[25] which certified
that Carlos Urbina had paid real estate taxes on real property describe[d] in the name of Carlos Urbina, with property
located at Lower Bicutan, Taguig City from 2009 and prior years, we note that the certification contains no description of
the property subject of the tax declaration, leaving us to wonder on the identity of the property covered by the declaration.

In any case, even if we consider this certification as sufficient proof that Urbina declared the subject property
for tax declaration purposes, it must be stressed that the mere declaration of land for taxation purposes does not
constitute possession thereof nor is it proof of ownership in the absence of the claimants actual possession.[26] And
in light of our categorical finding that the Modestos actually occupied the property in question from the time that it was
declared alienable and disposable until the present time, the tax declaration fails to convince us that Urbina has a right to
legally possess it.

For these reasons, we find that Urbina utterly failed to prove that he has a better right to possess the property.
Thus, we cannot sustain his complaint for ejectment against the Modestos and, perforce, must dismiss the same for lack of
merit.



On the finding of estoppel

Lastly, we find the CAs reliance on the principle of estoppel against the Modestos to be misplaced.

Through estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying on it.[27] This doctrine is based on the grounds of public policy, fair
dealing, good faith and justice, and its purpose is to forbid one to speak against his own act, representations, or
commitments to the injury of one to whom they were directed and who reasonably relied on it.[28] It bears noting,
however, that no estoppel arises where the representation or conduct of the party sought to be estopped is due to
ignorance founded upon an innocent mistake.[29]

Here, the Modestos do not deny that they negotiated with Urbina for the sale of the subject property. However,
because they entered the negotiated sales contract with Urbina on the mistaken belief, based on Urbinas erroneous
assertion, that he was the lawful owner-possessor of the property in question, we do not consider them bound by this
action. Consequently, the principle of estoppel finds no application in this case.

WHEREFORE, premises considered, we GRANT the motion and REINSTATE the petition. Consequently,
we REVERSE and SET ASIDE the Decision dated January 26, 2009 and Resolution dated October 5, 2009 of the Court
of Appeals in CA-G.R. CV No. 68007. We DISMISS the complaint for Recovery of Possession filed by Carlos T. Urbina
for lack of merit.


SO ORDERED.

FRANCISCO MADRID and
EDGARDO BERNARDO,
Petitioners,


- versus -
G.R. No. 150887

Present:


*
CARPIO-MORALES, J.,
Acting Chairperson,

**
CARPIO,

***
CHICO-NAZARIO,

****
LEONARDO-DE CASTRO, and


SPOUSES BONIFACIO MAPOY and FELICIDAD
MARTINEZ,
Respondents.

BRION, JJ.




Promulgated:


August 14, 2009
x --------------------------------------------------------------------------------------- x


D E C I S I O N

BRION, J .:

Before us is the Petition for Review on Certiorari[1] filed by petitioners Francisco Madrid and Edgardo
Bernardo (petitioners-defendants) to reverse and set aside the Decision[2] dated July 16, 2001 and Resolution[3] dated
November 19, 2001 of the Former Second Division of the Court of Appeals (CA) in CA-G.R. CV No. 47691 entitled
Spouses Bonifacio Mapoy and Felicidad Martinez v. Edgardo Bernardo and Francisco Madrid.

FACTUAL BACKGROUND

The facts of the case, based on the records, are summarized below.

The spouses Bonifacio and Felicidad Mapoy (respondents-plaintiffs) are the absolute owners of two parcels of
land (the properties) known as Lot Nos. 79 and 80 of Block No. 27 of the Rizal Park Subdivision, located at No. 1400
Craig Street corner Maria Clara Street, Sampaloc, Manila, under Transfer Certificate of Title (TCT) Nos. 130064 and
130065 of the Registry of Deeds of Manila. The properties have a combined area of two-hundred seventy (270) square
meters.

On April 4, 1988, the respondents-plaintiffs sought to recover possession of the properties through an accion
publiciana filed with the Regional Trial Court (RTC) of Manila[4] against Gregorio Miranda and his family (Mirandas)
and two other unnamed defendants. After the pre-trial conference, the unnamed defendants were identified as the present
petitioners and summons were duly served on them. These defendants are referred to in this Decision as the petitioners-
defendants. The Mirandas are no longer parties to the present case; they did not appeal the lower court decision to the
CA.

The respondents-plaintiffs alleged that they acquired the properties from the spouses Procopio and Encarnacion
Castelo under a Deed of Absolute Sale dated June 20, 1978. They merely tolerated the petitioners-defendants continued
occupancy and possession until their possession became illegal when demands to vacate the properties were made.
Despite the demands, the petitioners-defendants continued to occupy and unlawfully withhold possession of the properties
from the respondents-plaintiffs, to their damage and prejudice. Efforts to amicably settle the case proved futile, leaving
the respondents-plaintiffs no recourse but to file a complaint for ejectment which the lower court dismissed because the
respondents-plaintiffs should have filed an accion publiciana. Thus, they filed their complaint for accion publiciana,
praying for recovery of possession of the properties and the payment of P1,000.00 as monthly rental for the use of
the properties from January 1987 until the petitioners-defendants vacate the properties, plus P50,000.00 as moral and
exemplary damages, and P30,000.00 as attorneys fees.

The Mirandas countered that Gregorio Miranda owned the properties by virtue of an oral sale made in his favor
by the original owner, Vivencio Antonio (Antonio). They claimed that in 1948, Gregorio Miranda was Antonios
carpenter, and they had a verbal contract for Miranda to stay in, develop, fix and guard the properties; in 1972, Antonio
gave the properties to Gregorio Miranda in consideration of his more than twenty (20) years of loyal service.

Petitioner-defendant Bernardo also asserted ownership over the portion he occupies based on an oral sale to
him by Antonio. He alleged that he became a ward of Gregorio Miranda in 1965 when he was 10 years old and helped in
the development of the properties; he helped construct a bodega and a house within the properties. He and Antonio met
in 1975, and Antonio promised that the bodega would be given to him in gratitude for his work.

Petitioner-defendant Madrid, for his part, claimed that he started occupying a portion of the properties in 1974,
and constructed a house on this portion in 1989 with the permission of Bernardo, the son of Gregorio Miranda.

On the basis of the length of their claimed occupation of the properties, the petitioners-defendants likewise
invoked Section 6 of Presidential Decree No. 1517 (PD 1517), also known as the Urban Land Reform Law, which
provides that legitimate tenants of 10 year or more, who have built their homes on these lands and who have continuously
resided thereon for the past ten years, shall not be dispossessed of their occupied lands and shall be allowed the right of
first refusal to purchase these lands within a reasonable time and at reasonable prices.

THE RTC RULING

On July 21, 1994, the RTC-Manila, Branch 3, rendered its decision,[5] the dispositive portion of which states:

WHEREFORE, judgment is rendered, ordering the defendants and all persons claiming
rights thereto to vacate the premises located at the corner of Ma. Clara and Craig Streets,
Sampaloc, Manila, evidenced by TCT No. 130064 and 130065 and restore the same to the
plaintiffs. The defendants are hereby ordered to pay plaintiff the sum of P10,000.00 as attorneys
fees and the sum of P1,000.00 as reasonable rental for the use and occupation of the premises
beginning from the filing of this complaint until they vacated the premises.

SO ORDERED.[6]

The RTC upheld the respondents-plaintiffs right of possession as registered owners of the properties. It found
no merit in the petitioners-defendants claims of ownership via an oral sale given the absence of any public instrument or
at least a note or memorandum supporting their claims. The RTC also found the petitioners-defendants invocation of PD
1517 futile, since its Section 6 refers to a legitimate tenant who has legally occupied the lands by contract; the petitioners-
defendants are mere squatters.

The petitioners-defendants elevated the RTC decision to the CA via an ordinary appeal under Rule 41 of the
Rules of Court. The Mirandas did not join them, and thus failed to file a timely appeal. The petitioners-defendants
objected to the RTCs ruling that the sale or promise of sale should appear in a public instrument, or at least in a note or
memorandum, to be binding and enforceable. They argued that the RTC failed to consider the respondents-plaintiffs bad
faith in acquiring the properties since they knew of the defects in the title of the owner. They further argued that the CA
should have noted Gregorio Mirandas occupancy since 1948, Bernardos since 1966 and Madrids since 1973. The
petitioners-defendants further submitted that their continuous residence for more than ten (10) years entitled them to the
rights and privileges granted by PD 1517. They also argued that the RTC should not have applied the pre-trial order to
them, since they had not then been served with summons and were not present during the pre-trial.

THE CA RULING

The CA dismissed the appeal in its decision[7] of July 16, 2001, affirming as a consequence the RTC decision
of July 21, 1994. The CA held that the certificate of title in the name of the respondents-plaintiffs serves as evidence of
an indefeasible and incontrovertible title to the properties. The CA found that the petitioners-defendants never submitted
any proof of ownership. Also, their reliance on their alleged continuous occupation is misplaced since petitioner-
defendant Bernardos occupation in the concept of owner started only in 1975 when Antonio allegedly gave him a portion
of the properties as a gift, while petitioner-defendant Madrids occupation could not have been in the concept of an owner,
as he recognized Gregorio Miranda as the owner and paid him rents. The CA noted that the petitioners-defendants are not
covered by PD 1517 because the law does not apply to occupants whose possession is by the owners mere tolerance. The
CA also observed that the RTC did not err in applying the pre-trial order to the petitioners-defendants because they derive
the right of possession from the principal defendants, the Mirandas, who were duly represented at the pre-trial; they
waived their right to pre-trial by failing to move that one be held.

The petitioners-defendants moved[8] but failed[9] to secure a reconsideration of the CA decision; hence, they
came to us through the present petition.

THE PETITION and THE PARTIES POSITIONS

The petitioners-defendants essentially reiterate the issues they raised before the CA, i.e., that the ruling court
failed to consider: (1) the respondents-plaintiffs bad faith in the acquisition of the properties; (2) the occupancy of
Gregorio Miranda since 1948, Bernardos since 1966, and Madrids since 1973; and, (3) petitioners-defendants
continuous residence for more than ten (10) years entitling them to the rights and privileges granted by PD 1517. They
also contend that the principle of indefeasibility of the certificate of title should not apply in this case because fraud
attended the respondents-plaintiffs acquisition of title. They again point out that the pre-trial order should not have been
applied to them since they were not present during the pre-trial conference.

The respondents-plaintiffs counter-argue that the issues raised by the petitioners-defendants are essentially
factual in nature and all have been well-considered and adequately refuted in the challenged CA decision.

OUR RULING

We resolve to deny the petition for lack of merit.



a. Accion Publiciana and Ownership

Accion publiciana, also known as accion plenaria de posesion,[10] is an ordinary civil proceeding to determine
the better right of possession of realty independently of title.[11] It refers to an ejectment suit filed after the expiration of
one year from the accrual of the cause of action or from the unlawful withholding of possession of the realty.[12]

The objective of the plaintiffs in accion publiciana is to recover possession only, not ownership.[13] However,
where the parties raise the issue of ownership, the courts may pass upon the issue to determine who between or among the
parties has the right to possess the property. This adjudication, however, is not a final and binding determination of the
issue of ownership; it is only for the purpose of resolving the issue of possession, where the issue of ownership is
inseparably linked to the issue of possession. The adjudication of the issue of ownership, being provisional, is not a bar to
an action between the same parties involving title to the property.[14] The adjudication, in short, is not conclusive on the
issue of ownership.[15]

In the present case, both the petitioners-defendants and the respondents-plaintiffs raised the issue of ownership.
The petitioners-defendants claim ownership based on the oral sale to and occupation by Gregorio Miranda, their
predecessor-in-interest, since 1948. On the other hand, the respondents-plaintiffs claim that they are the owners, and their
ownership is evidenced by the TCTs in their names. Under this legal situation, resolution of these conflicting claims will
depend on the weight of the parties' respective evidence, i.e., whose evidence deserves more weight.

b. Findings of Fact Below Final and Conclusive

A weighing of evidence necessarily involves the consideration of factual issues an exercise that is not
appropriate for the Rule 45 petition that the petitioners-defendants filed; under the Rules of Court, the parties may raise
only questions of law under Rule 45, as the Supreme Court is not a trier of facts.[16] As a rule, we are not duty-bound to
again analyze and weigh the evidence introduced and considered in the tribunals below.[17] This is particularly true
where the CA has affirmed the trial court's factual findings, as in the present case. These trial court findings, when
affirmed by the CA, are final and conclusive and are not open for our review on appeal.[18]

In the present case, both the RTC and the CA gave more weight to the certificate of title the respondents-
plaintiffs presented, and likewise found that the petitioners-defendants' possession of the properties was merely upon the
respondents-plaintiffs tolerance. We see no reason to doubt or question the validity of these findings and thus recognize
their finality.

As a matter of law, a Torrens Certificate of Title is evidence of indefeasible title of property in favor of the
person in whose name the title appears. The title holder is entitled to all the attributes of ownership of the property,
including possession, subject only to limits imposed by law.[19] In the present case, the respondents-plaintiffs are
indisputably the holders of a certificate of title against which the petitioners-defendants claim of oral sale cannot
prevail. As registered titleholders, they are entitled to possession of the properties.

c. Claim of Fraud a Prohibited Collateral Attack

Registration of land under the Torrens system, aside from perfecting the title and rendering it indefeasible after
the lapse of the period allowed by law, also renders the title immune from collateral attack.[20] A collateral attack
transpires when, in another action to obtain a different relief and as an incident of the present action, an attack is made
against the judgment granting the title.[21] This manner of attack is to be distinguished from a direct attack against a
judgment granting the title, through an action whose main objective is to annul, set aside, or enjoin the enforcement of
such judgment if not yet implemented, or to seek recovery if the property titled under the judgment had been disposed
of.[22] To permit a collateral attack on respondents-plaintiffs title is to water down the integrity and guaranteed legal
indefeasibility of a Torrens title.[23]

The petitioners-defendants attack on the validity of respondents-plaintiffs title, by claiming that fraud
attended its acquisition, is a collateral attack on the title. It is an attack incidental to their quest to defend their possession
of the properties in an "accion publiciana," not in a direct action whose main objective is to impugn the validity of the
judgment granting the title.[24] This is the attack that possession of a Torrens Title specifically guards against; hence, we
cannot entertain, much less accord credit to, the petitioners-defendants claim of fraud to impugn the validity of the
respondents-plaintiffs title to their property.



d. Claimed Protection under PD 1517

To qualify for protection under PD 1517 and avail of the rights and privileges granted by the said decree, the
claimant must be: (1) a legitimate tenant of the land for ten (10) years or more; (2) must have built his home on the land
by contract; and, (3) has resided continuously for the last ten (10) years. The tenant covered by PD 1517 is, as defined
under Section 3(f) thereof, "the rightful occupant of land and its structures, but does not include those whose presence on
the land is merely tolerated and without the benefit of contract, those who enter the land by force or deceit, or those whose
possession is under litigation."

Stated differently, those whose possession or occupation of land is devoid of any legal authority or those whose
contracts of lease are already terminated, or had already expired, or whose possession is under litigation are not
considered "tenants" under the decree. Conversely, a legitimate tenant is one who is not a usurper or an occupant by
tolerance.[25] The petitioners-defendants whose occupation has been merely by the owners tolerance obviously fall
outside the coverage of PD 1517 and cannot seek its protection.

e. The Pre-Trial-based Objection

Without doubt, the petitioners-defendants, having been belatedly served summons and brought into the case,
were entitled to a pre-trial as ordained by Section 2, Rule 18 of the Rules of Court. Unless substantial prejudice is shown,
however, the trial courts failure to schedule a case for new trial does not render the proceedings illegal or void ab
initio.[26] Where, as in this case, the trial proceeded without any objection on the part of the petitioners-defendants by
their failure to bring the matter to the attention of the RTC, the petitioners-defendants are deemed to have effectively
forfeited a procedural right granted them under the Rules. Issues raised for the first time on appeal and not raised timely in
the proceedings in the lower court are barred by estoppel.[27] Points of law, theories, issues and arguments not brought to
the attention of the trial court ought not to be considered by a reviewing court, as these cannot be raised for the first time
on appeal.[28] To consider the alleged facts and arguments raised belatedly would amount to trampling on the basic
principles of fair play, justice, and due process.

In arriving at this conclusion, we considered, as the CA did, that the petitioners-defendants anchored their right
to possess the property on the defenses raised by the original defendant, Gregorio Miranda, their predecessor-in-interest.
While belatedly summoned, the petitioners-defendants did not raise a substantial matter in their answer differently from
those propounded by Gregorio Miranda; they merely echoed Mirandas positions and arguments. Thus, no prejudice could
have resulted to the petitioners-defendants, especially after they entered trial and had the opportunity to fully ventilate
their positions.

f. Attorneys Fees

As a general rule, the appellate court may only pass upon errors assigned by the parties. By way of exception,
even unassigned errors may be taken up by the court on appeal if they involve (1) errors affecting the lower court's
jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors.[29] In the present case, we note
that the award of attorney's fees appears only in the dispositive portion of the RTC decision without any elaboration,
explanation, and justification. The award stood there all by itself. We view this as a plain legal error by the RTC that
must be rectified.

Article 2208 of the Civil Code enumerates the instances justifying the grant of attorneys fees; in all cases, the
award must be reasonable, just and equitable. Attorney's fees as part of damages are not meant to enrich the winning party
at the expense of the losing litigant. They are not awarded every time a party prevails in a suit because of the policy that
no premium should be placed on the right to litigate.[30] The award of attorney's fees is the exception rather than the
general rule. Thus, findings reflecting the conditions imposed by Article 2208 are necessary to justify an award; attorney's
fees mentioned only in the dispositive portion of the decision without any prior justification in the body of the decision is
a baseless award that must be struck down.[31]

WHEREFORE, premises considered, we here DENY the petition for lack of any reversible error, and
consequently AFFIRM the decision of July 16, 2001 of the Court of Appeals in CA-G.R. CV No. 47691, with the
MODIFICATION that the attorney's fees awarded to respondents-plaintiffs are hereby DELETED. Costs against the
petitioners-defendants.

SO ORDERED.

SPOUSES JONEL PADILLA and SARAH PADILLA,
Petitioners,

- versus -

ISAURO A. VELASCO, TEODORA A. VELASCO, DELIA A.
VELASCO, VALERIANO A. VELASCO, JR., IDA A.
VELASCO, AMELITA C. VELASCO, ERIBERTO C.
VELASCO, JR., and CELIA C. VELASCO,
Respondents.

G.R. No. 169956

Present:

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
LEONARDO-DE CASTRO,
*
JJ.

Promulgated:

January 19, 2009

x------------------------------------------------------------------------------------x


DECISION

NACHURA, J .:





Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision[1]
dated February 11, 2005 and the Resolution[2] dated October 4, 2005 of the Court of Appeals (CA) in CA-G.R. CV No.
69997 entitled Isauro A. Velasco, Teodora A. Velasco, Delia A. Velasco, Valeriano A. Velasco, Jr., Ida A. Velasco,
Amelita C. Velasco, Eriberto C. Velasco, Jr. and Celia C. Velasco v. Spouses Jonel Padilla and Sarah Padilla.

The Facts

The facts of the case are as follows:

Respondents are the heirs of Dr. Artemio A. Velasco (Artemio), who died single and without any issue on January
22, 1949. During his lifetime, Artemio acquired Lot No. 2161 consisting of 7,791 square meters situated at Barangay
Pinagsanjan, Pagsanjan, Laguna, covered by Tax Declaration No. 4739. Artemio acquired the lot from spouses Brigido
Sacluti and Melitona Obial, evidenced by a deed of sale dated February 14, 1944.

In October 1987, petitioners entered the property as trustees by virtue of a deed of sale executed by the Rural Bank
of Pagsanjan in favor of spouses Bartolome Solomon, Jr. and Teresita Padilla (Solomon spouses).

Respondents demanded that petitioners vacate the property, but the latter refused. The matter was referred to the
barangay for conciliation; however, the parties failed to reach an amicable settlement. Thereafter, petitioners caused the
cutting of trees in the area, fenced it and built a house thereon. They harvested the crops and performed other acts of
dominion over the property.

On October 14, 1991, respondents filed a complaint for accion publiciana, accounting and damages against
petitioners before the Regional Trial Court (RTC) of Santa Cruz, Laguna. They asked the court to order petitioners to
vacate the property and to pay moral and exemplary damages, attorneys fees and cost of suit.

Isauro A. Velasco (Isauro), the brother of the deceased Artemio, as administrator of the property, was presented as a
witness. He testified that Artemio owned the property. As evidence thereof, he presented the Kasulatan ng Bilihang
Tuluyan executed by spouses Brigido Sacluti and Melitona Obial in favor of Artemio, and declared that he (Isauro) was
present during the signing of the instrument. He offered in evidence tax declarations and tax receipts covering Lot No.
2161 which were all in the name of Artemio. A certification from the Land Registration Authority (LRA) was likewise
presented by Isauro which states that based on the records of the LRA, Decree No. 403348 was issued on October 10,
1930 covering Lot No. 2161.[3]

Rolando R. Flores, a geodetic engineer, also testified that on January 16, 1993, upon prior notice to petitioners, he
conducted a survey of the land based on the technical description of the property and the map from the Bureau of
Lands. The purpose of the survey was to verify if the area occupied by petitioners was Lot No. 2161. Upon his
examination and based on his survey, he concluded that the land occupied by petitioners was Lot No. 2161.[4]

On the other hand, petitioners averred that the Solomon spouses owned the property; that the said spouses bought it
from the Rural Bank of Pagsanjan as evidenced by a deed of sale dated September 4, 1987; that the land was identified as
Lot No. 76-pt, consisting of 10,000 square meters, located at Pinagsanjan, Pagsanjan, Laguna; and that the spouses
authorized petitioners to occupy the land and introduce improvements thereon.

Petitioners further claimed that subsequent to the sale of the property to the Solomon spouses, Lot No. 76-pt. was
levied on in Civil Case No. 320 under the jurisdiction of the Municipal Trial Court of Pagsanjan, Laguna. The case was
entitled Rural Bank of Pagsanjan, Inc. v. Spouses Hector and Emma Velasco, Valeriano Velasco and Virginia Miso.
Petitioners alleged that Valeriano Velasco obtained a loan from the Rural Bank of Pagsanjan, with Hector Velasco as co-
maker, and the land was mortgaged by Valeriano as collateral. Valerianos failure to pay the loan caused the foreclosure
of the land, and on September 17, 1980, Lot No. 76-pt was sold at a public auction by the Provincial Sheriff. The Rural
Bank of Pagsanjan was the highest bidder.

Pedro Zalameda Trinidad, Jr. (Pedro), as a witness for the petitioners, testified that he was born in Barangay
Pinagsanjan, Pagsanjan, Laguna, and had been residing there since birth. He said that based on his knowledge, the land
belonged to Nonong (Valeriano) Velasco because he used to buy coconuts harvested from the said land and it was
Nonong Velasco who caused the gathering of coconuts thereon.[5]

Petitioner Jonel Padilla also took the witness stand. He testified that Pedro was occupying the land when he initially
visited it. A representative of the Rural Bank of Pagsanjan disclosed to him that the land previously belonged to
Valeriano. He verified from the Municipal Assessor the technical description of the land, but no longer verified from the
Bureau of Lands because he trusted the bank. Upon his recommendation, his sister and his brother-in-law purchased the
property after verifying the supporting documents. It was his brother-in-law who went to the Bureau of Lands and found
that it was Lot No. 2161.[6]

On July 27, 1999, the RTC rendered a Decision,[7] the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the
[respondents] ordering the [petitioners] to vacate the land presently occupied by them and restore
possession thereof to the [respondents], to render an accounting of the proceeds from the crop
harvested therefrom starting September 1987 up to the time the property is returned to the
[respondents], and to remove at their expense all the structures they constructed thereon.[8]


Petitioners filed an appeal before the CA, but on February 11, 2005, the CA issued the assailed decision affirming
the decision of the RTC. They consequently filed a motion for reconsideration. However, the same was denied in the
assailed resolution dated October 4, 2005.

Hence, the instant petition.

The I ssues

Petitioners anchor their petition on the following grounds:

I. The alleged sale executed between Brigido Sacluti and Melitona Obial as seller and Dr.
Artemio [Velasco] as buyer was never established, respondents having failed to present
the original copy thereof during the trial despite their clear and categorical commitment
to do so. Furthermore, the purported Original Certificate of Title issued in the name of
Brigido Sacluti and Melitona Obial was never presented in evidence, thus, creating the
presumption that had it been presented, the same would have been adverse to
respondents.[9]

II. The spouses Solomon acquired the subject property from its lawful owner in good faith and
for value.[10]

III. The spouses Solomon acquired the subject property at the public auction sale conducted by
the provincial sheriff of Laguna based on the judgment and writ of execution issued by
the Municipal Trial Court of Laguna against respondent Valeriano Velasco for non-
payment of a loan considering that (1) the issuance of Tax Declaration No. 4624 in the
name of respondent Valeriano Velasco is entitled to the presumption of regularity
especially since respondents have not explained how and why it was wrongly issued in
the name of their own brother, respondent Valeriano Velasco and without any of them
taking any action to correct the alleged mistake; and (2) by their failure to assert their
alleged ownership of the property and their inaction [by not] questioning the legal action
taken by the bank against their co-respondent Valeriano Velasco and the subject property
despite their full awareness since 1980, respondents are barred by estoppel from denying
the title of the bank and the Solomon spouses.[11]

IV. The action a quo was barred by prescription considering that respondents filed their legal
action against the petitioners only on October 14, 1991, more than ten (10) years after the
bank had acquired the subject property on September 17, 1980 at the public auction
conducted by the Provincial Sheriff of Laguna.[12]

V. At the very least, respondents are guilty of laches, they having slept on their rights for an
unreasonable length of time such that to dispossess petitioners of the property after they
had introduced substantial improvements thereon in good faith would result in undue
damage and injury to them all due to the silence and inaction of respondents in asserting
their alleged ownership over the property.[13]

VI. The evidence proves that Lot no. 2161 and Lot no. 76-pt are one and the same.[14]

VII. The failure of Atty. Asinas to present other witnesses, additional documents and to respond
to certain pleadings brought about by his serious illnesses constitutes excusable
negligence or incompetency to warrant a new trial considering that the Supreme Court
itself had recognized negligence or incompetency of counsel as a ground for new trial
especially if it has resulted in serious injustice or to an uneven playing field.[15]

VIII. The overwhelming testimonial and documentary evidence, if presented, would have altered
the result and the decision now appealed from.[16]

IX. The petitioners should be awarded their counterclaim for exemplary damages, attorneys
fees and litigation expenses.[17]


The arguments submitted by petitioners may be summed up in the following issues:

I. Who, as between the parties, have a better right of possession of Lot No. 2161;
II. Whether the complaint for accion publiciana has already prescribed; and
III. Whether the negligence of respondents counsel entitles them to a new trial.

The Ruling of the Court

We deny the instant petition.

First. The instant case is for accion publiciana, or for recovery of the right to possess. This was a plenary action
filed in the regional trial court to determine the better right to possession of realty independently of the title.[18] Accion
publiciana is also used to refer to an ejectment suit where the cause of dispossession is not among the grounds for forcible
entry and unlawful detainer, or when possession has been lost for more than one year and can no longer be maintained
under Rule 70 of the Rules of Court. The objective of the plaintiffs in accion publiciana is to recover possession only, not
ownership.[19]

Based on the findings of facts of the RTC which were affirmed by the CA, respondents were able to establish lawful
possession of Lot No. 2161 when the petitioners occupied the property. Lot No. 2161 was the subject of Decree No.
403348 based on the decision dated October 10, 1930 in Cadastre (Cad.) Case No. 11, LRC Record No. 208. The Original
Certificate of Title to the land was issued to Brigido Sacluti and Melitona Obial. On February 14, 1944, the original
owners of the land sold the same to Artemio. From the date of sale, until Artemios death on January 22, 1949, he was in
continuous possession of the land. When Artemio died, Isauro acted as administrator of the land with Tomas Vivero as
caretaker. In 1987, petitioners occupied the property by virtue of a deed of sale between the Rural Bank of Pagsanjan and
the Solomon spouses. The land bought by the Solomon spouses from the Bank is denominated as Lot No. 76-pt and
previously owned by Valeriano. However, it was proved during trial that the land occupied by petitioners was Lot No.
2161 in the name of Artemio, whereas the land sold by the bank to the petitioners was Lot No. 76-pt.

Given this factual milieu, it can readily be deduced that respondents are legally entitled to the possession of Lot No.
2161.

It is a long-standing policy of this Court that the findings of facts of the RTC which were adopted and affirmed by
the CA are generally deemed conclusive and binding. This Court is not a trier of facts and will not disturb the factual
findings of the lower courts unless there are substantial reasons for doing so.[20] In the instant case, we find no
exceptional reason to depart from this policy.

Second. The case filed by respondents for accion publiciana has not prescribed. The action was filed with the RTC
on October 14, 1991. Petitioners dispossessed respondents of the property in October 1987. At the time of the filing of the
complaint, only four (4) years had elapsed from the time of dispossession.

Under Article 555(4) of the Civil Code of the Philippines, the real right of possession is not lost till after the lapse of
ten years. It is settled that the remedy of accion publiciana prescribes after the lapse of ten years.[21] Thus, the instant
case was filed within the allowable period.

Third. Petitioners put in issue that Lot No. 2161 and Lot 76-pt are one and the same, and that the land was owned
by Valeriano when it was foreclosed by the bank. This, in effect, is a collateral attack on the title over the property which
is registered in the name of Artemio.

We cannot countenance this stance of the petitioners, and perforce, must strike it down. Title to a registered land
cannot be collaterally attacked.[22] A separate action is necessary to raise the issue of ownership.

In accion publiciana, the principal issue is possession, and ownership is merely ancillary thereto. Only in cases
where the possession cannot be resolved without resolving the issue of ownership may the trial court delve into the claim
of ownership. This rule is enunciated in Refugia v. CA,[23] where the Court declared, viz.:

Where the question of who has prior possession hinges on the question of who the real owner of the
disputed portion is, the inferior court may resolve the issue of ownership and make a declaration as
to who among the contending parties is the real owner. In the same vein, where the resolution of the
issue of possession hinges on a determination of the validity and interpretation of the document of
title or any other contract on which the claim of possession is premised, the inferior court may
likewise pass upon these issues. This is because, and it must be so understood, that any such
pronouncement made affecting ownership of the disputed portion is to be regarded merely as
provisional, hence, does not bar nor prejudice an action between the same parties involving title to
the land.


Fourth. Petitioners aver that they are entitled to a new trial due to the failure of their counsel in the proceedings
before the RTC to present testimonial and documentary evidence necessary for them to obtain a favorable judgment. They
maintain that the failure of their counsel to present these other evidence was due to counsels lingering illness at that time,
and therefore, constitutes excusable negligence.

It may be reiterated that mistakes of counsel as to the competency of witnesses, the sufficiency and relevancy of
evidence, the proper defense, or the burden of proof, as well as his failure to introduce certain evidence or to summon
witnesses and to argue the case, are not proper grounds for a new trial, unless the incompetence of counsel be so great that
his client is prejudiced and prevented from fairly presenting his case.[24]

In this case, the illness of petitioners counsel and his alleged failure to present additional evidence during the trial
of the case do not constitute sufficient ground for a new trial. The Order[25] issued by the trial court in its denial of the
motion for new trial filed by petitioners aptly explains the reason why a new trial is unnecessary, viz.:

Assuming that Atty. Asinas failed to perform the imputed acts by reason of his ailments,
still, the same is insufficient ground to grant a new trial. The evidence on record established the fact
that [respondents] and their predecessors-in-interest have been in possession of the subject realty for
a long time. Their possession was interrupted by [petitioners] who entered the property in [1987]
pursuant to a deed of sale between the Rural Bank of Pagsanjan and spouses Bartolome C. Solomon
and Teresita Padilla. Considering that this is an accion publiciana and [respondents] earlier rightful
possession of the subject parcel of land has been adequately established, the testimonial and
documentary evidence sought to be adduced in a new trial would not adversely affect the findings
of the Court. The ownership and possession of the property purchased by the Solomon spouses from
the Rural Bank of Pagsanjan could be the subject of an appropriate action.


WHEREFORE, the instant petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.

SPOUSES ELEGIO
*
CAEZO and G.R. No. 170189
DOLIA CAEZO,
Petitioners, Present:

CARPIO, J., Chairperson,
NACHURA,
BERSAMIN,
**

- versus - ABAD, and
MENDOZA, JJ.



SPOUSES APOLINARIO and Promulgated:
CONSORCIA L. BAUTISTA,
Respondents. September 1, 2010
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D E C I S I O N

CARPIO, J .:

G.R. No. 170189 is a petition for review[1] assailing the Decision[2] promulgated on 17 October 2005 by the Court
of Appeals (appellate court) in CA-G.R. CV No. 75685. The appellate court granted the appeal filed by the Spouses
Apolinario and Consorcia L. Bautista (spouses Bautista) and dismissed the complaint for the issuance of a writ of
demolition with damages filed by the Spouses Elegio and Dolia Caezo (spouses Caezo) without prejudice to the filing
of the appropriate action with the proper forum. In its Decision[3] on Civil Case No. MC-00-1069 dated 25 March 2002,
Branch 213 of the Regional Trial Court of Mandaluyong City (trial court) rendered judgment in favor of the spouses
Caezo. The trial court also ordered the issuance of a writ of demolition directing the removal of the structures built by
the spouses Bautista on the portion of the land belonging to the spouses Caezo.


The Facts

The appellate court narrated the facts as follows:

Spouses Elegio and Dolia Caezo (hereafter appellees) are the registered owner[s] of a
parcel of land with an area of One Hundred Eighty Six (186) square meters, covered by Transfer
Certificate of Title (TCT) No. 32911.

Spouses Apolinario and Consorcia Bautista (hereafter appellants) are the registered owners
of a parcel of land, containing an area of One Hundred Eighty One (181) square meters, covered by
Transfer Certificate of Title (TCT) No. 31727. Both parcels of land are located at Coronado
Heights, Barangka Ibaba, Mandaluyong City and registered with the Registry of Deeds of
Mandaluyong City. Appellants lot is adjacent to that of appellees [sic].

Sometime in 1995, appellees started the construction of a building on their lot. During the
construction, appellees discovered that their lot was encroached upon by the structures built by
appellants without appellees knowledge and consent.

The three (3) surveys conducted confirmed the fact of encroachment. However, despite oral
and written demands, appellants failed and refused to remove the structures encroaching appellees
lot.

Attempts were made to settle their dispute with the barangay lupon, but to no
avail. Appellees initiated a complaint with the RTC for the issuance of a writ of demolition.

For failure to file an Answer within the extended period granted by the court, appellants
were declared in default. Appellees were allowed to present their evidence ex parte before an
appointed commissioner. Thereafter the RTC rendered the assailed decision in the terms earlier set
forth.[4]
The spouses Caezo filed their complaint for the issuance of a writ of demolition with damages on 13 April
2000. In an Order dated 15 August 2000, the trial court declared the spouses Bautista in default for failure to answer
within the reglementary period. The Public Attorneys Office, which represented the spouses Bautista at the time, filed a
Motion to Admit Answer dated 15 June 2000. The trial court denied the motion in its Decision.

The Trial Courts Ruling

On 25 March 2002, the trial court promulgated its Decision in favor of the spouses Caezo. The trial court found
that the spouses Bautista built structures encroaching on the land owned by the spouses Caezo. The spouses Bautista
also refused to remove the structures and respect the boundaries as established by the various surveyors. A referral to the
Barangay Lupon failed to settle the controversy amicably. The trial court thus ruled that the spouses Bautista are builders
in bad faith, such that the spouses Caezo are entitled to an issuance of a writ of demolition with damages.

The dispositive portion of the Decision reads as follows:

IN VIEW WHEREOF, judgment is hereby rendered in favor of the plaintiffs and against the
defendants. Let a writ of demolition be accordingly issued directing the removal/demolition of the
structures built by the defendants upon the portion of land belonging [to] the plaintiffs at the
formers expense.

Further,

1. the defendant is ordered to pay P50,000.00 (Philippine Currency) as and
by way of moral damages[; and]
2. [t]he defendant is hereby ordered to pay P30,000.00 as and by way of attorneys
fees.

SO ORDERED.[5]

The spouses Bautista filed a notice of appeal dated 29 April 2002 before the appellate court.


The Appellate Courts Ruling

On 17 October 2005, the appellate court rendered its Decision which reversed the 25 March 2002 Decision of
the trial court. The appellate court ruled that since the last demand was made on 27 March 2000, or more than a year
before the filing of the complaint, the spouses Caezo should have filed a suit for recovery of possession and not for the
issuance of a writ of demolition. A writ of demolition can be granted only as an effect of a final judgment or order, hence
the spouses Caezos complaint should be dismissed. The spouses Caezo failed to specify the assessed value of the
encroached portion of their property. Because of this failure, the complaint lacked sufficient basis to constitute a cause of
action. Finally, the appellate court ruled that should there be a finding of encroachment in the action for recovery of
possession and that the encroachment was built in good faith, the market value of the encroached portion should be
proved to determine the appropriate indemnity.

The dispositive portion of the appellate courts Decision reads as follows:

WHEREFORE, premises considered, the instant appeal is GRANTED. The complaint filed
by plaintiffs-appellees is hereby DISMISSED without prejudice to the filing of the appropriate
action with the proper forum.

SO ORDERED.[6]

Issues


The spouses Caezo enumerated the following grounds to support their Petition:

I. Whether the Honorable Court of Appeals gravely erred in granting the petition of the
[spouses Bautista] and reversing the Decision of the Court a quo; [and]

II. Whether the Honorable Court of Appeals gravely erred in stating that the petitioners should
have filed recovery of possession and not writ of demolition.[7]


The Courts Ruling

The petition has merit.

The present case, while inaccurately captioned as an action for a Writ of Demolition with Damages is in reality an
action to recover a parcel of land or an accion reivindicatoria under Article 434 of the Civil Code. Article 434 of the
Civil Code reads: In an action to recover, the property must be identified, and the plaintiff must rely on the strength of
his title and not on the weakness of the defendants claim. Accion reivindicatoria seeks the recovery of ownership and
includes the jus utendi and the jus fruendi brought in the proper regional trial court. Accion reivindicatoria is an action
whereby plaintiff alleges ownership over a parcel of land and seeks recovery of its full possession.[8]

In order that an action for the recovery of title may prosper, it is indispensable, in accordance with the precedents
established by the courts, that the party who prosecutes it must fully prove, not only his ownership of the thing claimed,
but also the identity of the same.[9] However, although the identity of the thing that a party desires to recover must be
established, if the plaintiff has already proved his right of ownership over a tract of land, and the defendant is occupying
without right any part of such tract, it is not necessary for plaintiff to establish the precise location and extent of the
portions occupied by the defendant within the plaintiffs property.[10]

The spouses Caezo were able to establish their ownership of the encroached property. Aside from testimonial
evidence, the spouses Caezo were also able to present documentary and object evidence which consisted of
photographs,[11] transfer certificates of title,[12] and a relocation survey plan.[13]

The relocation survey plan also corroborated Elegio Caezos testimony on the reason for the spouses Bautistas
attitude regarding the encroached property. The relocation survey plan showed that the spouses Bautistas property
encroached upon that of the spouses Caezo by 0.97 centimeters, while the spouses Bautistas property was encroached
upon by 1.01 centimeters by another landowner. Elegio Caezo testified thus:

Q I am showing you a survey plan of lot 13. Can you please tell us what is this survey plan?
A That is the survey plan of the surveyor whom we hired sir.

Q Can you please point to us where in this plan is your property indicated?
A This is our property, sir.

Q The witness, your Honor, is pointing to Lot 13 indicated in the survey plan. How about
the property of the defendants?
A The defendants property is this, sir.

Q The witness, your Honor, is pointing to Lot 14 indicated in the survey plan. Now, Mr.
Witness, you said that the defendants wanted you to recover that portion of your property
encroached on from the property adjacent to theirs. Please illustrate to us by referring
to this survey plan what the defendants meant?
A The defendants want us to get the portion they had encroached on from Lot 15 because,
according to them, Lot 15 also encroached on their lot, sir.

Q The witness, your Honor, is pointing to Lot 15 indicated in the plan. What happened
next?
A We told them that this is not possible because Lot 15 is not adjacent to our property, sir.

Q What did the defendants do?
A The defendants still refused to remove their structure, sir.

Q So, what happened?
A We filed a complaint against the defendants before the Office of the Barangay Captain of
Barangay Barangka, Ibaba, sir.

Q What happened in the Barangay?
A The Barangay council tried to settle the matter amicably between us. However, no
settlement was reached, sir.

Q While in the barangay, did you offer anything to the defendants in order to settle the
case?
A Yes, sir.

Q What was it?
A We offered that if the defendants will remove the structures, we are willing to shoulder
half of the expenses for the removal.

Q What did the defendants say to this?
A They refused our offer and insisted on their previous position that we get our portion from
Lot 15, sir.

Q What did the Barangay do after failing to settle the case?
A The Barangay issued a Certification to File Action, sir.[14]


Given the efforts made by the spouses Caezo to settle the present issue prior to the filing of a Complaint, the trial
court was justified in ruling that the spouses Bautista were in default and in not admitting their Answer. The Complaint
was not the spouses Bautistas first encounter with the present issue. Moreover, the spouses Bautista failed to file their
Answer even after the expiry of the motion of extension granted to them.[15]

The testimony and the relocation survey plan both show that the spouses Bautista were aware of the encroachment
upon their lot by the owner of Lot 15 and thus they made a corresponding encroachment upon the lot of the spouses
Caezo. This awareness of the two encroachments made the spouses Bautista builders in bad faith. The spouses Caezo
are entitled to the issuance of a writ of demolition in their favor and against the spouses Bautista, in accordance with
Article 450 of the Civil Code.[16]

We affirm the awards made by the trial court in its Decision:

x x x Considering the length of time when [the spouses Caezo] were deprived of beneficial use on
the subject portion of land owned by them, the [spouses Bautista] are likewise liable to pay
P30,000.00 (Philippine Currency) in accordance with Article 451 of the Civil Code.

With respect to the prayer for the award of P50,000.00 (Philippine Currency) as moral
damages, the court decides to give due course to it in view of the fact that the [spouses Caezo]
satisfactorily proved the existence of the factual basis of the damages and its causal relation to [the
spouses Bautistas] acts. There was bad faith on the part of the [spouses Bautista] when they built
the structures upon the land not belonging to them. This wrongful act is the proximate cause which
made the [spouses Caezo] suffer mental anguish, sleepless nights and serious anxiety. The
[spouses Caezo] positively testified about these matters.

As regards the prayer for exemplary x x x damages, no sufficient evidence were adduced
which would warrant and justify this court to award the same. The prayer for attorneys fees
however, is found meritorious hence, the same is hereby granted.[17]


WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R. CV No. 75685
promulgated on 17 October 2005 is SET ASIDE and the dispositive portion of the Decision of Branch 213, Regional
Trial Court of Mandaluyong City promulgated on 25 March 2002 is AFFIRMED with MODIFICATION. A writ of
demolition of the encroaching structures should be issued against and at the expense of Spouses Apolinario and Consorcia
L. Bautista upon the finality of this judgment. Spouses Apolinario and Consorcia L. Bautista are further ordered to pay
Spouses Elegio and Dolia Caezo P30,000 as actual damages; P50,000 as moral damages; and P30,000 as attorneys
fees. The interest rate of 12% per annum shall apply from the finality of judgment until the total amount awarded is fully
paid.

SO ORDERED.
ANECO REALTY AND G.R. No. 165952
DEVELOPMENT
CORPORATION, Present:
Petitioner,
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
- versus - CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

LANDEX DEVELOPMENT Promulgated:
CORPORATION,
Respondent. July 28, 2008

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D E C I S I O N


REYES, R.T., J .:


THIS is a simple case of a neighbor seeking to restrain the landowner from fencing his own property. The right to
fence flows from the right of ownership. Absent a clear legal and enforceable right, We will not unduly restrain the
landowner from exercising an inherent proprietary right.

Before Us is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) affirming the
Order[2] of the Regional Trial Court (RTC) dismissing the complaint for injunction filed by petitioner Aneco Realty and
Development Corporation (Aneco) against respondent Landex Development Corporation (Landex).

Facts

Fernandez Hermanos Development, Inc. (FHDI) is the original owner of a tract of land in San Francisco Del
Monte, Quezon City. FHDI subdivided the land into thirty-nine (39) lots.[3] It later sold twenty-two (22) lots to petitioner
Aneco and the remaining seventeen (17) lots to respondent Landex.[4]

The dispute arose when Landex started the construction of a concrete wall on one of its lots. To restrain
construction of the wall, Aneco filed a complaint for injunction[5] with the RTC in Quezon City. Aneco later filed two
(2) supplemental complaints seeking to demolish the newly-built wall and to hold Landex liable for two million pesos in
damages.[6]

Landex filed its Answer[7] alleging, among others, that Aneco was not deprived access to its lots due to the
construction of the concrete wall. Landex claimed that Aneco has its own entrance to its property along Miller Street,
Resthaven Street, and San Francisco del Monte Street. The Resthaven access, however, was rendered inaccessible when
Aneco constructed a building on said street. Landex also claimed that FHDI sold ordinary lots, not subdivision lots, to
Aneco based on the express stipulation in the deed of sale that FHDI was not interested in pursuing its own subdivision
project.




RTC Disposition

On June 19, 1996, the RTC rendered a Decision[8] granting the complaint for injunction, disposing as follows:

Wherefore, premises considered, and in the light aforecited decision of the Supreme
Court judgment is hereby rendered in favor of the plaintiff and the defendant is hereby ordered:

1. To stop the completion of the concrete wall and excavation of the road lot
in question and if the same is already completed, to remove the same
and to return the lot to its original situation;

2. To pay actual and compensatory damage to the plaintiff in the total
amount of P50,000.00;

3. To pay attorneys fees in the amount of P20,000.00;

4. To pay the cost.

SO ORDERED.[9]

Landex moved for reconsideration.[10] Records reveal that Landex failed to include a notice of hearing in its
motion for reconsideration as required under Section 5, Rule 15 of the 1997 Rules of Civil Procedure. Realizing the
defect, Landex later filed a motion[11] setting a hearing for its motion for reconsideration. Aneco countered with a
motion for execution[12] claiming that the RTC decision is already final and executory.

Acting on the motion of Landex, the RTC set a hearing on the motion for reconsideration on August 28,
1996. Aneco failed to attend the slated hearing. The RTC gave Aneco additional time to file a comment on the motion
for reconsideration.[13]

On March 13, 1997, the RTC issued an order[14] denying the motion for execution of Aneco.

On March 31, 1997, the RTC issued an order granting the motion for reconsideration of Landex and dismissing
the complaint of Aneco. In granting reconsideration, the RTC stated:

In previously ruling for the plaintiff, this Court anchored its decision on the ruling of the
Supreme Court in the case of White Plains Association vs. Legaspi, 193 SCRA 765, wherein the
issue involved was the ownership of a road lot, in an existing, fully developed and authorized
subdivision, which after a second look, is apparently inapplicable to the instant case at bar, simply
because the property in question never did exist as a subdivision. Since, the property in question
never did exist as a subdivision, the limitations imposed by Section 1 of Republic Act No. 440, that
no portion of a subdivision road lot shall be closed without the approval of the Court is clearly in
appropriate to the case at bar.

The records show that the plaintiffs property has access to a public road as it has its own
ingress and egress along Miller St.; That plaintiffs property is not isolated as it is bounded by Miller
St. and Resthaven St. in San Francisco del Monte, Quezon City; that plaintiff could easily make an
access to a public road within the bounds and limits of its own property; and that the defendant has
not yet been indemnified whatsoever for the use of his property, as mandated by the Bill of
rights. The foregoing circumstances, negates the alleged plaintiffs right of way.[15]

Aneco appealed to the CA.[16]

CA Disposition

On March 31, 2003, the CA rendered a Decision[17] affirming the RTC order, disposing as follows:

WHEREFORE, in consideration of the foregoing, the instant appeal is perforce
dismissed. Accordingly, the order dated 31 March 1996 is hereby affirmed.

SO ORDERED.[18]


In affirming the RTC dismissal of the complaint for injunction, the CA held that Aneco knew at the time of the
sale that the lots sold by FHDI were not subdivision units based on the express stipulation in the deed of sale that FHDI,
the seller, was no longer interested in pursuing its subdivision project, thus:

The subject property ceased to be a road lot when its former owner (Fernandez
Hermanos, Inc.) sold it to appellant Aneco not as subdivision lots and without the intention of
pursuing the subdivision project. The law in point is Article 624 of the New Civil Code, which
provides:

Art. 624. The existence of an apparent sign of easement between
two estates, established or maintained by the owner of both, shall be
considered, should either of them be alienated, as a title in order that the
easement may continue actively and passively, unless, at the time the
ownership of the two estates is divided, the contrary should be provided in the
title of conveyance of either of them, or the sign aforesaid should be removed
before the execution of the deed. This provision shall also apply in case of the
division of a thing owned in common by two or more persons.

Viewed from the aforesaid law, there is no question that the law allows the continued use
of an apparent easement should the owner alienate the property to different persons. It is
noteworthy to emphasize that the lot in question was provided by the previous owner (Fernandez
Hermanos, Inc.) as a road lot because of its intention to convert it into a subdivision project. The
previous owner even applied for a development permit over the subject property. However, when
the twenty-two (22) lots were sold to appellant Aneco, it was very clear from the sellers deed of
sale that the lots sold ceased to be subdivision lots. The seller even warranted that it shall undertake
to extend all the necessary assistance for the consolidation of the subdivided lots, including the
execution of the requisite manifestation before the appropriate government agencies that the seller is
no longer interested in pursuing the subdivision project. In fine, appellant Aneco knew from the
very start that at the time of the sale, the 22 lots sold to it were not intended as subdivision units,
although the titles to the different lots have yet to be consolidated. Consequently, the easement that
used to exist on the subject lot ceased when appellant Aneco and the former owner agreed that the
lots would be consolidated and would no longer be intended as a subdivision project.

Appellant Aneco insists that it has the intention of continuing the subdivision project
earlier commenced by the former owner. It also holds on to the previous development permit
granted to Fernandez Hermanos, Inc. The insistence is futile. Appellant Aneco did not acquire any
right from the said previous owner since the latter itself expressly stated in their agreement that it
has no more intention of continuing the subdivision project. If appellant desires to convert its
property into a subdivision project, it has to apply in its own name, and must have its own
provisions for a road lot.[19]

Anent the issue of compulsory easement of right of way, the CA held that Aneco failed to prove the essential
requisites to avail of such right, thus:

An easement involves an abnormal restriction on the property of the servient owner and
is regarded as a charge or encumbrance on the servient owner and is regarded as a charge or
encumbrance on the servient estate (Cristobal v. CA, 291 SCRA 122). The essential requisites to be
entitled to a compulsory easement of way are: 1) that the dominant estate is surrounded by other
immovables and has no adequate outlet to a public highway; 2) that proper indemnity has been paid;
3) that the isolation was not due to acts of the proprietor of the dominant estate; 4) that the right of
way claimed is at a point least prejudicial to the servient estate and in so far as consistent with this
rule, where the distance from the dominant estate to a public highway may be the shortest (Cristobal
v. Court of Appeals, 291 SCRA 122).

An in depth examination of the evidence adduced and offered by appellant Aneco,
showed that it had failed to prove the existence of the aforementioned requisites, as the burden
thereof lies upon the appellant Aneco.[20]

Aneco moved for reconsideration but its motion was denied.[21] Hence, the present petition or appeal by
certiorari under Rule 45.

Issues

Petitioner Aneco assigns quadruple errors to the CA in the following tenor:

A.
THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING PETITIONERS APPEAL
AND SUSTAINING THE TRIAL COURTS ORDER DATED 31 MARCH 1997 GRANTING
RESPONDENTS MOTION FOR RECONSIDERATION WHICH IS FATALLY DEFECTIVE FOR
LACK OF NOTICE OF HEARING.

B.
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURTS
ORDER WHICH GAVE FULL WEIGHT AND CREDIT TO THE MISLEADING AND
ERRONEOUS CERTIFICATION ISSUED BY GILDA E. ESTILO WHICH SHE LATER
EXPRESSLY AND CATEGORICALLY RECANTED BY WAY OF HER AFFIDAVIT.

C.
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE LIBERAL
CONSTRUCTION OF THE RULES IN ORDER TO SUSTAIN THE TRIAL COURTS ORDER
DATED 31 MARCH 1997.

D.
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURTS
ORDER THAT MADE NO PRONOUNCEMENTS AS TO COSTS, AND IN DISREGARDING
THE MERIT OF THE PETITIONERS CAUSE OF ACTION.[22]

Our Ruling

The petition is without merit.

Essentially, two (2) issues are raised in this petition. The first is the procedural issue of whether or not the
RTC and the CA erred in liberally applying the rule on notice of hearing under Section 5, Rule 15 of the 1997 Rules of
Civil Procedure. The second is the substantive issue of whether or not Aneco may enjoin Landex from constructing a
concrete wall on its own property.

We shall discuss the twin issues sequentially.

Strict vs. Liberal Construction of Procedural Rules;
Defective motion was cured when Aneco was given an
opportunity to comment on the motion for
reconsideration.

Section 5, Rule 15 of the 1997 Rules of Civil Procedure[23] requires a notice of hearing for a contested motion
filed in court. Records disclose that the motion for reconsideration filed by Landex of the RTC decision did not contain a
notice of hearing. There is no dispute that the motion for reconsideration is defective. The RTC and the CA ignored the
procedural defect and ruled on the substantive issues raised by Landex in its motion for reconsideration. The issue before
Us is whether or not the RTC and the CA correctly exercised its discretion in ignoring the procedural defect. Simply put,
the issue is whether or not the requirement of notice of hearing should be strictly or liberally applied under the
circumstances.

Aneco bats for strict construction. It cites a litany of cases which held that notice of hearing is mandatory. A
motion without the required notice of hearing is a mere scrap of paper. It does not toll the running of the period to file an
appeal or a motion for reconsideration. It is argued that the original RTC decision is already final and executory because
of the defective motion.[24]

Landex counters for liberal construction. It similarly cites a catena of cases which held that procedural rules
may be relaxed in the interest of substantial justice. Landex asserts that the procedural defect was cured when it filed a
motion setting a hearing for its motion for reconsideration. It is claimed that Aneco was properly informed of the pending
motion for reconsideration and it was not deprived of an opportunity to be heard.[25]

It is true that appeals are mere statutory privileges which should be exercised only in the manner required by
law. Procedural rules serve a vital function in our judicial system. They promote the orderly resolution of cases. Without
procedure, there will be chaos. It thus behooves upon a litigant to follow basic procedural rules. Dire consequences may
flow from procedural lapses.

Nonetheless, it is also true that procedural rules are mere tools designed to facilitate the attainment of justice.
Their strict and rigid application should be relaxed when they hinder rather than promote substantial justice. Public policy
dictates that court cases should, as much as possible, be resolved on the merits not on mere technicalities. Substantive
justice trumps procedural rules. In Barnes v. Padilla,[26] this Court held:

Let it be emphasized that the rules of procedure should be viewed as mere tools designed
to facilitate the attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed.
Even the Rules of Court reflect this principle. The power to suspend or even disregard rules can be
so pervasive and compelling as to alter even that which this Court itself has already declared to be
final x x x.

The emerging trend in the rulings of this Court is to afford every party litigant the
amplest opportunity for the proper and just determination of his cause, free from the constraints of
technicalities. Time and again, this Court has consistently held that rules must not be applied rigidly
so as not to override substantial justice.[27]

Here, We find that the RTC and the CA soundly exercised their discretion in opting for a liberal rather than a strict
application of the rules on notice of hearing. It must be stressed that there are no vested right to technicalities. It is within
the courts sound discretion to relax procedural rules in order to fully adjudicate the merits of a case. This Court will not
interfere with the exercise of that discretion absent grave abuse or palpable error. Section 6, Rule 1 of the 1997 Rules of
Civil Procedure even mandates a liberal construction of the rules to promote their objectives of securing a just, speedy,
and inexpensive disposition of every action and proceeding.

To be sure, the requirement of a notice of hearing in every contested motion is part of due process of law. The
notice alerts the opposing party of a pending motion in court and gives him an opportunity to oppose it. What the rule
forbids is not the mere absence of a notice of hearing in a contested motion but the unfair surprise caused by the lack of
notice. It is the dire consequences which flow from the procedural error which is proscribed. If the opposing party is
given a sufficient opportunity to oppose a defective motion, the procedural lapse is deemed cured and the intent of the rule
is substantially complied. In E & L Mercantile, Inc. v. Intermediate Appellate Court,[28] this Court held:

Procedural due process is not based solely on a mechanistic and literal application of a
rule such that any deviation is inexorably fatal. Rules of procedure, and this includes the three (3)
days notice requirement, are liberally construed in order to promote their object and to assist the
parties in obtaining just, speedy, and inexpensive determination of every action and proceeding
(Section 2, Rule 1, Rules of Court). In Case and Nantz v. Jugo (77 Phil. 517), this Court made it
clear that lapses in the literal observance of a rule of procedure may be overlooked when they have
not prejudiced the adverse party and have not deprived the court of its authority.

A party cannot ignore a more than sufficient opportunity to exercise its right to be heard
and once the court performs its duty and the outcome happens to be against that negligent party,
suddenly interpose a procedural violation already cured, insisting that everybody should again go
back to square one. Dilatory tactics cannot be the guiding principle.

The rule in De Borja v. Tan (93 Phil. 167), that what the law prohibits is not the absence
of previous notice, but the absolute absence thereof and lack of opportunity to be heard, is the
applicable doctrine. (See also Aguilar v. Tan, 31 SCRA 205; Omico v. Vallejos, 63 SCRA 285;
Sumadchat v. Court of Appeals, 111 SCRA 488.) x x x[29]

We also find that the procedural lapse committed by Landex was sufficiently cured when it filed another motion
setting a hearing for its defective motion for reconsideration. Records reveal that the RTC set a hearing for the motion for
reconsideration but Anecos counsel failed to appear. The RTC then gave Aneco additional time to file comment on the
motion for reconsideration.[30]

Aneco was afforded procedural due process when it was given an opportunity to oppose the motion for
reconsideration. It cannot argue unfair surprise because it was afforded ample time to file a comment, as it did comment,
on the motion for reconsideration. There being no substantial injury or unfair prejudice, the RTC and the CA correctly
ignored the procedural defect.

The RTC and the CA did not err in dismissing the
complaint for injunction; factual findings and
conclusions of law of the RTC and the CA are afforded
great weight and respect.

Anent the substantive issue, We agree with the RTC and the CA that the complaint for injunction against Landex
should be dismissed for lack of merit. What is involved here is an undue interference on the property rights of a
landowner to build a concrete wall on his own property. It is a simple case of a neighbor, petitioner Aneco, seeking to
restrain a landowner, respondent Landex, from fencing his own land.

Article 430 of the Civil Code gives every owner the right to enclose or fence his land or tenement by means of
walls, ditches, hedges or any other means. The right to fence flows from the right of ownership. As owner of the land,
Landex may fence his property subject only to the limitations and restrictions provided by law. Absent a clear legal and
enforceable right, as here, We will not interfere with the exercise of an essential attribute of ownership.

Well-settled is the rule that factual findings and conclusions of law of the trial court when affirmed by the CA are
accorded great weight and respect. Here, We find no cogent reason to deviate from the factual findings and conclusion of
law of the trial court and the appellate court. We have meticulously reviewed the records and agree that Aneco failed to
prove any clear legal right to prevent, much less restrain, Landex from fencing its own property.


Aneco cannot rely on the road lot under the old subdivision project of FHDI because it knew at the time of the sale
that it was buying ordinary lots, not subdivision lots, from FHDI. This is clear from the deed of sale between FHDI and
Aneco where FHDI manifested that it was no longer interested in pursuing its own subdivision project. If Aneco wants to
transform its own lots into a subdivision project, it must make its own provision for road lots. It certainly cannot piggy
back on the road lot of the defunct subdivision project of FHDI to the detriment of the new owner Landex. The RTC and
the CA correctly dismissed the complaint for injunction of Aneco for lack of merit.

WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED.

SO ORDERED.


FIRST DIVISION


NATIONAL POWER G.R. No. 168732
CORPORATION,
Petitioner,
Present:
-versus-

LUCMAN G. IBRAHIM, OMAR PUNO, C.J., Chairperson,
G. MARUHOM, ELIAS G. SANDOVAL-GUTIERREZ,
*

MARUHOM, BUCAY G. CORONA,
MARUHOM, FAROUK G. AZCUNA, and
MARUHOM, HIDJARA G. GARCIA, JJ.
MARUHOM, ROCANIA G.
MARUHOM, POTRISAM G.
MARUHOM, LUMBA G. Promulgated:
MARUHOM, SINAB G.
MARUHOM, ACMAD G.
MARUHOM, SOLAYMAN G. June 29, 2007
MARUHOM, MOHAMAD M.
IBRAHIM, and CAIRONESA M.
IBRAHIM,
Respondents.

X----------------------------------------------------------------------------------------X

DECISION

AZCUNA, J .:


This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul the Decision[1]

dated June 8, 2005 rendered by the Court of Appeals (CA) in C.A.-G.R. CV No.
57792.
The facts are as follows:


On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in behalf of his co-heirs
Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G.
Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom, Sinab G. Maruhom, Acmad G. Maruhom,
Solayman G. Maruhom, Mohamad M. Ibrahim and Caironesa M. Ibrahim, instituted an action against petitioner National
Power Corporation (NAPOCOR) for recovery of possession of land and damages before the Regional Trial Court (RTC)
of Lanao del Sur.

In their complaint, Ibrahim and his co-heirs claimed that they were owners of several parcels of land described
in Survey Plan FP (VII-5) 2278 consisting of 70,000 square meters, divided into three (3) lots, i.e. Lots 1, 2, and 3
consisting of 31,894, 14,915, and 23,191 square meters each respectively. Sometime in 1978, NAPOCOR, through
alleged stealth and without respondents knowledge and prior consent, took possession of the sub-terrain area of their
lands and constructed therein underground tunnels. The existence of the tunnels was only discovered sometime in July
1992 by respondents and then later confirmed on November 13, 1992 by NAPOCOR itself through a memorandum issued
by the latters Acting Assistant Project Manager. The tunnels were apparently being used by NAPOCOR in siphoning the
water of Lake Lanao and in the operation of NAPOCORs Agus II, III, IV, V, VI, VII projects located in Saguiran, Lanao
del Sur; Nangca and Balo-i in Lanao del Norte; and Ditucalan and Fuentes in Iligan City.

On September 19, 1992, respondent Omar G. Maruhom requested the Marawi City Water District for a permit
to construct and/or install a motorized deep well in Lot 3 located in Saduc, Marawi City but his request was turned down
because the construction of the deep well would cause danger to lives and property. On October 7, 1992, respondents
demanded that NAPOCOR pay damages and vacate the sub-terrain portion of their lands but the latter refused to vacate
much less pay damages. Respondents further averred that the construction of the underground tunnels has endangered
their lives and properties as Marawi City lies in an area of local volcanic and tectonic activity. Further, these illegally
constructed tunnels caused them sleepless nights, serious anxiety and shock thereby entitling them to recover moral
damages and that by way of example for the public good, NAPOCOR must be held liable for exemplary damages.

Disputing respondents claim, NAPOCOR filed an answer with counterclaim denying the material allegations of the
complaint and interposing affirmative and special defenses, namely that (1) there is a failure to state a cause of action
since respondents seek possession of the sub-terrain portion when they were never in possession of the same, (2)
respondents have no cause of action because they failed to show proof that they were the owners of the property, and (3)
the tunnels are a government project for the benefit of all and all private lands are subject to such easement as may be
necessary for the same.[2]

On August 7, 1996, the RTC rendered a Decision, the decretal portion of which reads as follows:

WHEREFORE, judgment is hereby rendered:

1. Denying plaintiffs [private respondents] prayer for defendant [petitioner]
National Power Corporation to dismantle the underground tunnels constructed between the lands of
plaintiffs in Lots 1, 2, and 3 of Survey Plan FP (VII-5) 2278;

2. Ordering defendant to pay to plaintiffs the fair market value of said 70,000
square meters of land covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-5) 2278 less the
area of 21,995 square meters at P1,000.00 per square meter or a total of P48,005,000.00 for the
remaining unpaid portion of 48,005 square meters; with 6% interest per annum from the filing of
this case until paid;

3. Ordering defendant to pay plaintiffs a reasonable monthly rental of P0.68
per square meter of the total area of 48,005 square meters effective from its occupancy of the
foregoing area in 1978 or a total of P7,050,974.40.

4. Ordering defendant to pay plaintiffs the sum of P200,000.00 as moral
damages; and

5. Ordering defendant to pay the further sum of P200,000.00 as attorneys fees
and the costs.

SO ORDERED.[3]


On August 15, 1996, Ibrahim, joined by his co-heirs, filed an Urgent Motion for Execution of Judgment Pending
Appeal. On the other hand, NAPOCOR filed a Notice of Appeal by registered mail on August 19, 1996. Thereafter,
NAPOCOR filed a vigorous opposition to the motion for execution of judgment pending appeal with a motion for
reconsideration of the Decision which it had received on August 9, 1996.

On August 26, 1996, NAPOCOR filed a Manifestation and Motion withdrawing its Notice of Appeal purposely
to give way to the hearing of its motion for reconsideration.

On August 28, 1996, the RTC issued an Order granting execution pending appeal and denying NAPOCORs
motion for reconsideration, which Order was received by NAPOCOR on September 6, 1996.

On September 9, 1996, NAPOCOR filed its Notice of Appeal by registered mail which was denied by the RTC
on the ground of having been filed out of time. Meanwhile, the Decision of the RTC was executed pending appeal and
funds of NAPOCOR were garnished by respondents Ibrahim and his co-heirs.

On October 4, 1996, a Petition for Relief from Judgment was filed by respondents Omar G. Maruhom, Elias G.
Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Potrisam G. Maruhom
and Lumba G. Maruhom asserting as follows:

1) they did not file a motion to reconsider or appeal the decision within the reglementary
period of fifteen (15) days from receipt of judgment because they believed in good faith
that the decision was for damages and rentals and attorneys fees only as prayed for in the
complaint:

2) it was only on August 26, 1996 that they learned that the amounts awarded to the
plaintiffs represented not only rentals, damages and attorneys fees but the greatest
portion of which was payment of just compensation which in effect would make the
defendant NPC the owner of the parcels of land involved in the case;

3) when they learned of the nature of the judgment, the period of appeal has already
expired;

4) they were prevented by fraud, mistake, accident, or excusable negligence from taking
legal steps to protect and preserve their rights over their parcels of land in so far as the
part of the decision decreeing just compensation for petitioners properties;

5) they would never have agreed to the alienation of their property in favor of anybody,
considering the fact that the parcels of land involved in this case were among the valuable
properties they inherited from their dear father and they would rather see their land
crumble to dust than sell it to anybody.[4]


The RTC granted the petition and rendered a modified judgment dated September 8, 1997, thus:

WHEREFORE, a modified judgment is hereby rendered:


1) Reducing the judgment award of plaintiffs for the fair market value of
P48,005,000.00 by 9,526,000.00 or for a difference by P38,479,000.00 and by
the further sum of P33,603,500.00 subject of the execution pending appeal
leaving a difference of 4,878,500.00 which may be the subject of execution
upon the finality of this modified judgment with 6% interest per annum from
the filing of the case until paid.

2) Awarding the sum of P1,476,911.00 to herein petitioners Omar G.
Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mahmod G. Maruhom,
Farouk G. Maruhom, Hidjara G. Maruhom, Portrisam G. Maruhom and
Lumba G. Maruhom as reasonable rental deductible from the awarded sum of
P7,050,974.40 pertaining to plaintiffs.

3) Ordering defendant embodied in the August 7, 1996 decision to pay
plaintiffs the sum of P200,000.00 as moral damages; and further sum of
P200,000.00 as attorneys fees and costs.

SO ORDERED.[5]


Subsequently, both respondent Ibrahim and NAPOCOR appealed to the CA.

In the Decision dated June 8, 2005, the CA set aside the modified judgment and reinstated the original Decision
dated August 7, 1996, amending it further by deleting the award of moral damages and reducing the amount of rentals and
attorneys fees, thus:

WHEREFORE, premises considered, herein Appeals are hereby partially GRANTED, the
Modified Judgment is ordered SET ASIDE and rendered of no force and effect and the original
Decision of the court a quo dated 7 August 1996 is hereby RESTORED with the
MODIFICATION that the award of moral damages is DELETED and the amounts of rentals and
attorneys fees are REDUCED to P6,888,757.40 and P50,000.00, respectively.

In this connection, the Clerk of Court of RTC Lanao del Sur is hereby directed to reassess
and determine the additional filing fee that should be paid by Plaintiff-Appellant IBRAHIM taking
into consideration the total amount of damages sought in the complaint vis--vis the actual amount
of damages awarded by this Court. Such additional filing fee shall constitute a lien on the judgment.

SO ORDERED.[6]


Hence, this petition ascribing the following errors to the CA:


(a) RESPONDENTS WERE NOT DENIED THE BENEFICIAL USE OF THEIR
SUBJECT PROPERTIES TO ENTITLE THEM TO JUST COMPENSATION BY WAY
OF DAMAGES;

(b) ASSUMING THAT RESPONDENTS ARE ENTITLED TO JUST COMPENSATION
BY WAY OF DAMAGES, NO EVIDENCE WAS PRESENTED ANENT THE
VALUATION OF RESPONDENTS PROPERTY AT THE TIME OF ITS TAKING IN
THE YEAR 1978 TO JUSTIFY THE AWARD OF ONE THOUSAND SQUARE
METERS (P1000.00/SQ. M.) EVEN AS PAYMENT OF BACK RENTALS IS ITSELF
IMPROPER.

This case revolves around the propriety of paying just compensation to respondents, and, by extension, the basis for
computing the same. The threshold issue of whether respondents are entitled to just compensation hinges upon who owns
the sub-terrain area occupied by petitioner.

Petitioner maintains that the sub-terrain portion where the underground tunnels were constructed does not
belong to respondents because, even conceding the fact that respondents owned the property, their right to the subsoil of
the same does not extend beyond what is necessary to enable them to obtain all the utility and convenience that such
property can normally give. In any case, petitioner asserts that respondents were still able to use the subject property even
with the existence of the tunnels, citing as an example the fact that one of the respondents, Omar G. Maruhom, had
established his residence on a part of the property. Petitioner concludes that the underground tunnels 115 meters below
respondents property could not have caused damage or prejudice to respondents and their claim to this effect was,
therefore, purely conjectural and speculative.[7]

The contention lacks merit.

Generally, in an appeal by certiorari under Rule 45 of the Rules of Court, the Court does not pass upon questions of
fact. Absent any showing that the trial and appellate courts gravely abused their discretion, the Court will not examine the
evidence introduced by the parties below to determine if they correctly assessed and evaluated the evidence on
record.[8]

The jurisdiction of the Court in cases brought to it from the CA is limited to reviewing and revising the errors
of law imputed to it, its findings of fact being as a rule conclusive and binding on the Court.

In the present case, petitioner failed to point to any evidence demonstrating grave abuse of discretion on the
part of the CA or to any other circumstances which would call for the application of the exceptions to the above
rule. Consequently, the CAs findings which upheld those of the trial court that respondents owned and possessed the
property and that its substrata was possessed by petitioner since 1978 for the underground tunnels, cannot be
disturbed. Moreover, the Court sustains the finding of the lower courts that the sub-terrain portion of the property
similarly belongs to respondents. This conclusion is drawn from Article 437 of the Civil Code which provides:

ART. 437. The owner of a parcel of land is the owner of its surface and of
everything under it, and he can construct thereon any works or make any plantations and
excavations which he may deem proper, without detriment to servitudes and subject to special laws
and ordinances. He cannot complain of the reasonable requirements of aerial navigation.

Thus, the ownership of land extends to the surface as well as to the subsoil under it. In Republic of the Philippines
v. Court of Appeals,[9]

this principle was applied to show that rights over lands are indivisible and, consequently, require
a definitive and categorical classification, thus:

The Court of Appeals justified this by saying there is no conflict of interest between the
owners of the surface rights and the owners of the sub-surface rights. This is rather strange
doctrine, for it is a well-known principle that the owner of a piece of land has rights not only to its
surface but also to everything underneath and the airspace above it up to a reasonable height.
Under the aforesaid ruling, the land is classified as mineral underneath and agricultural on the
surface, subject to separate claims of title. This is also difficult to understand, especially in its
practical application.

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

The Court feels that the rights over the land are indivisible and that the land itself cannot
be half agricultural and half mineral. The classification must be categorical; the land must be either
completely mineral or completely agricultural.


Registered landowners may even be ousted of ownership and possession of their properties in the event the
latter are reclassified as mineral lands because real properties are characteristically indivisible. For the loss sustained by
such owners, they are entitled to just compensation under the Mining Laws or in appropriate expropriation
proceedings.[10]

Moreover, petitioners argument that the landowners right extends to the sub-soil insofar as necessary for their
practical interests serves only to further weaken its case. The theory would limit the right to the sub-soil upon the
economic utility which such area offers to the surface owners. Presumably, the landowners right extends to such height
or depth where it is possible for them to obtain some benefit or enjoyment, and it is extinguished beyond such limit as
there would be no more interest protected by law.[11]

In this regard, the trial court found that respondents could have dug upon their property motorized deep wells
but were prevented from doing so by the authorities precisely because of the construction and existence of the tunnels
underneath the surface of their property. Respondents, therefore, still had a legal interest in the sub-terrain portion insofar
as they could have excavated the same for the construction of the deep well. The fact that they could not was appreciated
by the RTC as proof that the tunnels interfered with respondents enjoyment of their property and deprived them of its full
use and enjoyment, thus:

Has it deprived the plaintiffs of the use of their lands when from the evidence they have
already existing residential houses over said tunnels and it was not shown that the tunnels either
destroyed said houses or disturb[ed] the possession thereof by plaintiffs? From the evidence, an
affirmative answer seems to be in order. The plaintiffs and [their] co-heirs discovered [these] big
underground tunnels in 1992. This was confirmed by the defendant on November 13, 1992 by the
Acting Assistant Project Manager, Agus 1 Hydro Electric Project (Exh. K). On September 16, 1992,
Atty. Omar Maruhom (co-heir) requested the Marawi City Water District for permit to construct a
motorized deep well over Lot 3 for his residential house (Exh. Q). He was refused the permit
because the construction of the deep well as (sic) the parcels of land will cause danger to lives and
property. He was informed that beneath your lands are constructed the Napocor underground
tunnel in connection with Agua Hydroelectric plant (Exh. Q-2). There in fact exists ample evidence
that this construction of the tunnel without the prior consent of plaintiffs beneath the latters
property endangered the lives and properties of said plaintiffs. It has been proved indubitably that
Marawi City lies in an area of local volcanic and tectonic activity. Lake Lanao has been formed by
extensive earth movements and is considered to be a drowned basin of volcano/tectonic origin. In
Marawi City, there are a number of former volcanoes and an extensive amount of faulting. Some of
these faults are still moving. (Feasibility Report on Marawi City Water District by Kampsa-Kruger,
Consulting Engineers, Architects and Economists, Exh. R). Moreover, it has been shown that the
underground tunnels [have] deprived the plaintiffs of the lawful use of the land and considerably
reduced its value. On March 6, 1995, plaintiffs applied for a two-million peso loan with the Amanah
Islamic Bank for the expansion of the operation of the Ameer Construction and Integrated Services
to be secured by said land (Exh. N), but the application was disapproved by the bank in its letter of
April 25, 1995 (Exh. O) stating that:

Apropos to this, we regret to inform you that we cannot consider your
loan application due to the following reasons, to wit:

That per my actual ocular inspection and verification, subject property
offered as collateral has an existing underground tunnel by the NPC for the
Agus I Project, which tunnel is traversing underneath your property, hence, an
encumbrance. As a matter of bank policy, property with an existing
encumbrance cannot be considered neither accepted as collateral for a loan.

All the foregoing evidence and findings convince this Court that preponderantly plaintiffs
have established the condemnation of their land covering an area of 48,005 sq. meters located at
Saduc, Marawi City by the defendant National Power Corporation without even the benefit of
expropriation proceedings or the payment of any just compensation and/or reasonable monthly
rental since 1978.[12]


In the past, the Court has held that if the government takes property without expropriation and devotes the property
to public use, after many years, the property owner may demand payment of just compensation in the event restoration of
possession is neither convenient nor feasible.[13] This is in accordance with the principle that persons shall not be
deprived of their property except by competent authority and for public use and always upon payment of just
compensation.[14]



Petitioner contends that the underground tunnels in this case constitute an easement upon the property of
respondents which does not involve any loss of title or possession. The manner in which the easement was created by
petitioner, however, violates the due process rights of respondents as it was without notice and indemnity to them and did
not go through proper expropriation proceedings. Petitioner could have, at any time, validly exercised the power of
eminent domain to acquire the easement over respondents property as this power encompasses not only the taking or
appropriation of title to and possession of the expropriated property but likewise covers even the imposition of a mere
burden upon the owner of the condemned property.[15] Significantly, though, landowners cannot be deprived of their
right over their land until expropriation proceedings are instituted in court. The court must then see to it that the taking is
for public use, that there is payment of just compensation and that there is due process of law.[16]

In disregarding this procedure and failing to recognize respondents ownership of the sub-terrain portion,
petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the
acquisition of the easement is not without expense. The underground tunnels impose limitations on respondents use of
the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are
clearly entitled to the payment of just compensation.[17] Notwithstanding the fact that petitioner only occupies the sub-
terrain portion, it is liable to pay not merely an easement fee but rather the full compensation for land. This is so because
in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the
owners of the property thus expropriated, are entitled to a just compensation which should be neither more nor less,
whenever it is possible to make the assessment, than the money equivalent of said property.[18]

The entitlement of respondents to just compensation having been settled, the issue now is on the manner of
computing the same. In this regard, petitioner claims that the basis for the computation of the just compensation should be
the value of the property at the time it was taken in 1978. Petitioner also impugns the reliance made by the CA upon
National Power Corporation v. Court of Appeals and Macapanton Mangondato[19] as the basis for computing the
amount of just compensation in this action. The CA found that the award of damages is not excessive because the P1000
per square meter as the fair market value was sustained in a case involving a lot adjoining the property in question which
case involved an expropriation by [petitioner] of portion of Lot 1 of the subdivision plan (LRC) PSD 116159 which is
adjacent to Lots 2 and 3 of the same subdivision plan which is the subject of the instant controversy.[20]

Just compensation has been understood to be the just and complete equivalent of the loss[21] and is ordinarily
determined by referring to the value of the land and its character at the time it was taken by the expropriating
authority.[22]

There is a taking in this sense when the owners are actually deprived or dispossessed of their property,
where there is a practical destruction or a material impairment of the value of their property, or when they are deprived of
the ordinary use thereof. There is a taking in this context when the expropriator enters private property not only for a
momentary period but for more permanent duration, for the purpose of devoting the property to a public use in such a
manner as to oust the owner and deprive him of all beneficial enjoyment thereof.[23] Moreover, taking of the property
for purposes of eminent domain entails that the entry into the property must be under warrant or color of legal
authority.[24]
Under the factual backdrop of this case, the last element of taking mentioned, i.e., that the entry into the
property is under warrant or color of legal authority, is patently lacking. Petitioner justified its nonpayment of the
indemnity due respondents upon its mistaken belief that the property formed part of the public dominion.

This situation is on all fours with that in the Mangondato case. NAPOCOR in that case took the property of
therein respondents in 1979, using it to build its Aqua I Hydroelectric Plant Project, without paying any compensation,
allegedly under the mistaken belief that it was public land. It was only in 1990, after more than a decade of beneficial use,
that NAPOCOR recognized therein respondents ownership and negotiated for the voluntary purchase of the property.

In Mangondato, this Court held:

The First Issue: Date of Taking or Date of Suit?

The general rule in determining just compensation in eminent domain is the value
of the property as of the date of the filing of the complaint, as follows:

Sec. 4. Order of Condemnation. When such a motion is overruled or when any party fails
to defend as required by this rule, the court may enter an order of condemnation declaring that the
plaintiff has a lawful right to take the property sought to be condemned, for the public use or
purpose described in the complaint, upon the payment of just compensation to be determined as of
the date of the filing of the complaint. x x x (Italics supplied).

Normally, the time of the taking coincides with the filing of the complaint for expropriation.
Hence, many ruling of this Court have equated just compensation with the value of the property as
of the time of filing of the complaint consistent with the above provision of the Rules. So too,
where the institution of the action precedes entry to the property, the just compensation is to be
ascertained as of the time of filing of the complaint.

The general rule, however, admits of an exception: where this Court fixed the value of
the property as of the date it was taken and not the date of the commencement of the
expropriation proceedings.

In the old case of Provincial Government of Rizal vs. Caro de Araullo, the Court ruled that
x x x the owners of the land have no right to recover damages for this unearned increment resulting
from the construction of the public improvement (lengthening of Taft Avenue from Manila to
Pasay) from which the land was taken. To permit them to do so would be to allow them to recover
more than the value of the land at the time it was taken, which is the true measure of the damages, or
just compensation, and would discourage the construction of important public improvements.

In subsequent cases, the Court, following the above doctrine, invariably held that the
time of taking is the critical date in determining lawful or just compensation. Justifying this
stance, Mr. Justice (later Chief Justice) Enrique Fernando, speaking for the Court in Municipality of
La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan, said, x x x the owner as is the
constitutional intent, is paid what he is entitled to according to the value of the property so devoted
to public use as of the date of taking. From that time, he had been deprived thereof. He had no
choice but to submit. He is not, however, to be despoiled of such a right. No less than the
fundamental law guarantees just compensation. It would be injustice to him certainly if from such a
period, he could not recover the value of what was lost. There could be on the other hand,
injustice to the expropriator if by a delay in the collection, the increment in price would accrue
to the owner. The doctrine to which this Court has been committed is intended precisely to avoid
either contingency fraught with unfairness.

Simply stated, the exception finds the application where the owner would be given
undue incremental advantages arising from the use to which the government devotes the
property expropriated -- as for instance, the extension of a main thoroughfare as was in the case in
Caro de Araullo. In the instant case, however, it is difficult to conceive of how there could have
been an extra-ordinary increase in the value of the owners land arising from the
expropriation, as indeed the records do not show any evidence that the valuation of P1,000.00
reached in 1992 was due to increments directly caused by petitioners use of the land. Since
the petitioner is claiming an exception to Rule 67, Section 4, it has the burden in proving its claim
that its occupancy and use -- not ordinary inflation and increase in land values -- was the direct
cause of the increase in valuation from 1978 to 1992.


Side Issue: When is there Taking of Property?

But there is yet another cogent reason why this petition should be denied and why the
respondent Court should be sustained. An examination of the undisputed factual environment
would show that the taking was not really made in 1978.

This Court has defined the elements of taking as the main ingredient in the exercise of
power of eminent domain, in the following words:

A number of circumstances must be present in taking of property for purposes of eminent
domain: (1) the expropriator must enter a private property; (2) the entrance into private property
must be for more than a momentary period; (3) the entry into the property should be under warrant
or color of legal authority; (4) the property must be devoted to a public use or otherwise informally
appropriated or injuriously affected; and (5) the utilization of the property for public use must be in
such a way to oust the owner and deprive him of all beneficial enjoyment of the property.(Italics
supplied)

In this case, the petitioners entrance in 1978 was without intent to expropriate or was not
made under warrant or color of legal authority, for it believed the property was public land covered
by Proclamation No. 1354. When the private respondent raised his claim of ownership sometime in
1979, the petitioner flatly refused the claim for compensation, nakedly insisted that the property was
public land and wrongly justified its possession by alleging it had already paid financial assistance
to Marawi City in exchange for the rights over the property. Only in 1990, after more than a decade
of beneficial use, did the petitioner recognize private respondents ownership and negotiate for the
voluntary purchase of the property. A Deed of Sale with provisional payment and subject to
negotiations for the correct price was then executed. Clearly, this is not the intent nor the
expropriation contemplated by law. This is a simple attempt at a voluntary purchase and sale.
Obviously, the petitioner neglected and/or refused to exercise the power of eminent domain.

Only in 1992, after the private respondent sued to recover possession and petitioner filed its
Complaint to expropriate, did petitioner manifest its intention to exercise the power of eminent
domain. Thus the respondent Court correctly held:

If We decree that the fair market value of the land be determined as of 1978, then We
would be sanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for
eminent domain would occupy anothers property and when later pressed for payment, first
negotiate for a low price and then conveniently expropriate the property when the land owner
refuses to accept its offer claiming that the taking of the property for the purpose of the
eminent domain should be reckoned as of the date when it started to occupy the property and
that the value of the property should be computed as of the date of the taking despite the
increase in the meantime in the value of the property.

In Noble vs. City of Manila, the City entered into a lease-purchase agreement of a building
constructed by the petitioners predecessor-in-interest in accordance with the specifications of the
former. The Court held that being bound by the said contract, the City could not expropriate the
building. Expropriation could be resorted to only when it is made necessary by the opposition of
the owner to the sale or by the lack of any agreement as to the price. Said the Court:

The contract, therefore, in so far as it refers to the purchase of the building, as we have
interpreted it, is in force, not having been revoked by the parties or by judicial decision. This being
the case, the city being bound to buy the building at an agreed price, under a valid and subsisting
contract, and the plaintiff being agreeable to its sale, the expropriation thereof, as sought by the
defendant, is baseless. Expropriation lies only when it is made necessary by the opposition of the
owner to the sale or by the lack of any agreement as to the price. There being in the present case a
valid and subsisting contract, between the owner of the building and the city, for the purchase
thereof at an agreed price, there is no reason for the expropriation. (Italics supplied)

In the instant case, petitioner effectively repudiated the deed of sale it entered into with the
private respondent when it passed Resolution No. 92-121 on May 25, 1992 authorizing its president
to negotiate, inter alia, that payment shall be effective only after Agus I HE project has been placed
in operation. It was only then that petitioners intent to expropriate became manifest as private
respondent disagreed and, barely a month, filed suit.[25]


In the present case, to allow petitioner to use the date it constructed the tunnels as the date of valuation would
be grossly unfair. First, it did not enter the land under warrant or color of legal authority or with intent to expropriate the
same. In fact, it did not bother to notify the owners and wrongly assumed it had the right to dig those tunnels under their
property. Secondly, the improvements introduced by petitioner, namely, the tunnels, in no way contributed to an
increase in the value of the land. The trial court, therefore, as affirmed by the CA, rightly computed the valuation of the
property as of 1992, when respondents discovered the construction of the huge underground tunnels beneath their lands
and petitioner confirmed the same and started negotiations for their purchase but no agreement could be reached.[26]

As to the amount of the valuation, the RTC and the CA both used as basis the value of the adjacent property,
Lot 1 (the property involved herein being Lots 2 and 3 of the same subdivision plan), which was valued at P1,000 per sq.
meter as of 1990, as sustained by this Court in Mangondato, thus:
The Second Issue: Valuation

We now come to the issue of valuation.

The fair market value as held by the respondent Court, is the amount of P1,000.00 per square
meter. In an expropriation case where the principal issue is the determination of just compensation,
as is the case here, a trial before Commissioners is indispensable to allow the parties to present
evidence on the issue of just compensation. Inasmuch as the determination of just compensation in
eminent domain cases is a judicial function and factual findings of the Court of Appeals are
conclusive on the parties and reviewable only when the case falls within the recognized exceptions,
which is not the situation obtaining in this petition, we see no reason to disturb the factual findings
as to valuation of the subject property. As can be gleaned from the records, the court-and-the-
parties-appointed commissioners did not abuse their authority in evaluating the evidence submitted
to them nor misappreciate the clear preponderance of evidence. The amount fixed and agreed to by
the respondent appellate Court is not grossly exorbitant. To quote:

Commissioner Ali comes from the Office of the Register of Deeds who may well be
considered an expert, with a general knowledge of the appraisal of real estate and the prevailing
prices of land in the vicinity of the land in question so that his opinion on the valuation of the
property cannot be lightly brushed aside.

The prevailing market value of the land is only one of the determinants used by the
commissioners report the other being as herein shown:

x x x

x x x

Commissioner Doromals report, recommending P300.00 per square meter, differs from the
2 commissioners only because his report was based on the valuation as of 1978 by the City
Appraisal Committee as clarified by the latters chairman in response to NAPOCORs general
counsels query.

In sum, we agree with the Court of Appeals that petitioner has failed to show why it should
be granted an exemption from the general rule in determining just compensation provided under
Section 4 of Rule 67. On the contrary, private respondent has convinced us that, indeed, such
general rule should in fact be observed in this case.[27]

Petitioner has not shown any error on the part of the CA in reaching such a valuation. Furthermore, these are
factual matters that are not within the ambit of the present review.

WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in C.A.-G.R. CV No.
57792 dated June 8, 2005 is AFFIRMED.

No costs.

SO ORDERED.